Page 371 - Arabia the Gulf and the West

368 Arabia, the Gulf and the West

countries to forge an alliance with the oil companies in which the producing countries,
while pursuing their national objectives, would still be able to take advantage of the
larger distribution outlets, the investment capabilities and the technical know-how of
the oil companies.

Under a participation regime competition would be stifled. The OPEC
governments would agree production levels among themselves with the object
of guarding against excessive production in any one country and thus prevent­
ing any fluctuations in oil prices such as would occur in an open market.
Partnership with the major international oil companies was essential if OPEC’s

designs were to be successfully carried into execution. If the oil states them­
selves took complete charge of oil production, they would become sellers and
brokers of oil, with the companies as its purchasers and distributors. Since
there was no shortage of oil, and the companies would naturally seek to strike
the best possible bargain, oil prices were bound to drop, as the producing
countries were forced to compete with one another to sell their oil.
There were other good reasons why OPEC preferred participation to out­
right nationalization. Although the organization’s secretary-general, Nadim

al-Pachachi, claimed at the outset of the Geneva talks in January 1972 that the
demand for participation ‘is based on our conviction that such direct participa­
tion would reinforce and render more effective our right to permanent
sovereignty over our resources’, six months earlier he had, rather more
frankly, explained that ‘the main objective of our participation is to gain
know-how rather than to increase revenue’. None of the producing countries
was in a position to take over production from its own fields, still less to
undertake exploration or marketing. Saudi Arabia, the largest producer in the
Middle East, was particularly vulnerable in this respect, which was why
Yamani, her oil minister, walked so carefully around the jagged edges of the

nationalization issue, preferring the smoother outlines of participation as being
hener suited to his government’s purposes.
madC " attracpve to the oil-
repugnant. Sir David Barran the n,,, 1 c°mpanies>,n general, found so
condemned the idea of si ner’e, utsP°ken chairman of Shell, in June 1972
he would even nref> f n P • nt ParUciPation as ‘intolerable’, and said that
Xcompaniesr300^6011- If" the managements of several

*e one pZerfu w* X S view>’whV> may be asked, did they not use
abandon their cone P°n 3t ^eir disPosaJ at the time, viz. the threat to
nf7h“nS and thrOW the onus of operating them upon the
far nartir' t’ s XT 1 St^.tes’ t0 ^orce those governments to drop the demand
•k'?3 °n k °ne dle comPan*es so, presumably out of a sense of

ponsi ty to eir customers, but also, perhaps, because they were sub­
jected to pressure from their home governments to keep the oil flowing. With
s°me companies, however, and they may well have constituted a majority, it
wou seem that the desire to retain access to their oil reserves, at whatever