Iran and OPEC

Never in the 20th century have oil prices been so volatile as during the last two years since OPEC put an end to the unilateral pricing of oil by the major international oil companies. During the 1970's OPEC was dominated by three leading members, Saudi Arabia, Iran and Iraq, who struggled for a balance of power. There was a time when the barrelage weight of Saudi Arabia was balanced or even overridden by the political clout of other regional OPEC players, such as Iran, in particular, Iraq, Algeria, and even Libya. Since the two Persian Gulf wars, the whole politico-economic balance has changed. Iraq is prostrate, Libya is a world pariah and both countries have been put under strict international sanctions. Algeria is in turmoil and on the verge of a civil war. Iran is suffering from international isolation and a deep financial crisis. Consequently, Saudi Arabia has become a kind of oil super power who can dictate OPEC policy. What is almost certain is that OPEC's share of world oil consumption will have risen considerably by the end of the century and this will put the organization in a strong position to play a leading role in the oil market.

However, most of OPEC's members will by then have reached their peak capacity. This is the case of Gabon, Algeria, Indonesia, Libya, Nigeria and Qatar. By contrast, Saudi Arabia, Iraq, Kuwait, UAE, Iran and Venezuela__with combined oil reserves of 700 billion barrels__would be capable of a very substantial increase in their production capacity. The OPEC of the future would be a club of limited membership comprising the five original founding members (Saudi Arabia, Iran, Iraq, Kuwait and Venezuela) plus UAE that will essentially determine OPEC's policy.

Iran's oil output capacity is on the wane. With due regard for the fact that internal consumption is growing at a rapid rate__and barring capacity expansion, substitution of gas for oil in domestic consumption, or changes in the oil consumption rates__Iran's export potential will, by the end of the decade, be reduced to around 1.7 million b/d. This will place the country in the position of sixth exporter in OPEC after Saudi Arabia, Iraq, Kuwait, UAE and Venezuela. However, resource-wise, Iran still has the potential to regain its rightful position within OPEC, provided it takes necessary measures to revive the oil industry, to change its international image and its relations with OPEC Arab members, and rid itself of the current state of international politico-economic isolation.

* Abstract prepared by the author

Parviz Mina
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