OPEC: The dialectic of economics, geopolitics and law | The Guardian Nigeria News


An unchanging conflict remains between altruism and aphorism in world affairs. Altruism in this context involves providing economic, educational, legal, military or other assistance where one sovereign nation A, offers support to another, B, without the expectation or receipt of corresponding service or no service by the way. Altruistic restitution is, in principle, simply carried out because it is deemed fair and appropriate, therefore an end in itself: not the means to an end! On the slide, the term aphorism as deployed here simply captures the true idiom that charity begins at home. In other words, the primary duty of all sovereign states is the welfare and security of their people. This is well summed up in the Latin maxim salus populi suprema lex esto (the security of the people is the supreme law).

This proposition is enshrined in constitutional provisions around the world, exemplified in part by Section (1) of the 14th Amendment to the United States Constitution, which provides among other things: “all persons born or naturalized in the United States and subject to their jurisdiction are citizens of the United States and of the state they reside in. No state shall make or enforce any law which would restrict the privileges or immunities of citizens of the United States; no state shall deprive more life, liberty, or property, without due process of law; nor deny any person within its jurisdiction the equal protection of the laws”.

Similarly, the Constitution of the Federal Republic of Nigeria 1999 (as amended) in Article 14 (1) (b), states that “the security and welfare of the people shall be the primary objective of the government”. Further, Section 41(1)(b) of the Constitution of the Republic of South Africa Number 108 of 1996 (as amended) establishes that “all spheres of government and all organs of the state in every sphere must ensure the well-being of the people of the Republic.

Objectively, the terms “well-being” and “security” of the above people refer to their physical and economic well-being and security. This last point concerning economic security and the well-being of citizens is the subject of this treaty. This is the role of the Organization of the Petroleum Exporting Countries (OPEC); against the endless contestability of the economic and geopolitical dynamics of a volatile, unstable, complicated and abstruse world, which is aggravated by the Russian-Ukrainian war, which has pushed Russia and the West (allies of the United States and of NATO) close to a nuclear war conflict on the one hand. And OPEC’s legitimate interest in maintaining an unspoken, albeit de facto, “charity begins at home” policy of doing the utmost for the economic well-being of the citizens of its member states, on the other hand.

Keysian economic theory posits an active role for some state intervention in free markets as the basis for economic growth. Moreover, economists of this bent roughly define cartels as for-profit, mutually beneficial collaborations between two or more corporations, sovereign nations, or bodies of sovereign nations, which attempt to control the prices of goods or services over a given territorial or global market. The cartels’ strategic objective is to drive up prices by restricting the production of raw materials or the provision of services which are not only in high demand but which, for reasons of competitive advantage, economies of scale, significant market opportunities, natural resources, or a combination of all of these, in a particular province or in defined locations, are extremely limited.

Applying this definition, OPEC is clearly an economic cartel because it comprises 13 major oil-exporting nations whose policies, apparently driven by “charity begins at home” motivations, influence world oil prices, through taxation production quotas for the commodity most in demand. in the world: crude oil. That’s because crude oil is refined into gasoline, diesel, A1 jet fuel, lubricants and petrochemicals used to make plastics – all of which are used by nearly all of the world’s roughly 8 billion people (United Nations) in some form or form, whether in the form of public transport, private vehicles, small boats, airplanes, spaceships, smartphones, computers, intravenous containers, medical equipment, storage tanks, etc.

When it was founded on September 14, 1960, OPEC had 5 members; Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. In addition to the 5 founding members, OPEC has 8 additional member countries, making the cartel one of 13 countries; including Libya, United Arab Emirates, Nigeria, Algeria, Gabon, Angola, Equatorial Guinea and Congo. OPEC represents approximately 40% of world oil production (US Energy Information Administration) and more than 80% of world proven oil reserves. Taken together, these factors guarantee OPEC’s status as a key player in international energy dynamics and global geopolitics. It simply cannot be ignored.

For greater clarity, a subtle distinction is made between OPEC and OPEC+. While the former has been elucidated, OPEC+ involves oil-producing countries having strategic production quota agreements with OPEC. OPEC+ countries Oman, Sudan, Brunei, Russia, Mexico, Bahrain, Malaysia, Azerbaijan, Kazakhstan and South Sudan.

In some cases, the geopolitical tensions of OPEC+ can easily be deduced from the prism of international geopolitics. For example, Sudan and South Sudan, despite their OPEC+ pacts, remain at loggerheads and support rival warlords in their respective territories.

However this is not always the case. Although Mexico shares land and sea borders with the United States and relations between the two countries can generally be considered “good neighborly”, despite tensions emanating from the border wall and patterns of irregular migration from Mexico to United States ; realpolitik is a little more complex. After Brazil, Mexico is Russia’s largest trading partner with trade volumes in the first and second quarters of 2022 exceeding US$1.193 billion.

Additionally, Mexico and Russia are members of the Asia-Pacific Economic Cooperation forum, an intergovernmental group of 21 member states that seeks to promote free trade in Asia-Pacific areas. Strategic neutrality underpins Mexico’s position on the Russia-Ukraine crisis as it tries to maintain a nuanced balance between its American neighbor on the one hand, and a key economic partner, Russia, on the other. In other words, even within OPEC+ there are heightened moral hazards and significant strategic dilemmas to overcome.

However, the ethics of economic cartels have been debated endlessly and opinions remain very divided between opponents and supporters. Opponents argue that it is anti-market and therefore harmful to economic growth. Proponents, on the other hand, argue that the economic welfare of the people is the highest law and, if it involves market intervention, for the benefit of the citizens; that is to say, the national interest justifies that “charity begins at home” and must really begin at home.

Despite these diametrically opposed views, the fact remains that OPEC interventions in world oil markets are protected by the doctrine of state immunity under international law. It simply means that OPEC, an intergovernmental organization, cannot normally be sued for acts strictly consistent with its objectives of: coordinating and unifying the oil policies of its member countries and ensuring the stabilization of oil markets in order to ensure a economic and regular supply of oil for consumers, a stable income for producers and a fair return on capital for those who invest in the oil industry.

Therein lies the complexity, particularly as the world has moved ever closer to the prospect of nuclear war given the heightened controversies between Russia on the one hand, and America, the Ukraine and the Western allies on the other. Toxic rhetoric should concern everyone.

It is in this context that the recent announcement by OPEC+ to drastically cut production by 2 million barrels per day, or about 2% of global production, has prompted a resounding response from the United States. OPEC+ justifies production cuts with the imperative to stabilize prices, encourage long-term investment in production and facilitate a decent return on investment for consumers – the charity argument starts at home ; however, the United States sees it as an attempt to “align OPEC with Russia”.

The background is that Western sanctions against Russia are hampering the latter’s ability to carry out its war against Ukraine and that OPEC+ production cuts will ultimately benefit Russia, catalyzing its revenue stream and therefore its ability to prolong the war, thus weakening the impact of Western sanctions. This clearly puts OPEC on a collision course with the United States and its Western allies, although the former claims it is acting solely out of economic necessity and in the national interests of its member states.

To end where I started, the contestability between “altruisms” and “aphorisms” as used in this piece, regarding the world order, is truly endless. Besides, there is no “altruism” in the purist sense of the term in international affairs. This is because there is always a quid pro quo to accommodate in one form or another. To this extent, cartels like OPEC and OPEC+ are often caught in the geopolitical crosshairs of the superpowers, as is clear from the above.

In my treatise published in The Guardian on March 5, 2022, “The Russian Invasion of Ukraine: A Human Tragedy,” I argued among other things that “there are lessons to be learned from how the real threat of Nuclear war was averted in the 1962 Cuban Missile Crisis between the superpowers – USA and Russia. Our common humanity deserves nothing less.” It follows that the search for a reasonable negotiation on the current Russian-Ukrainian war is not an appeasement: far from it. It is a reasonable, necessary, belated and pragmatic way out of the debacle and it now requires concerted efforts by men and women of goodwill inside and outside the United Nations. After all, diplomatic inertia has never been a rational strategy in world affairs.

Ojumu, Esq, is lead partner, Balliol Myers LP, a law firm based in Lagos, Nigeria. T. 07016303208 E. info@balliolmyers.com


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