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OPEC Summit Ends in Division Over Weak US Dollar

Reuters
Monday, 19 Nov 2007 | 9:53 AM ET

An OPEC summit ended on Sunday in sharp political division over whether to take action over the weak dollar, as heads of state vowed to keep providing Western consumers with an "adequate" supply of oil.

Oil Barrels
Oil Barrels

A fall in the value of the U.S. dollar on global markets helped fuel oil's rally to a record $98.62 on Nov 7 -- causing Western consumer nations to call for more OPEC supplies to cool prices -- but it has also eroded the purchasing power of OPEC members.

The final statement of the oil cartel's summit in Riyadh did not include any reference to the dollar's predicament, in an apparent victory for U.S.-allied moderates led by Saudi Arabia.

But Iran and Venezuela -- anti-U.S. firebrands locked in tough diplomatic disputes with Washington -- made clear before and after the summit that they would press for action, which could include pricing oil in a basket of currencies.

Such a move would be a political blow to the United States, whose currency Iran's President Mahmoud Ahmadinejad told reporters had become a "worthless piece of paper."

Fears the United States or its ally Israel could attack Iran -- over a nuclear energy program Washington says is a cover for seeking atomic weapons -- have helped drive world oil prices to record levels. Tehran denies the charge.

Iraqi Finance Minister Bayan Jabor told Reuters after the summit's close that, backed by Ecuador, the anti-U.S. powers won agreement that finance ministers would discuss the issue before a scheduled oil ministers meeting in Abu Dhabi on Dec. 5.

OPEC May Drop Dollar
OPEC members are considering moving away from the dollar in favor of the Euro. Peter Webley, stockbroker at Oceanus Investments, tells CNBC's Brian Shactman that the potential move could cause the dollar to move even lower.

"There was a proposal from Iran and Venezuela to have a basket of currencies for the pricing of OPEC oil. But a consensus could not be reached (in the summit)," he said. "Because the final communique was already drafted, there was an agreement that OPEC finance ministers hold a meeting before the oil meeting in the UAE in December to discuss economic issues including the dollar's exchange rate," he added.

OPEC oil ministers said last week any decision on raising output will be left to the Abu Dhabi meeting in two weeks time.

"We affirm our commitment ... to continue providing adequate, timely and sufficient oil to the world market," said the final declaration issued at the two-day summit's close.

Saudi Backs The Greenback

Talks on the dollar were actively discouraged by Saudi Arabia, an old U.S. ally that has traditionally assured the West of easy oil supplies through its OPEC "swing producer" status.

On Friday, Foreign Minister Saud al-Faisal was seen in a closed session -- accidentally beamed to reporters by closed- circuit television -- arguing against putting the question in the communique lest it backfire and weaken the currency further.

At the summit's opening session on Saturday, Venezuela's President Hugo Chavez vaunted OPEC's ability to ensure high oil prices for developing producer nations, partly as recompense for perceived Western injustices toward the rest of the world.

Addressing leaders assembled in an opulent hall with crystal chandeliers and toilet accessories fitted in gold leaf, the self-styled socialist revolutionary said OPEC "must stand up and act as a vanguard against poverty in the world."

And he threatened that if Washington follows through on military threats against Iran, oil could double to $200 a barrel. Ahmadinejad said on Sunday Iran would not use oil as a weapon if attacked.

King Abdullah, the octogenarian Saudi leader, sat stone-faced throughout the 25-minute diatribe, joking afterward to the anti colonial-era firebrand: "You went on a bit!"

"Oil is an energy that is about construction and development and should not be turned into a tool of dispute and whimsy," the Saudi monarch said in a brief speech.

The summit -- only the third in the group's history -- also acknowledged the oil industry's role in global warming, with pledges of cash for research into climate change.

Saudi Arabia said it would give $300 million, and Kuwait, Qatar and the United Arab Emirates each pledged $150 million toward research on the environment.

But even there, clear differences emerged, as other countries were reluctant to make similar promises.

"We are not committing anything. We don't know what the proposal is," Algerian Energy Minister Chakib Khelil said.

Ecuador's leftist President Rafael Correa -- a Chavez ally -- told reporters the world's richest nations should pay for the protecting the environment in the world's poorest countries.

"It annoys us a bit, all this moralizing 'don't cut down your trees' from the first world, when they've already done it," he said. "If Europe wants to breathe pure air from Amazon countries then Amazon countries shouldn't have to pay for it."