Saudi Arabia a Wild Goodbye to Mr. Oil

By John Greenwald

To a world that often cowered before him, he was "Mr. Oil," the very symbol of what many viewed as Arab rapaciousness and relentless resolve to strangle the West. As the chief strategist and unofficial spokesman of the Organization of Petroleum Exporting Countries for more than two decades, Sheik Ahmed Zaki Yamani could seemingly drive oil prices -- and the global economy -- up or down at will. A few words from the unfailingly suave sheik could make government officials shudder and cause stock markets from New York City to New Delhi to fall. With gallows humor, wags depicted OPEC at the height of its power as a highwayman who seizes his victim by the throat and cries, "Yamani or your life!"

Last week Yamani's legendary power came to an end. In a royal decree, Saudi Arabia's King Fahd ibn Abdul Aziz dismissed Yamani, 56, as his Petroleum and Mineral Resources Minister, a post he had held since 1962. Planning Minister Hisham Nazer, a longtime Yamani rival, was named to take his place until a permanent new oil minister is named. Nazer's first official act was to call for an emergency meeting of the pricing committee of OPEC, whose 13 members include Nigeria, Venezuela and Indonesia, as well as seven Arab countries. The avowed purpose of the meeting, which is expected to be held later this week, is to find ways to push up prices, which fell under Yamani's policy of pumping unlimited quantities of oil.

The news of Yamani's ouster, spreading instantly through government offices, trading floors and boardrooms around the world, set off a kind of mini-panic. Markets careened as speculators struggled to grasp what the departure meant. Spot oil prices first dropped more than a $1.10 per bbl. in New York City and then climbed nearly $2 to about $15.25 by week's end. Prices seesawed in London and Rotterdam. In Washington, a bewildered Reagan Administration official said the firing "caught us all by surprise."

The ousted minister had apparently run afoul of the ruling House of Saud on several counts. By electing to pump Saudi oil as fast as he could at a time when there was already a plentiful world supply, Yamani sparked a price war that caused OPEC prices to plunge from some $30 per bbl. last December to less than $10 this spring. Yamani's goal was to flood the world with cheap oil and thereby drive high-cost producers in the U.S., Britain and elsewhere out of business. OPEC would then be free to raise prices once again.

Experts say Yamani clung to his strategy despite growing opposition from King Fahd, who has called for a price of at least $18 per bbl. to boost Saudi oil earnings. Yamani countered that producers could control either prices or output, but not both at once. During OPEC's 17-day meeting in Geneva last month, Fahd repeatedly intervened from Riyadh on several key issues. The Geneva session wound up endorsing price-raising production limits, which Yamani initially opposed, through the end of 1986.

The King's desire for higher prices was due in part to pressure from Iran, which relies on energy earnings to finance its economy and pay for its six- year war with Iraq. While the Saudis privately support Iraq in the conflict, they fear Iran's military might as well as its influence over potentially seditious Islamic fundamentalists. Iran warned in July that military reprisals might be directed at Saudia Arabia, Kuwait and any other country that gave Iraq money to buy arms. Yamani's dismissal ended a remarkable career. The son of a religious judge in Mecca, Islam's holiest city, Yamani graduated from Cairo University and in 1956 received a degree from Harvard Law School. In 1958 he became a government legal adviser and protege of Crown Prince (later King) Faisal, who named the 32-year-old attorney oil minister in 1962. At that time OPEC, which had been founded only two years earlier, was an obscure group whose members had come together to form a united front against the major oil companies that then controlled world oil prices.

As much at ease in a tailored business suit as in a traditional flowing Bedouin thobe, or lengthy shirt, Yamani was the chief architect of the 1973-74 OPEC oil embargo. That historic action, which drastically cut back OPEC exports to several Western nations, including the U.S., more than quadrupled oil prices within 15 months and caused a severe global slump and then nearly a decade of rising inflation. By 1979, however, OPEC was already slipping from Saudi control. In that year the fall of the Shah of Iran led to a second worldwide oil shock, which nearly doubled prices once again and brought on the sharp recession of 1982. The downturn, combined with conservation and the development of new energy sources, considerably reduced the group's power. Since late 1985 the world has been awash in oil, and OPEC can no longer dictate prices.

As energy experts pondered Yamani's ouster last week, many rose to the veteran minister's defense. They noted that while he is sometimes viewed as the West's inveterate enemy, Yamani has often taken conciliatory stances. "Since the last few years have seen a deterioration in Saudi revenues, he may have been used as a scapegoat," said Saad-Eddin Ibrahim, a professor of political sociology at the American University in Cairo.

Amid the furor, Yamani last week telephoned a close friend in Geneva, where OPEC meets and the former oil minister keeps an apartment. "What's there to say," Yamani remarked. "It's the King's decision, and that's life." He added that he would "be around" when the OPEC ministers reconvene in Geneva early in December. Yamani's friend was philosophical: "Here's one man who won't have to worry about keeping himself busy," he said. "Every headhunter ) in Big Oil must be after him." To be sure. Big Oil and Mr. Oil know each other well.

With reporting by David S. Jackson/Cairo, with other bureaus cr; AZZI WOODFIN CAMP