One equal temper of heroic hearts

OPEC Bulletin Commentary June-July 2020

One of the most striking aspects of the ‘Baghdad Conference’, which took place in the Al-Shaab Hall in the Bab Al-Muaadham district in Baghdad, Iraq, between September 10 and 14, 1960, was how the Founding Fathers arrived on the banks of the Tigris River with different priorities, perspectives and expectations. Each Member State had its own particular circumstances, situation, culture and history.

Yet, Fuad Rouhani of Iran, Dr Tala’at al-Shaibani of Iraq, Ahmed Sayed Omar of Kuwait, Abdullah Al-Tariki of Saudi Arabia, and Dr Juan Pablo Perez Alfonzo of Venezuela, all realized that their nations’ best interests would be served by working together. Their commonalities outweighed any differences they may have had. They knew that teamwork will always yield greater results than going alone and unity is a source of strength.

Together, they were able to found OPEC, an action that has had profoundly positive consequences for all Member Countries and the oil market industry over the subsequent 60 years. Yet with every subsequent meeting of the OPEC Conference the same characteristic of the Baghdad meeting has been present: the need for Member Countries to reconcile their individual, national perspectives with the greater, collective good.

Fortunately, the story of OPEC has shown that the national, individual perspective is always best served by working towards the common good. The individual and the collective synchronize in harmony. It chimes with the saying in the Irish language: Ní neart go cur le chéile — there is no strength without unity.

This was very much a prominent theme at the 179th Meeting of the OPEC Conference and the 11th OPEC and non-OPEC Ministerial Meeting of June 6. Expressions of unity were common across all statements and interventions made throughout the day. Indeed, it was clear the only way to respond to the unprecedented challenges unleashed by the COVID-19 pandemic was to demonstrate to the market the unwavering commitment of all Participating Countries to fulfil their responsibilities under the historic decisions made by the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting on April 12, 2020.

The decisions of June 6 were further expressions of this unity. Participating Countries adopted the following ‘Five Elements’ as a means of implementing the commitment of OPEC+:

  • Reconfirmation of existing commitment under the agreement.
  • The subscription to the concept of compensation by Participating Countries who are unable to attain full conformity (100 per cent) in May and June 2020, to accommodate the pending production adjustment in July, August and September 2020, in addition to their already agreed production adjustment for such months.
  • Extending the first phase of the supply adjustments in May and June 2020 by one month, until the end of July 2020.
  • The continuity of the current agreement is contingent on the fulfillment of principles stated in the first two points above.
  • The full and timely implementation of the agreement on the basis of the above elements for its entire duration remains inviolable.

These principles provided an extra level of assurance to the market that Participating Countries were determined to match their commitments with action. Less than a fortnight later, on June 18, the 19th Meeting of the Joint Ministerial Monitoring Committee welcomed the expressed commitments from those countries below the 100 per cent May conformity level and specific compensation plans highlighting how this will be accommodated, and delivered, between July and September.

As a result of this unity, conformity was high in May, at 87 per cent. Furthermore, by the end of June, countries that did not achieve full conformity in May had submitted plans about how they would adjust their production to allow for the principle of compensation. Therefore, the principle of compensation has reinforced the ‘Declaration of Cooperation’ process, lending it extra strength and credence. As OPEC Secretary General, Mohammad Sanusi Barkindo, has said on several occasions with regard to OPEC’s response to the COVID-19 pandemic: “When this crisis struck, OPEC ‘did not need to reinvent the wheel’. We possessed the tools to respond to the emergency. In other words, we had the wheel; we just needed to reinforce it. Our wheel — our firefighting utensil — is the ‘Declaration of Cooperation’.”

The recent response by OPEC+ to the COVID-19 pandemic has shown, that although OPEC is in its 60th years, and ranks as one of the older members of the multilateral system, it still remains adaptable, relevant and essential. Perhaps the best way to encapsulate OPEC’s unity and robustness is to recall the words of the great poet, Alfred, Lord Tennyson, in his chef-d’œuvre, Ulysses:

“One equal temper of heroic hearts.”

OPEC Bulletin (June-July 2020)

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