Global Issues: Austria & Czech Republic/Case Reports/OPEC OFID
The Organization of Petroleum Exporting Countries or OPEC was originally formed among a group of Persian Gulf nations in response to the United States refusal to buy oil from the region. Iraq, Iran, Kuwait, and Saudi Arabia, Venezuela were the founding nations. Over the years the organization grew with more members. The rest of the member states joined in 1973. Those states include Indonesia, Libya, Algiers, and Gabon. Ecuador joined in 1973 but later withdrew itself from the organization. OPEC controls oil prices by regulating the production of oil among its member nations, therefore creating balance in the market.
The organization faced a dire situation in 1975 when it came under attack from a terrorist ground led by llich Ramirez Sanchez. The armed group stormed into the room where oil ministers were meeting and after killing several people, took the oil ministers and nearly 70 people hostage. They forced the oil ministers to read propaganda on the airwaves.
Vienna, Austria is the current location that houses OPEC. Vienna along with the Austrian government makes efforts to provide lodgings when OPEC holds it annual meetings, which bring over a 1000 people into the city. In return OPEC spends nearly its entire 20 million Euro budget in Austria. OPEC provides money for social institutions.
In 1975 after the ministers of OPEC first gathered in Algiers, they laid the groundwork for a financial institution that would be able to promote economic development in the southern hemisphere. This organization is now known as OFID or the OPEC Fund for International Development. This is an institution that is directly connected to OPEC. The ministers make voluntary donations but also utilize public sector money in offering grants to those in need. At the end of April 2010 1,205 grants were dispersed among 125 countries, totaling $483 million USD.
OPEC and OFID are globally important institutions. Due to the economic connections that countries now have through fuel needs, OPEC has become an important mediator of the issue. OPEC is as only as strong as its member nations and Saudi Arabia is its strongest member. In the early 1980s the country made huge sacrifices on profits to keep OPEC quotas. OPEC has the power to fine nations that veer away from their set production quotas. The fines are needed because too much oil on the market could drive down the price too low and could be costly for everyone involved.