DON'T BLAME THE ARABS
In this exclusive interview with Justin Marozzi, Opec's new secretary
general, Dr Ali Rodriguez-Araque, accuses the West of racism and humbug, and calls for an end to sanctions against Iraq
Vienna YOU might think that the head office of Opec would be a fairly swish affair. This is the organisation that represents 40 per cent of global crude-oil production and 77 per cent of its proven reserves. As my taxi approaches through wintry Vienna, I imagine that the sheikhs will have run to something intimidating: in towering black glass, perhaps, its interior a gold-encrusted marblefest complete with voice-activated lifts, infrared-controlled urinals, a line of black helicopter taxis, and — why not? — a dozen Ray-Banned Amazonian female bodyguards.
We pull up outside a shabby little prefab, dwarfed on either side by a bank and IBM. It looks like a Best Western motel, only it has a blue flag on the roof and a sculpture in front, resembling a couple of mushrooms squashed on top of each other. Can this really be the headquarters of the Organisation of the Petroleum Exporting Countries cartel? Is this the same Opec (motto: 'Co-operation and Stability') that decided to punish Western governments for supporting Israel in the Arab-Israel war, hijacked the world's energy supply in 1973, and sent prices for every 159-litre barrel rocketing from $2.50 to $11.50?
For those of us who remember that crisis — listening by candlelight to Ted Heath, the three-day week, rampant inflation — the word Opec sounds like a knell. Some will tell you that we're heading for a similar experience today. The global economy is slowing down sharply, they say, and, with a threefold increase in the price of oil in recent years, Opec's Arabs have their oily thumbs around our collective windpipe once again.
Stepping inside, I see that reception consists of a desk manned, according to their name-plaques, by Messrs Mohammed El Alaka and Fadhil Sharad. This is the HQ of the world's biggest oil barons — Saudi Arabia, Iran, Iraq, Venezuela, United Arab Emirates, Nigeria, Kuwait, Libya, Algeria, Indonesia and Qatar — but so far there's nothing slick about Opec.
'Salem aleikum [Peace be with you]. Aza
yek? [How are youl' I venture. `Waleikum se/am [And peace be on you],' Mohammed replies, pulling on his cigarette. His colleague continues to eat a sandwich.
Mohammed comes from Egypt. It seems a long way to go to recruit a receptionist, but it allows me to compare the weather in Cairo with that of Vienna. Outside, the Danube is blurred beneath thick falling snow.
After a few more pleasantries, I am whisked upstairs to meet Dr Ali Rodriguez-Araque, Opec's new secretarygeneral. Like the rest of the Opec building, his office has a forlorn, 1960s sort of air. Someone has filled it with enough greenery to recreate the jungle, perhaps in the hope of making him feel at home.
Dr Rodriguez, a former Venezuelan oil minister, is a small man, elegantly dressed in a grey suit and blue silk tie. This is the most powerful figure in the cartel, the oil baron's oil baron. He co-ordinates the bick ering oil ministers and ensures that Opec speaks with a single voice. In the imagina tion of Opec's critics, I suppose, he's the evil genius, the Blofeld de nos fours who can send the price of four-star rocketing with a twitch upon the tap. He's the South American frontman for Arab sheikhs who bathe in milk, treat London and Paris as glorified bordellos, and fritter millions on blackjack. As the American economic commentator Irwin Stelzer wrote recently, on the subject of oil-price rises and Arab ingratitude: 'Powell and Cheney took the decision to risk American lives to prevent Kuwait from becoming a province of Iraq, while some members of the Kuwaiti ruling class fled to the Dorchester hotel and disported themselves in Harrods and in London's casinos.' Rodriguez is not impressed by this line of criticism. The comment has a 'flavour of blackmail', he says in heavily accented English.
Rodriguez has started with a bang. Less than two weeks after becoming ()pee supremo at the beginning of January, he announced that the organisation's 10+1 members (under UN sanctions, Iraq is not allowed to participate in Opec decision-making) would cut oil production by 1.5 million barrels a day. With the US economy apparently teetering on the brink of recession, this was not a move destined to win Dr Rodriguez Western acclaim. Worse, he warned that there might be more of the same when Opec meets again next month.
'We thought it was a bit premature,' says Leo Drollas, chief economist and deputy director of the London-based Centre for Global Energy Studies, which describes itself as an independent thinktank. 'The decision is not looking good and it's playing a role in bringing on a recession in the USA, increasing costs and lowering profitability. Another cut in production would be over the top.'
Basil Papachristidis, who chairs an oil transportation business, argues that Opec's latest move may be counterproductive. 'What's pertinent is whether we agree with the cutbacks Opec has once again decided to impose and whether they are justified. We don't happen to think so. We think cutbacks may not be appropriate now, for the interests of both consuming and producing countries. We don't think the world is awash with oil, and, if Opec pushes prices up too aggressively, it'll simply backfire.' Sharp price rises, according to this analysis, merely encourage both non-Opec oil exploration and the use of other energy sources.
Were Rodriguez to drive his Mercedes 500 on to a British petrol-station forecourt, and announce his identity to those filling their tanks, the chances are that he would not be mobbed by admirers. What does all this talk of 'bringing stability to the market' mean? If Opec has brought stability, then why has the price of oil leapt from $12 a barrel in 1998 to more than $25 today? Call that stability, Rodriguez?
'The main point for Opec this year, and in the near future, is to work to guarantee the stabilisation of the market,' he replies steadfastly. 'But it isn't enough for Opec to maintain stability. There are many other factors which have influences. As you know, there is the issue of tax within the OECD, and mainly European countries.
Then there are problems with transportation, problems with market futures and refining in the USA, and other external economic problems.'
In other words, says Rodriguez, Western pain is nothing — or nothing much — to do with him. Opec's website offers a neat explanation of 'Why You Pay So Much for Gasoline and Other Oil Products'. That, and the recent Opec publication entitled Who Gets What from Imported Oil, should make embarrassing reading for our lightfingered Chancellor, Gordon Brown, and his counterparts in consuming countries.
They show, for instance, that taxes represent 68 per cent of the price of a barrel of oil in the European Union. Oil exporters receive only 16 per cent of the final price, with the remaining 16 per cent taken by refiners and marketers. In fact, far from being a low-tax, free-market paragon, the UK is the world's worst culprit, bar none, for pocketing petropounds. In 1995, the price of UK crude was $17.3 a barrel, rising to $21.1 in 1996, then slumping to $12.6 in 1998 before climbing back to $17.6 in 1999.
During the same period, composite barrel prices, instead of reflecting this fluctuating trend, rose constantly, from $109.1 a barrel in 1995 to $141.5 in 1999. The statistics are dry, but it's a point worth making. The rea son for the inexorable price rises? Step forward the Treasury, whose plunder from every refined-oil barrel shot up from $64.6 in 1995 to a whopping — some would say scandalous — $96.1 in 1999.
Industry experts confirm this analysis. Most of the Opec countries have not been blessed with the temperate climate of Europe or America. They have deserts and rock and blazing sun. But they also have reserves of this one natural resource, and they naturally desire to profit from them. Why should their poor people be prevented from enjoying the prosperity that oil brings simply because Gordon wants to divert money into the British NHS, for example?
'I think it's harsh to blame Opec and equally harsh to blame the oil companies,' argues Steve Turner, oil analyst at Commerzbank Securities in London. 'It's a source of great friction between consuming countries and Opec that Gordon Brown gets more out of a barrel of oil than the Saudis or Opec.' (Not only that, but 'Fingers' Brown's oil taxes are non-hypothecated: that is to say, they are only partly directed towards things you might expect, like roads. According to the Centre for Global Energy Studies, the Treasury trousered £35 billion from fuel duty and vehicle tax in 1998-99, yet the Blair government condescended to spend a trifling £5 billion on road maintenance and improvements that year.) Opec has been scapegoated, says one former British oilman. 'They resent this post-colonial arrogance which says "stuff your revenue from your product, we want the revenue from your product". When you consider that in the UK 75 per cent of the pump price is government tax, you can see their point.' This figure compares with 71 per cent in France, 69 per cent in Germany and just 26 per cent in the USA, All the same, it seems important to try to goad Dr Rodriguez. Suppose the Western treasuries did cut their taxes. Wouldn't the Saudis just move the price of crude north, to compensate? They'd just stuff more money into Swiss bank accounts and buy up the entire contents of FAO Schwarz, Tiffany, and the like, wouldn't they? 'On the contrary. That's ridiculous. If you compare income accruing from oil in our countries with that in OECD countries, you'll find the latter is greater. In the last 20 years, OECD taxation on oil increased by more than 350 per cent and in the EU by more than 500 per cent. During the same time the price of oil in real terms fell 50 per cent. I wonder whether he feels that there is any racism against his organisation and the people he represents. Are Western governments whipping up anger against the Middle Eastern governments involved in oil-price rises? Are they colluding with prejudice against `towelheads' and 'camel jockeys'? Dr Rodriguez nods emphatically. 'Not only against the population of Opec countries. Even against other people. After the fall of the socialist bloc these tendencies became very strong in some countries, especially in Europe. It is an irony that the main governments are supporters of free trade but many of them are against the free circulation of the world's population. They want to globalise trade but not humanity.'
The West is too high-handed for its own good, says Rodriguez, and that is evident in its treatment of Iraq, which was one of the five founding members of Opec and sits on the second largest oil reserves in the world after Saudi Arabia. The best thing for the energy world would be to normalise the situation with Iraq.' This would remove the current opacity about how much oil Iraq is releasing on to the global market. Is the Opec secretary-general calling for sanctions against Baghdad to be lifted? 'Yes, but it's not up to Opec,' he says. You can tell that he wishes it were.
And then, of course, there is global warming, which Rodriguez sees as just another way for rich, developed nations to beat the Arabs over the head, and slap lucrative taxes on oil. Dr Rodriguez recalls the Prescottian shambles of the recent climate-change meeting at The Hague. 'It's very, very simple to blame Opec for this problem. We have a taskforce looking at it. What is clear is that the solution depends not exclusively on fossil fuel.' Opec's research estimates that the cartel could lose as much as $65 billion per annum, if Western governments were truly to comply with the targets of the Kyoto Protocol.
The new Bush administration in the USA, which has vowed to make energy policy a top priority and is keen to reduce its dependence on Opec oil, will find Dr Rodriguez a self-confident leader of a resurgent organisation. Until Western governments honestly address the crippling energy taxes they impose, Opec feels under little pressure to reduce the price of oil from its desired range of $22 to S28 a barrel. 'The irony is that they try to put pressure on us to reduce prices, but when prices drop, they don't drop taxes,' says Dr Rodriguez. 'Many times they increase taxes in order to maintain income. Is this taxation a normal practice of free trade in the world when it is used as a tool to reduce consumption?'
It is a good question. It is Fingers Brown and his Western counterparts, rather than Opec, who have a lot of explaining to do.
Justin Marozzi is a contributing editor of The Spectator.