Page 362 - Arabia the Gulf and the West

The Masquerade 359

differences which had arisen over the implementation of the Evian accords as a

whole. Among the main topics for discussion were sales of Algerian wine to
France, freedom for Algerians to work in France, the supply of French
teachers to Algerian educational institutions and the exploitation and sale of oil
and natural gas. From the outset, the talks between the Algerian government
and the French oil companies involved in Algeria - the partly state-owned

Compagnie Frangaise des Petroles and the wholly state-owned Entreprise de
Recherches et d’Activites Petrolieres (ERAP) in association with the ELF
company - were compromised by the collaboration going on at the time
between the Algerians and the Libyans to take advantage of the temporary oil
shortage in Europe early in 1970, and the proximity of the North African
oilfields to European markets, to force substantial price increases from the

producing companies. Libya, as we have seen, made the first move in the
spring of 1970, and then in July the Algerians unilaterally raised the posted
price of their oil from $2.08 to $2.85 a barrel, the increase to be retroactive to 1
January 1969. The Franco-Algerian discussions were broken off and they did

not resume until December 1970, by which time much had occurred that was
ominous from a French point of view, notably the Libyan junta’s triumph over
the oil companies in September, the arbitrary enactment of a 60 per cent tax
rate by the Venezuelans at the outset of December and the OPEC resolutions
at Caracas soon afterwards, which had both endorsed and adopted Libyan
methods of negotiation.

In the last week of December 1970 CFP and ELF-ERAP tabled a set of
proposals which represented considerable concessions to the Algerians’
wishes. They offered retroactive royalty payments to 1 January 1969 on the
basis of an oil price of $2.65 a barrel, an offer which would cost them FF700
million, and a posted price of $2.75 for five years from 1 January 1971.

One-third of the companies’ oil production would be set aside for the use of
Algeria, and 50 per cent of the companies’ profits on oil sales to the Algerian
state oil and gas corporation, SONATRACH (Societe Nationale de Transport
et de Commercialisation des Hydro-Carbures), would be repatriated to Algeria
for investment. SONATRACH would also be awarded the majority share­
holding in joint oil and natural gas undertakings. The Algerians rejected the

proposals almost without reading them, demanding instead a posted price of
$3 24 a barrel and the reinvestment in Algeria of 90 per cent of the companies’
profits on Algerian oil sales. To reinforce their demands they barred
ELF-ERAP tankers in the second week of January 1971 from loading crude at
Arzew terminal.

Stung by the Algerian government’s unreasonable and uncompromising
attitude, CFP reacted by associating itself that same week with the joint
initiative of the other major companies and the independents against OPEC,
putting its signature to the message to OPEC delivered on 16 January. Yet
even as CFP was taking this action the French foreign minister, Maurice