FROM THE BARREL: Iran sanctions and the battle for the soul of Opec
CAPE TOWN – There is a great chance that the politics of the Trump administration may rupture and forever alter the bonds that helped found Opec. These bonds are the roots that have sustained the organization’s values and continue to harness the sinews holding them together. His inelegance of style and bullying tactics, project an administration with a peripatetic penchant to foray into difficult areas of our common welfare and disturb them, completely without a plan. In the place of a determinable policy framework, there is in its stead, infantile political instincts wholly predicated on anarchy.
The signature of his administration as Tweeter would testify, is haphazardness, or transactional, as some observers are inclined to endear him. North Korea and Venezuela come to mind. Where ‘Transactional’ is the operative word, he may not be haphazard after all. And if he succeeds on this complex Opec transaction, Trump may be the first President to capture the soul of the organization so it may oblige his bidding as he wishes.
So, early in the days of assuming the reins of the Big Office, Trump zoomed in on the Saudis and no sooner, they started talking oil production, Opec quotas, the stabilization of oil prices, and most importantly, the political and economic stranglehold of the Iranians, as well as the isolation of the Qataris. There was much, much else besides. Importantly however, sanctions followed quickly in lock step against Qatar who had their airspace blockaded and watched helplessly as their financial assets which were banked in the GCC states, were accordingly frozen. Saudi Arabia, UAE and Kuwait are members of Opec, as is Iran. And so was Qatar when the discord surfaced all so sudden. But all that didn’t matter. For Trump and his team watching from across the Atlantic, there was wholesome contentment that the battle for the soul of Opec had begun in earnest. For them, it is a war of attrition they dare not lose!
It can be asserted without fear of contradiction that there are historic bonds that motivated the founders of Opec to come together under this aegis. They are traceable to certain events in history. The convenient starting point for this purpose, proceeds from the many anti-exploitation statements made in the months and weeks leading up to the date of the formation of this new organization. They were reinforced by publicly canvassed aspirations to rid themselves off the economic yoke resulting from many odious and evergreen legacy contracts in favour of multinational corporations. And in like manner, they particularly detested the political manipulation of their sovereignties by a few companies through insufferable oil production contractual obligations.
They chose a fairly innocuous style whose acronym Opec, they have since become known by. They purposely described themselves as an Organisation of Petroleum Exporting Countries. At foundation, so much of their anti-colonialism posture featured eminently in their early literature. It is such literature which led to some industry analysts to cast them somewhat stereotypically, portraying them as different pieces of the same cloth. But nothing could be further from the truth. Their characterization aside, they had powerful competitors who were monopolies of the time and affectionately dubbed ‘the Seven Sisters’. Quite contrary to what the pundits sought us to believe, the sorority had a singularity of purpose. They wanted then what they still want now, the domination of the world. They were indeed of one mind. Just different cuts of the same cloth. Arguably, the 1928 Achnacarry conspiracy saw to that.
Export of petroleum
In the case of Opec founders, and as a countervailing force, they endearingly referred to each other as Brothers. In this setting, no matter the volumes of export of petroleum of an aspiring applicant, there is a fine print of tees and cees requiring first, an affiliation to the developmental aspirations of its members. Besides, any aspirant applicant will be confronted with the reality of either liking its individual members, or be inclined to tolerate them. These unspoken requirements may silently limit other petroleum exporters’ enthusiasm to join, or at the very least, help explain their absence from this body in over six decades of its existence.
Leaving Opec, especially by voluntary suspension, is not without precedent. In 2008 Indonesia voluntarily left the Group ostensibly on account of its diminishing petroleum exporting capabilities. One would have thought that the accruing benefits of membership are enduring in their insularity, so that any change in export status would at worst, only result in a demotion to a category B, whatever that would entail. Not so simple! The complexity of egress and ingress has been aptly demonstrated by the Indonesia and Ecuador exemplars on re-joining the mother body after suspending themselves from it. Lybia on the other hand, with the largest proven oil reserves on the African continent, has never been suspended. Notwithstanding its inability to export petroleum, it has not left the fraternity. The distinguishing factor between these two cases, provides a clearer understanding of when is it convenient to leave the Brotherhood. And this is that when the proven reserves of a member country dwindle, there’s the door!
Prodigious gas reserves
When Qatar announced its intent to depart from the esteemed group for good, notwithstanding it’s proven prodigious gas reserves, there was a collective sense of shock. Being mindful of the lesson that the depletion of petroleum reserves results in disqualification, this announced departure left us with one unavoidable conclusion that gas does not qualify as petroleum. Yet if it does, why did they leave in a huff, or so it seemed? Conventional wisdom suggests that three most unlikely conspirators met fortuitously and produced a wholly unexpected result. First, it turned out that Gas alone may not qualify an exporter for membership as contemplated by the preeminent provisions of the Opec statutes. Second, Qatar’s liquid petroleum reserves had diminished, and third, the bonds of brotherhood have snapped. Not matter the differing political shades of the analysts and the rigor of their remonstration, there is no escaping these three elephantine factors in a room occupied fully by only three elephants.
The African petroleum exporters who retain their exclusive membership in this elite club, may one day matter significantly in tipping the scales in favor of reason. We do not know for certain. But if they would, Donald J. Trump is not aware of it yet. No matter. The real target in his view, as emphasized by J. Bolton, is to finish any Bush unfinished business in Iran. And so, the most compelling front for the ostracization of the Iranians, is cutting them off from global oil diplomacy. To this end, there are intensified unilateral and punitive sanctions, including the non-renewal of waivers of some dozen or so countries purchasing oil from Iran. Next, would be the full blockade of the Strait of Hormuz, and eventually the complete removal of their participation from Opec.
There are two countries whose external posture in global politics and the intensity of their domestic discourse and social contestation are most interesting to watch in respect of the future configuration of Opec. For one, whatever happens to Iran, shall bear enormous influence on the future relations between Opec and a Maduro-led Venezuela. Similarly, any future Opec without Iran may need to craft a new political speak for a Shia dominated Iraq. Failure to retain Iraq in an Iran-less brotherhood, may unwittingly result in the creation of a new paradigm, a known unknown. This is a Trump captured Opec.
Prevent a cataclysmic self-destruction
When that eventuality looms, the African Opec bloc may be the only lobby within that behemoth that could possibly save it from the capture of its soul and so prevent a cataclysmic self-destruction that would inevitably result. Depending on their state of readiness, one more time, the participating African leadership may be required to shield the organization’s integrity from anarchic tempest, or as we suspect, Trump’s transactional designs.
The Russian Federation, the world’s largest oil producer is not a member of Opec. Norway too, the world’s wealthiest nation and a net oil exporter, is not a member neither. There is Canada, North America’s most prolific producer which is also not affiliated. So are others like Brazil, Mexico and Colombia. Being a petroleum exporter, it would seem, may not be the most qualifying criterion for voluntary association. With so many petroleum exporters bivouacked outside the Opec lobby tent, especially when we add Kazakhstan, Azerbaijan and Turkmenistan, it is tempting to postulate that the clouds of energy tension are ominously gathering in the near horizon.
The intense politicization of Opec will mark the triumph of extremism, of intolerance to rational debate and a deliberate weakening of one of the world’s most powerful sane voices as it speaks on behalf of the hydrocarbon endowed developing world. Oil economics and their political influence overall, have always fuelled regional wars and social instability, or plainly, just about anywhere where the devil’s excrement is found in prodigious concentrations. Qatar is for all intents and purposes no longer a member. Who is next?
There is a new volatile cocktail however. Trump and a captured Opec is equal to a smouldering incendiary of a terrifying kind. Long past this moment of conflagration, we shall look back wistfully, shouting, MOGA, MOGA, MOGA...!!
Ambassador Bheki Gila is a Barrister-at-Law. The views expressed here are his own.
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