OPEC and the International System: a Political History of Decisions and Behavior Reza Sanati Florida International University, [email protected]
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Florida International University FIU Digital Commons FIU Electronic Theses and Dissertations University Graduate School 3-24-2014 OPEC and the International System: A Political History of Decisions and Behavior Reza Sanati Florida International University, [email protected] DOI: 10.25148/etd.FI14040875 Follow this and additional works at: https://digitalcommons.fiu.edu/etd Part of the International Relations Commons Recommended Citation Sanati, Reza, "OPEC and the International System: A Political History of Decisions and Behavior" (2014). FIU Electronic Theses and Dissertations. 1149. https://digitalcommons.fiu.edu/etd/1149 This work is brought to you for free and open access by the University Graduate School at FIU Digital Commons. It has been accepted for inclusion in FIU Electronic Theses and Dissertations by an authorized administrator of FIU Digital Commons. For more information, please contact [email protected]. FLORIDA INTERNATIONAL UNIVERSITY Miami, Florida OPEC AND THE INTERNATIONAL SYSTEM: A POLITICAL HISTORY OF DECISIONS AND BEHAVIOR A dissertation submitted in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY in INTERNATIONAL RELATIONS by Reza Sanati 2014 To: Dean Kenneth G. Furton College of Arts and Sciences This dissertation, written by Reza Sanati, and entitled OPEC and the International System: A Political History of Decisions and Behavior, having been approved in respect to style and intellectual content, is referred to you for judgment. We have read this dissertation and recommend that it be approved. _______________________________________ Thomas Breslin _______________________________________ Mira Wilkins _______________________________________ Ronald Cox _______________________________________ Mohiaddin Mesbahi, Major Professor Date of Defense: March 24, 2014 The dissertation of Reza Sanati is approved. _______________________________________ Dean Kenneth G. Furton College of Arts and Sciences _______________________________________ Dean Lakshmi N. Reddi University Graduate School Florida International University, 2014 ii Copyright 2014 by Reza Sanati All rights reserved. iii ABSTRACT OF THE DISSERTATION OPEC AND THE INTERNATIONAL SYSTEM A POLITICAL HISTORY OF DECISIONS AND BEHAVIOR by Reza Sanati Florida International University, 2014 Miami, Florida Professor Mohiaddin Mesbahi, Major Professor The conventional understanding behind how the Organization of Petroleum Exporting Countries (OPEC) has formulated its decisions and subsequently behaved in the international system has consistently centered on the role of market forces. Either proactively or reactively, it has been assumed that OPEC’s actions were merely engaging and responding to the supply and demand dynamics in the global economy. Though space was always given to the political considerations of certain OPEC Member States, and how that impacts the behavior of the Organization, inquiry into OPEC decision-making and behavior has generally centered on economic considerations, with politics playing an intermittent supporting role. This work challenges the assumptions behind the conventional narrative of OPEC’s behavior in the international system. By utilizing a historically-based process tracing method, relying heavily on archival data from OPEC’s headquarters and declassified American national security documents from the late 1940s to the present, a more sophisticated model of decision-making and behavior is developed. Accordingly, OPEC’s decisions and behavior are more accurately a product of four inter-related iv determinants: the role of market forces, the influence of outside actors (usually great powers) upon the Organization, interstate relations and politics among Member States, and the pressure of the internal state dynamics within OPEC Member States. It is at the intersection of these four variables where OPEC’s behavior is more readily understood. Thus, with a sophisticated understanding of the interplay of these determinants, OPEC’s decision-making process and behavior can be more accurately understood and possibly forecasted to a limited degree. v TABLE OF CONTENTS CHAPTER PAGE INTRODUCTION • UNDERSTANDING THE DETERMINANTS BEHIND OPEC’S INSTITUTIONAL BEHAVIOR ........................................................................................ 1 The Historical Context of Analysis................................................................................. 4 The Conventional Understanding of OPEC .................................................................... 6 Cartel vs. Economically-based Intergovernmental organization .................................... 6 Why the Cartel and Economically-based Intergovernmental organization labels fall short................................................................................................................................. 9 A New Framework of Analysis .................................................................................... 13 Outside Actor Intervention ....................................................................................... 14 Interstate Member Relations within the Organization .............................................. 16 Intrastate Member Dynamics .................................................................................... 16 CHAPTER I • THE EMBRYONIC PHASE: THE RISE AND FALL OF THE CONCESSIONARY SYSTEM & THE BIRTH OF OPEC ............................................. 19 The geo-economic and geopolitical context ................................................................. 21 Creating the Home-IOC-Host triangle .......................................................................... 21 The Companies scramble .......................................................................................... 23 Expanding the Concession System in the Middle East ............................................. 28 The Seeds of Nationalization and the beginnings of the domino cascade .................... 33 The Mexican Catalyst ............................................................................................... 33 The spread of the 50/50 arrangement ........................................................................ 40 Changes in the Imperial roles in the Middle East and 50/50 challenged in Iran ...... 43 The Birth of OPEC........................................................................................................ 52 Market forces ............................................................................................................ 54 The immediate pre-OPEC global oil dynamics ........................................................ 54 Intrastate dynamics ................................................................................................... 59 The Internal Picture of the main proto-OPEC member states .................................. 59 The Host Countries Act ............................................................................................ 68 From Collusion to Creating OPEC ........................................................................... 68 Outside Actors .......................................................................................................... 73 The US policy of Conscious Indifference: the fall of the Home-IOC-Host Nexus .. 73 CHAPTER II • THE INFANCY PHASE: THE INSTITUTIONALIZATION OF OPEC AND THE STRUGGLE FOR COLLECTIVE ACTION, 1961-1969 .................. 82 Market Forces: .............................................................................................................. 84 The IOCs fight to save their market dominance ........................................................... 84 Outside Actors .............................................................................................................. 89 Triangulating between the IOCs and OPEC ................................................................. 89 US Aid ...................................................................................................................... 91 The beginning of Indirect American influence within OPEC .................................. 91 Intrastate Dynamics ...................................................................................................... 99 The Domestic Political Landscape ............................................................................ 99 The Beginnings of the National Oil Companies ..................................................... 106 vi Interstate Dynamics .................................................................................................... 110 Organizational Enlargement and Negotiation ............................................................. 110 Building the Organs of OPEC while Individual Negotiations begin ...................... 114 Collective Negotiations with the IOCs ................................................................... 127 CHAPTER III • THE ASCENDANCY PHASE: THE SHIFT OF POWER TO THE PRODUCERS, ORGANIZATIONAL ACTION, AND THE POLITICIZATION OF PETROLEUM, 1969-1979 ............................................................................................. 140 Market Forces ............................................................................................................. 143 The changing macro conditions .................................................................................. 143 Outside Forces ............................................................................................................ 151 US evolution