[OPE-L:6012] rentier state (Saudi Arabia)

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Mon Sep 24 2001 - 13:29:47 EDT

Here is an excerpt Chibuzo Nwoke's Third World Minerals and Global Pricing 
(Zed, 1987) which makes use of the analysis by Massarrat in the Nore volume.

"The actual world market price of crude oil is thus governed by the individual 
price of coal production and the great demand for coal in the world energy 
market. the point of this analysis is that it is obvious that substantial 
surplus profits, or absolute rents, are created in the international oil 
industry tooday. If collusion within OPEC could be effectively implemented, the 
rewards to its member govts could be substantial. This reward, or increasing 
shares of absolute rent, could be obtained if the OPEC organization priced oil 
just below the price of the cheapest substitute for oil, that is, coal.

"If OPEC were an effective cartel, the substantial absolute rent in the intl 
oil industry today would be captured by its member govts as monopoly gains. 
However, because of the inability of the govts to exploit their producer power, 
only a modest amount of this surplus was, for a long time, actually captured by 

"As a result of OPEC govts' weakness at operating an effective cartel, before 
the so called energy crisis they failed to capture a large part of the surplus 
profit from oil. Instead, even today, this surplus is shared by the govts of 
the industrialized world and their oil MNCs. The govts of the industrialized 
world can capture part of this surplus profit in the form of petroleum taxes on 
that part of the annual crude oil production of the oPEC countries that they 
actually imported. And their oil MNCs can capture part of the surplus as 
excess, or super, profits from that part of OPEC's oil production that htey 
control in their concessionary areas...

"The threat of the perceived power of the OECD govts vis a vis OPEC govts will 
be magnified if, in addition to the economic levels at their disposal, the 
former's military and politcial power are also taken into account...On the 
whole the defensive strategies of the industrialized world have fostered splits 
within the ranks of OPEC. In this respect, within OPEC, the ruling class of 
Saudi Arabia has proved to the be the most important ally of imperialism and 
the industrialized countries' govts

"For example, as Massarrat put it: 'when one group of OPEC grouped around Iran 
announced a 30% increase in the posted price for oil from 1 Oct 1975, Yamani, 
the Saudi Arabian oil minister, firmly rejected it and pleaded instead for the 
freezing of the price. By threatening to leave OPEC, increase its production 
and offer its oil at a cheaper rate on teh world market than the other OPEC, 
Saudi Arabia succeeeded in keeping thei increase down--officially to 10% but in 
reality to 6.8%. 

"Saudi Arabia's (and others) divisive poliices within OPEC are due to political 
pressure of the OECD govts, especially that of the United States." p.102 

There is also a helpful book by Pierre Terzian on OPEC, but most of my cites 
are old--it's mostly books and articles which I read during the US-Iraq war a 
decade ago, and I haven't kept up.


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