C o m m e n t a r y
A year on from December
It is sometimes said that history is forged by ordinary people doing
extraordinary things. The tides of the affairs of mankind, their ebbs
and flows, are driven by such extraordinary acts. Significant moments
are marked by the decisive actions and words of people shouldering
responsibility to address a common challenge. We hasten to add —
perhaps unnecessarily — that such actions and words are rarely the
product of one solitary individual acting alone or unilaterally. More
often than not, they are the consequence of individuals working to-
gether, of groups forming partnerships, of stakeholders sharing a vision.
It is with such ideas and concepts in mind that we should view
the landmark ‘Declaration of Cooperation’ of December 10, 2016. This
decision by OPEC’s 14 Member Countries and the ten non-OPEC oil
producing nations that chose to participate underlined the shared re-
solve they all had in achieving an accelerated realignment of global
oil supply and demand at a time of critical importance.
In this Special Edition of the
we celebrate and hon-
our the ‘Declaration of Cooperation’ — not only because it is historic
in itself but also because it is a noteworthy achievement on so many
other levels: It is the first production adjustment since Oran 2008. It
is the first time that participating non-OPEC countries are committed
to a joint agreement for production adjustment. It allows for Iraq to be
effectively part of the production management for the first time since
1998, while separately, it includes a compromise solution accepted
by IR Iran that takes into account its temporary special circumstances
with a cap on its production. It establishes anOPEC and non-OPEC Joint
Ministerial Monitoring Committee to monitor the implementation and
compliance of the decision and to demonstrate the joint commitment
to and collaboration in production adjustments. It institutionalized a
framework for structured, sustained and transparent partnership with
non-OPEC countries. Finally, the Declaration and the extensive work
that went into it have been openly shared with the public to reflect its
credible, equitable, transparent, measurable and verifiable features.
Any one of these achievements alone would be worthy of celebra-
tion and proper tribute; but taken all together, the many achievements
of the ‘Declaration of Cooperation’ mark an era — one which those who
come after us will look to for inspiration and those who were involved
will recall with pride.
With the ‘Declaration of Cooperation’, the 24 producers upheld
their responsibility for oil market stability in the interest of all oil pro-
ducing and consuming countries. Their monumentally significant deci-
sion, taken after extensive rounds of consultations in order to address
the prevailingmarket realities at the time, were considered to bemuch
more than just a short-term ‘fix’; they were seen as essential in the
medium- and long-term as well. As a result, the Declaration demon-
strated and even exemplified a commitment to the global community
in shared efforts to restore and sustain market stability with positive
and broad implications for the world economy, the oil industry and
oil producing countries.
The signatories of the ‘Declaration of Cooperation’, as has been
well-documented in various other media, further agreed to reinforce
their decision of implementing a production adjustment through a
Joint Ministerial Monitoring Committee, consisting of oil ministers,
co-chaired by Kuwait and the Russian Federation, and assisted by the
OPEC Secretariat. In a joint effort to strengthen and institutionalize
their collaborative actions through a structured programme of joint
activities and regular meetings, they all agreed to regularly review
the status of their cooperation at technical and ministerial levels.
Thus, one could also see that the mechanisms and tools created by
the Declaration all embody the spirit of cooperation that undergirds
the Declaration itself.
Those were the apparent conditions surrounding the Declaration.
But beyond themeetings and behind the Declaration itself, lay another
important aspect: the profound and unprecedented amicable coming
together of a group of disparate oil producers. The Declaration is, in
this sense, the public manifestation of a consensus-building spirit that
animated all 24 producers. It motivated them and invigorated them
in such a way that they repeatedly chose to meet in an indefatigable
attempt to find a way out of the dire situation then faced by the oil
market, which also threatened the long-term health of the oil industry
and the many stakeholders around the world which depended on it.
It’s worth recalling that the background conditions were, at the
time tempestuous. Crude oil prices had been trapped in a downward
slide since mid-2014, primarily driven by supply levels. The
price fell by an extraordinary 80 per cent between
June 2014 and January 2016. An abundance of supply above market
requirements, coming from North America and elsewhere, turned into
a significant stock overhang for both crude and products, which fur-
ther pressured oil market and prices.
The consequences of this lowoil price environment weremanifold,
not least of which was the threat to the global economy. This fact had
been highlighted by other leading world economic institutions such
as the IMF, OECD and WTO. In addition, there were other negative
consequences that included low and falling growth along with rising
inequality; weak trade and financial distortions, which had damaged
global growth prospects; and uncertainties with regard to geopolitical
developments, the European immigration crisis and the uncertainties
surrounding the final outcome of the Brexit negotiations.
But despite all these sources of uncertainty and the different kinds
of challenges they represented, the 24 signatories of the Declaration
found ways to see beyond parochial concerns and view the problem
together, collectively, with the aim of finding a way forward that might
benefit all of them — as well as the world as a whole.
On many other occasions, capable men and women facing differ-
ent, unrelated and lesser challenges have fallen short, and have been
unable to come together for the greater good. In the case of the 24 pro-
ducer countries, they managed to rise to the occasion, amid extensive
consultations andmultiple rounds of shuttle diplomacy, and produced
an extraordinary action that has changed the course of history.
of the market rebalancing long sought by so many, the progress made
in the year has been remarkable. Furthermore, the relationships built
and the ties made have been exemplary — and they are now serving
as a model of how to tackle other problems in the future. Whether it
is the sharing of technical know-how or creating partnerships to col-
laborate on research projects or simply meeting to share different and
sometimes divergent outlooks on the market, a precedent has been
set for all future work — one in which dialogue and communication
become essential tools to address collective problems.