The Organization of the Petroleum Exporting Countries is an institution comprised of the governments of different nations (Venezuela, Saudi Arabia, Iran, Nigeria, Kuwait, Qatar, Iraq, Algeria, the United Arab Emirates, Indonesia and Libya) whose principal objectives are to defend the interests of its partners, the stabilization of the oil market and the receipt of a fair price for a barrel of crude.
Venezuela played an important part in the founding of OPEC, to the extent that
in 1967, seven years after its creation, another of its founders Sheik Abdullah Al Tariki, went so far as to say that “... without the Venezuelans around to keep it on its feet, the OPEC would have died a long time ago”.
Precedents
Towards the end of the 20s last century, the so-called Achnacarry Agreement took place (the name is that of a castle in Scotland) where the main oil magnates of the major oil companies of the time met to establish a policy that would satisfy consumption of a determined area with the production from the same area; reduce production where there was a surplus and control future production, thus controlling oil prices.
Parallel to this, the Texas Railroad Regulation Agency established production quotas for the independent oil producers of the US State of Texas. At this time, the US authorities were being faced with the collapse of energy prices caused by over-production due to the ferocious competition among these independent producers.
These elements contributed to the formation of intellectual nationalistic principles arising in the oil producing countries as a defense against the decisions contemplated by the Achnacarry Agreement, with the purpose of promoting fiscal and legal changes, based on the doctrine of the important antecedent established by the Texas Railroad Regulation Agency.
The origin of the Organization is also related to the price crisis that arose at the end of World War II, since oil production that had risen significantly during the
conflicts was affected by a sharp fall in demand.
Home-grown Venezuelan achievements
Between Achnacarry and the Maadi Agreement, the power to control the market was in the hands of the multinational oil companies. Nevertheless, important progress had already been made in Venezuela in fiscal matters. Almost since the first days of oil production in the country, a slow but sure process of adaptation of the legal framework had begun, seeking a greater participation of the State in the profits obtained by the multinationals from the extraction of our hydrocarbons.
When World War II broke out, Venezuela increased its negotiation power with the multinational oil corporations. President Isaías Medina Angarita led the tax reform of 1943, held public meetings all over the country and visited the oil fields and union centers and warned that if an agreement were not reached with these companies, the nation would take its own unilateral decision.
In his book “The Oil Issue”, Bernard Mommer concludes that thanks to the 1943 oil reform “ownership of the oil reserves was definitively established as state-owned and national”, and, moreover, a clear differentiation was marked of the State’s role “as owner and sovereign”.
A birth in Baghdad
The OPEC was incorporated in Baghdad, the capital of Iraq, on September, 1960, as an interstate and international institution, that represents the governments of the member countries – on the doctrinal basis of “conserving a non-renewable and exhaustible resource” and the search for a “fair and reasonable valuation of such resource” – and to which the following goals were assigned: the defense of the individual and collective interests of its partners, the maintenance of the stability of the prices of crude and the coordination and unification of its oil policies. At the same time, it was proposed that a reliable and economic supply be guaranteed for the consumer nations.
Its by-laws establish that the Organization will “at all time lend due attention to the interests of the producer nations and to the need to ensure a stable income
for the producer countries.” They also state that the institution will be guided
by the principle of equal sovereignty of its member countries.
Moreover, it is also held that “if, as a result of the application of a determined decision of the Organization, any company or companies impose direct or indirect sanctions against one or several members, no other member shall accept any offer or special treatment, neither in the form of increase of oil exports nor in the improvement of prices, that may be offered by the company or companies, with the intention of inhibiting the decisions of the Organization”.
The OPEC has four basic bodies: the Conference, the Board of Governors, the Secretariat and the Economic Commission, structures that are explained as follows:
• The Conference is the maximum authority. It is composed by Leaders and Ministers of each of the member countries. Each Nation is represented in the Conference by its Oil Minister. This body controls the most important policies of the organization and meets twice a year, unless special conferences are called.
• The Board of Governors is formed by Officers appointed by each country. This is the authority that drafts the resolutions and puts them into practice. Its president is appointed by the Conference.
• The General Secretariat of the OPEC is the legal representative of the institution.
• The Economic Commission is the body in charge of watching over the situation in the markets and oil prices and preparing the draft resolutions that are to be subject to decisions in the Conference.
Rebirth
Up until that time, the initiatives in the oil industry were in the hands of the OPEC. However, the major consumer countries launched a counter-offensive that included the introduction of market mechanisms where they did not exist, future pricing, and the creation of institutions to politically and directly with the Organization, such as the case of the International Energy Agency. At the same time, within the countries of the Organization members, an ideology associated with the free market was advanced to conduct a policy of “opening-up,” without the presence of strong institutions that could look after national interests and by means of contracts that were favorable to the purposes of the multinationals.
This situation brought about a long period of hibernation, between the end of the 80s and almost the whole of the decade of the 90s, when the OPEC kept
little control over production and prices. This period was also characterized by
the indiscipline and lack of coordination among its members.
Nevertheless, at the close of the 20th Century, the OPEC was on the move again. Following the election triumph of December 1998 of President Hugo Chávez, the Organization recovered it vital role in the world energy market. The national oil policies are now designed taking in to account the basic tenets of the institution, i.e., the principle of demanding and exercising the sovereign right of the country to administer our main natural resource; oil.
As of 1999, Venezuela has participated as a leading actor in the strategy of returning the OPEC to being a positive political instrument for the underdeveloped oil producing countries, particularly for the poorest among them; in ratifying the original principles, exactly as was established at the II Summit of Heads of State, held in Caracas in September (25 years after the one held in Algiers in 1975); in the design, proposal and application of the price band system for, and the drafting of a long-term policy for the Organization, guidelines that include not only the economic and pricing factor, but also the
the environment and social questions.
Appointment in Caracas
On June 1, 2006, the 141st Special Meeting of the OPEC was held in Caracas, a meeting in which Ministers of Energy of the partner countries of the Organization and also of the oil producing countries not belonging to the institution, such as Egypt, Syria and Angola.
The holding of this event in Venezuela has been considered very important, since Venezuela is employing an oil policy that demands and rescues the principles that were the very reason for founding the OPEC, the policy of Full Oil Sovereignty.
During the inauguration ceremony of this event, the President of the Bolivarian Republic, Hugo Chávez, stated that the OPEC has signified a flag of independence for the countries of the Third World. “One of the most important revolutionary events, in my opinion, in the history of the Third World, was the birth of OPEC”, he said.
From the publication Venezuela, major player in the OPEC