Page 396 - Arabia the Gulf and the West

The ‘Sting 393

latter half of 1973, the price of petroleum products had risen from $29 to $52
per metric ton. Likewise, the revenue derived by the governments of the
industrial oil-consuming countries from duties and taxes levied upon
petroleum products greatly exceeded those obtained by the governments of the
producing states from the extraction of crude oil. As an argument, it had about
as much sense and worth as a complaint from a farmer about the profits made
by a whisky distiller to whom he had sold barley. The only valid test of the

justice of the price received for a raw material is its relationship to the cost of its
production, especially in terms of capital investment, skill and effort. The
contribution of the Middle-Eastern members of OPEC to the production of
crude oil was, in all three respects, exactly nil.
A further complaint voiced by OPEC was that inflation in the Western
industrial countries was eroding the value of the price increases obtained by

and since the Tehran settlement of February 1971. That these increases may
have been a contributory cause of that inflation was conveniently ignored. In
any case, the original Tehran settlement provided for dual increases of 5 cents a
barrel and 2A per cent on posted prices each year to compensate for inflation in
the cost of goods imported from the West. Moreover, the United States dollar,
in which oil prices were calculated, had in the summer of 1973 regained ground
against other major currencies and was still rising. Under the terms of the
Tehran settlement such a development called for a reduction in the price of

crude oil, not an increase. (It also called for Jamshid Amuzegar, the Pangloss of
OPEC, to live up to the assurance he had so eagerly preferred to all and sundry
at Geneva in June.) Such considerations, however, were as thistledown in the
wind that was blowing in September 1973. OPEC was due to meet on 15
September to set a date for the start of new price negotiations with the oil

companies. On 7 September Yamani pronounced the Tehran settlement to be
'dead or dying’. ‘If we fail to obtain the co-operation of the oil companies in
amending the Tehran price agreement,’ he said, ‘we will have to exercise our
rights on our own.’
At its meeting in Vienna on 15-16 September OPEC designated Monday, 8
October as the date for the opening of talks with the companies at Geneva. The
mood of the meeting left no doubt that the new prices would be dictated, not
negotiated, and that the instrument of coercion OPEC had in mind to enforce

its will was a threatened restriction upon oil production, the same threat that
had recently been used with effect by Saudi Arabia against ARAMCO. Again,
as in the case of the Saudis, the aims of the Arab members of OPEC were as
much political as they were financial. The world was well aware of the nature of
these aims from the incessant and insistent proclamation of them by Arab
governments over the years, and they were again being expounded with great

ervour by the spokesmen of Arab oil interests in the summer of 1973. One
such exponent was a former secretary-general of OPEC, Nadim al-Pachachi,
who, m an address given at the American University of Beirut in the second