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Iran Balks at OPEC Accord to Maintain Current Prices, Quotas

December 14, 1987|DONALD WOUTAT | Times Staff Writer

VIENNA — OPEC ministers reached another impasse Sunday when Iran refused to go along with a proposed agreement to continue prices and production quotas at current levels, raising the specter that two of the cartel's largest oil producers--warring Iran and Iraq--would flaunt its rules.

Iraq already has refused to abide by the proposed accord. At war with each other for the past seven years, Iran and Iraq follow only Saudi Arabia as the leading oil producers in the Organization of Petroleum Exporting Countries.

As negotiations continue today, the ministers will have one eye on the oil markets to see whether prices plunge. That is the widely predicted effect of the proposal now on the table here.

$18 Acceptable to Majority

A lopsided majority of the 13-member organization, led by Saudi Arabia, has lined up behind a plan to extend the current price and production system into 1988. It would continue the official average price of $18 a barrel and maintain the cartel's current production quota.

Iraq, rebuffed in its bid for a quota equal to Iran's, had been expected to refuse to sign such a plan again, as it had done for this year. The other members had hoped that Iran would go along, despite the fact that OPEC has ignored the Iranians' demand for price increases of at least $2 a barrel.

In a series of meetings involving Venezuela, Nigeria and Indonesia as go-betweens, the Iranians were pressured to agree to sign, delegates said. But they countered with a proposal to cut production and raise prices, an approach uniformly opposed by the Saudis and their Persian Gulf allies, Kuwait and the United Arab Emirates.

Inflexible Positions

A senior aide in one of the mediating delegations said they were trying to mollify Iran by incorporating in the agreement the possibility of price increases sometime during 1988. But he said that both Iran and the Saudis had carved out such inflexible positions before the meeting that neither felt able to compromise.

The absence of both Iran and Iraq from an accord in itself wouldn't necessarily worsen economic conditions in the oil markets, analysts said. But it would weaken the cartel's already shaky credibility and diminish the incentives for other members to abide by quotas.

Even with Iran on board, the status-quo proposal doesn't have many enthusiasts. Although it is seen as better than nothing, oil market experts predicted that it could send spot prices plummeting by more than 15% to the $14 to $16 per barrel range by early 1988.

Analysts said such a decline could mean a drop in the price of gasoline of more than 5 cents at service stations in the United States.

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