Saudis Move to Assure Win in Oil Price War

As oil producers across the world nervously watch the price of oil slide below $20 a barrel, Saudi Arabia continues to prepare the ground to ensure that it will be the victor in any oil price war.

According to oil industry specialists, the strategy is being guided by Oil Minister Ahmed Zaki Yamani, who repeatedly warned last year that, if oil producers failed to cooperate in reining in output, an oil price war would inevitably result.

His strategic weapon has been agreements that ensure that buyers of Saudi oil make a profit when they refine it. Assured of profits, oil companies are lining up to sign these deals.

“Right now, the Saudis have dozens of proposals from all over the world from people who want to refine Saudi crude. Refineries which haven’t run for years are being dusted off and readied to run Saudi oil,” said one industry specialist with contacts with Saudi Arabia.

Control Over Exports

Yamani, who personally approves every such deal, is thus in a position to determine exactly how much oil Saudi Arabia exports and to ensure his country preserves its share of the oil market as other producers scramble for theirs.

Yamani’s calls last year for restraint by other oil exporters, both inside and outside the Organization of Petroleum Exporting Countries, fell on deaf ears.

Now, with North Sea crudes being displaced in European refineries with Saudi crude, prices of British crudes are falling particularly sharply.

Some industry specialists now see a shift in attitude by non-OPEC producers such as Britain, whose own oil is the most expensive in the world to get out of the ground.

The Middle East Economic Survey reported Monday that Yamani and British Energy Secretary Peter Walker were likely to meet soon.

A Kuwaiti newspaper said Tuesday that Kuwait’s oil minister, Ali al Khalifa al Sabah, would represent OPEC in Moscow in a fresh drive to urge production restraint on the Soviet Union.