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Petroleum Politics Has Oil-Rich Gulf States Over a Barrel : Nations of the region are united in resources, divided by self-interest. Suspicion, rivalry and threats have torn apart their natural alliance.

July 10, 1990|NICK B. WILLIAMS Jr. | TIMES STAFF WRITER

NICOSIA, Cyprus — In Vienna last fall, the Organization of Petroleum Exporting Countries sought once again to forge the unity of a proper cartel. They would, the ministers of the member states said, agree to continued limits on production in order to sustain the price of their oil.

Not so fast, said Mana Said Oteiba, the oil minister of the United Arab Emirates. His country would produce "what pleases me." And so it has. The emirates are reputedly producing nearly double its quota.

The maverick emirates are one of six producers along the shores of the Persian Gulf, ranging from the richly endowed Saudi Arabia to little Qatar. Together, they pump more than a quarter of the world's oil, united in resources but divided on how to share them.

The kings, emirs and presidents of the gulf states, all Arab except for Iran, play their oil cards close to their robes, each pursuing his national economic interests. Conflict is common in petroleum politics, and alliances shift.

"Right now," said a Middle Eastern oil analyst, "they roughly break down into three groups. Iran and Iraq want some sort of formula to drive up the price. Kuwait and the UAE act like merchants; they want to improve their market share. Saudi Arabia is more subject to political pressures from outside the gulf."

In recent times, Kuwait and the emirates have broken from the OPEC fold. They have been producing more than their assigned quotas--cheating is the accepted term--in part to underline a demand for bigger pieces of the OPEC pie commensurate with their large reserves.

Almost all producers consider themselves special cases when OPEC quotas are allotted. The emirates' quota, for instance, was largely based on the production of Abu Dhabi, the principal oil emirate, but now Dubai, a second emirate, is boosting production, diminishing Abu Dhabi's share of the UAE total.

At the top of the gulf, Iran and Iraq, which fought an exhausting war from 1980 to 1988, argue that their shares should be larger to help finance the rebuilding of their depleted economies. Their quotas are identical, and they watch each other's shipments like hawks, neither agreeing that the other should get one barrel more. And their competitors down the gulf decline to decrease their shares to help them out.

Even Saudi Arabia, with the world's largest reserves, is insistent on its share, and its oil ministers have pointed out that the Saudis too have a special case. The kingdom bore the brunt of production cuts in the early 1980s to bolster tumbling prices. It also has been accused of cheating.

In these recent weeks of falling prices, due in large part to overproduction by quota cheaters, tempers have been strained. Sheik Ali Khalifa, the formidable former Kuwaiti oil minister recently transferred to the Finance Ministry in a Cabinet shuffle, rejected widespread reports that his country is overproducing. He declared, "Our adherence to the recent OPEC resolutions (on quotas) should not be in any doubt." But, he warned, "Kuwait's pledge to implement the resolutions should not take place on a unilateral basis."

More heated was the confrontation between the oil ministers of Iraq and the UAE. In Baghdad, Oil Minister Issam Abdul-Rahim Chalabi, breaking OPEC protocol by publicly naming the culprit, accused the UAE of cheating, and complained that the resulting decline in prices meant the cartel was "giving away a free barrel of oil for every three barrels sold."

The oil minister's outburst was followed by the dispatch of Iraqi Deputy Prime Minister Saadoun Hammadi to the gulf states to press Baghdad's case. He met a stone wall in Abu Dhabi, where UAE Oil Minister Oteiba declared: "The UAE rejects threats and pressure from any source. I hope the recent comments from a fellow minister were not real but only a slip."

Optimists among the ministers continue to insist that quotas will become redundant in the 1990s. UAE's Oteiba and Iran's Gholamreza Aghazadeh have both predicted that rising demand will eliminate the need and that the problem will become one of capacity to produce.

The austere, gray-bearded Iranian pointed out that demand has risen for the last four years and that the gulf states are prepared to meet the needs of the 1990s. With 60% of the world's proven reserves in Iran, Iraq, Saudi Arabia, Kuwait and the emirates, he said, "these are the only ones which can meet increased demand in the future."

Michael Prest, writing in the London-based Middle East International, observed of last fall's quota negotiations:

"The big gulf producers effectively said (to the less oil-rich cartel members): You must give up some of your quota to us because you cannot produce any more oil. The attitude of Kuwait toward Ecuador, which complained that it could produce more, was: Let them--who cares if they pump another measly 20,000 barrels a day? The future lies with us."

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