The riddle of Opec

Opec is an organisation riddled through with contradictions. It has ceded control of the oil market in an attempt to retain control of it. It is tackling high-cost oil by making low-cost oil expensive to produce. It talks of a market rebalancing being just around the corner but on the same day its most high-profile individual insists such a move will take an unspecified amount of time.

And it appears to think a meeting involving all oil producers — including non-Opec exporters — is a good idea, but can’t agree to have one involving just its own members.

Amid the palpable discord this is creating, Opec’s figurehead Abdullah al-Badri, has spent much of this year trying to hold the group together. Such is the frequency with which the matter arises that no-one would be surprised if Venezuela, which is perhaps suffering more than the others, was found to have an entire government department dedicated to requesting emergency Opec meetings.

But Opec’s core Mideast Gulf members aren’t interested.

The last thing Iran wants right now is an Opec meeting. Its oil is heading back out to customers in Europe and Asia-Pacific, and it wants to regain its position as a major supplier after years of frustration under embargo.

Saudi Arabia doesn’t want a meeting, because it considers its position to be clear — that only the efficient will survive.

Iraq doesn’t want a meeting because it just pumped a record amount in December and is targeting even more this year.

In fact, Iran’s oil minister Bijan Namdar Zanganeh says an emergency Opec meeting would only be justified if all of the group’s 13 members were in agreement. And the chances of that are zero.

But al-Badri, in his role as the organisation’s reassuring face, has suggested talks between Opec and non-Opec producers are “crucial”. Indeed, a coalition of the willing-to-cut is emerging outside Opec. Oman and Kazakhstan have indicated that they would be happy to join a co-ordinated move to trim output. But it would take the involvement of some bigger beasts — especially Russia — to make such a thing happen. Mexico’s tentative embrace of the need for dialogue is a step in that direction.

Unless Russia is there, and in agreement with a move to share cuts in production, Opec could clearly not bring a common position to this hypothetical meeting. Of the opposing views battling for control within the organisation, the stance presented to non-Opec would more likely than not be the Saudi-led orthodoxy.

Some Opec members, such as Ecuador, are turning their anger inwards, at Opec. Al-Badri, channelling Lyndon B Johnson, is trying to keep everyone in the tent, facing out. Even for a career politician, this is an increasingly difficult task in such a contrarian organisation.

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