Page 359 - Arabia the Gulf and the West

356 Arabia, the Gulf and the West

protect itself against ‘any collective act that might be exercised by the oil
companies’ - in other words, the safety-net sharing agreement. Outside the
conference hall Amuzegar made it clear that the resolutions constituted a
diktat. ‘There is no question of negotiations or resuming negotiations,’ he
declared. ‘It’s just the acceptance of our terms or we will go ahead with
legislation.’

Legislation by all the members of OPEC, however, was by no means a
foregone conclusion. Each of them separately, in their capacity as sovereign
states, would have to bear the brunt of the consequences of legislation, not
OPEC as an organization. There was, therefore, a strong possibility that
OPEC’s unity would crumble if the companies stood firm and their own
governments showed the slightest disposition to back them. The shah was
confident that they would not. ‘The major governments happily, after my
warning two weeks ago,’ he observed at a press conference late on 3 February,

‘have shown not the slightest sign of any interference or support for the
companies.’ He was, of course, right, especially so far as the British and
American governments were concerned, since neither of them wished to run
the risk of provoking him and thus jeopardizing the attainment of their own
separate goals - the British to make as smooth and comfortable an exit as
possible from the Gulf at the end of the year, the Americans to build the shah
up as the guardian of the Gulf’s security after the British departure.
The oil companies capitulated on 14 February, twenty-four hours before the
expiry of the deadline set by OPEC. The principal terms of agreement worked

out with the Gulf states were:

(i) the posted price of Gulf oil was to go up by 30 cents a barrel from an average of
$1.80 to $2.10 a barrel for the marker crude (Arabian light);
(ii) it was to increase thereafter by 5 cents a barrel per annum (to match the increased

profits the companies might expect to receive on refined products);
(iii) there was to be a further increase of 2J per cent every year to offset inflation in the
price of industrial goods (indexing for inflation rather than a fixed percentage had
been offered to OPEC but was rejected);
(iv) the tax rate was to be raised to 55 per cent; and
(v) the agreement was to run for five years from 1 January I97C with the Gulf states
undertaking to refrain from leap-frogging should other OPEC members obtain
higher prices.

At the same time, the parent companies of the Iraq Petroleum Company were
compelled to issue a separate notification to the Iraqi oil minister, Hamma 1,
stating that the Tehran agreement ‘is applicable solely and exclusively to> cru
oil exported from Gulf terminals, and contains no obligation or comm1

whatsoever on Iraq or any of the said companies in respect of crude 01 P
from Mediterranean terminals’. 11 was a humiliating end to the brav P
only six weeks earlier.