August 2011, No. 61

OPEC Exclusive

Iran's Chairmanship over OPEC

The first secretary general of OPEC, who was inaugurated in 1961, was an Iranian who retained that post until 1964.

When Perez Alfonso, the then Venezuelan minister of oil, proposed Iran, Saudi Arabia, Kuwait and Iraq to establish an organization of petroleum exporting countries, no oil major believed that a new player was entering the oil game.

Five big oil producing countries from Asia and Latin America agreed to launch OPEC in a private meeting. The organization came into being in 1960, just a year after that agreement.

Organization of Petroleum Exporting Countries (OPEC) has more than 12 members and last year celebrated its 50th anniversary. The second half century of OPEC's life has begun with Iran at its helm.

Iran has taken charge of OPEC at a time that the organization is in control of 60 percent of the world's oil reserves and this has been a great achievement for the Iranian diplomacy in 2011.

Iran, founder and supporter of OPEC

Between oil shocks in 1973 and 1986, the international oil market has seen emergence of a new player called OPEC, which came into being with players from Asia and Latin America in Baghdad. Iran was quite famous among the oil producing countries because, it was among big exporters of crude oil. On the other hand, it was among founders of the OPEC.

It was not easy to launch OPEC as its founders were not quite ready to run it. National Iranian Oil Company and Iran's Ministry of Economic Affairs and Finance played axial role in launching the organization. Iran and Venezuela were the sole countries among founders with national oil companies which were involved in exploration, production, refining and distribution of oil and its products. When secretariat of OPEC opened in Geneva, it was organized by the Iranian experts.

At the outset, member countries did not have solid information on each other and Iran was assigned to gather necessary information. This was also done by experts of the National Iranian Oil Company that made frequent trips to Saudi Arabia, Venezuela, Kuwait and Iraq.

Therefore, Iran was not only a founder of OPEC, but did a lot to get it organized. Its role has been pivotal in protecting the rights of oil producing countries. Five decades later, OPEC has 12 members and controls 40 percent of global oil output. It has been greatly successful in setting balanced oil prices in the past decades. Though consuming countries were not ready to recognize it at the beginning, after a decade, it gained international recognition.

The first secretary general of OPEC, who was inaugurated in 1961, was an Iranian who retained that post until 1964. Iran has hosted three conferences of OPEC in 1961 (3^rd conference), 1971 (22nd conference) and 2005 (135^th conference). The country has been chairing OPEC nine times and was elected for the 10^th time to that post in 2011, though after lapse of 36 years.

OPEC's influence on oil market

There are many views about achievements and failures of OPEC, but on the whole, it has been among the most successful international organizations.

Some analysts maintain that in absence of a number of big oil exporting countries (which are developed states), OPEC has been facing challenges.

For example, critics maintain that as OPEC cuts down output in time of crisis, non-OPEC producers raise production, thus preventing the organization from achieving its goal.

OPEC, however, is still playing an effective role in setting market trends. In times of economic crises, OPEC has been able to create stability.

In other words, consuming countries have always looked to OPEC in time of crisis to overcome challenges by managing production.

Although oil prices are currently determined though market mechanisms and according to dealings in speculative and real markets, OPEC's policies still affect global oil price.

OPEC has moved to interact with consuming countries in the past half a century and has constantly balanced global prices.

Many Western politicians maintain that OPEC members are to blame for high prices, but even if true, OPEC has been also a great force in organizing the market.

Preventing oil shocks, doing away with monopoly of oil majors (like Seven Sisters) on the market, and controlling oil resources to gain logical revenues are just part of OPEC's positive role in the market.

OPEC connecting members to international organizations

OPEC is currently working with most international organizations. They include the United Nations Conference on Trade and Development (UNCTAD), the World Bank, and the International Monetary Fund. During the past five decades, OPEC has expanded cooperation with developed states to elevate standards of living in member countries.

The ongoing dialogue between OPEC and other producers as well as many energy consuming organizations such as the International Energy Forum, the International Energy Agency, and the Gas Exporting Countries Forum all attest to the importance of the organization in international system. OPEC has been protecting the interests of member countries in addition to those international collaborations.

Iran's chairmanship over the biggest oil exporting organization

Iran has taken charge of the organization at the time of its peak power. The achievement was outcome of effective energy diplomacy adopted by Iran. This is also important because of rising demand and increasing prices which call for better management of international oil market by an organization which is currently playing a more effective role in managing that market.

Iran and other member countries maintain that OPEC has been a great success in the past 50 years. It is also great to be at the helm of the organization which can produce more than 30 million barrels of oil per day.

Experts have shown different reactions to Iran's chairmanship of OPEC.

G L Group Institute has reported that Iran, as chair of OPEC, can greatly influence the oil market.

It has noted that Iran can also make structural changes to OPEC. G L Group maintains that chairmanship of OPEC will also increase Iran's political clout at international level. The institute announced that OPEC, under chairmanship of Iran, was supposed to raise its share of international oil production from 40 percent to 46 percent in 2011.

Some American officials have got ready to start negotiations with OPEC to see the results of Iran's chairmanship over the organization.

Deutsche Welle announced that all important sessions of OPEC in 2011, especially its important annual meeting with the European Union will be presided over by Iran.

Deutsche Welle has judged that Iran's chairmanship over OPEC is generally positive.

Other Western countries maintain that Iran's chairmanship of OPEC will raise global oil prices to 100 barrels per day in 2011.