Crown Prince Fahd has reaffirmed Saudi Arabia's determination to hold the line on oil prices, apparently quashing any remaining prospect for an early compromise to end the price war in the Organization of Petroleum Exporting Countries.
The prince, who as the kingdom's chief administrative officer is running the country while King Khalid recuperates from surgery in London, said the Saudi position was based on the "full conviction" that oil prices must be used as a tool for "fighting international inflation."
He said that "we absolutely do not like to have any split in the ranks of OPEC," and that the Saudis have "done all we can to narrow differences of opinion" in the producers' cartel. But he added that "maintaining world economic stability" is one of the kingdom's principal policy objectives. He offered no indication that Saudis would heed the pleas of other OPEC states for a price compromise.
The prince's remarks were made in written responses to questions submitted by The Washington Post. They are consistant with statements over the past two weeks by the Saudi petroleum minister, Sheikh Ahmed Zaki Yamani, but have additional import because Yamani takes his orders from Fahd.
The oil-price split developed at the OPEC conference in Qatar in December, where Saudi Arabia and the United Arab Emirates decided to raise their oil prices for 1977 by 5 per cent over last year. All 11 other members raised prices by 10 per cent Jan. 1 and are committed to a further rise of 5 per cent in July.
Yamani predicted that the current split would not last long. He said the Saudis would increase their production to undercut the increased prices of the other producers and that countries that need the cash would be forced back to the Saudi price because they could not sustain a cut in production if their buyers shifted to lower-priced Saudi crude.
Oil economists and oil industry officials predicted that the two-tier system would be short-lived because it was difficult to administer.
But more than two months have passed since the Qatar meeting, and positions seem to be hardening. The Saudis have already rejected a compromise offered by Qatar in which all OPEC members would level off at 10 per cent for this year and another 10 per cent next year.
The two major producing countries expected to be hardest hit by the Saudi move, Iran and Iraq, have strongly criticized the Saudis and reported some loss of revenue, but apparently the harsh winter in the United States has spurred, demand for oil and enabled them to keep their exports up.
Fahd said that relations between his country and Iran and Iraq "are thanks to God, very good and cannot be affected by a difference in opinion inside OPEC. This is because our relations with them are too strong to be affected by such casual matters."
The price of oil, however, is hardly a "casual matter" to the Iranians and the Iraqie. Unlike Saudi Arabia, they are spending their oil income as fast as they get it. But so far there is no sign that they are any more willing to compromise than the Saudis. The 15 per cent increase for this year was already less than they wanted.
Fahd gave no reasons other than economic for the Saudi position on oil prices.
In December Yamani said the Saudis expected a show of U.S. "appreciation" for the price restraint in the form of pressure on Israel to meet Arab terms for a Middle East peace settlement.
Since then, however, the Saudis have officially dropped that theme, saying their only consideration was the impact that oil prices would have on the world economy, on their own massive investments abroad and on the stability of friendly governments, particularly in Western Europe.
On another matter, Prince Fahd said the Saudi response to the Egyptian economic crisis that brought on last month's food-price riots was that "Saudi Arabia's sides with our dear sister-state Egypt and will not begrudge it anything.
For the Egyptians, who are clamoring for massive economic aid from the Arab oil states, that is what they want to hear. But so far as is know this and similar pledges since the riots have not brought in any actual cashto bail out the Egyptian economy.