Tom Bower talks to Ali al-Naimi, the Saudi oil minister, at Opec’s meeting and is struck by how this master manipulator escapes censure in the great oil blame game
Speculators are back in favour, especially the fund managers bidding up the price of oil. Cursed last year for tipping the world into recession, the same traders are now praised by some for once again betting on rising prices. Last year’s sinners are now cast as the Good Samaritans.
The conductor of that topsy-turvy world is Ali al-Naimi, the Saudi oil minister. Choosing his words carefully as he walked through the centre of Vienna towards last week’s Opec meeting, the 75-year-old geologist smiled enigmatically about the speculators: ‘I’m not concerned.’ The opposite is the truth. The 5ft tall former shepherd boy turned Master of the Universe modestly claims praise for orchestrating this defiance of economic laws. In the midst of the recession, while the world’s demand for crude oil has fallen to a 16-year low and there is more unsold oil sloshing around in storage than ever before, prices have doubled in eight months. Tantalisingly, al-Naimi, alias ‘Mr Opec’, drew the curtains on a mad world in Vienna.
Eleven nations producing 40 per cent of the world’s crude were plotting how to restore the fortunes they previously enjoyed as prices rose from $30 in 2003 towards a record $147 last July. Hundreds of billions of dollars had flowed from the industrialised world to the oil producers, transforming nations and their inhabitants’ lives. Amid months of hectic trading, with authoritative predictions that the price was remorselessly heading to $200, most producers including al-Naimi believed the good times would never end. Wise oil men know that the cycle never changes. ‘No one can permanently fix the market,’ al-Naimi had been told, but he ignored the truism.
Then the bubble burst. Within four weeks, prices plunged to $32. Inefficient producers like Mexico and greedy governments like Venezuela’s face penury. Their salvation depends on prices soaring back up very soon. While the major oil companies like ExxonMobil and BP speak about the ‘right’ price for crude at between $30 and $50, al-Naimi admitted during his Viennese walk that he wants $80 oil immediately and $150 in two years, although it only costs $2 to extract a barrel from the desert. If al-Naimi fails, the new cities under construction in Saudi Arabia, Dubai and along the Gulf cannot be completed. In the contest between ghost cities in the desert versus derelict communities in Europe, the soft-spoken al-Naimi, dapperly dressed in a blue pinstriped suit, affects to be the humble broker seeking to please everyone. No one should be fooled. Al-Naimi is a dangerous man. His high-risk strategy threatens economic recovery. But if the world’s recovery stalls, this consummate operator will never take responsibility — he’ll simply blame the speculators, a convenient scapegoat.
Manipulating oil prices has been a Saudi trick for 35 years. Al-Naimi’s predecessor, the stylish Sheikh Yamani, won infamy by threatening armageddon — a world without oil — if the West failed to eat humble pie. Levelling blame on the rapacious major oil companies and their imperialist governments was Yamani’s smokescreen to raise prices. In 1988, two years after Yamani was dismissed, al-Naimi knew the game had changed. Opec’s enigma and lurking threat had evaporated. Traders and bankers speculating in New York and London decided oil prices, not Opec. Oil had been democratised. Al-Naimi switched battlefields. Instead of blaming the west and tweaking the oil majors’ consciences for past exploitation, he began to manipulate the markets. The trick the then president of Saudi Aramco, the nation’s oil producer, learned was to micro-manage Opec’s supply of crude oil.
Unlike Yamani, al-Naimi is a diligent student. ‘I cared for many, many sheep,’ he said as we walked through Vienna’s pedestrian zone. At the age of ten, he swapped his Bedouin life to become an office boy for Aramco, then owned by Exxon and other American oil companies. His break was studying geology at Stanford. ‘I was a good student, but I had many girls. I had a good time,’ he chortled. California also gave him a taste for fitness.
At 6 a.m the day before the Opec meeting, al-Naimi was running along Vienna’s deserted Ringstrasse surrounded by a handful of journalists holding tape recorders to his mouth. In his rehearsed soundbite, he puffed his optimism about the world’s economy. Accordingly, he confided, oil prices could continue to rise. Just as he intended, speculators piled in. Although the world now consumes about 80 million barrels a day (down 8 million barrels from last year), traders speculate 1 billion barrels of oil during the same single day. To Naimi’s satisfaction, prices rose in the 24 hours after his run by $1 to $63 — and the trend has continued.
‘No more soundbites,’ al-Naimi said as he followed the Austrian security man through the rush-hour crowds towards Opec’s 153rd meeting. There, he would not be confronted by the exotic pageant which greeted Yamani of world-famous presidents, kings and dictators plotting to use the cartel’s power to decide the world’s fate, but by nondescript placemen. Confident that for the first time the warring factions — Venezuela, Libya and Iran — would unquestioningly obey his edict not to cut oil supplies, al-Naimi walked out before the meeting concluded. Unsurprised that his conviction of an inevitable economic recovery was accepted, he was equally unsurprised by the absence of any protest from Gordon Brown about forcing price increases.
One year ago, in his familiar search for a favourable photo opportunity, Brown had dashed to Jeddah to confront al-Naimi for failing to curb the speculators. Blaming the Saudis for profiteering by deliberately limiting oil supplies, Brown demanded they pump more oil. Al-Naimi knew there was no oil shortage. Dozens of tankers in the Persian Gulf were laden with Saudi sour crude but could find no customers. There was a bottleneck in the refineries. Then Brown jetted to Aberdeen to blame the oil companies for the decline of production in the North Sea. For their part, the North Sea operators blamed Brown’s crippling taxes for deterring their search for new oil. Having exposed his ignorance about the matrix of independent but interconnecting criteria now determining oil prices, Action Man returned to London, universally derided for being trapped in the 1970s.
Absurdly, that is where much of public sentiment remains stuck. Oil arouses mistrust, yet, while most people are ignoring al-Naimi’s potent plot, they have focused on a courthouse not far from New York’s mercantile exchange, the centre of oil speculation. Shell is being sued for contributing to the death of Ken Saro-Wiwa, the Nigerian activist, hanged in 1995 after campaigning against Shell’s environmental damage in his native Ogoniland. In reality, Saro-Wiwa’s challenge was directed against General Sani Abacha, a corrupt dictator. Nigeria’s federal government was refusing to give even 1 per cent of the proceeds of Ogoni oil back to the tribe. Shell’s straitjacketed refusal to intercede in the power struggle and rigged trial was self-destructive. ‘It is not for commercial organisations like Shell,’ said a company spokesman in 1995, ‘to interfere in the legal process of a sovereign state such as Nigeria.’ Whether Shell could have persuaded Abacha not to murder Saro-Wiwa is debatable, but it was Abacha and not Shell who killed the poet.
Oil is a tough business and the prejudices rarely change. The contrast between the blunt opprobrium heaped on Shell and al-Naimi’s silky, secretive manipulation suggests that in the blame game t he Saudis, unlike Shell, can count on escaping censure. Back in Riyadh, al-Naimi has reported to the King, ‘Mission Accomplished’.