In many ways, the current conflict in Yemen can be seen as a “proxy war” between two OPEC members, motivated by oil.
VIENNA — Since its formation in Baghdad over 50 years ago, the Organization of the Petroleum Exporting Countries, or OPEC, has used its influence not just to benefit members’ own profits from exporting crude, but also to affect global politics through the power of energy.
OPEC formed at the “Baghdad Conference,” held from Sept. 10-14, 1960, according to a history timeline on the OPEC website. The five original member nations — Iraq, Kuwait, Saudi Arabia, Iran and Venezuela — were asserting new control over their national energy reserves, which had been previously controlled by Western corporations, and they saw the formation of an oil cartel as a way to increase their power and influence global oil prices. From their history:
“OPEC’s formation by five oil-producing developing countries in Baghdad in September 1960 occurred at a time of transition in the international economic and political landscape, with extensive decolonisation and the birth of many new independent states in the developing world.”
Over the next 15 years, nine other members joined OPEC: Qatar, Egypt, Indonesia, the United Arab Emirates, Algeria, Nigeria, Ecuador, Angola and Gabon. OPEC was headquartered in Switzerland for the first five years of its existence, but has been based in Vienna ever since.
OPEC first began to exert serious influence over world affairs in the aftermath of the 1973 Yom Kippur War, when Israel waged war on a coalition of Arab countries over control of the oil-rich Golan Heights and the Sinai region of Egypt. OPEC — and, in particular, a subset of Arab members — retaliated economically against the countries that had financially supported Israel. Oil prices increased by 130 percent, and the Organization of Arab Petroleum Exporting Countries slowed oil production and put an embargo on the United States and the Netherlands, Israel’s two main supporters during the war. Oil prices increased tenfold over the remainder of the decade.
Kate Lanier, writing this week on MyMPN, the MintPress News blog, explained that the oil crisis led directly to the passage of the Energy Policy and Conservation Act in 1975. This landmark law continues to influence American energy policy today, from controls over oil exports to the emphasis on domestic energy sources that created today’s fracking boom. It also led to the “emergence of the concept of ‘oil as a weapon,’” Lanier argues, with global policy altered by, and even wars being fought over, this powerful resource.
According to Time magazine’s “A Brief History of OPEC,” the influence of OPEC rises and falls along with oil prices, with war between two members a further factor diminishing its power. “By 1973 … the group accounted for two-thirds of the world’s oil production,” wrote Time’s Megan Gibson, but:
“In 1980, the Iraq-Iran War broke out, pitting two member countries against one another for the first time ever. At the same time many countries that imported OPEC oil began to explore alternate energy sources such as coal, natural gas and nuclear power. The two together resulted in falling oil prices … By 1986, revenues for all oil producers had fallen by an estimated two-thirds.”
Saudi Arabia’s attacks on Yemen are further evidence of the continuing importance of OPEC and the ongoing conflicts between its members, now influenced by the recent Iran nuclear deal. The end of sanctions against Iran could see millions of gallons of Iranian crude oil for sale, threatening Saudi Arabia’s control over global markets. The bloody conflict in Yemen can in many ways be seen as a reaction to power plays between the two nations, according to an April report from the Houston Chronicle:
“There is a real fear that OPEC’s largest producers may find themselves divided along religious lines and unable to agree upon a production quota.
That could spell very bad news for oil prices. The Sunni members of OPEC have the lowest costs of production and the least need for oil revenues. They could flood the world with cheap oil as a tool to punish Iran, which needs high oil prices to maintain economic stability. Once the glut of oil on the market dries up later this year, geopolitics will become a major price driver if this instability continues.”