OPEC AND THE POLITICS OF THE INDIAN OCEAN THESIS FOR Moitox of IN POLITICAL SCIENCE BY Mohaiinmad GvLli»ez Under the Supervision of: Prof. S. A. H. Bilgrami DEPARTMENT OF POLITICAL SCIENCE ALIGARH MUSLIM UNIVERSITY ALIGARH 1986—87 T3552 PHONES = lUNlVERSITVERSITY : 265 S. A. H. BILGRAMI Ph.D. PROFESSOR DOCTORATE DES SCIENCES POLITIQUE3 DEPARTMENT OF POLITICAL SCIENCE ALIGARH MUSLIM UNIVERSIJ-*, ALIGARH INDIA-20:001 May 24, 1987 This is to certify that Mr. Mohamfhpd Gulrez has completed his thesis, 'OPEC And The Politics of the Indian Ocean* under my supervision. In my opinion the thesis of Mr, Mohainmad Gulrez is satisfactory enough to be submitted for examination for the av;ard of the degree of Doctor of Philosophy in Political Science, S,A,lTr Bilg CONTENTS PAGE LIST OP TABLES AND MAPS ABBREVIATIONS i - ii PREFACE i - xvi CHAPTfciR - I OIL PRODUCTION POLICIES IN THE INTERNATIONAL CONFLICTS AND WORLD ECONOMIC DEVELOPMENT 1-23 CHAPTER - II SCENARIO PLANNING IN THE COOTEXT OF INTERNATIONAL ENERGiT POLICY 24-58 CHAPTER - III AN ENERGY STRATEGY FOR COOPERATION AND THE NORTH SOUTH DIALOGUE 59 -82 CHAPTER - IV OPEC AID: A NEW FACTOR IN THIRD V/QRLD POLITICS 83 - 108 CHAPTER - V GULF REGIONAL ECONOMIC DEVELOPMENT AND ITS IMPACT ON INDIAN OCEAN POLITICS 109 - 146 CHAPTER - VI LOCAL PROBLEMS OF OFFSHORE BOUNDARIES IN THE GULF, CONFLICTING NATIONAL CLAIMS IN AFRICA AND THE SUPER P0V7ERS: THE QUESTION OF THIRD WORLD SECURITY 147-168 ASSESSMENTS AND CONCLUSIONS 169-186 APPENDICES CHAPTER - I TEXT OP THE OPEC STATUTE APPROVED BY THE CONFERENCE IN JANUARY 1961 IN CARACAS i - xxil CHAPTER - II TEXT OP THE EEC STATEt^ENT ON ENERGY DECEMBER 1973 i - iii CHAPTER - III TEXT OF THE SOLEMN DECLARATION OF OPEC SUMMIT CONFERENCE MARCH 1975 i - xvii CHAPTER - V NOTES; A. THE STRAITS OF BAB EL 14ANDEB i - iv B. THE STRAIT OF HORMUZ V - vii CHAPTER - VI NOTES J 1- MARINE POLLUTION CONTROL i - vii 2- EXCLUSIVE FISHING ZONESt EXCLUSIVE ECONOMIC ZONES viii - xii 3- LEGAL PROBLEMS OP OFFSHORE BOUNDARIES IN THE GULP 1) IRAN - SHARJAH - UMM AL-QAIWAIN xiii - xxvii 4- SPECIFIC REGIONAL ISSUES 1) IRAQ^KUWAIT DISPUTE OVER V7ARBAH AND BUBIYAN ISLANDS xxviii - xxxi SELECTED BIBLIOGRAPHY i - xxvii LIST OP TABLES/ MAPS AND FIGURES TABLES PAGE 1. ENERGY CONSUMPTION BY MAJOR INDUSTRIALIZED POWERS - 1974-75 22 2. FUND DISBURSEMENTS OP OPEC MEMBERS 1970-1973 85 3. CHARACTERISTICS OF THE RED SEA AND THE PERSIAN GULP 122 4. VOLUME OP SAUDI ODA 1973-1981 132 5. CONCESSIONALITY OP SAUDI ODA 1974-1981 134 6. VOLUME OP IRAN'S ODA 1974-1980 139 7* IRAN'S ODA CONTRIBUTION TO MULTILATERAL ORGANIZATION 1973-1981 141 I-IAPS AND FIGURES PAGE 1- PREFACE (1) ORGANIZATION OP PETROLEUM EXPORTING COUOTRIES (GULF) 3 (2) OPEC FLOWS OF CRUDE AND REFINED OIL 1982 6 2- CHAPTER - V (3) THE INDIAN OCEAN Ri:;GION 120 APPENDICES CHAPTER V I (4) OPEC ORGANIZATIONAL SET UP IV CHAPTER - III (5) OPEC MEMBER COUNTiilES 1975 I (6A) THE STRAITS OF BAB-AL MANDEB I (63) THE STRAIT OF HORMUZ V (7) ISLAI^S OF WAiiBAH AI® BUBIYAII ..... ICXVIII ABBREVIATIONS 1. ADB African Development Bank 2. AFESD Arab Fund for Economic and Social Development 3. BADEA Arab Bank for Economic Development in Africa 4. CI EC Conference on International Economic Cooperation 5. CIPEC Intergovernmental Council of Copper Exporting Countries 6o CMEA Council for Mutual Economic Assistance 7. COPAL Cocoa Producers Alliance 8. CPEs Centrally Planned Economies 9. DAC Development Assistance Committee 10. ECDC Economic Cooperation Among Developing Countries 11. EEC European Economic Community- 12. GATT General Agreement on Tariffs and Trade 13. IBPD International Bank for Reconstruction and Development 14. IDA International Development Association 15. lEA International Energy Agency 16. I FAD International Fund for Agricultural Development 17. IsDB Islamic Development Bank 18. IMP International Monetary Fund 19. IPC Iraqi Petroleum Company 20. KPEAD Kuwait Fund for Arab Economic Development 21. MEED Middle East Economic Digest 22. MEES Middle East Economic Survey 23. MITI Ministry of International Trade and Industry 24. MNC - Multinational corporations 25. NIEO - New International Economic Order 26. OAPEC - Organization of Arab Petroleum Export Countries 27. ODA - Official Development Assistance ^Sr. OPEC - OfOanization of Petroleum Exporting countries 29. PDRY - Peoples Democratic Republic of Yemen 30. PRC - Peoples Republic of China 31o SDR - Special Drawing Rights 32. SFD - Saudi Fund for Development 33. UAE - United Arab Emirates 34. UNCTAD - United Nations Conference on Trade and Development 35. UNESCO - UN Educational, Scientific and Cultural Organization 36. YAR — Yemen Arab Republic PREFACE PREFACE Nationalism emerged as the major force animating Afro- Asian and Latin American countries in the. world that developed following the end of the world War II. The diverse manifestation of this emergent nationalism exerciscd fcur reaching effects on the development of international relations - both political and economic. On the political level, the objectives of Third World 'nationalism' were to end colonial domination, to take change of their own destinies, and to play more effective role in global affairs - particularly in those matters that directly affected their vital interests. On the economic plan, their goals were to generate and encourage international cooperation in the field of development assistance, anc' to establish their sovereign rights over their natural resources. For several reasons, the oil producing countries eventually came to play a major role in advancing these objectives, shifting their focus from political liberation and struggle for independence to economic independence. In addition to general international factors, developments in the countries of the West Asia after the World War II, regarding Arab unity and the role assigned to oil in its achievement along with other countries speeded this process that finally led to the creation of the Organisation of Petroleum Exporting Countries in 1960. ii As is often the case with the major historical events the creation of OPEC was prompted by two sets of factors: The immediate factors were the two subsequent unilateral and arbitrary reductions of oil prices by the international oil companies in February 1959 and August i960. These price reductions had a determining effect on the creation of OPEC by galvanishing the oil producers to take action to counter the erosion of their economic position. Yet at the same time, the establishment of an association of oil producers would not have been possible, if certain developments had not taken place within the oil producing states in the light of the emerging new ideas and concepts regarding international economic relations, the relationship between developing and industrialised countries, and the factors stimulating cooperation among developing countries - all contributed to OPEC's establishmento Although the creation of OPEC did much to intensify the need felt among Third World countries for closer cooperation in order to achieve their political and economic objectives. However, the fundamental differences among OPEC members - as they differ widely in size, population, petroleum reserves, development needs and political and ideological orientation, affected to a great deal the outlook and approach of the member countries towards oil matters, which in turn have restricted OPEC's operation and policy evolution. Of course, one major source of difference within OPEC is the division of its members between Arab and GULF OPEC MEI4BFRS Map No. 1 + OPEC West Asia - Isl.amic Republic of Iran, Iraq, Kuwait, Qatar, Saudi Arabia, UAE Source: Based on OPEC at a Glance published by OPEC Secretariat, OPEC, VIENNA, Austria,1983. iii non-Arab countries, and this has led the West Asian Arab countries to fullfil their particular needs, to establish purely Intra-Arab and Arab Gulf countries' Organization in the form of OAPEC and GCC, which contribute the largest share of OPEC's oil reserves and financial surplus. Yet the Arab members of OAPEC and GCC within OPEC do not form a homogenous group, but rather have remain divided along ideological lines between the so-called progressive and conservative regimes. This is aiso true in the case of three major non-Arab OPEC countries i.e. Iran, Venezuela and Nigeria which like their Arab counterparts are more confined to their own specific objectives than for a cohesive unity of OPEC. In the past, their needs and objectives have sharply conflicted with one-another with the OPEC - the best example of which is the Iran-Iraq dispute over border problems - and later their war - in addition to a whole range of other issues. And hence this study of the'OPEC and the Politics of Indian Ocean* is purposely try to confine itself to the Gulf OPEC members in the context of their being located as littoral states and dominated by the rivalry between tbe ,'juper powers, in the Indian Ocean. As the rise of OPEC is not an event that the Super Powers have viewed with equanimity and conposure. Both the United States and the Soviet Union have been affected by the growth of the economic power of the OPEC countries. Looking at the map, the Persian Gulf region of the Indian Ocean is obviously important for the Super Powers to control the production and transportation of oil, while the control of the Red Sea region, means to ensure a smooth passage iv of cargo vessels and warships. In the wider circle, control of the area includes not only the control of political units directly located on the shores of the Persian Gulf and the Red Sea* but also other unites that depend economically* militarily and strategically on the Red Sea, the horn of Africa arid the Persian Gulf, The United States and the West depend for their oil needs on this region while the Soviet Union considers the Red Sea important as the nearest route connecting its black sea ports to the Indian Ocean.