OPEC Meets the Customers

In Paris last week, for the first time since the Arab oil embargo, representatives of the countries that have quintupled petroleum prices faced delegates of the consuming nations that are paying those prices. Across the conference table it became immediately apparent that the oil producers have the upper hand diplomatically. The 18-nation meeting, called at the invitation of French President Valery Giscard d'Estaing, showed the depths of the differences rather than any path to resolving them. At week's end delegates could not even agree on an agenda for a larger conference this summer. The oil producers managed to form a united front with the underdeveloped consuming countries against the industrialized nations by insisting that the summer conference consider not just oil but the general matter of commodities as well.

Market Power. Even before the conference opened, U.S. Assistant Secretary of State Thomas Enders struck a discordant note. In an interview on British television, he declared that the U.S. aim is "to get enough market power to hasten OPEC'S demise," referring to the producers' cartel, the 13-nation Organization of Petroleum Exporting Countries. Though that U.S. attitude is scarcely a surprise, it was undiplomatic of Enders to voice it so bluntly; Under Secretary of State Charles W. Robinson, chief of the U.S. delegation, disavowed the remarks in a background briefing for American correspondents.

At any rate, the oil producers came into the conference with a set position worked out at previous meetings of their own: oil prices will be held at their present disruptively high level until Sept. 30 and may then be adjusted to reflect world inflation and price increases on manufactured goods the oil producers buy. The world recession has reduced demand for oil enough to create a sizable glut, but OPEC members are cutting production rather than making any substantial reduction in prices. "We are masters of the oil price," declared Messaoud Ait-Chaalal, chief Algerian delegate to the Paris conference.

Strategically, the oil producers are very cleverly enlisting the support of the Third World by demanding that energy problems not be discussed in isolation. They are endorsing the controversial contention of the developing countries that fluctuating world commodity prices need some sort of price-stabilization arrangement. The four oil exporting nations at the Paris meeting (Algeria, Iran, Saudi Arabia and Venezuela) succeeded in getting the very word energy removed from the formal title of the conference. Sid-Ahmed Ghozali, chief of Algeria's state oil company, Sonatrach, snapped, "We didn't ask for an energy conference. You are the ones who want to discuss oil."

U.S. Delegate Robinson urged that non-oil commodities be considered in parallel, separate talks. But the oil producers, along with the three less developed nations at the Paris meeting (Brazil, India and Zaire), insisted that at least some non-oil commodities be talked about at any bigger conference; at week's end delegates were still trying to resolve the issue. The underdeveloped countries have generally been hurt even more than industrialized nations by high oil prices: India last year paid about $2 billion for imported oil, and Brazil expended nearly half of its foreign-currency earnings to buy petroleum. But the less developed countries generally feel politically more attuned to the OPEC states than to the capitalist West, and would like to use this international conference to steady the prices of the raw materials they themselves sell (prices of many non-oil commodities have been falling sharply lately).

Vain Hope. It now seems that a summer conference, if any ever convenes, will have to concern itself with raw materials other than oil. That approach is certain to cause confusion. The industrial nations are not united on what to do about non-oil commodities. Some European nations might agree to price-stabilizing pacts, which the U.S. has traditionally opposed on free-market principles, but is now reconsidering.

The only recourse for consuming nations seems to be to pursue efforts to hold down oil imports and minimize the damage caused by high prices while hoping for market pressures to force a price break. But so far that has been a vain hope. On the defensive front, however, some progress has been made. At a separate meeting in Paris last week, the 24 nations of the Organization for Economic Cooperation and Development formally created the long-discussed $25 billion "safety net" of standby credits that can be used by any member otherwise unable to pay its oil bills.

But the U.S., which had hoped to set an example of oil conservation for other consuming countries, is still deeply divided on its internal strategy. The Senate last week passed a bill that would compel the Administration to institute a wide-ranging series of mandatory conservation programs. The bill, though, would also force price rollbacks of an estimated 10 per gal. on gasoline, in direct opposition to Ford's insistence that prices should be allowed to rise enough to compel consumers to save fuel. A presidential veto is possible, and could leave the U.S. in the position of having to prepare for an international conference without any coherent energy policy at home.

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