Arab Victory

In his elegant Manhattan hotel suite, the bearded, Harvard-educated Arab signed his initials to an international treaty that has vast political and economic implications. "The agreement is very satisfactory to me," he said. Well it should be. Sheik Ahmed Zaki Yamani, Saudi Arabia's 42-year-old oil minister, had just realized the decades-old Arab dream of gaining control over the vast pools of oil beneath the Middle East's deserts. Last week's agreement allows the five Persian Gulf states of Saudi Arabia, Kuwait, Qatar, Iraq and Abu Dhabi to buy an immediate 20% interest in foreign oil-producing operations in their lands. Most important, the pact calls for the five states to get a 51 % share of ownership in time, perhaps by the early 1980s.

The sellers will be nine of the world's largest oil companies, including British Petroleum, Jersey Standard, Gulf, Texaco, Royal Dutch/Shell and Mobil. The various Arab governments will pay each firm the book value of its real estate and equipment (which was often understated for tax purposes), and add something extra to compensate for the loss of future profits because of the transfer of ownership. The price will run to billions of dollars. But the oil-producing countries will be able to squeeze it all out of the oil companies, for the firms agreed to buy back each country's share of the oil output at a higher than normal price. Thus the consumer will ultimately foot the bill for the takeover.

For their part, the producing nations also apparently agreed to expand production at a rate designed to prevent any world oil shortage. But with Middle Eastern producers now clearly holding the upper hand, the availability as well as the price of oil is more than ever under their control..

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