OPEC from myth to reality.

On April 4, 2000, Prewitt Enterprises Inc.--an Alabama based company that purchased refined petroleum products for its gasoline station in Birmingham, Alabama--filed a class action against OPEC before the U.S. District Court for the Northern District of Alabama for alleged antitrust violations. (325) OPEC did not appear before the court. (326) Notwithstanding the above, the court entered an order certifying a plaintiff class of all persons or entities that purchased refined petroleum products in the United States between March 1999 and April 2000. (327) The claim alleged a conspiracy to restrict production and export of crude oil to unlawfully and illegally raise prices. (328) In its findings of fact, the court concluded that it was "beyond dispute that OPEC was created and exists for the express purpose of coordinating, limiting, stabilizing and otherwise controlling crude oil production and export in order to increase its members' revenues." (329) The complaint alleged that OPEC coordinated and implemented production cuts to reduce crude oil supply and increase price to maintain it within a price band of $22-28 per barrel, as a "balancing of the cartel's short term and long term interests" and fixing prices above "competitive levels." (330) The complaint also averred that OPEC was assisted by Norway, Mexico, the Russian Federation, and Oman. (331) The court concluded that it had subject matter jurisdiction under the Sherman and Clayton acts, that OPEC as an "unincorporated association" may be sued in Federal Court and that OPEC activities were within the court's antitrust jurisdiction due to their substantial and foreseeable adverse impact on U.S. trade and commerce. (332) The court also concluded that OPEC did not have any form of jurisdictional immunity and is not a "foreign state or agency or instrumentality of a foreign state" (333) and that as a "voluntary intergovernmental organization" the Foreign Sovereign Immunities Act and the act of state doctrine did not apply. (334) The court also established that the acts of price fixing were commercial in nature and therefore excluded from sovereign immunity and act of state protection. (335) The court enjoined OPEC for a twelve month period. (336)

On August 2, 2002, reviewing the issue of whether process had been validly served on OPEC, the court concluded that under Austrian law no such service was possible and dismissed the complaint. (337) The U.S. Court for the Eleventh District affirmed such dismissal. (338) The court's decision concluded that "the individual Member States of OPEC are afforded immunity from suit brought for damage caused by their commercial activities when they act through OPEC" but not when acting individually because they would be subject to the commercial activity exception under the Foreign Sovereign Immunity Act. (339)

Thus, recent U.S. precedents indicate an OPEC exposure to litigation before U.S. courts. Certain amendments to the OPEC Statute and international binding agreements could limit such potential risks.

The nature of OPEC as an international exporter commodity agreement or as a truly political supranational organization will be critical in determining whether its activities have a "commercial nature" and thus may not be entitled to sovereign immunity.

These precedents once more confirm that OPEC's charter has weaknesses and could be referred to as precedents against the recognition of the Organization as a true political international organization.

9. Consolidation of Saudi Arabia as Most Important Producer and Country with the Most Reserves and Its Foreign Policy Challenges

According to the U.S. Department of State, Saudi Arabia's oil reserves are "the largest in the world, and [the country] is the world's leading oil producer and exporter." (340) With one fourth of the world's oil reserves, Saudi Arabia is not matched by any other country and has been referred to as the "mother lode" of oil and gas reserves. (341) The kingdom is the world's largest net oil exporter. (342) Saudi Arabia was OPEC's "swing producer" until 1985 when it agreed to a production quota. (343)

According to OPEC's 2005 Annual Statistical Bulletin, only one country, Saudi Arabia, has enough proven crude oil reserves to independently influence the international oil market. (344) In 2005, its crude oil reserves of 264,211 m/b represented almost 30% of total proven reserves and were followed by Iran (136,270 m/b); Iraq (115,000 m/b) Kuwait (101,500 m/b), United Arab Emirates (97,800 m/b), and Venezuela (80,012 m/b). (345) The differences in terms of crude oil reserves between OPEC members are substantial. (346) Algeria (12,270 m/b), Indonesia (4,301 m/b), Libya (41,460 m/b), Nigeria (36,220 m/b), and Qatar (15,207 m/b) all lack meaningful reserves to make a difference in terms of potential future supply. (347)

Saudi Arabia also dominates in terms of crude oil production with 9,353.3 (1,000 b/d) followed by Iran (4,091.5), Venezuela (3,128.0), Kuwait (2,573.4), and Nigeria (2,356.9). (348)

This clearly means today as it meant twenty-five years ago that any agreement toward stabilizing the international price of crude oil must include Saudi Arabia. After the Saudis, only Iran and Iraq have enough reserves and production to influence oil prices. (349) Recently Saudi Arabia's share of OPEC's production increased from 25% to 35%. (350)

OPEC figures are not far away from the 2006 United States Energy Information Administration Energy Outlook according to which Saudi Arabia's oil reserves are the highest at 264.3 billion barrels followed by Canada (178.8), (351) Iran (132.5 b/b), and Kuwait (115.0 b/b). (352) Saudi Arabia is the only country with readily accessible spare production capacity that may replace supply disruptions. (353) However, the Kingdom's reserves and spare production capabilities are a matter of speculation. (354)

Both OPEC and nonOPEC production is expected to augment to cover an overall increase of future world oil supplies by 2030. (355) However, only 38% of the total supply is expected to come from OPEC members. (356) This is an important reduction from OPEC's 52% share of world supply in 1973. (357) NonOPEC oil is expected to supply 62% of the world market in 2030. (358) Some of the important sources of nonOPEC additions to world supply are expected from the Caspian Basin region, Sudan, West Africa, Australia, Malaysia, and South America. (359)

In the last six years OPEC's production has fluctuated between a high of 44.5% of total world production and a low of 39.4%. (360) If each OPEC's member average production in 1973 is compared with average production in 2005 the numbers decreased for six of the ten OPEC members. (361) Only Algeria, Nigeria, Qatar, and Saudi Arabia reported production increases. (362)

Therefore, with divisions among OPEC members, only Saudi Arabia's share is significant enough to cause an impact in the world market. OPEC's share of the market has been reduced, and thus its control over total supply is smaller. (363) Thus, this creates multiple challenges, such as whether OPEC should be proactive in increasing its membership to include some of the nonOPEC producing countries; and/or whether OPEC should contemplate broadening its organizational scope beyond strict crude oil pricing issues.

An additional important issue to be considered refers to Saudi Arabia's unique foreign policy characteristics. Saudi Arabia is a party to a mutual defense assistance agreement with the United States. (364) The agreement declares that Saudi Arabia's ability to defend itself is important to the security of the United States, and provides for "adequate numbers of qualified United States Army, Navy and Air Force personnel to provide training," delivery of arms and equipment. (365) A U.S. Military Training Mission to the Kingdom of Saudi Arabia was created pursuant to a 1977 agreement between the two countries. (366) Also, in furtherance of military cooperation between the two countries, as of 1957 the United States has rights to use the Dhahran airfield. (367) In April 2003 the U.S. Secretary of Defense announced an end to the presence of military personnel in Saudi Arabia. (368)

Saudi Arabia and the United States have executed multiple technical cooperation agreements. One of these agreements entered into force in 1975 and provides for cooperation in the fields of economics, technology, and industry. (369) The agreement provides for a joint commission on economic cooperation and for the United States to provide technical assistance to Saudi Arabia in the development of its economic and human resources. (370) Another technical cooperation agreement in science and technology was executed one year later, and one of its purposes is to assist Saudi Arabia in the "optimum use of [the Kingdom's] petroleum energy resources." (371)

Finally, in its condition as premier oil exporter, Saudi Arabia maintains strong financial relationships with western financial institutions. (372)

The U.S. Department of State summarized the status of bilateral relationships as follows:

The United States and Saudi Arabia share a common concern about

regional security, oil exports and imports, and sustainable

development. Close consultations between the U.S. and Saudi Arabia

have developed on international, economic, and development issues

such as the Middle East peace process and shared interests in the

Gulf. The continued availability of reliable sources of oil,

particularly from Saudi Arabia, remains important to the prosperity

of the United States as well as to Europe and Japan. Saudi Arabia