Big Question at OPEC: How Will Iran React?

Iran all but lost its battle Thursday to raise oil prices, and the biggest unresolved question at the year-end meeting of the Organization of Petroleum Exporting Countries appeared to be whether the Iranians will abide by the agreement forged here.

Oil ministers stressed late Thursday that no agreement on prices and production was imminent, however. And Iran’s oil minister invited reporters to his hotel room to reiterate his demand for higher prices and his charge that Middle East politics are dictating OPEC policy.

Though Iranian Gholamreza Aghazadeh disputed it, other ministers said Thursday that all but one of the cartel’s 13 members now support maintaining the current official average price of $18 per barrel of crude oil.

“The price is more or less settled. The big majority is in agreement to preserve the $18,” said Indonesian Oil Minister Subroto, a leading moderate.

Pragmatic View

His counterpart from Kuwait, Sheik Ali Khalifa al-Sabah, the leading proponent of flat prices along with Saudi Arabia, said there is only one holdout, presumed to be Iran.

All 13 members would prefer to raise prices if only to compensate for the steep fall in the purchasing power of the dollar, oil’s worldwide currency. But most believe there is too much oil on the market and too much economic uncertainty to support a price higher than $18. Iran needs extra revenue more than most because of its war with Iraq.

Said Hisham Nazer, the Saudi oil minister: “It isn’t what you need, it’s what you can get in the markets.”

Aghazadeh said “some members” still support the Iranian position on price. However, seated on a couch behind a huge bowl of pistachio nuts--a big Iranian export product, though not as big as oil--Aghazadeh sounded conciliatory, compared to recent public statements.

Lower Prices Favor Iraq

“The matter of price is of significance to our point of view. . . . If we can’t agree about the prices, I’m doubtful about any sort of agreement,” Aghazadeh told reporters.

The price dispute also reflects the politics of the Persian Gulf, Aghazadeh said. The nations that support a flat price were also leading participants in last month’s Arab summit, which condemned Iran’s recent military action in the Gulf and its role in the July violence in the holy city of Mecca.

“It seemed that especially countries in the Persian Gulf region who participated in that conference have a political determination for the results” of the OPEC meeting, Aghazadeh said. “To me, it is directly related to the situation and tensions in the Persian Gulf.”

He was referring especially to Saudi Arabia and Kuwait, both wealthy, sparsely populated nations that have less need for higher oil prices and that also have strongly supported Iraq in the war. Lower oil prices would presumably work to Iraq’s military advantage because of its smaller population and higher oil production than Iran.

Later, at a reception attended by several oil ministers, the Saudis’ Nazer insisted that OPEC deliberations are based on economics, not politics.

Aghazadeh stopped short of threatening to flood the markets with oil if his view on prices didn’t prevail, a warning he made the previous day. He was also mild in comments on the likelihood that war foe Iraq will be granted a higher official oil production quota in the current talks, directing complaints against Saudi Arabia and Kuwait instead of the battlefield enemy.

Kuwait and Saudi Arabia favor granting Iraq’s demand that it be given the same production quota as Iran. The Iraqis have refused to abide by their theoretical quota of 1.5 million barrels a day, and have instead produced as much as 2.7 million barrels a day--the biggest single factor in OPEC’s overproduction, which has weakened prices.

Saudi Assistance

The high production has been facilitated in part by pipeline access through Saudi Arabia and other assistance.

“I don’t think the problem lies with the Iraqis. Our problem is with those countries which offer the capacity to Iraq and contribute to their violation” of the current OPEC agreement, Aghazadeh said.

If Iran rejects an agreement reached here but Iraq signs it, the cartel would be in a better position than it is now. Iran is not thought to have the ability to overproduce, as Iraq has been doing. However, ministers consider unanimity in the cartel to be at least as important as the details of the accord.

“The ideal agreement would be one which all 13 members signed,” said Rilwanu Lukman, the Nigerian oil minister and president of OPEC.