OPEC Fails to Compromise on Production Rate

Saudi Arabia fails to convince other oil exporting nations to boost output.

Talks between oil-producing nations broke down in acrimony on Wednesday without an agreement to raise output after Arab Gulf members failed to convince the cartel to increase production. The lack of compromise is a disappointment for consumer countries, especially the United States, which are coping with high gas prices.

Brent crude rose $1.40 a barrel to almost $120 after a conference of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria failed to reach an agreement. Saudi Arabia and the smaller Gulf nations were under pressure from the United States to increase output by 1.5 million barrels a day to bring down their price closer to $100.

Kuwait, Qatar, Saudi Arabia and the United Arab Emirates faced staunch opposition from a majority of seven — Algeria, Angola, Ecuador, Iran, Iraq, Libya and Venezuela — who said production and price were at an acceptable rate. Nigeria’s position was unknown.

According to the Iranians, most oil exporting nations agreed that supplies were adequate to meet global demand which has exceeded output by several millions of barrels a day.

Usually Saudi Arabia, which is the cartel’s largest oil producer by far, manages to push for a compromise. This time, the anti-American camp, led by Iran and Venezuela, won enough support to block Riyadh. The Saudis will likely boost output unilaterally however.

The discord is emblematic of political differences among OPEC nations. Both Qatar and the UAE have supported the military intervention in Libya where Colonel Muammar Gaddafi is facing popular pressure to resign. Saudi Arabia has antagonized Shia Iran by using force to support the Sunni government in neighboring Bahrain where Shiites took the streets to protest religious discrimination.

With both Saddam Hussein and Hosni Mubarak gone from Iraq and Egypt respectively, Saudi Arabia is the only Sunni power in the region still standing. But its influence is eroding. The Saudi backed government of Lebanon was undermined by Iranian ally Hezbollah earlier this year. The unrest in Bahrain, according to the Saudis, was an Iranian conspiracy against their kingdom.

Iran and Saudi Arabia are now the only two Middle Eastern powers that able to project influence beyond their borders. Further conflict, whether it’s about oil prices or American influence in the region, seems likely. Saudi Arabia is closely aligned to the United States while the Iranians are internationally isolated and struggling with sanctions because of their suspected nuclear weapons program.