OPEC Issues Riyadh Declaration as OPEC 3 Summit Ends

RIYADH -- The Third OPEC Summit came to a close Sunday with the issue of the Riyadh Declaration, a statement of governing principles that by the end of deliberations by oil and energy ministers, finance ministers and heads of state conformed to the three themes announced in advance of the gathering—oil supply stabilization and security, energy for sustainable development and environmental protection.

No mention was made in the final public communiqué presented by Abdullah Salem Al-Badri, OPEC’s secretary general at the King Abdul-aziz International Center, of shifting pricing of OPEC’s oil trade from the US dollar to a currency basket. Al Badri stated at the closing press conference given at the Marriott Hotel that while it was OPEC’s obligation to its members to maximize returns on their resource bases, the matter was best left for respective members’ finance ministers to study.

Will OPEC Mix Oil & Politics?

There were a number of questions presented at the closing press conference to do with Middle Eastern politics, including the peace process and the possibility of US military action against Iraq.

The late arrival Saturday of Venezuelan president Hugo Chavez was accompanied by a something of a media frenzy that some experienced reporters said was a bit muted compared to that usually generated by his appearances at international meetings. Chavez reportedly raised the issue of OPEC’s response to military action against Iraq.

The gist of Al Badri’s responses was the reiteration of principles that form part of OPEC’s charter, stating that OPEC was not a political organization and that while such issues might be raised in other forums, they were not issues to be considered or acted upon by OPEC.

The internal challenges and difficulties OPEC faces associated with maintaining this non-political stance and reaching organization-wide consensus became clear during the conference, raising the possibility of organizational paralysis.

Record high oil prices, resource nationalism and mounting geopolitical tensions, the possibility of Russia and Brazil applying for membership, and the diversity of nations and national interests already built into organization are exacerbating them.

Anti-Western political members, including Iraq and Iran, made good use of the media as they sought to advance their respective concerns, raising the specter of OPEC being used as a political platform which would only increase risk, uncertainty and instability in world markets and political circles.

Iran’s proposal that OPEC consider shifting its oil trade off the US dollar, while it has economic merit and is clearly of valid concern to OPEC as per its charter, also increases the likelihood of further US dollar declines and in turn reduces the value of OPEC members’ own dollar-based treasury stores, as Saudi Arabia’s delegation, with the support of other members, was quick to point out.

The Riyadh Declaration

OPEC’s final communiqué and the Riyadh Declaration contained no mention of these more controversial issues and developments. They do reaffirm OPEC’s commitment to the three principles that led to convening the summit.

Efforts to stabilize oil supply and foster energy security, as well as sustainable development, are apparent in OPEC’s investments in adding to global refining capacity. Saudi Arabia, for example, now refines 3.2 million barrels per day of crude oil. That’s expected to nearly double to 6 million bpd within five years.

OPEC’s intention to further realize its goal of oil supply stability and security is also apparent in efforts to make the organization and its workings more transparent. Invitations were extended to a record number of journalists—more than 150, for example, and the organization is further developing its news and information distribution infrastructure and capabilities, which include the OPEC.org website.

Fostering Sustainable Development, International Dialogue & Cooperation

Also of substance along this line is the ongoing development of the International Energy Forum (IEF) based in Riyadh, the creation of which was effected by the Custodian of the Two Holy Mosques, Saudi Arabia’s King Abdullah bin Abdulaziz.

Currently led by former Norwegian diplomat Arne Walther though his term will soon draw to an end, the IEF’s main mission is to promote sincere, ongoing dialogue between consuming, producing, developed and developing nations on issues pertaining to the development, use of energy resource and sharing of technology.

The IEF’s membership includes some 60 ministers of state from OPEC, International Energy Agency (IEA) and developing countries, as well as representatives from major international and national oil and energy companies. Two IEF meetings have been held thus far, most recently in Riyadh in May. A third meeting of the full membership is scheduled in Japan in 2009.

The IEF is also the motive force behind the JODI (Joint Oil Data Initiative) which is progressing towards its goal of collecting, collating and publicly distributing detailed data on worldwide petroleum resources, as well as establishing an international standard for the collection and reporting of this information.

The OPEC Fund for International Development (OFID) is the main vehicle through which the organization seeks to live up to its stated intentions to promote and foster sustainable development through developing energy services. OFID grants public and private sector loans, provides debt relief and technical assistance, makes research grants and provides emergency assistance. OFID as of end July 2007 had provided more than US$8.5 billion in concessional development financing to 120 developing countries. Its budget will double next year to US$1 billion.

The OPEC Environmental Fund

“Protecting the Planet “was the third pillar of the OPEC 3 Summit. In the wake of the issuance of the United Nations Framework Convention on Climate Change (UNFCC) issuing its latest scientific findings and analysis of data related to the potentially catastrophic effects of climate change and global warming, OPEC announced that it will establish the OPEC Environmental Fund.

An initial capital contribution of US$ 300 million, augmented by contributions of US$ 150 million each from Kuwait, Qatar and the United Arab Emirates, is to fund research and development efforts that aim to reduce carbon dioxide and greenhouse gas emissions from the production and consumption of petroleum, derivative products and electrical power generation.

This program stands to benefit both oil producing and consuming countries, Al Badri noted, as environmental protection “is a shared responsibility with shared benefits.” Climate change and environmental pollution do not discriminate and they do not recognize national boundaries, he said.