Page 383 - Arabia the Gulf and the West

380 Arabia, the Gulf and the West

The tumult and the clamour were observed with some puzzlement and not a
little excitement by the Arabs and Persians. They knew that there was no real
shortage of oil supplies, then or in the foreseeable future. Output in all the
Arab oil states except Saudi Arabia had, in fact, dropped in 1971 and again in

1972, reflecting a fall in the world market despite a rise in European, American
and Japanese consumption. Still, if the nations of the West insisted upon
working themselves into a hysterical state over a looming ‘oil crisis’, the Arabs
were not going to pass up the opportunity to unsettle them further. Soon such
learned and amiable students of the human predicament as Colonel Qaddafi
and the oligarchs of Kuwait began prating, in the jargon made fashionable by

Western discourse on the subject, about ‘conservation’, ‘diminishing assets’,
‘finite resources’ - everything, in fact, short of ‘caribou crossings on the
Alaskan pipeline’ - demurely portraying themselves as disinterested benefac­
tors holding their oil reserves ‘as a sacred trust for mankind’. (‘Conservation’
was the pretext used by the Kuwaiti government in the spring of 1972 to
impose a limit on oil production of 3 million b/d, in the hope both of disguising
the falling sales of Kuwaiti crude and of preparing the ground for a price
increase.) So many solemn dunces in the West were swift to applaud these
pieties that the Arabs began to wonder whether the time was not ripe for a

further round of price increases. They were further encouraged in this line of
thought by the shah’s high-handed treatment of the Persian consortium com­
panies in January 1973, and by Qaddafi’s truculent behaviour towards the
Libyan oil producers in the same month.
A new devaluation of the United States dollar by 11.11 per cent in February
1973 gave the Arabs and OPEC their opening. An extraordinary congress ol

OPEC was convened at Vienna on 15 March 1973, ostensibly to consider the
impending oil-supply ‘crisis’. Its real purpose, however, as the burden of the
discussions made clear, was to push for a price increase on the grounds of the
dollar’s devaluation. (The situation was not without the touch of irony which
customarily graced OPEC’s deliberations. A major contributory factor in the
decline of the dollar’s fortunes was the substantial speculation against it by
those members of OPEC, Saudi Arabia and Kuwait in particular, which had

large financial surpluses.) According to the formula agreed at Geneva in
January 1972, an il.ii per cent dollar devaluation called for a maximum
increase in oil prices at the end of the first quarter of 1973 of between 6 and .
per cent. At the Vienna conference, however, Algeria demanded an imme ate
increase of 10 per cent. Saudi Arabia opposed the motion and the conference
adjourned, to be reconvened in Beirut on 22 March. As a remin er to
Western industrial nations of the purported reason for the conference,

warning was issued by the OPEC secretariat that any ‘concerted acuon
them to keep prices down ‘would have negative effects on the presen

situation’. ir decided to
When the OPEC conference resumed at Beirut in late March 1