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Double-cross: Saudi Arabia could create OPEC’s rival

Double-cross: Saudi Arabia could create OPEC’s rival

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Date: 12 January 2016 16:52

Baku, Azerbaijan, Jan. 12

By Elena Kosolapova – Trend:

The tensions with Iran could push Riyadh to create a new oil exporters organization which will be competitive with OPEC, economist and expert on Iran at the US Northeastern University, Kamran Dadkhah believes.

“Perhaps Saudi Arabia gathers some of the members allied to it and form a rival organization,” Dadkhah said to Trend.

Nigeria's oil minister Emmanuel Ibe Kachikwu said on Tuesday that a "couple" of members of the OPEC have requested an emergency meeting, adding current market conditions create the need to hold such a gathering.

Dadkhah noted that it would be difficult to conduct any meaningful meeting if two main players – Iran and Saudi Arabia - are at loggerhead.

Relations between Saudi Arabia and Iran soured after execution of Nimr al-Nimr, a prominent Shia cleric, by the Kingdom along with other 46 people, which was followed by a strong protest from Iran. Some Iranian protesters stormed Saudi embassy in Tehran on Jan. 3, smashing furniture and setting the building on fire before being dispersed by police. The Saudi consulate in the eastern city of Mashhad also was attacked. Saudi Arabia broke off diplomatic ties with Iran in response to these attacks. Bahrain, Djibouti and Sudan aligned with Saudi Arabia and also cut the relations with Iran.

“We should not expect any serious policy or quota to come out of the OPEC [in this situation],” Dadkhah said.

He noted that the OPEC never had the power to control oil prices.

"Some refer to oil price increases in the 1970s as the evidence of its power. However the reason oil prices went up was that in August, 1971 US President Richard Nixon severed the dollar-gold connection, effectively ending the Bretton Woods Agreement and the Gold Exchange Standard regime," he said.

“Immediately the price of gold went up and the price of oil followed,” he said.

Dadkhah said that what the OPEC members achieved was to end the dominance of the “Seven Sisters” (the seven large oil companies including BP, Exxon, Gulf Oil, Mobil, RD/Shell, Chevron and Texaco) over the international oil market and over the oil sectors of the member countries. This was especially true in case of Iran during the Shah’s regime, he added.

Dadkhah went on to say that as far as quotas are concerned, the OPEC members frequently produce and export beyond their quotas.

Edited by SI

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