The Battle for OPEC

The markets were shocked on Wednesday as the Organization of Petroleum Exporting Countries unexpectedly announced it would not increase oil production. Oil prices spiked 2 percent on the news. Brokers scrambled to match sellers with buyers who had been sitting on the sidelines in hopes of an announcement of increased supplies.

With Libya in turmoil, most traders had expected opec to boost supply to make up the difference. But apparently, many opec nations are not too happy with the West’s invasion of Libya—and may be taking the opportunity to show their displeasure.

According to Dow Jones Newswires, Iran, Iraq, Venezuela, Algeria, Angola and Libya all voted against increasing supplies. Opposing the Iran-led bloc were Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Nigeria and Ecuador.

Reports suggest the opec meeting was potentially the most divisive in recent history. The Saudi oil minister called it “one of the worst meetings we have ever had.”

But the meeting was about more than one group of oil-rich countries wanting to stick it to the West slightly more than another group. The split opec vote is characteristic of the whole Middle East region.

Increasingly, the Middle East is divided into two opposing camps: one led by Iran and another led by Saudi Arabia.

Iran, which currently holds the opec presidency, is using its power to push for higher oil prices and show Muslims across the region that it is not afraid to stand up to European powers—even if they are bombing Libya. Characterizing the more “moderate” Arab states as stooges of the West is part of Iran’s effort to feed popular anger in those Arab countries that oppose its leadership.

The Saudi-led camp is an alliance of convenience, made up of countries united not only in their hatred for Israel but in their mutual fear of Iran. Because of Iran’s rising power, the Saudi-led camp is turning to Europe for protection. Thus these countries have a motivation to keep oil prices within a reasonable price range. Also, many of these countries have supported Europe’s campaign to remove Libyan leader Muammar Qadhafi.

Tensions are escalating in the Middle East. You can see it in Libya. You can see it in Bahrain. And you can feel it in your pocketbook. But where is it all ultimately leading? To find out, read The King of the South and “Why Iran Can Afford to Be So Bold.”