With Saudi Arabia and Iran battling each other for influence in the cartel, is OPEC still able to control oil prices? Doubtful, not least since it’s more important to watch what Saudi Arabia does than what OPEC says.
The Kingdom exports 6.2 million bpd, making it the world’s largest oil exporter, and controls 70% of the world’s spare capacity.
Will Saudi diplomacy work?
Through oil diplomacy, Saudi Arabia hopes to sap Iran of important regional partners, a diplomatic coup the US and other western nations have so far failed to achieve
Consequently the Saudi Minister of Petroleum, Ali Al Naimi, vowed to meet increasing world demand after the last OPEC meeting where members failed to reach an agreement. Or as its secretary-general Abdalla el-Badri put it were “unable to reach a consensus” between countries wanting a production increase and those happy to do nothing. In other words those agreeing with Saudi Arabia versus those siding with Iran.
Oil as a weapon
Already before the meeting Saudi Arabia had actually agreed to double its crude oil exports to India in order to reduce the Asian country’s dependence on Iranian crude.
Interesting and clever move. Have always wondered why the Saudis didn’t use oil as a weapon to, for instance, help the Palestinians. But better late than never to start using it in order to instead contain the mullahs.
Remember Ali Al Naimi telling me how strongly he felt that Saudi oil should be used for the good of the people of the Kingdom. Maybe their oil is now going to benefit not just the Saudi people but the citizens of the world?
If Riyadh can weaken Iran by supplying oil to countries, like India, that would otherwise need to get it from Iran, that’s really a good start.
Riyadh versus Teheran
OPEC now consists of two camps, those with spare capacity headed by Saudi Arabia and those who cannot pump any more oil, led by Iran.
In the first group, the Gulf states and the Kingdom believe that a high oil price is damaging to the world economy. Iran and its allies, on the other hand, are keen on a high oil price and hence don’t want more oil to get onto the market.
Riyadh has already pledged to fill the gap of Libya disappearing from the market. And my guess is that they will go it alone and keep prices in check. In particular if it works against Iran.
The deep divisions within OPEC, particularly between Saudi Arabia and Iran, appear to have become so poisonous that this organisation is incapable of taking any substantive decision.
So maybe it’s time for Saudi Arabia and the other Gulf States to join forces against Iran and through diplomatic efforts achieve what the West has so far failed to do.
Saudi moves behind the scenes
Not sure exactly what was said but I have inside information that King Abdullah sent Prince Bandar to Teheran in 2006 and told the Iranians to tell Hezbollah to stop waging war in Lebanon. And they did. Not sure what leverage the Saudis had against Iran but something made the Iranians listen. Maybe it was about oil?
Personally believe that the Saudis now are really motivated to act against Iran. Knew years ago that King Abdullah told George W Bush what would happen if the US invaded Iraq but was ignored. Saudi Arabia knows it can no longer rely on America to look after its interests so they will go it alone. And their oil is a potent weapon. If Saudi diplomacy against Iran works they will, in my opinion, be doing the world a favour. What do you think? Has OPEC outlived its purpose? Is it a good idea for the Saudis to carry out oil diplomacy against Iran? Will they succeed where the West failed? Or should it be left to the West to contain Iran? Can you think of any other way to stop Iran from creating problems and trying to take advantage of the Arab Spring? Or maybe you believe Iran should be left to their own devices?
Photo: The White House – Flickr