October 26, 2003
Opec boss
tries to pour oil on troubled waters
By Faisal Islam
(The Observer) - "Alvaro Silva Calderón,
perched on his sofa in a suite at Claridges, does
not appear to be a powerful man. Quietly influential,
perhaps. But the slightly grandfatherish demeanour
of the head of the Organisation of Petroleum Exporting
Countries does not bear any relation to the Bond-villain
caricature painted of him in the US. Some Washington
factions nickname Opec, the 11-member club of
mainly Arab oil producers, 'One Purely Evil Cartel'".
"But Silva came to London to tell Britain's
big oil barons that Opec was still very much alive
and that contrary to popular perception, it was
here to help. 'The reality is that we don't try
to create scarcity in the oil market. We don't
try to take advantages of wars and other supply
shocks. Instead we mitigate them,' he says".
"Its critics are living in the past, he says.
'These people refer us back to the events of the
1970s to support their case. But they over-simplify
these events, they rarely have a detailed knowledge
of them and they overlook the fact that they happened
30 years ago and that the world has moved on since
then.'"
"Silva obviously rejects that 'evil' tag.
But he also believes that Opec cannot even accurately
be called a cartel. 'These people are wrong in
their appreciation of our role. Opec is not a
cartel. It is an international organisation that
is committed to the sustainable development of
the world, and to guaranteeing oil supplies for
rich and poor countries alike,' says Silva".
"Opec's most significant recent action, however,
was the reduction in quotas for oil output last
month. With crude oil prices right at the top
of the $22- $28 band, how could he justify an
output cut that pushed prices even higher?."
"'The price is not high because of a scarcity
of oil,' he said, pointing the finger at market
speculators. 'The fundamental reason [we have
quotas is that if everybody produced at full capacity
then the oil price would fall back to 1998 levels
($10 a barrel) and it would be impossible to guarantee
supply.'"
"The band - the centrepiece policy of the
reinvigoration of Opec over the past five years
- is here to stay and working well, he says. 'That
is the definition of stability - at an average
of $24.40 over the past year, the crude price
is almost exactly in the middle of the band. The
market is well supplied.'"
"And that stability of the oil price has
come in spite of the rollercoaster oil markets.
'We're now meeting far more frequently to decide
our quotas. In the past year we've had strikes,
storms, political unrest and wars, yet the market
has been stable,' he says".
"For most of the Nineties, quota-busting
was a way of life for Opec's members. Venezuela,
Silva's own country, led the charge in sabotaging
efforts. Oil prices dropped to below $10 a barrel.
It was a huge boost for industrialised economies,
but terrible for oil companies and for producing
nations' budgets".
"Enter Hugo Chávez in 1998 turned
class warrior and then President. Chávez
almost singlehandedly reinvigorated the cartel
as a force on the world stage. He toured all 10
of Venezuela 's fellow Opec members, and revelled
in his role as an international champion of the
impoverished masses."
"In 2000 he crowned his efforts by hosting
the first Opec heads-of-state meeting in Caracas
for 25 years. Venezuela has often been the man
in the shadows of the mainly Arab Opec."
"By that time the oil price had quadrupled,
and 70 per cent of exports and 60 per cent of
Venezuela's tax income was being generated by
oil. Before then the low price of oil was pushing
the country towards a devastating recession."
"Silva is a key ally of Chávez from
the justify of Venezuela's fractious political
system. He drafted the bill that led to the renationalisation
of Venezuela's oil assets in 1976, and eventually
headed the state oil company. Last year he was
drafted in to Opec from that job to complete the
term of office of fellow countryman Alí
Rodríguez."
"But change may be in the air at Opec's Vienna
offices. Members are engaged in a heated debate
over Silva's job, whose term of office ends in
December. Kuwaiti and Iranian candidates have
also been put forward and some countries want
to replace the permanent management with a rotating
presidency. Saudi Arabia may choose to back Silva
for reappointment to keep out the Iranian."
"Whatever
the outcome, crude oil runs through Silva's veins.
His official CV says that 'he made a significant
contribution towards conceptualising and creating
Opec', back in 1960. He admits to some scepticism
at the time about how long the organisation would
last: 'In the moment of its creation the organisation
was in a lot of difficulties. But now I think
if it did not exist we would have to create it.'"
