Part Ⅲ

OPEC and the World Economic Forum

In 1949 Venezuela and Iran were the first countries to move towards the establishment of OPEC by approaching Iraq,Kuwait and Saudi Arabia,suggesting that they exchange views and explore avenues for regular and closer communication among petroleum-producing nations.

Organization of the Petroleum Exporting Countries(OPEC),a permanent,international organization headquartered in Vienna,Austria,was established in Baghdad,Iraq on 10-14 September 1960.The formation of OPEC represented a collective act of sovereignty by oil exporting nations,and marked a turning point in state control over natural resources.In the 1960s when the international oil market was largely dominated by a group of multinational companies known as the“seven sisters”,OPEC ensured that oil companies could not unilaterally cut prices.Its mandate is to“coordinate and unify the petroleum policies”of its members and to“ensure the stabilization of oil markets in order to secure an efficient,economic and regular supply of petroleum to consumers,a steady income to producers,and a fair return on capital for those investing in the petroleum industry.”In 2014 OPEC comprised twelve members:Algeria,Angola,Ecuador,Iran,Iraq,Kuwait,Libya,Nigeria,Qatar,Saudi Arabia,the United Arab Emirates and Venezuela.Norway and Russia have attended OPEC meetings as observers,indicating that OPEC is not averse to further expansion.Iraq remains a member of OPEC,but Iraqi production has not been a part of any OPEC quota agreements since March 1998.

OPEC was headquartered in Geneva,Switzerland before moving to Vienna,Austria,on September 1,1965.

The OPEC Conference is the supreme authority of the organization,and consists ofdelegations normally headed by the Ministers of Oil,Mines and Energy of member countries.The Conference usually meets twice a year(in March and September)and in extraordinary sessions whenever required.It operates on the principle of unanimity,and one member,one vote.

Objectives and Activities

Coordinate International Petroleum Policies

According to the United States Energy Information Administration(EIA),OPEC crude oil production is an important factor affecting global oil prices.OPEC sets production targets for its member nations and generally,when OPEC production targets are reduced,oil prices increase.Projections of changes in Saudi production result in changes in the price of benchmark crude oils.Crude oil benchmark is a crude oil price that serves as a reference price for buyers and sellers of crude oil.

In the 1970s,OPEC began to gain influence and steeply raised oil prices during the 1973 oil crisis in response to US aid to Israel during the Yom Kippur War.It lasted until March 1974.OPEC added to its goals the selling of oil for socio-economic growth of the poorer member nations,and membership grew to 13 by 1975.A few member countries became centrally planned economies.

In a 1979 U.S.District Court decision held that OPEC‘s pricing decisions have sovereign immunity as“governmental”acts of state,as opposed to“commercial”acts,and are therefore beyond the legal reach of U.S.courts competition law and are protected by the Foreign Sovereign Immunities Act of 1976.

In the 1980s,the price of oil was allowed to rise before the adverse effects ofhigher prices caused demand and price to fall.The OPEC nations,which depended on revenue from oil sales,experienced severe economic hardship from the lower demand for oil and consequently cut production in order to boost the price of oil.During this time,environmental issues began to emerge on the international energy agenda.Lower demand for oil saw the price of oil fall back to 1986 levels by 1998-1999.

In the 2000s,a combination offactors pushed up oil prices even as supply remained high.Prices rose to then record-high levels in mid-2008 before falling in response to the 2007 financial crisis.OPEC‘s summits in Caracas and Riyadh in 2000 and 2007 had guiding themes of stable energy markets,sustainable oil production,and environmental sustainability.

In April 2001,OPEC,in collaboration with other international organizations,such as APEC,Eurostat and IAE,launched the Joint Oil Data Exercise,which became rapidly the Joint Organization Data Initiative(JODI).

In 2003 the International Energy Agency(IEA)and OPEC held their first joint workshop on energy issues and they continued to meet since then to better“understand trends,analysis and viewpoints and advance market transparency and predictability.”

In 2011 Nymex oil future trades reached record highs.By mid-March the Nymex WTI“exceeded 1.5 million futures contracts,18 times higher than the volume ofdaily traded physical crude.”OPEC called for more efforts by governments and regulatory bodies to curb excessive speculation in oil futures markets.OPEC claimed this increased volatility in oil prices,disconnected price from market fundamentals.

1973 Oil Embargo

In October 1973,OPEC declared an oil embargo in response to the United States‘and Western Europe‘s support of Israel in the Yom Kippur War of 1973.The result was a rise in oil prices from＄3 per barrel to＄12 starting on 17 October 1973,and ending on 18 March 1974 and the commencement of gas rationing.Other factors in the rise in gasoline prices included a market and consumer panic reaction,the peak of oil production in the United States around 1970 and the devaluation of the U.S.dollar.U.S.gas stations put a limit on the amount of gasoline that could be dispensed,closed on Sundays,and limited the days gasoline could be purchased based on license plates.Even after the embargo concluded,prices continued to rise.

The Oil Embargo of 1973 had a lasting effect on the United States.The Federal government got involved first with President Richard Nixon recommending citizens reduce their speed for the sake of conservation,and later Congress issuing a 55 mph limit at the end of 1973.Daylight saving time was extended year round to reduce electrical use in the American home.Smaller,more fuel efficient cars were manufactured.

On 4 December 1973,Nixon also formed the Federal Energy Office as a cabinet office with control over fuel allocation,rationing,and prices.People were asked to decrease their thermostats to 65 degrees and factories changed their main energy supply to coal.

One of the most lasting effects of the 1973 oil embargo was a global economic recession.Unemployment rose to the highest percentage on record while inflation also spiked.Consumer interest in large gas guzzling vehicles fell and production dropped.Although the embargo only lasted a year,during that time oil prices had quadrupled and OPEC nations discovered that their oil could be used as both a political and economic weapon against other nations.

Responding to War and Low Prices

Leading up to the 1990-1991 Gulf War,the President of Iraq Saddam Hussein recommended that OPEC should push world oil prices up,helping all OPEC members financially.But the division of OPEC countries occasioned by the Iraq-Iran War and the Iraqi invasion of Kuwait marked a low point in the cohesion of OPEC.Once supply disruption fears that accompanied these conflicts dissipated,oil prices began to slide dramatically.

After oil prices slumped at around＄15 a barrel in the late 1990s,joint diplomacy achieved a slowing down of oil production beginning in 1998.

In 2000,Venezuela President Hugo Ch‘vez hosted the first summit of OPEC in 25 years in Caracas.The next year,however,the September 11,2001 attacks against the United States,and the following invasion of Afghanistan,and 2003 invasion of Iraq and subsequent occupation prompted a sharp rise in oil prices to levels far higher than those targeted by OPEC themselves during the previous period.

On 19 November 2007,global oil prices reacted violently as OPEC members spoke openly about potentially converting their cash reserves to the euro and away from the US dollar.

In May 2008,Indonesia announced that it would leave OPEC when its membership expired at the end of that year,having become a net importer of oil and being unable to meet its production quota.A statement released by OPEC on 10 September 2008 confirmed Indonesia‘s withdrawal,noting that it“regretfully accepted the wish of Indonesia to suspend its full Membership in the Organization and recorded its hope that the Country would be in a position to rejoin the Organization in the not too distant future.”Indonesia is still exporting light,sweet crude oil and importing heavier,more sour crude oil to take advantage of price differentials(import is greater than export).

Production Disputes

The economic needs of the OPEC member states often affect the internal politics behind OPEC production quotas.Various members have pushed for reductions in production quotas to increase the price of oil and thus their own revenues.These demands conflict with Saudi Arabia‘s stated long-term strategy of being a partner with the world‘s economic powers to ensure a steady flow of oil that would support economic expansion.Part of the basis for this policy is the Saudi concern that expensive oil or supply uncertainty will drive developed nations to conserve and develop alternative fuels.To this point,former Saudi Oil Minister Sheikh Yamani famously said in 1973:“The stone age didn‘t end because we ran out of stones.”

On 10 September 2008,one such production dispute occurred when the Saudis reportedly walked out of OPEC negotiating session where the organization voted to reduce production.Although Saudi Arabian OPEC delegates officially endorsed the new quotas,they stated anonymously that they would not observe them.The New York Times quoted one such anonymous OPEC delegate as saying“Saudi Arabia will meet the market‘s demand.We will see what the market requires and we will not leave a customer without oil.The policy has not changed.”

OPEC Aid

OPEC aid dates from well before the 1973-1974 oil price explosion.Kuwait has operated a program since 1961(through the Kuwait Fund for Arab Economic Development).

The OPEC Special Fund was conceived in Algiers,Algeria,in March 1975,and formally founded early the following year.A Solemn Declaration reaffirmed the natural solidarity which unites OPEC countries with other developing countries in their struggle to overcome underdevelopment,and called for measures to strengthen cooperation between these countries,operating under a reasoning that the Fund‘s“resources are additional to those already made available by OPEC states through a number of bilateral and multilateral channels.”The Fund was later renamed as the OPEC Fund for International Development(OFID).

The Fund became a fully fledged permanent international development agency in May 1980.

The World Economic Forum ( WEF )

The World Economic Forum is a Swiss nonprofit foundation,based in Cologny,Geneva.Recognized by the Swiss authorities as the international institution for public-private cooperation,its mission is cited as“committed to improving the state of the world by engaging business,political,academic,and other leaders of society to shape global,regional,and industry agendas”.

The Forum is best known for its annual winter meeting in Davos,a mountain resort in Switzerland.The meeting brings together some 2 500 top business leaders,international political leaders,selected intellectuals,andjournalists to discuss the most pressing issues facing the world.Often this location alone is used to identify meetings,participation,and participants with such phrases as“a Davos panel”and“a Davos Man”.

The organization also convenes some six to eight regional meetings each year in locations such as Latin America and East Asia,as well as undertaking two further annual meetings in China and the United Arab Emirates.Beside meetings,the foundation produces a series of research reports and engages its members in sector specific initiatives.

History

The forum,first named the“European Management Forum”,was founded in 1971 by Klaus Schwab,a German-born business professor at the University of Geneva.In the summer of 1971,Schwab invited 444 executives from Western European firms to the first European Management Symposium held in the Davos Congress Centre under the patronage of the European Commission and European industrial associations,where Schwab sought to introduce European firms to American management practices.He then founded the WEF as a nonprofit organization based in Geneva and drew European business leaders to Davos for the annual meetings each January.

Schwab developed the“stakeholder”management approach,which attributed corporate success to managers actively taking account of all interests:not merely shareholders,clients,and customers,but also employees and the communities within which the firm is situated,including governments.Events in 1973,including the collapse of the Bretton Woods fixed-exchange rate mechanism and the Arab-Israeli War,saw the annual meeting expand its focus from management to economic and social issues.It changed its name to the World Economic Forum in 1987 and sought to broaden its vision to include providing a platform for resolving international conflicts,and,for the first time political leaders were invited to the annual meeting in January 1974.

Political leaders soon began to use the annual meeting as a neutral platform.The Davos Declaration was signed in 1988 by Greece and Turkey,helping them turn back from the brink of war.In 1992,South African President F.W.de Klerk met with Nelson Mandela at the annual meeting,their first joint appearance outside South Africa.At the 1994 annual meeting,Israeli Foreign Minister Shimon Peres and PLO Chairman Yasser Arafat reached a draft agreement on Gaza and Jericho.

Headquartered in Cologny,in 2006 the foundation opened regional offices in Beijing and New York City.It strives to be impartial and is not tied to any political,partisan,or national interests.The foundation is“committed to improving the State of the World”.Until 2012,it had observer status with the United Nations Economic and Social Council;it is under the supervision of the Swiss Federal Council.The foundation‘s highest governance body is the foundation board.

The foundation is funded by its 1 000 member companies,typically global enterprises with more than five billion dollars in turnover(varying by industry and region).These enterprises rank among the top companies within their industry and/or country and play a leading role in shaping the future of their industry and/or region.Membership is stratified by the level of engagement with forum activities,with the level of membership fees increasing as participation in meetings,projects,and initiatives rises.

Objectives and Activities

The flagship event of the foundation is the invitation-only annual meeting held during the winter at the end of January in Davos,Switzerland,The 2011 annual meeting in Davos was held from 26 to 30 January.The 2012 meeting was held on 25-29 January 2012,with the theme“The Great Transformation:Shaping New Models”.The 2013 meeting was held from 23 to 27 January,with the theme of“Resilient Dynamism,”following founder Klaus Schwab‘s declaration that“the need for global cooperation has never been greater”.The 2014 meeting was held from 22 to 25 January,with the theme“The Reshaping of the World:Consequences for Society,Politics and Business”.

During the five-day annual meeting in Davos,more than 2 500 participants from slightly fewer than 100 countries gather in Davos.Approximately 1 500 are business leaders drawn from its members,1 000 of the world‘s top companies.Besides these,participants included 219 public figures,including 40 heads of state or government,64 cabinet ministers,30 heads or senior officials of international organizations,and 10 ambassadors.More than 432 participants were from civil society,including 32 heads or representatives of non-governmental organizations,225 media leaders,149 leaders from academic institutions and think tanks,15 religious leaders of different faiths,and 11 union leaders.

The town is small enough to allow participants to meet anywhere outside the sessions and allows them the greatest opportunities to attend receptions organized by companies and countries.The participants are also taking part in role playing events,such as the Investment Heat Map.Informal winter meetings may have led to as many ideas and solutions as the official sessions.Approximately 2 200 participants gather for the five-day event and attend some of the 220 sessions in the official programme.The winter discussions focus around key issues of global concern(such as international conflicts,poverty,and environmental problems and possible solutions).

As many as 500 journalists from online,print,radio,and television take part,with access to all sessions in the official program,some of which are also webcast.Not all the journalists are given access to all areas,however,all plenary debates from the annual meeting also are available on YouTube.

Part icipants

In 2011,some 250 public figures(heads of state or government,cabinet ministers,ambassadors,heads or senior officials of international organizations)attended the annual meeting,including:Robert B.Zoellick,Nicolas Sarkozy,Ban Ki-moon,Angela Merkel,Gordon Brown,David Cameron,Min Zhu,Dmitry Medvedev,Kofi Annan,Jacob Zuma,and Chinese former premier Zeng Peiyan.

Al Gore,Bill Clinton,Bill Gates,and Tony Blair are also regular Davos attendees.Past attendees include Henry Kissinger,Nelson Mandela,and Yasser Arafat.

Summer annual Meeting

In 2007,the foundation established the Annual Meeting of the New Champions(also called Summer Davos),held annually in China,alternating between Dalian and Tianjin,bringing together 1 500 participants from what the foundation calls Global Growth Companies,primarily from rapidly growing emerging countries such as China,India,Russia,Mexico,and Brazil,but also including quickly growing companies from developed countries.The meeting also engages with the next generation of global leaders from fast-growing regions and competitive cities,as well as technology pioneers from around the globe.Premier Wen Jiabao has delivered a plenary address at each annual meeting.

Regional Meetings

Every year regional meetings take place,enabling close contact among corporate business leaders,local government leaders,and NGOs.Meetings are held in Africa,East Asia,Latin America,and the Middle East.The mix of hosting countries varies from year to year,but consistently China and India have hosted throughout the decade since 2000.

Young Global Leaders

The group‘s Forum of Young Global Leaders consists of 800 people chosen by the forum organizers as being representative of contemporary leadership,“coming from all regions of the world and representing all stakeholders in society”,according to the organization.After five years of participation they are considered alumni.

Social Entrepreneurs

Since 2000,the WEF has been promoting models developed by those in close collaboration with the Schwab Foundation for Social Entrepreneurship,highlighting social entrepreneurship as a key element to advance societies and address social problems.Selected social entrepreneurs are invited to participate in the foundation‘s regional meetings and the annual meetings where they may meet chief executives and senior government officials.

Global Shapers

In 2011,the World Economic Forum started a global network of people between the ages of 20 and30 who have shown great potential for future leadership roles in society.The Community of Global Shapers,highlighting Global Shapers is a network of self-organizing local hubs based in each major city around the world.They undertake events and activities intended by the Global Shapers to generate a positive impact within their local community.

As of 21 October 2014 there are 358 Hubs with more than 4 300 Shapers.

The foundation also acts as a think tank,publishing a wide range of reports.In particular,“Strategic Insight Teams”focus on producing reports of relevance in the fields of competitiveness,global risks,and scenario thinking.

Initiatives

The Global Health Initiative was launched by Kofi Annan at the annual meeting in 2002.The GHI‘s mission was to engage businesses in public-private partnerships to tackle HIV/ AIDS,tuberculosis,malaria,and health systems.

The Global Education Initiative(GEI),launched during the annual meeting in 2003,brought together international IT companies and governments in Jordan,Egypt,and India that has resulted in new personal computer hardware being available in their classrooms and more local teachers trained in e-learning.This is having a significant effect on the lives of children.The GEI model,which is scalable and sustainable,now is being used as an educational blueprint in other countries including Rwanda.

The Environmental Initiative covers climate change and water issues.Under the Gleneagles Dialogue on Climate Change,the U.K.government asked the World Economic Forum at the G8 Summit in Gleneagles in 2005 to facilitate a dialogue with the business community to develop recommendations for reducing greenhouse gas emissions.This set of recommendations,endorsed by a global group of CEOs,was presented to leaders ahead of the G8 Summit in Toyako and Hokkaido held in July 2008.

The Water Initiative brings together diverse stakeholders such as Alcan Inc.,the Swiss Agency for Development and Cooperation,USAID India,UNDP India,Confederation of Indian Industry(CII),Government of Rajasthan,and the NEPAD Business Foundation to develop public-private partnerships on water management in South Africa and India.

In an effort to combat corruption,the Part nering Against Corruption Initiative(PACI) was launched by CEOs from the Engineering and Construction,Energy and Metals,and Mining industries at the annual meeting in Davos during January 2004.PACI is a platform for peer exchange on practical experience and dilemma situations.Approximately 140 companies have joined the initiative.

Awards

The Technology Pioneers Programme recognizes companies that are designing and developing new technologies.The award is given to 30-50 companies each year,comprising,since 2000,more than 400 companies from 5 continents.

The Tech Pioneers are integrated into programme activities with the objective to identify and address future-oriented issues on the global agenda in proactive,innovative,and entrepreneurial ways.By bringing these executives together with scientists,academics,NGOs,and foundation members and partners,the foundation‘s goal is to shed new light on how technologies may be used to address,for example,finding new vaccines,creating economic growth,and enhancement of global communication.

The Public Eye Awards have been held every year since 2000.It is a counter-event to the annual meeting of the World Economic Forum(WEF)in Davos.Public Eye Awards is a public competition of the worst corporations in the world.In 2011,more than 50000 people voted for companies that acted irresponsibly.At a ceremony at a Davos hotel,the“winners”in 2011 were named as Indonesian palm oil diesel maker,Neste Oil in Finland,and mining company AngloGold Ashanti in South Africa.

“Davos Man”

“Davos Man”is a neologism referring to the global elite of wealthy(predominantly)men, whose members view themselves as completely“international”.It is similar to the term Masters ofthe Universe attributed to influential financiers on Wall Street.

Davos men supposedly see their identity as a matter of personal choice,not an accident of birth.According to political scientist Samuel P.Huntington,who is credited with inventing the phrase“Davos Man”,they are people who“have little need for national loyalty,view national boundaries as obstacles that thankfully are vanishing,and see national governments as residues from the past whose only useful function is to facilitate the élite‘s global operations”. TwhZf1/p+tx2TAwDWKAp0+QFdGxI0wYEo4DYRZ1Sh7sWXMHawWtBvuf2zaCHgzlS