Understanding OPEC+ legal Position

Unfortunately, the failure of international media in explaining OPEC+ statuary rights is overpowered by ignorant or prejudiced lobbies in various countries. Surprisingly enough, while these lobbies have participated in formulating and approving almost all international laws and regulations, they have ignored OPEC+ legal position which aims at stabilizing the oil market, and have purposefully overlooked the role of OPEC+ collaboration which fully complies with the following international laws and regulations:

First: The OPEC+ bloc is an internationally approved governmental legal system which complies with any of the following legal forms:

• The “International Symposium” system.
• The “International Forum” system, such as the International Energy Forum (IEF) and the Gas Exporting Countries Forum (GECF).
• The “international Conference” system which is widely known that this system is the oldest form of international cooperation.
• The “international Organizations” system which is the most pre-eminent example of legally defined as an autonomous entity such as the United Nations (UN) and the World Trade Organization (WTO).

Therefore, OPEC+ can be plausibly understood to be one of the four systems required for the establishment of a legal international organization.

Second: According to the provisions of the GATT agreement in the WTO, it would be fallacious to view OPEC+ as a monopolizing organization, because OPEC+ is not the sole organization influencing global oil markets. Indeed, the petroleum producing and exporting countries that are not members of OPEC+, including the USA, Canada, the EU, and the International Energy Agency (IEA), are all significant players in the oil market through laid plans and adopted policies. These countries are the cornerstones of policies aimed at reducing energy consumption, building up strategic oil reserves, sustaining the environment, and restoring the balance in the oil markets. Also, OPEC+ production policies are mainly the result of the coordination between OPEC+, with its 13 member states, and the 10 producing and exporting countries that are not members of OPEC+. Usually, all these countries exert a collective effort to reach appropriate agreements. Therefore, OPEC+ does not fall under the definition of monopolizing alliances “Cartels” in the international law, which requires a rigorous and sustained monitoring system to punish the violating countries. These practices are found in the Cartels of diamond, bauxite, sugar, wheat, rubber, copper, tea as well as the international Cocoa Organization. The absence of these features in OPEC+ confirms that this block is not a cartel. Furthermore, according to international laws, a “Cartel” presupposes controlling the world lion’s market share which exceeds 70%. For instances, the tin cartel controls 90% of the global market, while the bauxite cartel controls 73%, and the coffee cartel controls 90%. However, the shares of OPEC+ in the market does not exceed 55% in terms of both production and exports, and these are maintained only for short periods. In conjunction, OPEC+ does not satisfy the definition of monopoly in the US regulations that require a substantial share of the market exceeding 90%.

Third: OPEC+ countries legally enjoy constant and unconditional control of their natural resources in accordance with the resolutions of the General Assembly in the UN. The most recent resolution number 1803 (D-17) dated 14 September 1962 confirmed that every country has an absolute and unconditional dominion over its natural wealth and resources. This resolution is a basic principle of the right for self-determination and respect of the absolute right of each country to exploit its natural wealth and resources in a manner that serves its national development and the welfare of its people. Hence, OPEC+ nations can take measures that they deem necessary or appropriate regarding the permissions, restrictions, or inhibition of oil production and distribution activities. Therefore, the attempt to prevent OPEC+ countries from controlling their natural resources is regarded as a blatant violation of the spirit and principles of The UN charter as well as a hostile act against peace and international cooperation.

Fourth: The accusation that OPEC+ oil prices widely exceed the “marginal cost” is in a stark contrast to the simplest economic principles, since “marginal cost” applies only to produced goods and does not include natural resources such as oil and minerals. Consequently, article 11 of the GATT agreement in The WTO maintains a general contravention on quantitative restrictions that applies specifically to imports and exports of manufactured goods rather than natural resources. Moreover, section (2) of article 11 in the GATT agreement states that the provisions of this section do not apply to temporary restriction that affects acute shortage of agricultural and fish products. Also, these rules are incorporated under articles 12, 18, 20 and 21, which all explain the justifications and rationale for the exceptions, particularly in respect to the balance of payments, measures of emergency preventive protection, protecting public health and national security. The sole condition for applying to these quantitative restrictions is through informing all member states in the WTO. This is what OPEC+ always applies in full transparency, predictability, and credibility.

Fifth: On the basis of published documents by various international organizations, the petroleum importing countries impose exorbitant taxes on their oil imports that exceed 49% in the Organization for Economic Co-operation and Development (OECD), 51%, in the G7 major industrial countries, over 73% in certain EU countries, 51% in India ,43% in South Korea, and 38% in China. These taxes do not include charges imposed on the “Industry Margins” which amount to 21% in OECD, 19% in the G7, 41% in the USA, 26% in Canada, 27% in Japan, 15% average in the EU, 16% in the UK, and 17% in China. The total value of these taxes and charges reached last year an amount of 346.5 billion US dollars in the G7 countries, which exceeded OPEC+ oil export value to these countries equal to 321.1 billion US dollars in the same year. This means that the average tax imposed by the G7 on imported crude oil can reach up to 105.4 dollars per barrel, which is roughly equivalent to 240% of the average oil price per barrel last year.

A descending order of the value of the tax imposed on oil confirms that Italy is ranked the highest amounting to 156.7 US dollars for each imported barrel, equivalent to 3.6 times of the average price of crude oil barrel last year, followed by Britain with 3.57 times, France with 3.4 times, Germany with 2.4 times, while Japan taxes reached 78.6 dollars, followed by Canada at 48 dollars, and the USA came the lowest with imposed taxes and charges equal to 23.9 dollars for each imported barrel of oil.

Unfortunately, these oil importing countries and their lobbies purposefully ignore all above facts. Their allegations against the OPEC+ are unfounded, and consequently OPEC+ must immediately invoke these false claims and call on the concerned countries to reduce their taxes and charges imposed on their imported oil in order to maintain reasonable and balanced prices at the gas pumps for their citizens.