Saudi Arabia's effort to get the Organization of Petroleum Exporting Countries to give priority to an agreement on long-term strategy that would unify oil pricing and production levels ran into strong opposition here today from Iran and other OPEC members demanding immediate, new price rises.
The Saudis agreed to a special session of oil ministers Wednesday but indicated that they would not follow throught on recent hints of a cutback in their oil production unless there is agreement on a long-term strategy.
Saudi Arabia, which is using its leverage as OPEC's largest producer to get such a strategy adopted, appears to be trying at this meeting of oil, finance and foreign ministers to reassert its traditional leading role in the organization.
Meanwhile, the Iranian delegation threatened to walk out if original plans were carried out to make Irag chairman of the conference in anticipation of an OPEC summit meeting in the Iraqi capital of Baghdad, conference sources reported.
Iranian Oil Minister Ali Akbar Moinfar also tried to upset the agenda by calling for discussion of current oil prices and production levels before adoption of an elaborate long-term strategy on prices. He told reporters that it was a joke to discuss long-term prices when there was no agreement on today's prices.
A clash between Iran and Saudi Arabia is also expected over a letter Moinfar was recently reported to have to Saudi Petroleum Minister Sheik Ahmed Zaki Yamani, accusing his country of helping "imperialism" by maintaining Saudi production at 9.5 million barrels a day -- about a third of the 13-member organization's total.
Most ministers insisted that the special session of oil ministers Wednesday must discuss both prices and production levels, even though Yamani insisted that his country's production is a sovereign matter that is no direct concern of OPEC.
Today, Yamani said that Saudi Arabia would not cut back its production until after the Baghdad summit formally adopts the long-term strategy. The Saudi minister has been the moving force behind the strategy, whose basic idea is to find a formula for regular and predictable oil-price increases instead of the current system of sudden lurches followed by painful periods of economic readjustment.
Yamani, whose power position within OPEC appears to have greatly enhance by the current softness in the international oil market, was recently reported to have told British Foreign Secretary Lord Carrington that Saudi Arabia plans to cut its production.
Most oil experts here agree that such a cut would not substantially affect the world's currently glutted oil market in which the industrial West is estimated to be putting aside 2 million barrels daily into its reserves.
As a result, prices have been holding steady despite occasional flurries. In Algiers in June, prices were set at $32 to $37 a barrel, including surcharges for quality and closeness to markets. But Saudi Arabia has kept its basic price for Saudi light crude, the industry's benchmark, at $28 a barrel. Oil has been selling recently on the free, spot market for about $30 a barrel, while a year ago, it was ranging as high as $43.
"I cross my fingers" in hopes that a unified price structure will be found, Yamani said today at the start of the ministerial conference in one of the baraque meeting rooms of the Hofburg Palace, the ancient seat of the Holy Roman and Austrian empires.
While some ministers expressed measured optimism about price reunification, others said they did not expect it at all. "I don't know, I don't know," said Indonesian Energy Minister Subroto. Unification of current prices is a "prerequisite" for adoption of a long-term formula, even though OPEC's approach is to discuss the long-term first, Subroto said.
Iran's oil minister, Moinfar, said he would not approve Yamani's long-term strategy report unless there was prior agreement on current production and prices. He said he did not think there would be any long-term agreement.
"I cross my fingers" in hopes that a unified price structure will emerge, said Moinfar. "I think Saudi Arabia will rate its price to $32 effective within two weeks, [but] not necessarily as a result of this meeting."
Agreeing with industry estimates that there are about 2 million barrels more being produced a day than is being consumed, Moinfar said that OPEC's overall production should be cut by 3 million barrels daily. He wants Saudi Arabia to absorb 2 million barrels of that.
Venezuelan Oil Minister Humberto Calderon Berti, one of OPEC's leading moderates, said "there is no way to consider only prices and not production as Yamani wants to do."
Production and prices absolutely must be coordinated," said Gabon's Edouard-Alexis Mbouy. "Otherwise we will achieve nothing."
Yamani said he had no proposal to reduce the current spread of $5 a barrel between the lowest and the highest official OPEC prices, but agreed that it should be smaller. The United Arab Emirates' Mana Said Oteiba said he thought the difference should be no more than $2.
Algerian Foreign Minister Mohamed Benyahia was made chairman of the conference in a compromise proposed by Saudi Arabia and Venezuela to avert the threatened Iranian walkout. Iraqi Oil Minister Tayeh Addul Karim was mad alternate chairman to prepare the Baghdad summit, only the second in OPEC's 20 years.
Other members seem determined to prevent the current border clashes between Iraq and Iran from spoiling the event.
While Benyahia paid tribute to Yamani's "devotion" in presiding over OPEC's strategy, the Algerian minister delivered a hard-line opening speech to the conference. He denounced the inflation and "momentary mainipulations" of the industrial West, which he said took away the gains of OPEC in 1973, when the oil price quadrupled in a few months.
Western behavior, he said, has made OPEC price rises since 1979 "indispensable and unavoidable" to counter-act the "intransgent attitude" of a Western world "with little desire to change an order established for its sole benefit."
Nevertheless, he said, OPEC is prepared to see "a real and durable solution" with the West provided that it is "global."
Apparently in response to the concern, OPEC ministers agreed today to add to the long-term strategy, originally designed only for relations between the West and OPEC, further agreement on relations and "solidarity" with the rest of the Third World.
Algeria and Venezuela proposed establishment of a $20 billion OPEC bank to help developing countries out of balance-of-payments and other immediate financial difficulties.
Venezuela's Caldron noted that the existing $4 billion OPEC fund is too slow and bureaucratic in its focus on long-term projects to help developing nations that get into trouble.
Algeria is one of three OPEC countries with Libya and Iran that has objected to the Yamani formula for raising oil prices on a regular basis.