The Darker Nations, page 26
Because of the low level of capital available in the darker nations, the regimes tried to strengthen the one economic process that had already been perfected: the colonial crop. The regimes in the Third World relied on the singular colonial crop. They also had little capital to refine and process the crop to create some value before export. In other words, the raw material frequently left the old colonial rail lines and ports in its rawest form possible for transport, and brought a mediocre return to the former colony. The reliance on the singular crop or extractable raw material (or two crops and mined goods) meant that the national liberation state could not be too confrontational toward the only one who would buy the commodity and take it to the lucrative First World markets. As Egypt’s Nasser put it, “Arabs know that their oil has to go to the customer before it has any value.”17 Finally, the low level of capital in the arsenal of the darker nations meant that they gave “reasonable” terms to the transnational conglomerates that worked in the private cartel, and had the funds to explore and excavate, cultivate and transport. The concessions given to these conglomerates meant that the regime frequently lost control over production, and would only be able to restrict the giants through licenses, increased taxation, and other minor irritations. The broad sovereignty over resources and labor had been long mortgaged for the capital infusion that was so necessary in the ruined landscape of the former colonies.
By 1980, of the 115 “developing countries,” according to UNCTAD, at least half remained dependent on one commodity for over 50 percent of their export revenues. Most of these countries had come to rely on petroleum exports.18
The most common commodity on the following list is petroleum, although in the 1950s many of these nations had not yet produced petroleum at the rates they would in the 1980s. It made sense, then, that when the Seven Sisters played with the prices in the late 1950s, the regimes in the oil lands had to react. If they did not make any movement to challenge the Seven Sisters their livelihood would vanish.
Over 90 percent
Over 80 percent
Over 70 percent
Over 60 percent
Over 50 percent
Libya (petrol)
Trinidad and Tobago (petrol)
Niger (uranium)
Mauritius (sugar)
Ethiopia (coffee)
Iraq (petrol)
Gabon (petrol)
Burundi (coffee)
Mexico (petrol)
Cuba (sugar)
Nigeria (petrol)
Mauritania (petrol)
Chad (cotton)
Egypt (petrol)
El Salvador (coffee)
Saudi Arabia (petrol)
Iran (petrol)
Fiji (sugar)
Liberia (iron ore)
Cape Verde (fish)
Uganda (coffee)
Syria (petrol)
Vanuatu (oil seeds)
Seychelles (oil seeds)
Dominican Republic (sugar)
Venezuela (petrol)
Kuwait (petrol)
Angola (petrol)
Ecuador (petrol)
Tunisia (petrol)
Qatar (petrol)
Tuvalu (oil seeds)
Rwanda (coffee)
Indonesia (petrol)
Ghana (cocoa)
United Arab Emirates (petrol)
Zambia (copper)
Congo (petrol)
Suriname (alumina)
Mali (cocoa)
Algeria (petrol)
Maldives (fish)
Somalia (animals)
Jamaica (alumina)
Togo (crude fertilizer)
Bahrain (petrol)
Brunei (petrol)
Yemen (petrol)
Source: UNCTAD, Handbook of International Trade and Development Statistics (Geneva: United Nations, 1984), table 4.3D.
In April 1959, Nasser’s Egypt and the Arab League hosted the First Arab Petroleum Congress, a gathering attended by representatives from the Arab nations (except Iraq, whose leader Qasim had a disagreement with Nasser) along with Venezuela and Iran. The congress gathered just as the Seven Sisters reduced the posted price for Middle East oil. Venezuela’s representative, Juan Pablo Pérez Alfonzo, was an experienced AD politician. Pérez Alfonzo made his political mark in 1943 during a debate in Venezuela over the oil concessions enjoyed by the Seven Sisters. Whereas the government won the right to tax oil profits, it did put off the rule of the Seven Sisters for another forty years. Pérez Alfonzo and his AD colleagues considered the Hydrocarbons Law a sellout. In 1958, Pérez Alfonzo joined the AD government as the minister of mines and hydrocarbons. He led the charge against the Seven Sisters, earned the government 60 percent of the oil revenues, and established the notion that Venezuela had sovereignty over its subsoil so that the entire oil industry was a public utility.19 On his departure for Cairo from Caracas, Pérez Alfonzo noted, “We producers must try to find means to collaborate to avoid arbitrary fixing of prices.”20 Pérez Alfonzo, who refused to travel by car or use lights at night, had a mystical notion of Venezuela’s petroleum reserves: petroleum, which had an intrinsic value, had been given to the people for posterity, and it was the duty of the guardians of the state to ensure its longevity.21 His personal attitudes and practices with regard to petroleum did not come only from ecological motive but mainly from a nationalistic one. The reserves had to be saved for the future, not for themselves. Because of this idiosyncratic argument and because he was a close follower of Prebisch’s theory of public commodity cartels, Pérez Alfonzo tried to maximize on the momentary advantage given to Venezuela by the Seven Sisters.
At Cairo, the powers did not make any great headway toward price control because all they settled on was a word-of-mouth agreement to defend the price of oil.22 Franck Hendryk, legal counselor to the Saudi government, presented a paper at the congress in which he argued that “an oil-producing nation, by the law of civilized nations, may clearly in a proper case, modify or eliminate provisions of an existing petroleum concession which have become substantially contrary to the best interests of its citizens.”23 This inflammatory statement stunned the delegates, mainly because it came with the blessings of the Saudi petroleum minister ‘Abdullah al-Tariqi. A devotee of Nasser, Tariqi was a commoner who had studied engineering in the United States before he returned to Saudi Arabia. Given a break by radical elements in the Saudi royal family (who were known as the “Free Princes”), Tariqi articulated a progressive agenda for Saudi oil profits. He annoyed the Arab-American Oil Company (Aramco) with his criticism of its economic and political hold on Saudi Arabia, and pressured the monarchy with his statements on the need for more democracy on the peninsula (“We will soon have a Constitution,” he said in April 1958, “this country will shortly become a constitutional monarchy”). Not for nothing was he known as the “Red Sheikh.”24
The Red Sheikh met secretly with Pérez Alfonzo to draft an agreement on the side of the conference that would be later known as the Maadi Pact.25 Although the pact did not have any binding resolutions, it did set up the Oil Consultative Commission, which pledged to meet annually and push a five-point plan: to stabilize prices, integrate the operations of the industry so that the oil companies did not run rings around the oil lands, begin the refinement of oil products in the darker nations themselves, establish national oil companies “that would operate side by side with existing private companies,” and coordinate “the conservation, production and exploitation of petroleum.”26 The two men made no formal agreement, but they created the basis for what became the oil producers’ cartel.
Exxon egged on the nationalists with another price reduction (this time, by 7 percent of the posted price). When the oil producers met in Baghdad in September 1960, a month after the decrease, they came with a purpose: to form a public cartel of oil producers. After a week of deliberation, the group created OPEC. The five charter members nominally controlled or at least produced 82 percent of the world’s crude oil exports: Venezuela (30 percent), Kuwait (18 percent), Saudi Arabia (14 percent), Iraq (10 percent), and Iran (10 percent). Pérez Alfonzo’s opening statement reminded the delegates that oil is “an exhaustible, nonrenewable resource,” that “world reserves of crude oil would not continue to expand forever,” and so “our peoples cannot let flow, at an accelerated rate, their only possibility to pass without delay from poverty to well-being, from ignorance to culture, from instability and fear to security and confidence.”27 Export of the only lucrative raw material in these lands had to provide the basis for development, and if the leadership of these nations squandered that opportunity, it would be lost forever. From Pérez Alfonzo, the delegates got an awesome charge. The Nasserite delegates in the room would have already read something eerily similar in the Egyptian president’s The Philosophy of the Revolution (1954), where he had placed oil as one of the three pillars of Arab socialism—its wealth would help the Arab nation come into its own. Oil, Nasser wrote, was the “vital nerve of civilization, without which all its means cannot possibly exist.”28 If the oil producers could put their hands on the spigot, Exxon would not be able to drive the prices down and waste the down payment for the liberation of the darker nations.
The lofty rhetoric around the Baghdad meeting produced a meager agenda for the public commodity cartel. The first resolution of the organization excoriated the Seven Sisters for their domination of the industry, and charged OPEC members to “demand that oil companies maintain their prices steady, and free from all unnecessary fluctuation.”29 If OPEC did nothing else, it was at least able to prevent a reduction in the price of oil. The oil exporters rationalized their taxation laws and cleared up all kinds of inconsistencies over whether royalties (rent) should be included with profits for taxation, or whether rent should be an outright payment. The Seven Sisters refused to allow the rent to be an additional burden, because they wanted the rent to be taken as a cost and not a credit, that it be an advance to be deducted from the overall tax. OPEC conceded to the Seven Sisters on this crucial point, although this would be an issue raised repeatedly at OPEC forums (often by the more radical elements within OPEC). Whatever the immediate limitations of OPEC, henceforth the Seven Sisters and the oil importing countries had to acknowledge its place in discussions over price (and therefore over production totals). Pérez Alfonzo left Baghdad in an upbeat mood, declaring, “The spirit which has animated our discussions is more important than the results achieved.”30 The major financial papers of the world ignored the foundation of OPEC, treating it as another one of those interminable Third World conferences that would have no value in the long run.
The bravura of OPEC, the idea that the darker nations could produce a cartel for their precious commodities to ensure a decent price, impacted the Third World. Various Third World political forums now tried to move a similar agenda as OPEC, to create various public cartels for the otherwise-cheap raw materials bought in a market created by the private transnational cartels mostly located in the First World (or else by prices set by the members of the Council for Mutual Economic Assistance). At the NAM meeting in Belgrade (1961), the issue came up for discussion, and in the halls of UNCTAD (from 1964) economists and politicians drafted and redrafted statements and agreements on Integrated Commodity Programs. The question was, how to create a cartel for a commodity not as obviously precious as petroleum? Prebisch at UNCTAD had his heart set on cocoa, while other parties created such platforms as the Inter-Governmental Council of Copper Exporting Countries and the International Bauxite Association. None of these had the impact of OPEC, and they all faltered on the mechanism to ensure stable prices and supply. When it came to the creation of a buffer stock of the commodity in question, UNCTAD lacked the funds to buy sufficient quantities to regulate the price and ensure stability.31 A major disappointment in this was the failure of the OPEC nations to use their massive oil profits for the creation of such a fund to help stabilize other commodities.32 Not only did the OPEC powers refuse to contribute to a global fund to stabilize raw material prices but they also had a poor record in their aid contributions to their neighbors and the Third World in general (only 6 percent of their flush profits).33 Despite its political origins, OPEC became an economic cartel as it fought to defend oil prices and do little else. Certainly OPEC played an enormous part in the rise of the per barrel price of oil from $3 in 1973 to $36 in 1981, but by the 1999 Vienna meeting the major decisions were taken long before the powers met for a perfunctory three hours to ratify these prior resolutions. OPEC is now a hollow institution, in name a lion.
Despite OPEC’s feint against the international world order, the petroleum exporting countries remained relatively powerless mainly because they did not dethrone the Seven Sisters. In fact, the collaboration between the Seven Sisters and OPEC squelched the growth of independent oil firms on the world market (such as the Italian State Oil Company, headed by the combative Enrico Mattei, and the Russian state oil ministry, Minnefteprom, as well as the U.S.-based family firms such as Getty and Hunt). These firms might have helped break down the Seven Sisters’ suffocation of the market. The public oil cartel worked with the private cartel to close the market. The Seven Sisters benefited from OPEC, just as they did everything in their power to undermine it. For example, they began to explore other sources of oil in places like North Africa and off the shoreline of the Atlantic to enhance supply and reduce OPEC’s bargaining power. When the opportunity presented itself, the Seven Sisters bargained with individual countries and gave them deals to bypass the OPEC price ceilings. U.S. president Eisenhower clearly understood this: “The Middle East countries in the new organization were concerned anyone could break up the organization by offering five cents more per barrel for the oil of one of the countries.”34 This happened numerous times in the early history of OPEC.35
One approach that nations of the Third World took toward concessionary cartels like the Seven Sisters was to nationalize the ownership of the oil fields, the plantations, or even the refineries—all the physical plant of the industry that had been rented from the state or else that worked within the authority of the state. To nationalize these assets disrupted the power of the Seven Sisters and other private cartels, but it did not overturn their overwhelming planetary power. Indeed, the immense political pressure on the oil lands to nationalize the assets had made such a move inevitable, so that in at least two cases (Saudi Arabia and Kuwait), the Seven Sisters “voluntarily” withdrew themselves from ownership of the fields. Nationalization of the oil fields moved the local power from the cartel to the domestic bourgeoisie that controlled or had substantial power over the managerial state. For instance, when Venezuela took action against the Seven Sisters in the 1960s, one commentator described the transfer of power in this way: “A planning apparatus and state-owned heavy industry complexes (a steel mill and aluminium industry in the Guayana province; petrochemical complexes in the northwest) were established. These further expanded and strengthened the position of the bureaucracy as an independent social force. But this did not give them control of the economic development process as a whole.”36 The Venezuelan state and the domestic bourgeoisie took charge of the extraction of the oil, but they did not control the process. They still had to cooperate with the Seven Sisters, which continued to exert enormous pressure on the oil industry. In sum, the nationalization of economic assets from transnational firms replicated the problems of political independence from colonialism; it was an advance, but it created an illusion of freedom. The Seven Sisters transferred the burdens of extraction on to the state, while it continued to enjoy the fruits of the industry. Furthermore, the state’s newfound power over the fields and its ability to negotiate with the Seven Sisters over the prices and taxes moved it to bargain on two sides of the commodity cycle: with the oil workers for lower wages, and the Seven Sisters for higher prices. To raise the export receipt and increase the coffers of the state did not itself presage a strategy for the generation of equity.
If the public cartels and the strategy of asset nationalization did not always benefit the tropical working class, it should be said that the strategy also did not benefit those countries that did not have access to the higher-priced primary products. When OPEC maintained its price for oil, the darker nations without oil had a much higher import bill for the one energy source that had become indispensable for contemporary capitalism. While the radical members of OPEC, such as Libya in the early 1970s, did call for differential prices for the various nations of the world, OPEC’s strictly economic vision precluded any such political arrangement. The only time OPEC openly indulged in a political battle was over the defense of Palestine, but even here Arab unity could not be counted on.37 In general, commodity cartels did not always help the Third World and hurt the advanced industrial states: the latter often dominate the production of certain primary goods, such as agricultural commodities grown on factory farms by megacorporations, whereas the former often produce manufactured goods. High oil prices hurt the Third World states that have no domestic oil reserves, just as any cartel would only help those that have the commodity protected by it and not the others. Whereas the cartel approach certainly emboldened states, it did not have a general political strategy to build power in the totality of the Third World.
