Gulf war enmity stumps O.P.E.C.

Press, 19 December 1986, Page 6

Gulf war enmity stumps O.P.E.C.

NZPA-Reuter Geneva O.P.E.C. attempts to drive up world oil prices were deadlocked yesterday by Iraq’s refusal to bow to pressure from its Gulf war foe, Iran, and its supporters to accept an oil output quota, delegates said.

In spite of general consensus that the group must cut its output to tighten an over-supplied world oil market, and hence to push oil prices •up to about SUSIB ($36) a barrel, Iraq rejects any output allocation less than Iran’s.

Delegates said that dip-

lomatic pressure was being applied to both the Gulf war adversaries to find a compromise, but this was being stubbornly resisted, and O.P.E.C.’s Geneva conference, now in its eighth day, was at stalemate. Oil Ministers have not held a formal session since Monday because of failure to find a compromise formula, and no meeting was scheduled for today. The price of Britain’s key Brent crude fell 50c a barrel to about 5U515.50 yesterday because of the impasse, traders said.

Prices had risen steadily for a week on expectations of an agreement, but these are fading, they said.

In principle, all O.P.E.C.’s 13 members agree that ouput must be cut to raise prices and finally reverse the oil price crash which started a year ago, when crude fetched SUS3O.

But a deal has eluded Ministers because of Iraq’s refusal to accept any output quota less than that of Iran, whose allocation is 2.317 million barrels a day, against Baghdad’s 1.2 million.

Neither adversary in

the Gulf war wants to lose revenue needed to finance continued hostilities. In addition, if Iraq won a higher quota, it would give it more economic muscle and revenue for years to come, delegates said.

A planned over-all O.P.E.C. production cut of between 5 and 10 per cent originally floated at these talks was to have lasted most of next year.

One idea now being floated is that the group make cuts in its temporary output limit, which drove prices up from SUS 9 to SUSI 4 when it

was introduced in September. This interim accord expires on Decemb e r 31.

The accord effectively limited O.P.E.C.’s oil output to about 17 million barrels a day, but Iraq was excluded by Iran in a political concession to get the cuts approved by other countries.

In spite of the deadlock, some Ministers retained their optimism that O.P.E.C. would eventually reach agreement. The Libyan and Ecuadorean Oil Ministers both said they expected an accord to emerge, despite the problems.