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US Wants to Create Global Oil Cartel Under Auspices of American Corporations
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US Wants to Create Global Oil Cartel Under Auspices of American Corporations

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AUSTIN, TX - March 15, 2019

The US is looking to create a global oil carel under the auspices of American corporations. Today, one such cartel is known - OPEC. We used to call the “cartel” the agreement of private companies to establish uniform prices and the division of markets. In the twentieth century, in order to oppose the economic dictates of the West, developing countries  concluded similar agreements on many foods and commodities — wheat (1933), sugar (1937), tin (1956), coffee (1962), and In 1965, the Committee on Commodities was established within UNCTAD (United Nations Conference on Trade and Development - a permanent body of the UN), whose terms of reference included, among other things, the promotion of international commodity agreements.

Much of the oil was produced in those days in third world countries. They created OPEC. The organization was founded at a conference in Baghdad on September 10-14, 1960 at the initiative of five developing oil-producing countries: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Today, OPEC includes 14 countries: Algeria, Angola, Venezuela, Gabon, Iran, Iraq, Congo, Kuwait, Libya, United Arab Emirates, Nigeria, Saudi Arabia, Equatorial Guinea, and Ecuador. OPEC member countries control about 2/3 of global oil reserves. They account for about 35% of world production and half of world oil exports.

OPEC quite effectively controlled prices on the world market. In December 2016, an agreement on limiting oil production between OPEC and 11 oil-producing countries outside the cartel was signed. Among the latter are Russia, Mexico, Azerbaijan, Bahrain. This wider range of countries (only 25) began to be called OPEC+.

The importance of the oil market for the US is difficult to overestimate, so Washington has been trying to influence it by stimulating the production and export of oil in recent years. For the first time in nearly 70 years, in December 2018, the US recorded an excess of oil exports over its imports. America has become a net exporter of “black gold” and is going to increase its position in the global market. US companies engaged in the extraction of conventional and shale oil receive full support from the state (primarily tax breaks; there is also the re-conservation of oil fields located in protected areas). At the current growth rate of the oil industry in 2019, the US could take first place in the world in terms of oil production, surpassing Saudi Arabia and Russia (on a monthly basis, the US took first place at the end of 2018).

Another direction of the US oil policy is to weaken OPEC. Such plans have been being hatched by Washington for a long time. In particular, since 2000, the No Oil Producing and Exporting Cartels Act (NOPEC) project has been discussed in Congress. Usually, the White House was against it, but Donald Trump is a supporter of NOPEC. Back in 2011, he proposed starting with bringing OPEC to justice for violating antitrust laws.

One of Trump's latest attacks on OPEC countries came in late February when he tweeted: "Oil prices are getting too high. OPEC should relax and not try so hard” (a hint of a deal to reduce production under OPEC+ in December 2018).

Last summer, a new version of the law was presented to Congress, but in the fall the discussions on this issue subsided. OPEC+ updated the terms of the Vienna deal, having agreed in December 2018 to reduce oil production by 1.2 million barrels compared to October 2018 (by 0.8 million - OPEC countries; by 0.4 million - the rest country). This gave impetus to the revitalization of congressional efforts to adopt NOPEC.

NOPEC is a new generation law, which is a pronounced act of extraterritorial action. Such extraterritorial laws began to go off the assembly line of the US Congress after September 11, 2001, when the US administration, under the guise of fighting international terrorism, assumed the right to bring to justice not only foreign individuals and legal entities but also sovereign states. It turns out that the extraterritorial laws of the United States make the UN and its Security Council unnecessary for them.

The NOPEC bill gives Washington the opportunity to bring to justice both the OPEC organization and its member states. In this case, disputes can be considered in the American courts. That is, we are talking about changing the existing world order, the transition from using “Right of Power” rather than the “Power of Right.”

At the same time, the main instruments for punishing those who disagree with the decisions of American courts are economic sanctions. In addition, there is are secondary sanctions. If third countries and companies of third countries continue to trade and carry out other commercial and financial transactions with the “defendants” (OPEC and its member countries), they will also be punished.

Already, many officials in the US and other countries, as well as leaders of oil companies, have reacted to the revitalization of Congress to promote the NOPEC bill. Chief Executive Officer of British Petroleum (BP), Robert Dudley, called the adoption of the NOPEC law in the US "a bad idea." According to him, American lawyers will be able to "violate the sovereignty of any state."

This is the legal side of the issue. Equally important is the economic side. The adoption of NOPEC may cause chaos in the global oil market. It is possible that in case of liquidation of the oil cartel there will be a sharp increase in the oil supply on the market, which in turn will cause a collapse in prices and will boomerang the US oil industry. Bloomberg reports: "While Wall Street is silent on the NOPEC bill, the US oil sector is strongly opposed to it."

Mike Sommers, head of the American Petroleum Institute, wrote a letter to Congress in 2018 saying that, although "cartels of any kind are harmful to consumer interests," NOPEC "threatens the US oil and gas industry with serious unpredictable consequences." Since last summer, OPEC countries have sharply criticized NOPEC. UAE Oil Minister and former OPEC President Suheil Al-Mazrui warned of the disastrous consequences of this project.

However, Trump seems willing to take on these risks. He understands that NOPEC will hit the oil production of all countries, including the United States, but American companies themselves are more likely to survive in conditions of falling prices. They can be assisted both by the state (tax breaks and direct subsidies from the budget) and by banks (cheap long-term loans).

At the same time, removing a monopolist like OPEC from the market, NOPEC would create a new world monopoly consisting of several American oil giants: ExxonMobil, Chevron, Amoco, ConocoPhillips, and Valero Energy. And there is no doubt that they will conclude an agreement on prices, quotas, and the division of world markets. The interstate agreement on oil will be replaced by a truly classic oil cartel.

By the way, such an oil cartel already existed. In 1928, Royal Dutch Shell, the Anglo-Persian Oil Company (later BP), and Standard Oil of New Jersey (later Exxon) entered into an informal agreement to eliminate stiff competition, forming the international oil cartel Achnacarry (named after the Scottish town where the agreement was signed). By 1932, all seven of the largest Anglo-American companies (the “seven sisters”) entered the Achnacarry cartel. The parties to the agreement de facto retained control of the oil market for several decades until in the 1970s, when OPEC began to gain strength.

Congress declares that NOPEC is an act designed to eliminate such an ugly form of monopoly as a cartel. The NOPEC draft, proposed by the Upper House of Congress, considers the document as an amendment to the Sherman Act of 1890 - the first antitrust law in the United States that led to the fragmentation of John Rockefeller's Standard Oil. However, it is worth recalling that as early as the 1930s, Congress adopted amendments to antitrust laws that legitimized the participation of American companies in the international oil cartel (of the “seven sisters,” five were American). Now in the US, they want to recreate the world oil cartel with the predominance, if not 100% participation, of American corporations.

As for US antitrust laws, they are now applied very selectively. Most sectors of the American economy have cartel agreements, but the state is turning a blind eye. One of the most flagrant violations of US antitrust laws is the existence of the Fed. If you look at the US banking system without ideological blinders, it is a giant cartel that unites several thousand banks under the auspices of a non-state governing structure - the US Federal Reserve Board of Governors.

Apparently, this is why Wall Street banks have so far refrained from commenting on the NOPEC “anti-cartel” bill. The US media reported that the White House will try to achieve the adoption of this law in the coming months.

Author: USA Really