OPEC: The Dialectics of Economics, Geopolitics and Law

By ‘Femi D. Ojumu

An immutable conflict subsists between altruism and aphorism in global affairs. Altruism in this context implies rendering an economic, educational, legal, military or other strategic assistance where sovereign nation A, offers support to another, B, without the expectation, nor receipt of a corresponding service, nor any service for that matter. The altruistic rendition is, in principle, simply executed because it is deemed right and proper thus, an end in itself: not the means to an end! On the flip slide, the term aphorism as deployed here simply apprehends the veritable idiom that charity begins at home. In other words, the overriding duty of all sovereign states is the welfare and security of their people. This is well encapsulated in the Latin maxim salus populi suprema lex esto (the safety of the people is the supreme law).

That proposition is enshrined in Constitutional provisions around the world exemplified partly at section (1) of the 14th Amendment to the US Constitution providing inter alia: “all persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws”.

Equally, the Constitution of the Federal Republic of Nigeria 1999 (as amended) at section14 (1)(b), provides that “the security and welfare of the people shall be the primary purpose of government”. Furthermore, section 41 (1)(b), of the Constitution of the Republic of South Africa Number 108 of 1996 (as amended) establishes that “all spheres of government and all organs of state within each sphere must secure the wellbeing of the people of the Republic”

Objectively, the expressions “welfare” and “security” of the people above means their physical and economic welfare and security. The latter point regarding the economic security and welfare of citizens is the concern of this treatise. This is as it appertains to the role of the Organisation for Petroleum Exporting Countries (OPEC); relative to the unending contestability of economic and geopolitical dynamics of a volatile, unstable, complicated and abstruse world, that’s compounded by the Russian/Ukrainian war, which has pushed Russia and the West (US and NATO allies) close to nuclear war conflict on the one hand. And OPEC’s legitimate interest in maintaining an unwritten, albeit de facto, “charity begins at home” policy in doing the utmost for the economic welfare of citizens of its member states, on the other hand.

Keysian economic theory advances an active role for some state intervention in free markets as a basis for economic growth. Plus, economists of that inclination pretty much define cartels as profit-driven, mutually beneficial collaborations between two or more firms, sovereign nations or organs of sovereign nations, who attempt to control the prices of commodities or services within a given territorial or global market. The strategic goal of cartels is to drive up prices by restricting the production of commodities or the delivery of services which are not only in high demand but which, for reasons of competitive advantage, economies of scale, significant market share, naturally endowed resources or a combination of all of these factors, at a given province or in defined locations, are of extremely limited supply.

Applying this definition, OPEC, is patently an economic cartel because it comprises 13 major petroleum exporting countries whose polices, seemingly driven by “charity begins at home” motivations, influence global petroleum prices, through the imposition of production quotas of the most highly demanded commodity in the world: crude oil. That’s because crude oil is refined into petrol, diesel, jet A1 fuel, lubricants and petrochemicals used to make plastics – all of which are used by virtually all of the world’s circa 8 billion people (United Nations) in one shape or form whether in the form of public transportation, private vehicles, small boats, airplanes, spacecrafts, smartphones, computers, intravenous receptacles, medical equipment, storage tanks etc.

Upon its foundation on 14 September 1960, OPEC had 5 members; Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. In addition to the 5 foundation members, OPEC has an additional 8 member countries making the cartel one of 13 nations; notably Libya, United Arab Emirates, Nigeria, Algeria, Gabon, Angola, Equatorial Guinea and Congo. OPEC accounts for approximately 40% of global oil production (US Energy Information Administration) and over 80% of the world’s proven oil reserves. Juxtaposed, these factors guarantee OPEC’s status as a critical player in international energy dynamics and global geopolitics. It simply cannot be ignored.

For precision, a subtle distinction is made between OPEC and OPEC+. Whilst the former has been elucidated, OPEC + implies those oil producing countries with strategic production quota arrangements with OPEC. The OPEC+ countries Oman, Sudan, Brunei, Russia, Mexico, Bahrain, Malaysia, Azerbaijan, Kazakhstan and South Sudan.

In certain instances, one can readily deduce geopolitical tensions in OPEC+ from the prism of international geopolitics. For example, Sudan and South Sudan notwithstanding their OPEC+ compacts, remain at loggerheads and support rival warlords in their respective territories.

However, that is not always the case. Although Mexico shares land and maritime borders with the USA and relations between both countries may generally be considered as “neighbourly”, despite emanating tensions pertaining to the border wall and irregular migration patterns from Mexico to USA; the realpolitik thereof is somewhat more complex. After Brazil, Mexico is Russia’s largest trading partner with trade volumes in Q1 and Q2 2022 exceeding USD$1.193 billion.

Besides, Mexico and Russia, are members of the Asia Pacific Economic Cooperation forum, an intergovernmental group of 21 member states that seeks to promote free trade across the Asia Pacific realms. Strategic neutrality underpins Mexico’s stance on the Russian/Ukrainian crisis thus far as it tries to maintain a nuanced balancing act between its US neighbour on the one hand, and a key economic partner, Russia, on the other. Put another way, even within OPEC+ there are heightened moral hazards and significant strategic dilemmas to be overcome.

Now, the ethics of economic cartels has been debated ad infinitum and opinions remain sharply divided amongst opponents and proponents. Opponents contend that it is anti-market and therefore harmful to economic growth. Proponents, on the other hand, argue that the economic welfare of the people is the highest law and, if that entails market intervention, for the benefit of citizens; that is, the national interest justifies that “charity begins at home” and must truly begin at home.

Notwithstanding these diametrically opposed viewpoints, the fact remains that OPEC’s interventions in global petroleum markets are protected by the doctrine of state immunity under international law. Simply, that means that OPEC, an inter-governmental organisation, cannot ordinarily be sued for acts strictly consistent with its objectives of: coordinating and unifying the petroleum policies of its member countries and ensuring the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.

Therein lies the complexity especially because the world has edged ever closer to the prospect of nuclear war given heightened polemics between Russia on the one hand, and America, Ukraine and Western allies on the other hand. The toxic rhetoric should concern everyone.

It is in this context that the recent announcement of OPEC+ slashing production by 2 million barrels per day, approximating 2% of global output, has prompted a striking riposte from the USA. OPEC+ justifies the production cuts upon the imperative to stabilise prices, encourage long-term investment in production and facilitate a decent return on investments for consumers – the charity begins at home argument; however, the USA views this as an attempt to “align OPEC with Russia”.

The context is that Western sanctions against Russia are impeding the latter’s capacity to successfully prosecute its war against Ukraine and that production cuts by OPEC+ will ultimately benefit Russia, by catalysing its income stream and therefore its ability to prolong the war, thereby weakening the impact of Western sanctions. This clearly puts OPEC on a collision course with the US and Western allies although the former will contend that it is acting purely out of economic necessity and the national interests of its members states.

To finish where I began, the contestability between “altruisms” and “aphorisms” as used in this piece, regarding the global order is genuinely unending. Besides, there is no such thing as “altruism” in the purist sense of the word in international affairs. That’s because there is always a quid pro quo to be accommodated in some shape or form. To that extent, cartels like OPEC and OPEC+, are often caught in the geopolitical crosshairs amongst the super powers as is demonstrably evident from the foregoing.

In my treatise published in The Guardian on 5 March 2022, the “Russian Invasion of Ukraine: Human Tragedy”, I argued inter alia that “there are lessons to be learned from how the real threat of nuclear war was averted in the 1962 Cuban missile crisis between the superpowers – USA and Russia. Our common humanity deserves nothing less”. It follows that seeking a sensible negotiation out of the current Russian/Ukrainian war is not appeasement: far from it. It is a reasonable, necessary, overdue and pragmatic way out of the debacle and demands concerted efforts from men and women of goodwill within and outside the United Nations now. Afterall, diplomatic inertia has never been a rational strategy in global affairs.

Ojumu, Esq, is the principal partner, Balliol Myers LP, a firm of legal practitioners based in Lagos, Nigeria.  07016303208, info@balliolmyers.com


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