Regis Jesuit High School
Model United Nations Conference
Regis XV
Background Guide
Organization of Petroleum Exporting
Countries (OPEC)
Topic 1Tensions with Russia and Brazil
Authors- Zhang Qian, Jack McLaren, and Paul Asercion
OPEC General Information
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September 10–14, 1960: Created at the Baghdad Conference by Iran, Iraq, Kuwait, Saudi
Arabia and Venezuela.
1960-1965: Headquarters in Geneva, Switzerland
September 1, 1965: Headquarters moved to Vienna, Austria.
1961-1975: Qatar, Indonesia, Socialist People’s Libyan Arab Jamahiriya, United Arab
Emirates, Algeria, Nigeria, Ecuador, and Gabon join.
December 1992: Ecuador suspends membership
1994: Gabon leaves OPEC
2007: Angola joins OPEC
October 2007: Ecuador re-joins OPEC
2009: Indonesia suspended its membership
Current Members: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi
Arabia, United Arab Emirates, and Venezuela
“OPEC's objective is to co-ordinate and unify petroleum policies among Member Countries, in
order to secure fair and stable prices for petroleum producers; an efficient, economic and regular
supply of petroleum to consuming nations; and a fair return on capital to those investing in the
industry.”
OPEC Topics/Concerns
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2. Tensions with Russia and Brazil
Overview
o The worldwide economy has fallen into a recession, thus driving oil prices down.
Oil prices were once around $150 a barrel, but they are currently around $70 a
barrel.
ƒ In order to restore profitable oil prices, OPEC countries have decided to
drastically cut production in order to lower surplus.
ƒ However, despite OPEC member nations cutting oil production multiple
times, oil prices dropped as Russia and Brazil did not cut production.
ƒ The OPEC countries try to convince Russia and Brazil to cut production in
order to prevent a total price collapse.
• This creates tension between OPEC and Brazil and Russia, mainly
because Brazil’s and Russia’s economies rest heavily on oil
production.
• Despite the fact that oil prices have begun again to rise, the
question remains: will Russia and Brazil work with or against
OPEC?
ƒ The United States complicates the problem by importing large amounts of
oil from both Russia and Brazil.
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Russia
o Russia’s short-term oil production has peaked, matching the oil production of
Saudi Arabia at times.
o OPEC itself has noted that Russia will lead non-OPEC production in the years to
come.
o Russia’s oil production over the long-term is forecasted to substantially increase
by 13.25%, with output rising steadily from 9.98million (mn) barrels per day (b/d)
in 2007 to 11.30mn b/d by 2018.
ƒ This increase in production is certain to keep surplus high, especially if the
global economic recession persists.
• Russia has caused surplus previously, so Russian output is not a
new problem for OPEC
Brazil
o Brazil has incredible potential to become the largest oil producer in Latin
America.
ƒ Three massive new deepwater oil fields (the Tupi, Iara and Guara) have
been discovered in the past two years. One of which, the Tupi, is the
largest known deepwater oil reserve in the world. 5-8 billion barrels of oil
are estimated to be in this reserve.
ƒ Petrobras, the state oil company, has recently announced a five-year
investment plan worth $174 billion in order to exploit these precious
reserves.
ƒ In 2007 Brazil reached its goal of becoming self sufficient in oil. Exports
doubled between 2000 and 2007 and Petrobras recently announced record
monthly exports for December 2008, of 620,000 b/d. Petrobras ended
2008 producing 2.4m barrels of oil equivalent per day (boe/d).
ƒ Output from the Tupi, Iara and Guara deep water fields should hit 300,000
barrels of oil equivalent a day by 2012.
o Brazil’s oil production continues to be profitable despite the economic downturn.
ƒ Various Oil Companies, including Petrobras, have said that the recent fall
in oil prices will not stop exploration.
ƒ Even with oil prices currently at around $70-$75 per barrel, investors are
expected to continue to support the efforts of companies such as Petrobras.
o Just as with Russia, this large production of oil despite the low prices is bound to
keep oil prices down, thus economically hurting OPEC Member Nations.
Therefore, the challenge for OPEC is “to co-ordinate and unify petroleum policies…in
order to secure fair and stable prices for petroleum producers”
Sources:
1. http://www.opec.org/home/
2. http://www.theelectroniceconomist.com/displayStory.cfm?story_id=13348824
3. http://www.rncos.com/Blog/2009/04/Brazilian-Oil-Industry-Remains-Profitable-DespiteSlowdown.html
4. http://www.rigzone.com/news/article.asp?a_id=68795
5. http://www.opec.org/opecna/Speeches/2007/OPECSpareCapacity.htm
6. http://online.wsj.com/article/SB122929599488205129.html
7. http://industry.bnet.com/energy/10001076/energy-roundup-brazil-russia-hinder-opeccuts-ge-blows-away-competition-and-more/
8. http://www.platts.com/Oil/Resources/News%20Features/opec/prod_table.xml
9. http://www.live-pr.com/en/russia-oil-and-gas-report-q-r1048297904.htm
10. http://oil-price.net/dashboard.php?lang=en
11. http://www.opec.org/opecna/Speeches/2009/attachments/WOO09presentation.pdf
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Topic: Tensions with Russia and Brazil
Submitted To: Organization of Petroleum Exporting Countries (OPEC)
Submitted By: The Kingdom of Saudi Arabia
OPEC,
Expressing deep concern about the current economic situation,
Taking into account that world oil prices have dropped from record highs to new lows,
Recognizing that major surpluses in world oil stocks have been created due to the lack of
demand,
Noting that both the Russian Federation and the Federative Republic of Brazil have begun to tap
enormous petroleum resources and export these resources to the world,
Seeking cooperation among member and non-member countries,
1. Strongly recommends the incorporation of the Russian Federation and the Federative
Republic of Brazil into the Organization of Petroleum Exporting Countries;
2. Calls upon the council to set a deadline for the incorporation of the sovereign states of the
Russian Federation and the Federative Republic of Brazil into the Organization of Petroleum
Exporting Countries;
3. Reminds both the Russian Federation and the Federative Republic of Brazil that as members
of OPEC, each would have to follow the regulations and mandates of the council, including
limits on production levels;
4. Encourages this union for the following reasons:
a. The stability of world petroleum prices,
b. To foster the growth of the petroleum industry under all member nations,
c. To increase vital cooperation between all petroleum exporting countries in order to:
i. Reduce confusion,
ii. Create more unified strategies,
iii. Act more in concert in the face of economic crises,
d. And to, as stated in OPEC’s mission, provide “a fair return on capital to those
investing in the industry,”
5. Urges the council to act quickly in order to forestall further declines in world petroleum
prices;
6. Expresses the hope that an agreement can be reached with both the Russian Federation and
the Federative Republic of Brazil.
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Topic: Tensions with Russia and Brazil
Submitted To: Organization of Petroleum Exporting Countries (OPEC)
Submitted By: The Republic of Iraq
OPEC,
Noting with great concern the haste of the Organization of Petroleum Exporting Countries to
incorporate Russia and Brazil as member nations,
Observing the production cuts that OPEC has administered since the beginning of the economic
recession,
Emphasizing the fact that OPEC’s cuts in production have so far been successful without the full
cooperation of both the Russian Federation and the Federative Republic of Brazil,
Aware of the increase in petroleum production in both Russia and Brazil,
Fully aware that OPEC still controls one third of market supply,
Determined to develop diplomatic ties between Russia, Brazil, and OPEC
1. Urges OPEC to reconsider the attempt to incorporate Russia and Brazil as member nations for
the following reasons:
a. The uncertainties in both countries’ oil production going forward,
b. The fact that diplomatic channels can be kept open through other means than the
potentially foolish option of incorporating both countries into OPEC,
2. Encourages diplomatic connections to be opened between Russia, Brazil, and OPEC in order
to:
a. Foster a greater understanding,
b. Allow greater communication,
c. Allow the freedom and sovereignty of non-member nations while still encouraging a
dialogue between countries,
3. Expresses the hope that dialogue can be opened between OPEC, Brazil, and Russia in order
to diffuse the tensions between the countries, yet not bind any non-member country to OPEC.
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Topic: Tensions with Russia and Brazil
Submitted To: Organization of Petroleum Exporting Countries (OPEC)
Submitted By: The Republic of Ecuador
OPEC,
Noting with great concern the dramatic drop in petroleum prices during the current economic
recession,
Conscious of the sovereignty of non-member nations such as the Russian Federation and the
Federative Republic of Brazil,
Aware of the importance of unity in the petroleum exporting community in order to control
supply,
Determined to promote this unity between member and non-member countries,
1. Endorses the creation of a permanent “observer” status for nations such as the Russian
Federation and the Federative Republic of Brazil in order to:
a. Create a strong sense of unity between the “observer” countries and the member
countries,
b. Create unity and a desire to cooperate on critical issues such as production quotas,
c. Preserve sovereignty of “observer” nations by allowing them the freedom of not
being bound to OPEC quotas,
d. Keep lines of communication open between member and “observer” countries,
e. Diffuse tensions by creating complete transparency for “observer” countries,
2. Encourages “observer” countries, after some time of observing the OPEC council, to become
full member nations;
3. Proclaims that only five “observer” countries will be allowed at one time, which will be
decided by the general council at a later date;
4. Draws attention to the abilities of “observer” countries, which are:
a. The inability to vote on any issue brought up at any summit, meeting, council, etc,
b. The ability to speak and make any concerns heard within the summit, meeting, council,
etc,
c. The inability to draft resolutions,
5. Expresses the belief that a solution will be reached that will reduce tensions between OPEC,
and Russia and Brazil.