INTRODUCTION
In
order to encourage trade, economic cooperation and development among nations of
the World become rather imperative; some International Economic Organisation
established to facilitate this cooperation include; International Monetary Fund
(IMF), International Bank for Reconstruction and Development (IBRD), European
Union (EU), Organisation of Petroleum Exporting Countries (OPEC) etc.
One
important thing about OPEC is that it is made up of only the developing states
of Africa, Asia and the Middle East with the exception of Venezuela, a South
American country. Some other countries of the world also produce and export
crude oil but they are not members of OPEC. These include the U.S.A, Britain
and the Soviet Union. Since its creation, OPEC has continued to raise the price
of crude oil, especially since the early 1970s. For instance, the price of
crude oil rose from 3 dollars per barrel in 1973 to almost 40 dollars which was
the highest price in 1981. However, since that year oil prices have continued
to fall up to the present level of between 10 dollars and 15 dollars. The
fluctuation in oil prices over the years has not prevented the organization
from carrying out certain functions to benefit the countries of the Third
World. These functions include the establishment of the OPEC Fund for
International Development, aimed at giving loans and aid to poor states and
international groups. So far the states of Togo, Senegal, Bangladesh, Burundi,
Ethiopia and the Maldives (all developing countries) have benefited from the OPEC
Fund.
The
thrust of this paper is to analyse the activities of OPEC to the development of
the Third World Countries.
CONCEPTUAL
CLARIFICATION
Third World
According
to Handelman (2001: 1-2), Third World refers to the nations of Africa, Asia,
the Middle East, Latin America and the Carribean that belong neither to the
first world (Japan and the Western Industrial Democracies, the first countries
to develop industrial economies and liberal democracies) not to the now defunct
second world (the bloc of former communist nations that included the Soviet
Union and Eastern Europe…) Third World is essentially a residual category.
Countries fall under its banner not because of any specific quality, but simply
because they are not members of either the first or the second worlds. (Whirled
Bank Group, 2003)
ORIGIN AND NATURE OF
OPEC
The
history of OPEC can be traced to 196o in Baghdad, Iraq where a conference was
held by five oil-producing countries, namely Iraq, Venezuela, Kuwait and Saudi
Arabia. The meeting which was held between the 10th and the 14th
September 1960 gave rise to the formation of OPEC in Caracas, Venezuela in
January 1961. At present, OPEC is made up of thirteen oil-producing countries,
including Nigeria, Gabon, Libya, Algeria, United Arab Emirates, Indonesia, and
Algeria. OPEC headquarters is located in Vienna, Austria. The organisation’s
authority is the Conference, made up of high level representatives of the
member government usually the member states’ oil ministers, which meets at
least twice a year. The board of governors implements resolutions of the
Conference and manages the organisation.
In
the late 19sos the amount of oil produced worldwide was greater than demand.
The price of oil which was controlled by the oil companies, dropped and with it
dropped the amount of money the oil companies paid the oil-producing nations.
OPEC was formed in reaction to this drop in payments. In addition to production
and refining equipment of the oil companies, which generated large amounts of
income for those countries. . (Kalu, &Nwogwugwu, 2010)
In
the 1970s, oil supplies in non-OPEC countries were reduced, the organisation
raised the price of oil. Another price control tactic used by OPEC is to set
production ceilings that specify how much oil may be produced by each member
country. In the 1980s some OPEC nations ignored the production ceilings and
this resulted in over-production and drop in oil prices. The organisation has
also used the supply of oil as a political tactics for example, stopping
delivery of oil to nation supporting Israel in the Arab-Israeli War of 1973 a
tactic that resulted in oil and gasoline shortages in many Western nations.
OPEC has been seen by development pundits as a cartel (a group of people or
companies who agree to sell something at a particular price in order to prevent
competition and increase profits) while some others think otherwise. (Kalu, &Nwogwugwu, 2010)
OPEC
among other things has the following aims and objectives summarized here;
Stabilization
of price of oil in the world market in order to eliminate fluctuations; Coordination
and harmonization of oil policies of member-nations to bring them in line with
the standard set by OPEC; Stabilization of oil income of its member-nations; To
ensure steady supply of oil to consuming nations.; To negociate for the participation
of member-nations in the oil exploitation; It fixes and allocates production
quotas to member-nations; OPEC examines and ensures that participation of
foreign multinational companies in oil exploitation and exploration does not
jeopardize the interest of its member nations.
OPEC AND THE
DEVELOPMENT OF THE THIRD WORLD
During the past two years the
oil-producing countries of OPEC have become important donors of economic
assistance to non-oil Third World countries. There has been widespread interest
in these aid efforts, with one major British newspaper stating that "never
before have nations been so generous with their wealth as the OPEC countries
are now showing themselves to be." Others applaud what they regard as the
"Robin Hood role" of the OPEC countries in taking from the rich and
providing for the poor. (Maurice, 2011)
OPEC spokesmen
themselves have stated that they are "the world's largest donors of
financial assistance to developing countries and contribute the majority of
funds for the World Bank and IMF borrowings." Repeatedly claims are heard
that OPEC aid levels more than compensate developing
countries for the increased price of oil. And it has been announced in councils
of developing countries that OPEC aid will far exceed the aid flows of the
traditional donor countries, whose aid programs it is alleged are rapidly
declining in significance. Hence, many appear to believe that OPEC countries
can and will provide the means for non-oil developing countries to realize
their aspirations for economic development. (Maurice, 2011)
Let us now
examine in more detail the actual programs of the OPEC countries since early
1974 in providing economic assistance to non-oil Third World countries. With
the exception of Gabon, Ecuador and Indonesia, all OPEC members have provided
some such assistance. The total flow of resources originating in OPEC and
available for non-oil developing countries in 1974 was about $4.6 billion. (Not
included is $1 billion which actually went to developing countries from the IMF
Oil Facility in 1974 and a further $1.5 billion in 1975. Although derived from
OPEC subscriptions, and of direct benefit to non-oil developing countries, the
IMF does not regard this as a transfer of resources from OPEC .This $4.6
billion resource flow in 1974 was about equally divided between budgetary
supporting assistance and concessionary credits on the one hand, and the
purchase of bonds of multinational development banks at an average interest
rate of eight percent, on the other.
Approximately
$2.2 billion in grants and concessionary loans were disbursed as follows (in
millions of dollars): $1,200 Supporting assistance grants and loans to Egypt, Syria
and Jordan; 60 Supporting assistance grants to the Yemen Arab Republic and
Sudan; 45 Relief grants to African countries; 300 Oil credits to India and
Sudan (from Iran and Iraq); 190 Disbursements on supporting loans to Pakistan,
Bangladesh and Sudan; 70 Disbursements on loans to other countries; 350
Contributions to international and regional funds; Capital transfers on
non-concessional terms included purchases of almost $2 billion in World Bank
bonds, as well as other subscriptions to the Asian Development Bank, the
Inter-American Bank and the African Development Bank. These banks, in turn,
channel these funds to developing countries, mostly for projects on which funds
will be disbursed over a period of several years.; Beyond the actual $4.6
billion transfer of resources in 1974, a further $6.2 billion was committed to
regional funds, development projects, and commercial investments. The total of
actual transfers and future commitments was thus $10.8 billion during 1974,
with the promise of further substantial transfers in 1975 and ensuing years.
(Maurice, 2011)
As of November,
OPEC aid commitments have continued in 1975 at a total level of about $10
billion for both concessional aid and other capital transfers. But the actual
transfer of resources from OPEC to the Third World accelerated in 1975 and
appears likely to reach a level of approximately $6 billion. However, the tempo
of disbursements is slowing down and will level off or decline in 1976.
(Maurice, 2011)
A few of the
major OPEC commitments of 1974-75 have indeed been substantially disbursed. By
March 1975 the Special Arab Fund for Africa had disbursed $126 million of the
allocated $200 million, designed for special relief of increased oil costs. In
1975 the Arab oil producers have also transferred $80 million for special
assistance to non-oil Arab countries, and $150 million directly to the Special
Account of the United Nations Emergency Operation designed to help countries
most seriously affected by increasing import costs. Taking into account
bilateral aid flows from OPEC countries for this purpose, the total OPEC
contribution to the Emergency Operation is reported to have been $1.7 billion
for the period 1974-75
Moreover, supporting assistance grants have
continued to be rapidly disbursed, especially in Egypt, which continues to
receive almost half of the total aid transfers of Arab donors. This is the
result, of course, of Egypt's acute budgetary and balance-of-payments problems,
as well as the political priority it continues to enjoy in Arab donor capitals.
However, a
large part of the new commitments made in 1974 and 1975 have been slow to
produce actual transfers. This is due to the growing preference of OPEC donors
for project assistance and for plowing large commitments into the establishment
of new development funds, all of which take time to implement. For example,
almost a billion dollars of undisbursed commitments during 1974 was allocated
to the new regional development funds initiated by the Arab donors, which had
not begun operations. These were the Islamic Development Bank, the Islamic
Solidarity Fund, and the Arab Bank for Economic Development in Africa.
(Maurice, 2011)
Understandably,
little of the project commitments made in 1974 and early 1975 seem to have been
disbursed. A striking example is the experienced Kuwait Fund which since March
1974 increased its paid-up capital from $385 million to $1.35 billion and
extended its lending operations for the first time to non-Arab countries in
Asia and Africa
Saudi Arabia, as it expands its
aid operation through the newly established Saudi Arabian Development Fund with
capital of $2.8 billion, appears to be turning away from general supporting
assistance, which characterized its program in 1974. Aid commitments in 1975
are increasingly for projects in industry, roads, telecommunications, housing,
irrigation, agriculture and education. A similar emphasis on project assistance
is being pursued by the United Arab Emirates and Qatar.
The Arab aid donors appear to
regard development, and assistance for development, primarily in terms of
projects which facilitate the transfer of management skills and technology, and
contribute to structural change in the economies of developing countries, their
own and others as well. In rejecting general supporting assistance for most of
their aid recipients, Arab donors may be guided by their experience in this
respect with the front line countries of Egypt, Syria and Jordan. Although the
absorptive capacity for budget assistance generally is very high, in order to
achieve meaningful and accelerated development it is frequently desirable to
bypass traditional bureaucracies and encourage the more difficult task of
developing productive investments.
Before 1974 only Saudi
Arabia, Kuwait and Libya were major OPEC providers of economic assistance, and
over four-fifths of their aid was in the form of budgetary grants in support of
other Arab countries involved in the conflict with Israel. Following the 1967
war, the Heads of the Arab States, meeting in Khartoum that August, agreed on
annual transfer payments from the oil-exporting Arab states to help with the
cost of the war and the defense burden of the "front line" states of
Egypt, Syria and Jordan. These transfer payments have since become standing
obligations in the budgets of the contributing states, and during the period
1970-73 averaged about $400 million annually-not including additional economic
assistance to front line states for the purchase of arms. Kuwait, in
particular, with its great wealth and population of only 500,000, deploys
economic assistance skillfully as an important tool of foreign policy. In addition
to supporting assistance grants to the front line Arab states, averaging about
$200 million annually since 1970, Kuwait has built small but highly
professional programs of technical and capital assistance. Beginning in 1961,
the Kuwait Fund for Arab Economic Development has financed development projects
which meet fairly rigid standards of economic return. In its first 12 years of
operation, the Kuwait Fund committed over $450 million in 41 loans to 12 Arab
countries, half of which was directed to Egypt, Sudan and Tunisia. Thus
Kuwait's aid effort, along with its supporting assistance grants, has over many
years averaged five to six percent of its gross national product. Kuwait has so
far been unique among OPEC members in building a strong capability for the
management of aid programs.
On the other hand,
claims of large transfers of wealth and generous assistance from OPEC countries
seem to some observers to be grossly exaggerated. It is claimed that aid from
the oil exporters has been inadequate, well short of the billions of dollars
that the oil price increases have cost the non-oil developing countries.
Further, it is alleged that OPEC aid has been slow to materialize, and that the
bulk of OPEC assistance is going to fraternally associated countries. In the
years ahead it is thought that aid is likely to decline as the oil exporters
rapidly adjust to spending their revenues at home.
While there is much to be said
for this policy on a long-term basis, the short-term result is that resource
transfers are not as responsive as they might be in helping with the severe
deterioration in the balance of payments of the non-oil Third World. We have
estimated above an increased requirement for capital assistance of about $20
billion annually, of which $13 billion is accounted for by higher oil prices.
Although OPEC has contributed the bulk of the increased flow of long-term
financing resources to developing countries in 1974-75, this increased OPEC
flow is equivalent to only about 25 percent of the additional financing
requirements of the non-oil Third World due to structurally higher prices. The
OPEC effort is even less if allowance is made for the fact that much of OPEC
aid is directed to Egypt and Syria, which are net exporters of oil. In these
circumstances, it is reasonable to ask whether OPEC could more adequately
assist the non-oil Third World with their higher oil prices, and whether a
larger proportion of OPEC's surpluses could be recycled to help the Third World
overcome its severe balance-of-payments problems.
An outstanding example of an OPEC
country which reacted swiftly and to political advantage has been Iran, which
made loan commitments of about $1.5 billion during 1974, and despite reduced
oil earnings appears likely to approach the same level of commitment in 1975.
The terms of Iranian assistance are relatively hard, disbursements are
carefully phased, and its aid is directed toward development of natural
resources and manufacturing projects, which complement Iran's own development
program. At the same time, it has been politically flexible in providing major
balance-of-payments assistance, when it is politically advantageous to do so,
including, for example, large credits to Pakistan and Egypt. Algeria, Venezuela
and Iraq are countries whose aid programs in several years are likely to be
limited by the vast competing capital claims from their own large domestic
programs. Algeria has concentrated on regional programs in favor of African
countries. While the terms of Venezuela's almost $1 billion of commitments to
developing countries are hard, it has been flexibly responsive to the needs of
some of its economically distressed Latin American neighbors for special
arrangements in financing the purchase of oil. Iraq also has been responsive to
the need for oil credits and general assistance in helping to ease the
politically distressing reactions of some less-developed countries to higher
oil bills.
On one point
there is general agreement, namely that the dramatic oil price increases of
late 1973 created severe balance-of-payments and economic growth problems for
most less-developed countries. Not only must they pay higher prices for the
energy they need to fuel their development programs, but they must do so at a
time when the economic downturn in the industrial countries-itself at least
partly the result of abruptly higher oil prices-is cutting sharply into
developing countries' export earnings and leaving them less well equipped than
ever to bear the burden of their essential development needs. However one
assesses the responsibility for inflated prices and recession, the overriding
conclusion is that it is the poorest countries, those least able to bear
additional burdens, who are most seriously affected.
Information
concerning OPEC aid programs, and their effectiveness in helping less-developed
countries, has been shrouded in the claims and counterclaims of the propaganda
battle to influence and win the political support of non-oil developing
countries. Since most OPEC governments publish only fragmentary information on
their aid activities, there has been scope for such competing interpretations.
Since the
massive increase in oil revenues as a result of the quadrupling of oil prices
in late 1973, some observers and journalists have confused these supporting
assistance grants among Arab states, dating back to
1967, with aid efforts to help the non-oil developing countries adversely
affected by the inflation of prices for their essential imports. Thus, there
has been a tendency to credit OPEC countries with greater responsiveness to the
immediate needs of less-developed countries as a whole than they have been
prepared to claim for themselves. The fact is that most Arab leaders do not
regard supporting assistance grants to front line Arab states as compensating
for recent balance-of-payments needs of non-oil countries or as providing
assistance for development. In this they actually take a more logical view of
what constitutes assistance for development than the United
States has done in recent years, when it claimed as part of its development
assistance programs the budgetary grant assistance to support war-mobilized
economies in Southeast Asia.
Aside from such
"silent aid," the development assistance efforts of the OPEC
countries before 1974 were relatively small, averaging about $80 million
annually during 1970-73. Saudi Arabia, Kuwait and Libya again were the largest
donors, and Iraq, Qatar and the United Arab Emirates also contributed. This
assistance was largely directed to Arab states-including those in the front
line-in an expression of the fraternal commonwealth among Arab countries. For
the small but wealthy Arab states, such programs not only contribute to
pan-Arabic aspirations but serve to strengthen ties of friendship and security with larger and militarily stronger countries.
The aid
transactions of other OPEC countries before 1974 were mainly transfers of funds
among Arab states, carried out largely in the traditional diplomatic manner for
diverse political and economic ends. In addition, there was small and sporadic
aid to some of the African countries south of the Sahara, in recognition of
African support to Arab diplomatic interests. OPEC members did not contribute
appreciably to international organizations, again with the exception of Kuwait,
which cooperated with the World Bank and contributed to the International
Development Association. Arab oil-exporting countries made token contributions
to United Nations programs and appear to have received more aid from the United
Nations than they gave. The only multinational fund which received general Arab
support before 1974 was the Arab Fund for Social and Economic Development, with
authorized capital of $340 million. By April 1974, it had approved six loans
totaling $94 million.
Today, the Arab
members of OPEC largely continue the selective approach adopted before 1974.
Early in that year, the Arab attitude was summed up by Abdel-rahman Salem
al-Atiki, Kuwaiti Minister of Finance: “Nobody looked at the Arabs before. Why
does everybody expect us to be the Godfather? This part of the world has been neglected
for centuries and its wealth has been carried away by foreigners without giving
it a hand for development. The major part of our international financial aid
will be put at the service of Arab countries, and to assist other Moslem
countries, particularly in Africa”
That the
fourfold increase in oil prices would severely damage the economic prospects of
many developing countries was apparently not anticipated by OPEC. Since non-oil
developing countries are relatively small users of oil, accounting for only
about ten percent of annual world consumption, OPEC countries underestimated
the importance of oil to them and tended to regard forecasts of the dire effect
of oil price increases as part of the publicity campaign by industrial
consumers against higher prices. Certainly industrial countries have put their
concern for the less-developed countries in this respect well to the fore, in
part to place responsibility on OPEC to help poorer countries with their higher
oil prices.
Understandably,
OPEC countries are sensitive to the view expressed in Secretary Kissinger's
recent speech to the United Nations General Assembly, that increases in oil
prices are responsible for having "shattered" the development plans
of many countries. In response, OPEC officials argue that the quadrupling of
oil prices in late 1973 added "only slightly" to an inflationary
situation already under way, and that the oil price rises should not be seen in
isolation, but in conjunction with other factors causing additional balance-of-payment
burdens for developing countries including, in particular, price increases for
manufactures, food and fertilizers.
There is no
disputing that the nominal value of OPEC members' oil exports rose from $36
billion in 1973 to $113 billion in 1974, and that about $16-17 billion of the
higher oil revenues of OPEC came from non-oil Third World countries. Their
increased cost of oil was about $11-12 billion in each of the two years 1974
and 1975, over the level in 1973.
Since
relatively little of the oil consumption of poorer countries is for
nonessential uses, reduced supplies translate fairly directly into loss of
production and incomes. Unable to pull in their belts, these countries must
find some way to finance the increased costs. In view of their typically weak
foreign exchange positions and already precarious means for financing their
development programs, additional foreign borrowing and aid are their only
recourse.
Yet OPEC
members are justified in their claim that oil prices cannot be viewed in isolation.
The deterioration in the current account balance of payments of developing
countries has also been accelerated by the higher prices which they must pay
for manufactures. For example, increases in the price of manufactured goods of
about 40 percent during 1974-75, though small in relation to oil price
increases, have created difficulties for those countries for whom manufactures
account for a large proportion of imports. These countries, however, are almost
all those that are virtually self-sufficient in oil or are net oil exporters,
such as the OPEC members themselves.
As to food and
fertilizer, shortages in 1973-74 and related price increases posed additional
problems for non-oil developing countries, particularly for the poorer,
food-deficit countries. Export prices for United States wheat doubled between
1972 and 1973 and rose by a further 35 percent in 1974; nitrogenous fertilizer
cost more than twice as much in 1974 as two years earlier. Because of poor
harvests in 1973 and again in 1974 in a number of developing countries,
particularly in South Asia and Africa, requirements
for food grain imports rose sharply over the level of $3 billion in 1972.
Increased food import bills of $6-7 billion in the two-year period after 1972
reflected both extra volume and higher price claims on foreign exchange. While
food aid grants helped meet some of the essential food needs of many
countries-including Bangladesh, Tanzania, Ethiopia, and countries in the
Sahelian zone of Africa-it has been a period of shortages and added suffering
for many people among the low-income groups in less-developed countries. It
was, of course, in relation to these special needs that the U.N. General
Assembly, in April 1974, identified about 30 less-developed countries as
"most seriously affected" and thus requiring emergency assistance to
maintain essential imports.
The recent
easing of prices for both food grains and fertilizer, with the improved outlook
for crops in 1975 and larger annual food aid commitments, totaling about nine
million tons, appears to have moderated this source of strain on the balance of
payments of developing countries. However, most of the non-oil developing
countries are not large importers of food grains. They are more concerned with
the problems of financing their increased oil bills, which have not eased but,
on the contrary, have increased an additional ten percent by the OPEC decision
of September 1975. This further increase in the price of oil will add at least
an additional $1.5 billion to the oil bills of non-oil Third World countries in
1976, for an estimated total increase of about $13 billion beyond the level of
their payments for oil in 1973.
Today, the
prospects for many non-oil developing countries are bleak. Development programs
are not being sustained and momentum in growth is being lost as, for the first
time in over a decade, the import volume of non-oil developing countries has
declined and they have drawn heavily on both their borrowing capacity and
foreign exchange reserves. Most of these countries do not have the flexibility
and scope to adapt their economies to severe shortages of essential imports.
They lack adaptable export sectors as well as the ability to continue
borrowing, from international capital markets and institutions, the much
greater amounts necessary to pay for oil and other imports. With prices for
essential imports much higher and aid flows relatively constant, their options
are to reduce their already low consumption standards or to curtail further the
development programs which have been their main hope of future progress. (Paul,
Stuart , Ian & William. 2010)
The World Bank
has estimated that economic progress for many developing countries for the
remainder of the decade will not be possible without substantially increased
levels of aid. Whether measured by the overall $13 billion increase in oil
costs, or the still larger figures if one includes the added cost of food,
fertilizer and manufactured goods, the need for additional capital assistance
is enormous. The deterioration in the current account deficit of non-oil
developing countries was more than $20 billion in 1974. Recession in the OECD
countries during 1975 has added a further $10 billion as the Third World's
terms and volume of trade declined, and the current account deficit of the
non-oil Third World appears likely to go from $11.3 billion in 1973 to about
$42 billion in 1975. Recovery in the economies of the industrial countries will
see a revival of trade markets in 1976, but structurally higher prices for oil,
food and industrial imports will result in an increased average annual capital
requirement of about $20 billion for the non-oil Third World for the remainder
of the decade.
The success of
the oil-producing countries in achieving a uniquely sudden and large transfer
of purchasing power through their own collective action made a profound
impression on non-oil developing countries, particularly on countries which are
major producers of primary commodities. Less-developed countries with
cumulative problems of poverty, high unemployment, weak agricultural sectors
and sluggish development programs-those which were in trouble before the major
price increases-were in much greater trouble afterward and knew it. These were,
for the most part, African and Asian countries. But, a number of middle-income
developing countries, including primary commodity producers, were not
immediately hurt by the sharp increases in oil prices. They continued to
benefit from buoyant commodity prices until the commodity boom tailed out in
the latter half of 1974, their foreign exchange reserves were strong, and higher
oil payments were delayed as existing oil inventories were used. Also,
countries such as Argentina, Colombia, Bolivia, Mexico and Peru are not
dependent on imported oil. (Paul, Stuart
, Ian & William. 2010)
Hence, many
Third World countries saw OPEC as a role model which they would like to
emulate. While some non-oil developing countries were quick to identify higher
oil costs as one of their serious problems and to press for immediate economic
relief from OPEC, others came to the defense of OPEC price policies. For the
most part it was the middle-income countries who took a strong lead in building
and holding Third World support for OPEC.
Despite this
broad supporting role of non-oil developing countries, OPEC members appear to
have consistently rejected proposals for special discounts on the price of oil
for developing countries or any measure which would establish discriminatory
pricing of oil. Nor have they been able to agree on a policy of "oil aid
grants" for those most in need, comparable to the "food aid
grants" which continue to play an important part in helping less-developed
countries with their food grain imports. (Paul, Stuart , Ian
& William. 2010)
OPEC members
have extended some credits to developing countries specifically for the purchase
of oil, and they have supported the International Monetary Fund's Oil Facility
to the extent of $3.2 billion. However, these subscriptions are not considered
by the IMF to be a transfer of resources from OPEC since they remain, in
effect, part of the foreign exchange reserves of OPEC subscribers-reserves on
which they receive seven percent interest.1
The preferred
approach of OPEC members to helping the non-oil Third World appears to be
through the establishment of special funds or banks for the financing of
development projects which are not necessarily identified with the increased
cost of oil. While proposals for establishing an all-OPEC development fund have
been spawned, one after another, OPEC members have not been able to agree among
themselves on common funding. One of the early proposals was by the Shah of
Iran for a $2-3 billion fund with the joint participation of oil-exporting and
industrial countries, but this combined approach was too difficult to arrange.
Subsequently, in April 1974, OPEC members are reported to have agreed that a
special OPEC fund would come into being when seven of its thirteen members
ratified the articles of agreement. Apparently this did not occur, for the plan
appears to have been abandoned in late 1974. (Paul, Stuart , Ian
& William. 2010)
Why has a
common development aid policy, on behalf of its important relations with the
non-oil Third World, been so difficult for OPEC to achieve? One problem is that
OPEC has strong multiple leadership, with Saudi Arabia, Iran, Algeria,
Venezuela, and others all playing important parts. Also, it is difficult to
find a basis for sharing the burden of a common funding policy which satisfies
their diverse political interests. Saudi Arabia, Kuwait, the United Arab
Emirates and Qatar will run major surpluses on their current balance of
payments well beyond 1980, and they have important political interests to
pursue on behalf of the Arab world. Nigeria and Indonesia, with only seven
percent of OPEC proven oil reserves and over 70 percent of its population, find
that their oil will yield small returns relative to the large development needs
of their countries. In between are Algeria, Iran, Iraq and Venezuela-with
ambitious programs for development which appear likely to overtake their surplus
oil earnings in the next few years-and Libya, a special case and inclined to be
a loner.
What is clear
is that the diverse interests of these countries find common expression-beyond
the maintenance of high oil prices-mainly in general policies which assume that
OPEC interests and the interests of the non-oil Third World coincide. For
example, at the April 1974 Special Session of the U.N. General Assembly called
by President Boumedienne of Algeria, OPEC countries joined in supporting the
view that the current economic difficulties of non-oil developing countries
arose not from the essentially retrogressive effect on poorer countries of
recent major increases in the price of their essential oil imports, but rather
from a faulty economic system which had persistently neglected their economic
development needs, in general, and underpaid them for their commodity exports,
including oil, in particular. Non-oil developing countries were asked to accept
higher oil prices, as the vanguard of a new economic order which would seek to
improve substantially the terms of trade for other raw material and commodity
producers. It was a bold stroke in defense of higher oil prices, and in favor
of producer associations on the model of OPEC. Thus, in the Charter of Economic
Rights and Duties of States, adopted in December 1974 by the General Assembly,
less-developed countries who are major producers of primary commodities
continued to see OPEC as their role model. (Maurice, 2011)
CONCLUSION/RECOMMENDATION
OPEC being made up of only the
developing states of Africa, Asia and the Middle East with the exception of
Venezuela, a South American country, one would expect that this organization
will strive hard to benefit its follow developing or less developing countries
of the world. But instead their aims and objectives have been distorted by
ideological, geographical, political and even profit gains. As
might be expected from the foregoing discussion, direct OPEC assistance is
characterized by a marked geographic concentration. Almost two-thirds of the
direct concessionary aid disbursements of the past two years has gone to Egypt
and Syria, both of which, as mentioned above, are net exporters of oil. Another
25 percent went to Muslim states, leaving less than ten percent for non-Muslim
countries. Therefore if this
organization could cut across these boundaries affecting their cordial
relationship, try to understand what each other is facing and try to help in
its little way, this could promote mutual relationship and cooperation for as
the saying goes “no country in the international system is an island”.
REFERENCES
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Cheedal global prints Ltd
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