TEHRAN - A professor of international business and international affairs from the George Washington University is of the opinion that some OPEC members will not abide by their pledge to reduce their crude production.

“I don't think that they will agree to a quota level,” Hossein Askari tells the Tehran Times.

On Wednesday, for the first time in eight years some OPEC’s biggest oil producers agreed to cut production. Meeting in Algiers, OPEC agreed to reducing output to between 32.5m barrels a day and 33m b/d. 

However Askari says, “The only way that they could agree to any freeze would be for Saudi Arabia to cut output dramatically.” 

Following is the text of the interview:

Q: How do you assess the OPEC session in Algeria?

A: It was a symbolic meeting more than anything. They needed to agree to quotas that reduced output by about 1.5 million barrels a day. And the agreement had to be backed up by action--that is sticking to the agreement and not cheating. They could not. So they kicked the bucket and said they would come up with an agreement in December. No member had anything to lose by doing this.  

Q: What happened that Saudi Arabia agreed to freeze the level of its oil production?

A: Any meaningful future agreement would have to include a CUT (not just a freeze) in Saudi production. But for now, Saudi Arabia's ability to increase output over the next few months is smaller than Iran and Iraq's potential increase in output.  Recognizing these simple facts that any agreement would have to include a cut in their output and the larger potential for an output increase in Iran and Iraq, the Saudis simply took the diplomatic path of a freeze to demonstrate that they are making concessions. But in reality it is not much of a concession (as they are near their capacity) AND remember they can always cheat--say one thing (agree to a freeze) and do something else (increase output a little).

Q: Do you think that OPEC will act harmoniously after the Algiers meeting?

A: No. Iran and Iraq will not agree to any kind of a freeze as their output had been limited by factors outside of their direct control--for Iraq sanctions, wars and civil conflict, and for Iran sanctions. The only way that they could agree to any freeze would be for Saudi Arabia to cut output dramatically. But this is something that Saudi Arabia would not agree to because it will help Iran and Iraq, the Saudi role in OPEC would be diminished and Saudi Arabia would have a tough time regaining market share. 

But there is always the likelihood that they announce an agreement and then cheat a few months later. They have nothing to lose if they do this. There would be a temporary increase in oil prices and then they would revert back to where they were. 

Q: OPEC members announced that they will discuss oil production quotas in a future session. Do you think they will agree on quota levels?

A: Again, I don't think that they will agree to a quota level AND stick to it for a while. But they could say they have an agreement and then cheat and exceed agreed quotas.