Will Ahmadinejad at Opec summit be another sideshow?

Mahmoud Ahmadinejad faces challenges at the helm of Opec. But his internal ones are greater.

Iranian president Mahmoud Ahmadinejad said, "The place of the oil industry in our national economy is so important that I decided to take on the responsibility … myself." Reuters

Iran's president Mahmoud Ahmadinejad, never a stranger to controversy, is stepping up to the helm of Opec at a dramatic time.

In this unaccustomed role, he faces external challenges, but the internal ones are greater.

Iran took over on January 1 as Opec president for the first time in 36 years, and the organisation has its next, routine meeting on June 8. Mr Ahmadinejad will be hoping to avoid the fate of his predecessor, the shah's minister Jamshid Amuzegar, who was taken hostage along with 10 other oil ministers by the Venezuelan terrorist Carlos the Jackal at the December 1975 Opec summit and narrowly escaped death. Opec did not hold another summit for 25 years.

The first, procedural point the oil producers' organisation faces is who will represent Libya. Muammar Qaddafi, the Libyan leader, has been linked to the Jackal's plot, allegedly to assassinate Saudi opponents of higher oil prices. His former oil minister, the veteran Shukri Ghanem, appears to have defected and reportedly arrived last week in Vienna, where he worked until 2001 and where two of his daughters live.

The Transitional National Council, opposed to Col Qaddafi, has asked for official status at the Opec meeting. Still, with its production closed down, Libya is a sideshow compared to the key issue of prices.

These, well over US$100 a barrel, are the second reminder of 1975. Once again, Opec pronouncements receive rapt attention and move markets.

The International Energy Agency (IEA), Opec's alter ego representing the interests of oil importers, issued an unusually robust statement calling for more oil supplies and raised the possibility of releasing strategic stocks. The IEA pointed to rising inflation and risks to the global economic recovery.

So there is clearly plenty for Opec to discuss. But why, very unusually for a head of state, is Mr Ahmadinejad himself attending the meeting? The explanation lies in the continuing power struggle within Iran.

On April 17, he dismissed Heydar Moslehi, the powerful intelligence minister. A few days later, the supreme leader, Ayatollah Ali Khamenei, overruled him. Last week, Mr Ahmadinejad announced that, in purported deference to a parliamentary order, he was combining the oil and electricity ministries, sacking the oil minister Masoud Mir-Kazemi and temporarily assuming control himself.

"The place of the oil industry in our national economy is so important that I decided to take on the responsibility … myself," said Mr Ahmadinejad.

Iranian petroleum professionals will hope his stewardship does not follow the path of his economic or foreign policy. Annual inflation has at least doubled to 20 per cent and unemployment is unofficially put at more than 17 per cent.

And the regime has stumbled in its response to the Arab uprisings, contradictorily opposing both Col Qaddafi and Nato in Libya; and praising the revolution in Egypt but opposing it in Syria, its ally. An adventurous, incoherent foreign policy is undermined by a feeble economy.

In a further sign of the power struggle within Iran, the Guardian Council, responsible for ensuring the government follows the constitution, ruled that Mr Ahmadinejad could not legally become caretaker oil minister. Even if he sees out the last two years of his presidential term, he is likely to have to defer to Mr Khamenei on significant policy matters.

Whoever represents Iran in Vienna, the country has minimal influence in Opec due to its own problems with oil output, despite the country's vast resources. With Iranian production in slow decline, Saudi Arabia, with limited support from Kuwait and Abu Dhabi, is the only state with substantial spare capacity. Mr Ahmadinejad may employ some militant language, but Iran is neither likely to cut production significantly itself nor persuade others to do so.

The other perennial firebrands have ruled themselves out of serious influence: Libya because of its war; Venezuela for similar reasons to Iran - underinvestment and mismanagement. Iraqi production is rising, but the country's return to the quota system is a thorny debate Opec hopes to postpone for years.

Under the shelter of rhetoric from those such as Mr Ahmadinejad and Hugo Chavez, the president of Venezuela, the Saudis have expressed their usual devotion to moderate prices, for some reason taken at face value by most media and commentators, while enjoying a windfall that helps to fund a state budget swelled by populist handouts.

It is ironic, given the cold war now emerging between Iran and its GCC neighbours, that Saudi oil policy is propping up Iran's shaky economy. The Saudis might think back to 1986, when their engineering of an oil crash led quite rapidly to the fall of another adversary, the Soviet Union. For this reason, and because of the shaky world economy, a commitment to lower prices backed up by real action would be sensible.

So the theatre in Vienna - the case of the missing oil minister and the lame-duck president - though fascinating, is secondary to the behind-the-scenes machinations that will make the real difference to oil markets, and potentially to Middle East politics.

Robin Mills is an energy economist based in Dubai, and author of The Myth of the Oil Crisis and Capturing Carbon