By Dr. Soha El Magawry

Organizations & Economic Grouping O.P.E.C. OPEC: In accordance with its Statute, the mission of the Organization of the Petroleum Exporting Countries (OPEC) is to coordinate and unify the petroleum policies of its Member Countries and ensure 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.

Organizations & Economic Grouping O.P.E.C. Brief History: The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were later joined by nine other Members: Qatar (1961); Indonesia (1962) – suspended its membership in January 2009, reactivated it in January 2016, but decided to suspend it again in November 2016; Libya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) – suspended its membership in December 1992, but reactivated it in October 2007; Angola (2007); and Gabon (1975) - terminated its membership in January 1995 but rejoined in July 2016. OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria, on September 1, 1965.

Organizations & Economic Grouping O.P.E.C. Brief History (continued): The five Founding Members were later joined by nine other Members: Qatar (1961); Indonesia (1962) – suspended its membership in January 2009, reactivated it in January 2016, but decided to suspend it again in November 2016; Libya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) – suspended its membership in December 1992, but reactivated it in October 2007; Angola (2007); and Gabon (1975) - terminated its membership in January 1995 but rejoined in July 2016. OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria, on September 1, 1965.

Organizations & Economic Grouping O.P.E.C. OPEC's objective is to: co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.

Organizations & Economic Grouping O.P.E.C. The 1960s OPEC’s formation by five oil-producing developing countries in Baghdad in September 1960 occurred at a time of transition in the international economic and political landscape, with extensive decolonization and the birth of many new independent states in the developing world. The international oil market was dominated by the “Seven Sisters” multinational companies and was largely separate from that of the former Soviet Union (FSU) and other centrally planned economies (CPEs).

Organizations & Economic Grouping O.P.E.C. The 1960s (continued) OPEC developed its collective vision, set up its objectives and established its Secretariat, first in Geneva and then, in 1965, in Vienna. It adopted a ‘Declaratory Statement of Petroleum Policy in Member Countries’ in 1968, which emphasized the inalienable right of all countries to exercise permanent sovereignty over their natural resources in the interest of their national development. Membership grew to ten by 1969.

Organizations & Economic Grouping O.P.E.C. The 1970s OPEC rose to international prominence during this decade, as its Member Countries took control of their domestic petroleum industries and acquired a major say in the pricing of crude oil on world markets. On two occasions, oil prices rose steeply in a volatile market, triggered by the Arab oil embargo in 1973 and the outbreak of the Iranian Revolution in 1979.

Organizations & Economic Grouping O.P.E.C. The 1970s (continued) OPEC broadened its mandate with the first Summit of Heads of State and Government in Algiers in 1975, which addressed the plight of the poorer nations and called for a new era of cooperation in international relations, in the interests of world economic development and stability. This led to the establishment of the OPEC Fund for International Development in 1976. Member Countries embarked on ambitious socio-economic development schemes. Membership grew to 13 by 1975.

Organizations & Economic Grouping O.P.E.C. The 1980s After reaching record levels early in the decade, prices began to weaken, before crashing in 1986, responding to a big oil glut and consumer shift away from this hydrocarbon. OPEC’s share of the smaller oil market fell heavily and its total petroleum revenue dropped below a third of earlier peaks, causing severe economic hardship for many Member Countries.

Organizations & Economic Grouping O.P.E.C. The 1980s (continued) Prices rallied in the final part of the decade, but to around half the levels of the early part, and OPEC’s share of newly growing world output began to recover. This was supported by OPEC introducing a group production ceiling divided among Member Countries and a Reference Basket for pricing, as well as significant progress with OPEC/non-OPEC dialogue and cooperation, seen as essential for market stability and reasonable prices. Environmental issues emerged on the international energy agenda.

Organizations & Economic Grouping O.P.E.C. The 1990s Prices moved less dramatically than in the 1970s and 1980s, and timely OPEC action reduced the market impact of Middle East hostilities in 1990–91. But excessive volatility and general price weakness dominated the decade, and the South-East Asian economic downturn and mild Northern Hemisphere winter of 1998–99 saw prices back at 1986 levels. However, a solid recovery followed in a more integrated oil market, which was adjusting to the post-Soviet world, greater regionalism, globalization, the communications revolution and other high-tech trends.

Organizations & Economic Grouping O.P.E.C. The 1990s (continued) Breakthroughs in producer-consumer dialogue matched continued advances in OPEC/non-OPEC relations. As the United Nations-sponsored climate change negotiations gathered momentum, after the Earth Summit of 1992, OPEC sought fairness, balance and realism in the treatment of oil supply. One country left OPEC, while another suspended its Membership.

Organizations & Economic Grouping O.P.E.C. The 2000s An innovative OPEC oil price band mechanism helped strengthen and stabilize crude prices in the early years of the decade. But a combination of market forces, speculation and other factors transformed the situation in 2004, pushing up prices and increasing volatility in a well-supplied crude market. Oil was used increasingly as an asset class. Prices soared to record levels in mid-2008, before collapsing in the emerging global financial turmoil and economic recession.

Organizations & Economic Grouping O.P.E.C. The 2000s (continued) OPEC became prominent in supporting the oil sector, as part of global efforts to address the economic crisis. OPEC’s second and third summits in Caracas and Riyadh in 2000 and 2007 established stable energy markets, sustainable development and the environment as three guiding themes, and it adopted a comprehensive long-term strategy in 2005. One country joined OPEC, another reactivated its Membership and a third suspended it.

Organizations & Economic Grouping O.P.E.C. 2010 until now The global economy represented the main risk to the oil market early in the decade, as global macroeconomic uncertainties and heightened risks surrounding the international financial system weighed on economies. Escalating social unrest in many parts of the world affected both supply and demand throughout the first half of the decade, although the market remained relatively balanced. Prices were stable between 2011 and mid-2014, before a combination of speculation and oversupply caused them to fall in 2014.

Organizations & Economic Grouping O.P.E.C. 2010 until now (continued) Trade patterns continued to shift, with demand growing further in Asian countries and generally shrinking in the OECD. The world’s focus on multilateral environmental matters began to sharpen, with expectations for a new UN-led climate change agreement. OPEC continued to seek stability in the market, and looked to further enhance its dialogue and cooperation with consumers, and non-OPEC producers.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID): Sovereigns and Heads of State of OPEC Member Countries (MCs) do not meet regularly. However, when they do meet, the impact is felt beyond the confines of the Organization’s MCs and for decades too. Such meetings also, have the tendency to affect lives in a positive way.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): This could be said to be the effect their first meeting in 1975 has had on the world’s poor countries through the OPEC Fund for International Development, (OFID). Established as a multilateral development finance institution to promote cooperation between Member States of OPEC and other developing countries, OFID was conceived at the Summit of the Sovereigns and Heads of State of the OPEC Member Countries (MCs) held in the Algerian capital, Algiers, in March 1975.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): The Solemn Declaration, issued by the Summit, ‘reaffirmed the natural solidarity which unites OPEC MCs with other developing countries in their struggle to overcome under-development, and called for measures to strengthen cooperation with these countries.’

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): In this spirit, OFID was established in January 1976, as a collective financial facility to consolidate the assistance extended by its Member Countries namely Algeria, Ecuador, Gabon, Indonesia, Islamic Republic of Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. OFID’s resources are additional to those already made available by OPEC MCs through a number of bilateral and multilateral channels. The resources of OFID consist mainly of voluntary contributions by OPEC MCs and income derived from OFID’s investments and loans.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): OFID’s operations were launched in August 1976 with initial resources of about US$800m. This amount has since then been replenished four times. The last replenishment of US$1b was approved by the Ministerial Council in June 2011 as a direct response to the increasing needs of developing countries and the negative impact of the financial crisis on their economies.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): All non-OPEC developing countries are, in principle, eligible for OFID assistance. However, the least developed and other low-income countries are accorded priority and, therefore, receive a larger share. Over the years, OFID has spread its financing to 134 countries, of which 53 are in Africa, 43 in Asia, 31 in Latin America and the Caribbean, and seven in Europe.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): OFID’s total approved commitments distributed through its four financing mechanisms and contributions to other institutions stood at US$19,665m as of the end of June 2016. In the public sector, OFID has implemented 18 lending programs since its inception. The 19th Lending Program, approved for a three-year duration, became effective 1 January 2014.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): As of January 1, 2016 close to two-thirds of the outstanding loans were with Low Income Countries and half of all commitments were to Africa. Under the Private Sector Facility established in 1998, 245 operations have been approved in support of private entities in Africa, Asia, Latin America and Europe. By the end of June 2016, US$2,725m had been committed and US$1,667m disbursed.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): In 2006, a Trade Financing Facility was launched. By the end of June 2016, US$2,571m in term loans had been committed and US$2,358m had been disbursed. In addition, US$1,950m in risk-sharing guarantee programs had been approved.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): In the framework of grants, assistance is extended to social and humanitarian aid and social development operations through six grant programs; Technical Assistance, Research and Similar Activities, Emergency Relief Aid, Special Health Program, Energy Poverty and the Palestine Program.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): OFID has also established a special grant account to respond to specific global needs — such as the grants for the establishment of the Common Fund for Commodities and the International Fund for Agricultural Development (IFAD). By the end of June 2016, 1,713 grants amounting to US$622m had been extended.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): In addition, OFID channeled $972m to two international institutions: it has channeled OPEC Members’ contributions to the initial capital and first replenishment of IFAD’s resources and made irrevocable transfers in the name of seven OPEC Members to the Trust Fund of the IMF.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): Focus on energy poverty: In November 2007 during the OPEC Summit in Saudi Arabia, OFID was mandated to align its programs with energy poverty eradication. In 2008 OFID, in implementing the above mandate, started action on the “Energy for the Poor” initiative.

Organizations & Economic Grouping O.P.E.C. The OPEC Fund for International Development, (OFID) (continued): Focus on energy poverty (continued): To enhance these efforts the OFID Ministerial Council, in its June 2012 Declaration, committed a minimum of a revolving US$1b, which was announced by OFID management at Rio +20. This amount excludes US$972m in contributions from OPEC Member Countries channeled through the OPEC Fund to the International Fund for Agriculture (IFAD) and the IMF Trust Fund.