- The Washington Times - Wednesday, March 1, 2000

A top House Republican for foreign policy is ready to hit oil-exporting nations with sanctions if they do not increase production to lower skyrocketing fuel prices.

Rep. Benjamin A. Gilman, New York Republican, believes that members of the Organization of the Petroleum Exporting Countries (OPEC) ought to be more grateful for the favors the United States has done them over the last 10 years.

"We should be reviewing our current security relationships with all of the OPEC member states, suggesting to them we will not bail them out the next time their security is threatened," Mr. Gilman, chairman of the House International Relations Committee, said in a statement.

Mr. Gilman will hold a hearing today on OPEC, and on Energy Secretary Bill Richardson's recent visit to the Middle East, in which Mr. Richardson made the case for lower prices.

The congressman is drafting legislation to sanction oil exporters whose tight rein on production has forced up oil prices to $30 a barrel, a level not seen since 1991. The bill would penalize these countries by withdrawing U.S. military aid to the few countries that get it, according to a congressional source.

The bill could hit OPEC members Indonesia, Nigeria and Venezuela, as well as non-OPEC producers, including Mexico and Angola. These countries get "tens of millions of dollars" in aid, Mr. Gilman said.

But oil-industry experts and former government officials say the leverage won by U.S. military and economic aid to OPEC nations is best used subtly, due to the complexity of relationships with oil-producing nations. In most cases, they say, it is more effective to argue that allowing oil prices to remain at their currently high level will eventually hurt oil producers.

Total aid to the OPEC countries economic, agricultural and military amounts to less than $300 million, a tiny fraction of the total U.S. foreign-aid budget of $23 billion.

OPEC's membership includes Iran, Iraq and Libya, three countries that get no U.S. aid and have scant respect for the U.S. point of view.

The United States gets considerable leverage out of its political and military relationship with countries like Saudi Arabia and Kuwait, but American diplomats use it carefully.

"We don't need to remind them of the debt they owe to the United States," said Robert Ebel, a senior U.S. energy official in the 1970s.

But Mr. Richardson cannot publicly dress them down for their lack of gratitude, because it would add to the resentment in the Arab world towards U.S. power, Mr. Ebel said. That, in turn, would make it that much harder for friendly nations to face down proponents of higher prices in their own ranks.

"The leverage is there, but it loses its effectiveness if it is seen publicly," he said.

Mr. Richardson apparently had some success yesterday in getting OPEC's third-largest producer, Venezuela, to back an increase in production. Venezuelan oil minister Ali Rodriguez said after a meeting with Mr. Richardson in London that the 11-nation group will boost production if prices stay at $30 a barrel.

The comments by Mr. Rodriguez and other OPEC ministers signal OPEC wants to calm oil markets.

Mr. Richardson's best leverage for getting lower prices is to appeal to the basic motivations of major oil producers, according to Charles Doran, an expert on energy policy at the Center for Strategic and International Studies.

"Nothing gets results like self-interest," Mr. Doran said.

Major oil producers like Saudi Arabia and Kuwait know all too well that stratospheric prices are not sustainable. Mr. Doran points to the 1970s, which saw two successive oil shocks, from the 1973 Arab embargo and the 1979 Iranian revolution.

Sky-high oil prices helped tip the United States into recession and encouraged conservation efforts. As a result, in 1985, oil-producing nations were hammered by the lowest oil prices in a generation.

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