Some Blunt Talk from OPEC

For 18 years Sheik Ahmed Zaki Yamani has been Saudi Arabian Oil Minister and Mr. OPEC. Just before leaving for this week's meeting of the oil cartel in Bali, Indonesia, Yamani sat down in his Riyadh office with TIME Correspondent Bruce van Voorst to discuss the energy outlook. Some excerpts from the interview:

Q. There was an oil shock in 1974 and another in 1979. Does the world now face a third one?

A. It depends on how you behave. Your storage tanks have been overflowing. If your oil companies act responsibly and start drawing down these stocks to head off unnecessary panic, I think you'll get through this winter without price increases like those in 1979. If you keep stocks at present levels, the price will go up to at least $60 per bbl.

Q. Why would companies hoard oil?

A. Either because of a psychological fear of shortages or because it is in their interest to let the price of oil rise and then make more money. They are clever people.

Q. How long is the Persian Gulf war likely to continue?

A. Unless the Iraqis and Iranians can pump and export some oil, the war will end very soon. They need the revenues.

Q. How severe is the oilfield damage?

A. We understand that the damage to the Iraqi installations is not that bad. It appears that Iraq could pump at least 1.6 million bbl. per day early next year. The Iranians probably much less.

Q. Could the U.S. protect Saudi Arabia in a crisis in the Middle East?

A. You are not protecting us. When you send your airplanes, you are defending your own interests. If anything happens to the oilfields of Saudi Arabia, your economy will be in ruins. Our defense should be strengthened, and we expect the U.S. to give us the help we need.

Q. As in 1974, many developing nations are struggling to pay their oil bills. Will the world's banks be able to successfully recycle surplus OPEC money into loans for these countries?

A. We were more worried in 1974 about the recycling problem. The sums of money are bigger now, but we understand the process better. I don't think the banking system has reached its lending capacity. It can expand where necessary.

Q. What role will the big international oil companies play in the future?

A. Gradually they lost their role in oil exploration and production, and now they are losing it in refining and the petrochemical industry. The companies were the buffer element between the producers and the consumers until we took the pricing matter into our own hands. I don't think that you can eliminate companies all of a sudden. They'll be there, but only with their technology and as a service operation.

Q. Did the Carter freeze of Iranian assets have a serious impact on your thinking about investments in the U.S.?

A. If anyone tells you it did not affect our thinking, then he is lying.

Q. What are the prospects that OPEC will index the price of oil to protect it from Western inflation?

A. Good. Not under the present circumstances, but immediately after the Iran-Iraq war is over. Indexation is the cornerstone of our long-term strategy.

Q. Do you have any plans to cut production back to the 8.5 million bbl. per day level that existed prior to the Iranian revolution?

A. If I returned to a ceiling of 8.5 million bbl. per day, that would immediately affect you. It would remove 2.5 million bbl. per day from the market, and the price of oil would be $60 at least. But why should we keep our production at abnormally high levels without a quid pro quo?

Q. During the Arab oil embargo in 1973, there was talk of U.S. military intervention in the Middle East. Does that possibility concern you?

A. It sounds like a joke. For anyone who knows the nature of the oilfields and the sensitivity of the area, it cannot be taken seriously.

This file is automatically generated by a robot program, so viewer discretion is required.