OPEC: The Cartel That Never Was

The Atlantic

March 1983

by Edward Jay Epstein

0PEC, which stands for the organization of petroleum Exporting Countries, is a four-letter word synonymous with prodigious wealth, arbitrary power, and fear. The wealth is from the combined oil sales of its thirteen member nations, which exceeded $240 billion in 1981, a sum greater than half of the entire M-1 money supply in the United States; the power from the fact that its members control nearly two thirds of the free world's oil reserves; and the fear from the threat that OPEC might cut off this lifeline of energy, paralyzing the world's economy. No other organization, with the possible exception of the first Communist Internationale, has excited such concerns on a global scale.

The continued preoccupation with the potential threat of OPEC, however, distracted attention from the actual flesh-and-blood organization that inspired it. Despite a booming voice that has reverberated through the world's media for the past decade, it turns out that OPEC is a small organization. Its headquarters, in Vienna, is its only office: there are no branches or representatives elsewhere. Except for the alert squad of Austrian "Cobra" commando-, with submachine guns guarding the entranceway, the four-story building at Donaustrasse 93 in downtown Vienna resembles any other modern office building in Europe. It is built of gray marble, and glass, With a small parking lot in front, and almost identical buildings on either side, housing IBM and an Austrian hank. In 1982, twenty-two years after it was founded, 0PEC employed only thirty-nine persons on is executive staff. Not counting a few dozen Austrian secretaries and clerks and a handful of employees of OPEC's Fund for International Development (which awards grants and other largesse to countries in the Third World), this staff of thirty-nine men constitute the entire worldwide employment of OPEC. It included everyone from the secretary general to the press officers.

Last September, I was taken through the headquarters. The most prominent part of OPEC is the huge press auditorium on the ground floor, which is more than twice the size of its counterpart in the White House. It is surrounded by; state-of-the-art communications facilities for the press, on which no expense has been spared: a fully equipped color-television studio for taping interviews with OPEC spokesmen, telephones and Telexes for reporters' use in dispatching stories, a multilith printing press for churning out press releases, and a library of energy publications. There is even an in-house wire service, called OPECNA, which feeds announcements and other news releases to subscribing newspapers and radio stations. Aside from these services to reporters, OPEC edits a number of glossy publications-including a monthly OPEC bulletin, the annual report, and illustrated briefing books. Behind the auditorium, through a locked door, is the computer room, which contains the institutional memory of OPEC. The computer itself is a medium-size IBM 4341, installed in 1980 and programmed by a group of American consultants from the University of Southern California in Los Angeles. The air-conditioned room is crammed with metallic cabinets storing the hard disks of computer memory. In the center is a control console manned by a Viennese operator. When he initially attempted to demonstrate to me the computer.- graphic abilities, the screen. after an embarrassingly long hesitation, came up blank. "This is of course not the top-of-the-line IBM," he said apologetically, re-entering the instructions on the keyboard. This time, the computer drew out a multicolored graph of prices for different grades of crude oil. The data was eight years old.

The operator explained that the computer has no direct telecommunication links to the oil markets and loading facilities. Instead, the data on prices comes by mail from Platt's Oilgram Price Report, an oil-industry newsletter published in Houston and New York. Each day, the prices published in Platt's have to be entered into the OPEC computer. Since there are only two programmers at OPEC, the information in the computer is often outdated.

When it came to displaying oil production from individual OPEC countries, the computer was out of date by the end of the month.-. "The problem is political," the operator explained: the OPEC countries refuse to provide the Vienna headquarters with data on how much oil they are producing and shipping. While some members, such as Indonesia, Venezuela, and Saudi Arabia, do furnish some data-after a delay of from two to six months-other members, such as Libya, Iran, and Nigeria, refuse to supply any figures at all on production and oil shipments. The result is that OPEC relies for much of its information about oil production on the International Energy Agency, in Paris, which was formed in 1974 by sixteen industrial nations, led by the United States, to ration the remaining supply of oil in the event of a dreaded OPEC cutoff. The IEA, in turn, relies mainly on the data of the United State Department of Energy, which, to complete the circle, draws its data from the reporting of the major oil companies. The picture of the oil market whirled out in four colors by the OPEC computer is thus not the product of the daily reality of oil loadings in the Persian Gulf or other ports of OPEC countries but the product of outdated statistics from oil companies which have been filtered through government bureaucracies.

When we left the computer room, Dr. Edward Omotoso, OPECs head of communications, wistfully acknowledged that the data base was "not perfect." He explained, "OPEC is not the CIA. We do not have satellites in the skies to count every oil tanker. We are not really that sort of an organization." He added, "We are not even a wealthy organization."

The annual budget for OPEC, like the size of the staff, seems far more appropriate for a small business than for what the press has often called the "most powerful group on earth." In 1981, the allocated budget was about $13.4 million (not all of it spent), most of which went for the cost of publishing OPEC's bulletin, books, and annual report. Saudi Arabia's share, for example (equal to that of the other members), was $906,250 in 1981, equivalent to the revenue it earned in about four minutes from its oil fields. "We have to watch even the cost of our long-distance telephone calls," an Iranian finance officer in OPEC said, referring to the infrequent communications with the oil producing centers.

"No one considers the OPEC assignment a plum," an OPEC executive explained. Although some employees see in OPEC a chance to escape authoritarian regimes and seek opportunities in the West, a job at OPEC is usually a detour from the path of advancement at a national oil company. And as it turns out, many OPEC technocrats (to not return to jobs in their home countries; they frequently go on to be oil consultants in Geneva or Paris. A number of OPEC executives were openly dissatisfied with the chaotic and unpredictable working conditions. "There are a number of vacancies on the staff," Dr. Omotoso said, as he reviewed the roster.

The position of secretary general, which rotates among the thirteen member nations every two years, is currently held by Dr. Marc Nan Nguema, a Gabonese civil servant. Dr. Nguema spends a considerable part of his time representing OPEC at energy seminars, conferences, and other ceremonial occasions. His Office of the Secretary consists of an assistant and a speech writer. (In December, the OPEC ministers voted against extending the term of Dr. Nguema after he was severely criticized by Saudi Arabia, Kuwait, and the United Arab Emirates for exceeding his expense account and travel allowance.) The de facto head of OPEC is the deputy secretary general, Dr. Fadhil J. At Chalabi, a fifty-three-year-old Iraqi lawyer and former minister who before joining OPEC, in 1978, ran OAPEC, a completely different group composed entirely of Arab oil producers. Directly under Dr. Al-Chalabi is the Division of Research, headed by another Iraqi, which employs more than half the staff. Its job is to gather and analyze data :about the international oil trade. The other major job of OPEC, also under Chalabi's control, is image-making. The products of its international PR machine, according to OPEC's last annual report, include the commissioning of a book on the history of OPEC,.entitled OPEC: An Instrument of Change; films with titles such as For the Benefit of All; subsidized OPEC Workshops for Journalists of the Third World, designed to "counteract misinterpretations and distortions in the media of OPEC's aims"; a commemorative OPEC postage stamp; and the daily release of "news" through the OPEC wire service. These activities aim at reversing the "brainwashing" of the media in the West.


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