NO WAY FOR NOPEC

Inevitably aided and abetted by increases in oil prices and a US President who has been a long term critic of OPEC

, the No Oil Producing Exporting Cartels (“NOPEC”) Act has re-emerged. The act seeks to hold OPEC member states liable for violations of U.S. antitrust legislation by removing their sovereign immunity shield. The transgression is deemed to be OPEC’s collusive behaviour in its attempts to limit global crude oil production which they allege manipulates crude oil price outcomes. The NOPEC bill is a re-incarnation of legislative attempts that have variously been abortively introduced over 15 times since 1999. he NOPEC bill passed by the House Judiciary Committee last month could go to the floor this summer for a full vote. A different bill in the Senate also seeks to rein in OPEC by opening the door to complaints at the World Trade Organization if OPEC continues to pursue its policy of production cuts as a means to support oil prices.

Courts have repeatedly refused to rule on suits against OPEC member states, citing sovereign immunity and the Act of State Doctrine, and have dismissed suits against companies dealing with OPEC for the same reasons. US Federal courts have long relied on these principles to reject antitrust legislation against OPEC or OPEC members, Despite what appears to be overwhelming bipartisan enthusiasm in Congress for the bill, previous administrations of both President Bush and Obama have been reluctant  to turn over to the courts functions that have traditionally belonged in the executive and have preferred to use diplomacy in engaging OPEC. Furthermore such a bill would likely provoke the negative outcomes and increase in oil prices which it was meant to control. Both the American Petroleum Institute and American oil companies oppose the legislation

Treasury Secretary Henry Paulson under President George W. Bush asserted that the adoption of such a law would threaten foreign direct investment in the US, as OPEC countries might withdraw assets for fear they would be seized. This divestment would harm the U.S. economy and would almost certainly spur retaliatory measures against American-held assets abroad.

Indeed NOPEC legislation would almost certainly trigger punitive retaliatory action against U.S. commercial and political interests. This would likely be in the form of seizing the assets of U.S. energy companies operating abroad, and the dissolution of Joint Ventures with National Oil companies of member states. NOPEC’s central tenet of attempting to conduct US foreign policy by litigation in all likelihood will have the reverse effect of a stable low price oil regime.

The significant difference is that President Trump who for decades has railed against OPEC and its influence in global oil market pricing is more likely to back it than any of  his predecessors. OPEC has also changed and for now it is OPEC+ with Russia playing an increasing role in setting production quotas. The political ramifications are complex. They include the effect that such legislation will have on the real ‘special relationship’ between US and their critical ally in the Middle East, Saudi Arabia.

OPEC was formed in 1960 at a time of decolonization in an era of Western domination of the oil market with a  mission of coordinating and unifying the  petroleum policies of the members of the organization and ensuring that member countries have a stable oil market to ensure that they could  secure regular, economical and efficient supply of petroleum to the countries consuming the products and gaining  fair capital to be invested back in the petroleum industry.

Most of the member states are currently experiencing economic, social and political distress. In a world where non OPEC oil supply has grown substantially, reducing the call for OPEC  crude even in an expanding market, there is a determination on the part of OPEC to achieve an optimal price level which will provide member states with the best return without negatively impacting  global economic growth and destroying demand.

US foreign policy has become more militant and unilateral in it use of sanctions and extra territorial jurisdiction. How would NOPEC work globally ? It is one thing for the U.S. to invoke economic interests or other grounds as a rationale to impose punitive legal sanctions on a country, It is quite another for the U.S. to use extraterritorial sanctions to block trade and financial activities by non-U.S. parties with those countries — in other words, to coercively turn national actions into global measures, in breach of the sovereignty of other states. After all the US is not the sole importer of oil.

Through extraterritoriality, the U.S. aims not only to control OPEC member states economic affairs, but also to advance its own geopolitical and commercial interests. In the event that such a bill increases the price of oil are other consumers expected to take the hit?In the past, few international players were willing to flout U.S. extraterritorial sanctions for fear of being barred from the U.S. financial system. But Trump’s aggressive unilateralism on matters extending from trade and global warming to Iran and OPEC is beginning to create pushback to US intent on using the control of the reserve currency and its enormous financial capacity for its own self interest