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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

OPEC Bulletin,

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


Reference Basket

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.