Three models of OPEC leadership and policy in the aftermath of Iran

Abstract

Collapse of the Shah's regime has transformed Iran's attitude regarding oil production policy. The nature of OPEC leadership is changing as well. Three models examine the nature of this leadership inside OPEC: (1) the conventional price leadership model, (2) a model emphasizing a concept of egalitarian leadership, and (3) a team model composed of coalitions. The three models establish the limits within which OPEC leadership is exercised. A composite model drawing upon all three sets of results suggests that Saudi Arabia shapes cartel policy not by itself, but through a dominant coalition of states. For most of the period 1969–1978 this coalition has been stable. Following the unsettling changes of 1973, cooptation of Iran into the dominant coalition in 1974 was an important step in achieving a new level of stability. But during the turbulence of regime transformation in Iran, the nature of the governing coalition appears to have changed. One consequence may be that in the future Saudi Arabia will yield more willingly to arguments heard within OPEC on behalf of upwards price pressure, especially in an atmosphere of growing political isolation and overall tight supply.