Page 337 - Arabia the Gulf and the West

334 Arabia, the Gulf and the West

half of Libya’s oil exports, was highly vulnerable to the RCC’s chosen tactic of
imposing restrictions upon production as a means of forcing up prices. If the
independents could be made to yield, so the junta reasoned, the majors would
have to follow. Amoseas was ordered to reduce its production by 31 per cent in
June, Oasis by 12 per cent in July, Mobil/Gelsenberg (the West German oil
company) by 20 per cent in August, and finally Esso by 15 per cent in early
September.
It was largely the play of forces elsewhere which had both allowed and
encouraged Qaddafi to behave as boldly as he had. A rather mysterious ‘acci­
dent’ to the Syrian end of TAPline in May had cut off the flow of Saudi Arabian
oil to its Mediterranean terminal. Civil war broke out in Nigeria in the summer

over the attempted secession of Biafra, interrupting the supply of Nigerian oil.
A shortage of tankers, combined with a high demand for oil in Europe, drove
up the spot market prices for both oil and tankers. From the Libyans’ point of
view it was an excellent moment to force a renegotiation of the posted prices,
since the inflated rates for tanker charters could be used to raise the premium
paid for Libyan oil because of its lower transportation cost. Once the new
premium had been fixed, Qaddafi intended to compel the companies to con­
tinue paying it, regardless of whether or not tanker rates and transport costs
fell. For this very reason, and also because the other oil-producing countries
were bound to demand the same posted price as Libya achieved, the companies
were inclined to stand their ground and to put off all negotiations. While the
majors could afford to take this stand, having alternative sources of oil supplies
to fall back on should the going become rough, the independent producers

were without any such protection, and it was on them that the Libyan RCC
now concentrated its fire.
In the third week of August Occidental was instructed by Major Abdul
Salem Jallud, the deputy prime minister and Qaddafi’s right-hand man in the
RCC, to reduce its production further, from 485,000 to 425,000 b/d. Qaddafi
was clearly keeping a close eye on the Algerians, who in July had unilaterally
raised the posted price of Algerian oil by some 37 per cent. As a warning to the
French companies not to resist, the Algerians had at the same time nationalized
the assets of Shell, Phillips and Atlantic Richfield. With the first anniversary of
his own revolution approaching, Qaddafi was eager to show that he, too, could

triumph spectacularly over his Western adversaries. Occidental, whose
humiliation was obviously to be the piece de resistance of the celebratory games,
was caught in a trap. If it yielded to the Libyans and raised its posted price, it
ran the risk of pricing itself out of the European market, especially if tanker
rates for Persian Gulf crude were to drop as a consequence of the reopening 0
the Suez Canal, or for other reasons. On the other hand, if it stood up to e
junta and as a result was deprived of even more of its share of Libyan cru e, 1
would lose most of its European customers anyway. Earlierin the*um™^ ..
company had tried to persuade Esso to guarantee its supplies of crude, vi