Dollar Spat Shows Political Divide As Saudi OPEC Summit Ends

The Organization of Petroleum Exporting Countries wrapped up a historical third summit Sunday one member stronger and invigorated by record oil prices, but overshadowed by differences over the weakening dollar that has revealed a growing political divide in the 13-nation group.
Dow Jones Newswires
Δευ, 19 Νοεμβρίου 2007 - 04:32
The Organization of Petroleum Exporting Countries wrapped up a historical third summit Sunday one member stronger and invigorated by record oil prices, but overshadowed by differences over the weakening dollar that has revealed a growing political divide in the 13-nation group.

The divide raises the possibility of tougher, more protracted policy decisions ahead for OPEC, which next meets on Dec. 5 in Abu Dhabi, where delegates say ministers will discuss oil production and the impact of the weak dollar on their oil earnings.

OPEC ruled out making any changes to its oil output at this week's summit - only the third in its 47-year history.

Instead, the debate turned to the lackluster dollar: a sensitive topic among the oil producers, some of whom are closely tied economically and politically to the U.S., who have seen the value of their dollar-denominated oil export earnings erode recently. Saudi Arabia and the United Arab Emirates, for example, peg their currencies to the greenback.

Iran and Venezuela - hawkish allies in the group and united by their troubled relations with the U.S. - have pushed OPEC to discuss a possible oil currency basket and sought to include a mention of the weakening dollar in the summit's final communique.

Their efforts prompted a blunt response from Saudi Arabia's Foreign Minister Prince Saud Al-Faisal to take the issue up separately with finance ministers, as he warned "we shouldn't mention the dollar because that would only endanger it more and aid its collapse."

The final communique omitted any overt reference to the dollar but appeared to bow to pressure from Iranian President Mahmoud Ahmadinejad and his Venezuelan ally Hugo Chavez, who said they would raise the issue in the closed session, by substantially changing the wording of a clause from the draft version.

The final version instructed ministers "to study ways and means of enhancing financial cooperation...including proposals by some of the heads of state and governments in their statements to the summit."

The original draft of the communique, reviewed by Dow Jones Newswires Friday, read that the group seek to "encourage greater economic and financial cooperation among member countries."

The differences come as part of a growing schism in OPEC over whether the oil-producing group should take on a more explicit political role.

OPEC officially welcomed Ecuador back into the group over the weekend after a 15-year hiatus, and President Rafael Correa, in his first public speech following his country's re-entry, clearly positioned Ecuador along with Venezuela and Iran in backing a more political role for OPEC.

"OPEC must take political action," Correa told a news conference in the Saudi Arabian capital. "It can't be any other way. Rather, trying to deny this political dimension of OPEC is to deny reality."

Correa, a former economist, added that the question of "in what currency to trade our petroleum" was precisely the kind of "political discussion" OPEC needs to assume.

Venezuela's Chavez, at the summit's opening speech, called for OPEC to strengthen itself geopolitically "if the developed world wants a guaranteed supply of oil," drawing a swift rebuke from Saudi Arabia's King Abdullah who said: "Oil shouldn't be a tool for conflict, it should be a tool for development."

Meanwhile, Iran's Ahmadinejad said OPEC finance ministers and foreign ministers had been tasked to study the affects of the weaker dollar, adding that, "the U.S. dollar has no economic value."

Their stance stands in clear contrast to other members - including de facto leader Saudi Arabia - who have repeatedly opposed OPEC taking on political issues.

"OPEC is not a political institution," OPEC Secretary General Abdalla Salem el-Badri told reporters earlier in the week, saying the group would continue to focus on its "very successful" history of ensuring energy security and economic stability.

Yet other references in the summit communique reveal how difficult it is to isolate politics from the energy.

The communique also warned against the threat to energy security from consuming nations introducing what the group perceives to be anti-OPEC legislation.

"(We) reiterate that measures or legislation undermining the spirit of producer-consumer cooperation would jeopardize market stability and energy security," the document said, urging consumer-nation governments to adopt non-discriminatory, transparent policies.

A group of U.S. lawmakers have introduced a bill, recently approved by the U.S. Senate, that would allow the government to sue OPEC for cartel-like activity, although the White House has threatened to veto the measure.

The group's final communique approved Sunday by the heads of state gave more emphasis to environmental and sustainable development issues than any previous declarations, and reiterated OPEC's commitment to stable energy markets and "competitive petroleum prices."

At the summit, Saudi Arabia, Qatar, the United Arab Emirates and Kuwait pledged a total of $750 million toward a fund for investments in alternative energies and emissions-reducing technologies.

OPEC is set to hold its next summit in 2012 in Libya.

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