268. Airgram From the Embassy in Lebanon to the Department of State 1

A–605

SUBJECT

  • Petroleum: Libya, Kuwait, Saudi Arabia Sign Charter of Organization of Arab Petroleum Exporting Countries (OAPEC)

REF

  • CERP D; Beirut A–557, 12/29/67; Jidda A–254, 12/30/672

The Arab World’s three leading oil producers, Saudi Arabia, Kuwait, and Libya, signed an agreement in Beirut on January 9, 1968, establishing an Organization of Arab Petroleum Exporting Countries (OAPEC), which will have its headquarters in Kuwait. We are enclosing Middle East Economic Survey’s report (January 12)3 on the establishment of the new organization; MEES also reports the major provisions of the OAPEC charter.

During the press conference that followed the signing ceremony, Saudi PetMin Yamani confirmed that neither Algeria nor the UAR would be eligible for membership in the new group, as would, on the other hand, Qatar, Abu Dhabi, and Bahrain. Yamani pointed out that the charter provision on membership states that petroleum must constitute the principal and basic source of income for member-states. Although not specifically mentioned by Yamani, Syria would also be left outside OAPEC.

As for membership and the rationale for establishment of the new grouping, MEES concludes that the three charter members believed “the main responsibility for policy decisions on Arab oil should rest with those who actually produce it and are utterly dependent on this one source of revenue.” As we noted in our A–557, Saudi, Kuwaiti, and Libyan frustration with Middle East oil policy decisions following the June war probably gave considerable impetus to their decision to form OAPEC. Indeed, Iraq’s refusal to become a charter member of the new group substantiates this view, i.e., whereas Saudi Arabia, Kuwait, and Libya wanted to establish a more moderate group (without [Page 476]the likes of Syria, the UAR, and Algeria), Iraq decided not to join the new group and indicated it would prefer to coordinate its oil policy under the aegis of the Arab League, which of course includes more radical elements than the new OAPEC.

The commercial and economic nature of the new organization is also worthy of note; as Yamani stated during his press conference, OAPEC will be “the EEC of the Arab oil producers” and will be empowered to conclude commercial agreements and initiate and undertake transactions and joint enterprises with regard to oil and other related economic fields. It remains to be seen what sort of commercial cooperation can be undertaken between the diverse economies of the three charter members of OAPEC. However, as MEES notes, OAPEC will “at least provide a feasible framework for the implementation, … of the same sort of desirable inter-Arab projects as have in the past been consistently wrecked on the rocks of regional political discord.”

Finally, it would be interesting to learn the reactions of company lawyers to the idea of an OAPEC court which, under the OAPEC charter, will have authority over: 1. disputes regarding interpretation of the Charter; 2. disputes which may arise between the member states regarding oil matters; and 3. disputes which, in the opinion of the OAPEC Council of Ministers, fall within the jurisdiction of the court. Risalat al betrol al-arabi (a new Arabic petroleum newsletter published in Beirut, see A–602) goes beyond MEES’s interpretation of the court’s functions and notes that decisions of the court on disputes between member states (2 above) will be binding. As for 3, disputes the OAPEC Council of Ministers may decide fall within the jurisdiction of the court, Risalat al betrol al-arabi interprets this to mean that the court will act as a mediator or arbitrator between the OAPEC member states and the petroleum companies. MEES believes the court may have such jurisdiction in the future, but the new oil publication is more definite on this subject.

We would appreciate information obtained by other posts as to the reaction of company lawyers to the idea of an OAPEC court and OAPEC in general. Reports on discussions between the Department and company headquarters legal staffs on this subject would also provide useful background information.

Porter
  1. Source: National Archives and Records Administration, RG 59, Records of the Department of State, Central Files, 1967–69, PET 3 OAPEC. Limited Official Use. Drafted by R. Wright and cleared by N.K. Pratt. Also sent to Jidda, Kuwait, Tehran, Tripoli, and Dhahran, and passed to Algiers, Amman, Ankara, Brussels, Cairo, Caracas, Djakarta, Lagos, London, Paris, Rome, Tel Aviv, The Hague, USUN, Vienna, and Beirut.
  2. Neither printed. (Both ibid., PET 3 ARAB)
  3. Not printed.