The House passed H.R. 3822 on March 22, legislation that in an earlier version may have led to the imposition by the United States of foreign aid and arms sales sanctions against oil producing nations that engage in oil price fixing activities. As approved, the bill does not include explicit aid and arms sales sanctions. S. 2182, however, which has received no action in the Senate, includes mandatory sanctions. This report provides recent data regarding U.S. foreign aid and arms transfers to selected oil producing countries. Trade figures are also included. This report will be updated as legislative action occurs.

There is widespread concern in Congress over the rising cost of oil in the United States. Some Members have pressed the President to pursue a more aggressive policy to try to reverse the decision by OPEC ⁽¹⁾ and other major oil producing nations to limit production in order to drive up the price of oil. OPEC nations produce 40% of the world's oil supply and control 77% of current oil reserves. OPEC has attempted in the past to maintain a target price for crude oil of $21 per barrel. World petroleum prices prior to 1999 experienced a downward trend, falling to less than $10 per barrel. Low prices had dramatic consequences for the revenues of petroleum-producing nations, prompting OPEC members at their March 1999 meeting to curtail production in order to restore the $21 per barrel target. Other major oil producing nations such as Mexico, Norway, Oman, and Russia joined OPEC in limiting production. At an OPEC meeting in late March, some oil producers agreed to increase petroleum production levels.

Congress passed legislation on March 22 encouraging the President to take stronger action to convince OPEC and other producing nations to increase oil output and decrease prices. As introduced, H.R. 3822 would have required the President to reduce, suspend, or terminate U.S. foreign assistance and arms sales to any major net oil exporting country that he had determined to be engaged in oil price fixing (as defined in the Act). During a House International Relations Committee markup on March 15, the bill was amended to authorize the President to impose such sanctions. H.R. 3822, as approved by the House, however, was further amended and does not include explicit sanctions as stated in earlier versions of the bill. Senator Grassley introduced S. 2182 on March 6 that would require aid and arms transfers sanctions similar to the text of H.R. 3822, as introduced.

Several OPEC and other oil producing nations receive assistance or purchase military equipment from the United States, and would be the most affected by sanctions proposed in the legislation. As shown in Table 1, Indonesia, Nigeria, Russia, and Mexico are the current largest foreign aid recipients among this group. Most other OPEC members receive no U.S. foreign assistance. Saudi Arabia, Kuwait, the United Arab Emirates, Norway, and Oman buy significant amounts of arms from the United States, as illustrated in Table 2, while most other oil producing nations are not regular purchasers of American defense items.

Table 3 provides additional data regarding trade flows between the United States and oil producing nations. Pending legislation would not impose trade-related sanctions.

Table 1. U.S. Assistance to OPEC Members, FY1996 - FY2001
($s - millions)

Sources: USAID, USDA, and Department of State.

Food aid includes PL 480, titles I and II (bilateral and World Food Programme), and Section 416(b) donations. Food aid figures for FY2000 and FY2001 are very tentative and subject to change.

Table 2. U.S. Foreign Military Sales and Foreign Military Construction Sales Agreements with Major Oil Producers, FY1996 - FY2000
($s - millions)

Sources: Departments of Defense and State.

Table 3. U.S. Merchandise Trade with Major Oil Producing Nations, 1996-1999
($s - millions)

* = less than $50,000.

Sources: U.S. Census Bureau Foreign Trade Statistics and U. S. International Trade Center.

Footnotes

1. ^(back) The Organization of Petroleum Producing Countries (OPEC) is a voluntary association that coordinates and integrates the petroleum policies of its members. The current goal of OPEC appears to be to ensure the stabilization of oil prices in international markets by controlling the output of petroleum. OPEC was formed on September 14, 1960 at a meeting in Baghdad, Iraq. The five nations in attendance became the founding members: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. There are currently eleven OPEC member countries: Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.