OPEC Overview and History

What is OPEC?

• OPEC stands for the Organization of the Petroleum Exporting Countries.
• Established in Baghdad, Iraq, in 1960.
• It is a supranational organization of oil-exporting countries.
• Headquartered in Vienna, Austria (though Austria is not a member).

Original Members (1960)

• Iran
• Iraq
• Kuwait
• Saudi Arabia
• Venezuela (not Middle Eastern)

Current Members

• Iran, Iraq, Kuwait, Saudi Arabia
• Qatar, UAE, Libya, Algeria, Nigeria, Angola
• Venezuela and Ecuador
• Membership has fluctuated, e.g., Indonesia was a member but left.

Nature of OPEC

• A cartel: a coalition controlling a large share of a commodity; similar to a monopoly.
• Controls much of the world's oil, sparking concerns about its power.

Oil Production and State Control

• Members are countries where the state owns and controls the oil production process.
• The U.S. could not join OPEC because it is a net importer and oil is privately controlled.

Historical Context

• Western companies originally controlled Middle Eastern oil resources.
• Most contracts were made when Middle Eastern states were weak or still protectorates.
• Oil contracts often favored Western companies due to their technology and exploration.
• Post-WWII, British colonial influence waned, granting independence to many states.
• Self-Determination: Regions aimed to control their own resources and political futures.

Shift to State Control

• Middle Eastern governments began realizing their oil wealth potential in the 40s-60s.
• Western reliance on oil gave these countries increased economic and political leverage.
• Governments bought stakes in Western companies, gradually nationalizing resources.

Nationalization Process

• Varied by country; some controlled oil by 1960, others as late as the 1990s.
• Gradual process; often involved purchasing shares or compensating prior owners.
• Western companies remained for technical support in many cases.
• Iran and Venezuela had more abrupt takeovers, contributing to political tensions.

Key Points

• The formation of OPEC marked a turning point in global oil politics.
• Nationalization allowed Middle Eastern states to exert greater control over oil.
• U.S. and other Western countries have laws against monopolies, influencing OPEC's perception.
• Relations with countries like Iran and Venezuela are strained due to oil nationalization tactics.