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To: gregor who wrote (33465)	12/24/1998 12:47:00 AM
From: Mike from La.	Read Replies (2) \| Respond to of 95453

Now there is a new twist to the OPEC quota thing. Iran has a beef with Saudi Arabia. And they are probably right. Saudi Arabia picked up Iraq's production share as a result of the Gulf war. They were really the only ones with sufficient reserve capacity to quickly fill the gap. But then the Saudi's made the Iraq production part of their own. They never returned the share. I think Iran has decided that since everyone was putting their OPEC houses in order, Saudi had some paying up to do as well. So now it is a standoff between Iran and Saudi. Right after the Saudi and Venezuela fight is settled and it looks like there's a green light for oil prices. I don't think Iran is bluffing, just like Saudi wasn't bluffing with Venezuela. Iran may have the upper hand. It comes down to who can hang on the longest with oil prices this low. I think Iran can. Mainly because of its strict Islamic law, the standard of living in Iran is not very high. And the people, in spite of a little scuffle with some liberals, are firmly under the control of the rulers. Saudi, on the other hand, basically keeps its people under control by bribing them. They are used to a plush existence, with a minimum of anything that might resemble work. There are hundreds of princes, most with their own competing power bases, which they keep happy with a steady stream of oil money. The Saudis have definitely become aware of a lowering of their comforts. That, plus a growing religious discontent coming from fundamentalists who oppose both the US presence and the royal family's self exemptions from strict Islamic law, creates a much more volatile situation then in Iran. Not that Iran is happy with low oil prices, it's putting a hurting on them too, but they can hang on longer than Saudi. Throw in the possibility of King Fahd's death. The present prince designated to take over on Fahd's death may face big problems if the death occurs during a time of great duress caused by low oil prices. It's the economy, stupid, and if the Government can't be voted out, there are other ways. I'd guess that Iran wants Saudi to cut back its production to offset Iraqi production coming on line. It may get real nasty, and we may have not yet seen the bottom if Saudi decides it can't allow itself to be pushed around. But they have to consider if they can handle the alternative. The other poor OPEC members are like pygmies watching elephants fight. There's not much they can do but hope they don't get stepped on. And Russia is getting creamed, to the point of brutality, and their own screw-ups make it even worse. Maybe Russia will give joining OPEC some thought, if they make it through this one, they don't want it happening again. If OPEC can work through all this, it will be very good for our investments, because they really will become a disciplined, effective organization, at least for a while, and maybe for a long while. But, they are using live ammo, and things can get out of hand. Mike from La.