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Organization of Petroleom Exporting Countries, 1978

Written by Frank Pobutkiewicz

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January 7, 2019


Organization of Petroleom Exporting Countries, 1978

OPEC Organization History

The Organization of Oil Producing Countries (OPEC) was founded in 1960 as a part of the Baghdad Conference, a summit that would change the power dynamics of the international economy by unifying the world’s most prominent oil producers – Iran, Saudi Arabia, Iraq, Kuwait, and Venezuela.  Throughout the next several decades OPEC grew by adding seven additional member states- Qatar, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador, and Gabon. Together these nations reinforced the principle of national sovereignty, especially that over their own natural resources. No longer desiring to be controlled by foreign powers and companies, oil producing nations had banded together to regulate oil prices and exercise great economic power over the western world. One of the most notable examples of this exercise of power happened in 1973 when American-backed Israel launched attacks on Egypt and Syria in what became known as the October War. OPEC ceased exporting oil to the United States and caused its oil prices to rise dramatically, negatively impacting the American economy.

Current Situation (1978)

Nearly twenty years after its founding, OPEC faced a new challenge as political turmoil within its own ranks and attempted foreign interference intensified both internal and external conflicts within the region. The Iranian Revolution in 1978 ended with the exile of the Shah and the rise of Ayatollah Khomeini as the new leader of Iran. The political turmoil led to massive riots and protests from both sides of the conflict and all but halted Iranian exports of oil, as experienced oil workers fled the country. Iran’s production of oil decreased from 6 billion bbl/day to 2.4 bbl/day, sending the international community into panic and causing western nations to stockpile their oil reserves. This “oil shock” positively increased the GDP of oil producing nations; however, it turned international sentiment against OPEC.

Meanwhile, the United States continues its attempts to create price stability that would limit OPEC’s influence over western affairs. The West has taken two concurrent approaches when trying to moderate OPEC’s influence. The first is to increase its own oil production capabilities, mainly in The United States (Alaska) and the United Kingdom (North Sea). The second is to sway the governments of OPEC member states to their side, mainly Iran and Saudi Arabia, by promising large military aid packages in exchange for price stability.

It is important to note that the second oil shock occurred in the midst of the cold war, creating higher than normal stakes for many Western states as they attempted to remain competitive with the Soviet Union, who had large enough oil production capabilities to remain independent from OPEC. Furthermore, the USSR was attempting to cultivate its own energy monopoly by building pipelines to Eastern Europe.

Amid attempted U.S. intervention, decreased Iranian oil production, and cold war tensions, OPEC was attempting to cement its independence from foreign intervention and increase the dependence of both the West and the East on its resources; this all in the pursuit of greater export profits and higher GDPs. In the late 1970s, OPEC attempted to expand its mission to include internal development initiatives that would establish oil-producing states as international economic powers.

Bloc Positions

It will be the responsibility of the delegates of this committee to further the goals of OPEC, as well as their individual state. Saudi Arabia, Iran, the UAE, Kuwait, and Indonesia are, at this time, Western-leaning and anti-Soviet meaning they will favor policies that create price stability in exchange for military aid.  Meanwhile, Iraq, Russia, Kazakhstan, Libya, and are pro-Soviet and anti-Western meaning that they will favor economic alliances with the Soviet Union that cut the United States supply of oil and cause prices to rise unpredictably in the west. Sudan, Gabon, Ecuador, Nigeria, Qatar, and Algeria are all non-aligned at the start of this session.

Questions to Consider

  1. How can OPEC members gain more international power and influence by leveraging their energy production and export?
  2. Should OPEC expand its mandate into more political roles?
  3. Is OPEC stronger when individual members have more international clout?
  4. Should OPEC have more stringent requirements for member states to follow aside from oil output?
  5. What are the potential ramifications of a divided OPEC?

Simulation Instructions

OPEC is, at its core, a multilateral regional economic organization. Its main powers include the ability to regulate prices and supply, call for trade embargoes and sanctions, regulate the flow of natural resources, and draft regional trade laws.  Individual states within OPEC will have the ability to take their own unilateral actions to abide with or defy standing OPEC regulations and OPEC regulations made in this session. Furthermore, OPEC members will have the ability to work with foreign nations that may be able to offer them certain benefits in exchange for fostering price stability or disrupting flows to specific nations.

Committee Positions

Saudia Arabia

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