On June 11, the Organization of the Petroleum Exporting Countries will hold its next meeting in Doha, Qatar. Will the United States send a representative?
The United States has not, before now, been a member of OPEC (though Energy Secretary Spencer Abraham's trip to Vienna last month during the previous OPEC meeting may have led some to think otherwise). Any American who participates in OPEC's price-fixing can be sued for violating the Sherman and Clayton Antitrust acts. Indeed, Carl and Debbie Prewitt, who own a gas station in Birmingham, Ala., think even foreigners who participate in OPEC's price-fixing overseas can be sued under the Sherman and Clayton Acts. Their view has not yet gained wide acceptance, but nobody questions their premise that if jurisdiction could be established, the feds could easily put OPEC out of business. (Alas, Prewitt Enterprises v. OPEC was thrown out of federal court. To learn more, click here, here, and here.)
Now, however, our nation is in a quandary. It has more or less seized Iraq, which possesses 110 billion barrels of oil and a membership in OPEC that is surely transferable to its new owner. Although the American plan is to establish self-rule as soon as possible, that will take a little time. It almost certainly won't happen before June 11; even the war we're still waging to oust Iraq's previous rulers may not be done by then. If it is, American troops will still be out in force tracking down Baath Party loyalists and other troublemakers, rendering the United States Iraq's de facto ruler. There's been talk of handing Iraq over to the United Nations, which sounds sensible to Chatterbox. But the Bushies hate the idea, so it probably won't happen. It isn't even clear whether the White House will recognize the United Nations' claim to being legal guardian of Iraq's oil. (Vice President Cheney blew off a question about this today.)
So, what do we do about that June 11 OPEC meeting? It's unlikely that we'll want to send Saddam's acting oil minister, Dr. Amer M. Rashid, or Ali R. Hassan Al-Yousif, who ran Saddam's State Oil Marketing Organization. We could skip the meeting entirely, saying, in effect, "We want no part of your corrupt cartel." But that isn't President Bush's style (he likes OPEC!), and besides, it would offend the Saudis, who dominate OPEC. Although there's surely a faction in the White House ready to march on Riyadh, calm analysis of the situation suggests this would be a bad time to alienate our most powerful Arab ally in the Middle East. Practically speaking, Iraq isn't likely to pump significant quantities of oil till next year. (Before the invasion, it was pumping 2.5 million barrels a day, which is about a million less than it was pumping before Saddam declared war on Iran.) Over the long term, though, Iraq will be pumping lots of oil; Nelson Schwartz estimates in the April 21 Fortune that long-unexplored areas in Iraq could yield 100 billion more barrels. OPEC and the Saudis will want an early signal from Washington that once its oil fields are up and running, Iraq's new leaders will play ball.
What if Washington and Iraq's new leaders don't play ball? Could they sell below OPEC's price, as Russia has done in the past, in order to expand market share? That would certainly raise more money in the short term to rebuild Iraq. In the long term, though, oil economist Philip Verleger says, the Saudis would retaliate by opening the taps and flooding the market with oil. The end result, he says, would be a huge Iraq redevelopment bill to the American taxpayer. Better not to rock the boat, let the price of oil stay where it is, and keep the taxpayer cost "relatively modest." But if the White House is seen to be guiding this decision, President Bush could get nailed by his own Justice Department's antitrust division.
Bush could rid himself of this headache by handing control of Iraq over to the U.N.'s Kofi Annan, who enjoys the protection of diplomatic immunity.
[Update, April 24: This matter came to a head this week, which was a little sooner than Chatterbox expected, as various news organizations speculated whether the United States would send an Iraqi representative to today's emergency meeting in Vienna. (The "emergency" is that oil may stay cheap through the summer.) It did not. Let's see what happens June 11.]