When the ministerial meeting of the Organization of Petroleum Exporting Countries opens here Saturday, a nation that is not a member will be at the center of every major decision taken by the producer's cartel, including the expected rise in oil prices.
That nation is the United States. As consumers, producer, political power in the Middle East, supplier of industrial commodities, defender of the dollar and custodian of OPEC investments, the U.S. is an inescapble presence. The price of oil, the codiotopn of the American economy and the stability of the Middle East are factor that go beyond the simple desire of the oil states to get the best for their crude.
It is a foregoing conclusion that the price of oil going up from five to ten percent after a two year freeze at $12.70 a barrel. The oil minister of Saudi Arabai, Ahmed Zaki Yamani, said today that a price increase is 'inevitable.' Since it is the Saudis who are responsible for the freeze of the past two years, that eliminates the suspense before the meeting even begins.
The quesition facing OPEC is not whether to raise prices but how much prices can be raised without adding to the inflation in the industrial counties, especially the United States, from which they buy so many of the things they need, and without debasing further the value of the dollar, in which so many of their assets are invested.
Mana Said Oteiba, the oil minister of the United Arab Emirates, who recently toured the major oil producing countries of the Middle East seeking a consensus on price, said this week that any increase "has to be justified, so that it will not leave any negative effects on the dollar. After all, we are using the dollar as the medium for oil revenue, for our oil, and we are placing most of our investments in the dollar market."
Yamani said today that Saudi Arabia's position "coincides with that of the U.A.E." He said, "Both of us invest in the dollar. Most of our currency reserves are also in dollars, and any action from our side at present, in the midst of a situation where psychological and emotional reactions over-ride all other factors, such an action would lead to further deterioration in oil prices and consequently further deterioration in the value of the dollar, which reflects on oil prices."
Other OPEC countries that do not share the comfortable position of Saudi Arabia and the U.A.E. in having large cash surpluses take a different view.
Libya and Iraq, as usual, are pressing for price increases of up to 25 percent to make up for what they say they have lost in purchasing power because of the decline of the dollar and inflation in the industralized states. They have also recommended that OPEC jettison the dollar as its pricing unit.
At a meeting earlier this week of the Organization of Arab Petroleum Exporting Countries, which is separate from OPEC, the Libyan oil minister, Ezedin Mabrouk, told reporters, "Oil producer are concerned about the international economy, but not to the point of suicide." He said that the United States, in arguing for price restraint was representing only is own interests, and today he called for an increase of 20 percent.
Bankers and political observers around the Gulf, however, believe that the position taken by Iraq and Libya is essentially for public consumption and is not likely to prevail in OPEC's closed sessions.
The real OPEC dilemma showed up in figures given by Odeh Aburdene, an economist with the Arab Monetary Fund here. He said that the total foreign assests of the OPEC countries are valued at $185 billion, of which $130 billion is actually in dollar-denominated investments. That $130 billion is equal in buying power to only $75 billion in 1974 dollars he said.
Thus the OPEC sates are seeking to rebuild the value of their earnings and investments by boosting in prices, without further, undercutting the value of the dollar, specialists believe. In this view, OPCE-or at least its moderate pro-Western members like Saudi Arebia-is more a partner of cess, since the sentiment for drooping the dollar as the OPEC pricing uinit appears to have dwindled as the dollar firmed.
Even before Blumenthal's trip, Saudi Arabia was resisting pressure from Kuwait, Iraq and Libya to press for a big price increase and drop the dollar in favor of a "basket" or group of currencies.
OPEC Secretary General Ali Jaidah confirmed today that a report from an OPEC finance committee on this quesition is on the agenda. Iraq, Libya and perhaps Kuwait are in favor, but the Saudis are opposed, and regional bankers except the Saudis to prevail.
In a speech in London in October, Yamani said, "We still hesitate to depart from the dollar as a pricing currency for oil. We are afraid of the consequences on the value of the dollar. A large portion or our investment is in dollars?
Today he said, "We have no interest at present in abandoning the dollar and resorting back to it [when it rises again]. Such an action would be irresponsible, short-sighted and unwise."
The Saudis have more than enough money and their close political and military ties to the U.S. reinforce their desire to see things the U.S. way. In addition, at the time of Yamani's speech in October there was an oversupply of oil on the world market, due at least in part to production in Alaska.
Since then. however, the surplus has reportedly evaporated because of the paralysis of the oil industry in Iran.
The U.S. is not a major buyer of Iranian oil but is a political bulwark to the Shah, who had been unable to get Iran's lifeline flowing again. Secretary General Jaidah minimized the importance of the Iranian crisis today, saying it was not a price factor and would not by itself lead to a worldwide shortage.
But the Iranian situation brings a new shape to this meeting. At past OPEC sessions, Iran was an influential voice and a rival to the Saudis for dominance. This time the Iranians have already said they will accept whatever the majority decides. "The shah's problem isn't prices, it's getting the stuff out at all," observed a banker just returned from Iran.
Two years ago, when Saudi Arabia and the United Arab Emirates dramatically refused to raise their prices as much as the other 11 OPEC members, Yamani tied his country's action to a deman for "consideration" by the U.S. of the Arab view on Middle East peace issues.
He alluded to this today, saying there would be "grave consequences" if the Middle East question is not settled. But there is little evidence that the apparent failure of Secretary of State Cyrus Vance's 11th-hour attempt to salvage a peace treaty between Egypt and Israel will be a major factor at this meeting. Th issues instead are economic and that means the dollar. A19