Yamani returned to the Saudi Ministry of Finance, joining the new Department of Zakat and Income Tax. In 1964
University of Petroleum and Minerals was established, with the aim of producing Saudis with the skills to manage this company in the future. Following OPEC negotiations in 1972, the Saudi government bought 25% ownership of
Aramco. As oil minister of Saudi Arabia, Yamani took an important role in the development of the newly created
OPEC. Faced with the 1967
Arab-Israeli War, Yamani spoke against the use of an Arab oil embargo. The
1967 embargo was ineffective, although the experience led to a consideration of the possible political benefits of an Arab-only oil organisation.
1973 oil crisis During the
Yom Kippur War, Yamani took the initiative and planned to drop oil production initially by 10 percent alongside other OPEC members, followed by 5 percent reductions each month. On 16 October, the six
Persian Gulf members of OPEC met in Kuwait and took the decision to raise oil prices from US$3 to $5.12. This was the first time the producer countries had independently set the price of their oil. On the next day, the ten OAPEC members agreed to Yamani's moderate production cutback proposals. The production cutbacks, increased to 25 percent in November, affected the economic health of all Western powers. To gain political support, Yamani travelled through Europe, the United States, and Japan with Algerian oil minister
Belaid Abdesselam. Both Yamani and OPEC became well known in the West, with Yamani described as "the man of the moment" in
Newsweek Internationals 24 December 1973 cover article. Attempts by the United States at bringing together a consumer's cartel failed, and the
EEC and Japan called on Israel to withdraw from Arab territories occupied in 1967. On 22 December, the Persian Gulf members of OPEC met again in
Tehran where the
Shah, backed by the other states, urged that the
price of oil be raised to over $20 a barrel. Yamani opposed this extreme increase, but could not contact Saudi Arabia from Tehran. Fearing a split in OPEC, Yamani decided on a compromise that put oil at $11.65, four times the price of a barrel prior to 16 October. Following progress with Arab-Israeli disengagement agreements, a decision was taken to end the embargo, which was formally lifted on 17 March 1974. Saudi Arabia continued to push for price reductions from the $11.65 level, opposed by other OPEC members. This increasingly came to be seen as a pro-American stance by the other producers, although defended by Yamani as a safer option for the world economy. Saudi Arabia has been criticised for using its dominant position to force its own interests and its long-term production strategy, as a lower price enables the country to keep a high market share and discourages development of alternative energy sources that would curtail the worldwide demand for oil. To this point, Yamani famously said in 1973: "The Stone Age didn't end because we ran out of stones." (However, the quote may have been wrongly attributed by this and other sources.)
Assassination of King Faisal On 25 March 1975, King Faisal was shot dead by his nephew
Faisal bin Musaid. The young prince had joined a Kuwaiti delegation, led by oil minister Abdul Mutaleb Kazimi, which Yamani had escorted to the King's office. Yamani was standing next to the King when the shots were fired and, after interrogation, it was discovered that Faisal bin Musaid also believed Yamani to have been shot dead in the attack. Yamani continued in his role as oil minister for another eleven years after the death of Faisal.
Continuation of Saudi oil policy At an OPEC meeting in September 1975 in Vienna, Saudi Arabia continued to oppose sharp increases in the price of oil. Yamani was required to gain approval from Crown Prince Fahd for any increase to be agreed in excess of 5%. Unable to contact Saudi Arabia from Vienna, Yamani left the meeting and flew to London on his private jet in order to find a secure telephone. This incident was widely publicized. At an OPEC meeting in May 1976 in
Bali, Iran and seven other members advocated a 20% increase in oil prices to match inflation, although Saudi Arabia favoured a six-month price freeze. The Iraqi oil minister fiercely criticised Yamani and Saudi Arabia for pro-Western policy, which led to Yamani leaving the meeting and demanding an apology. This was settled and the six-month price freeze was agreed. Six months later, OPEC assembled in
Doha and Saudi Arabia again faced pressure to raise prices. Saudi Arabia and the
UAE were the only two member countries not to agree to a 10% increase in January 1977 followed by an additional 5% increase in July. This led to a period of two-tier pricing with Saudi Arabia and the UAE charging $12.09 per barrel and the other OPEC countries $12.70 per barrel. In July 1977, an OPEC meeting in
Stockholm ended two-tier pricing, with prices re-unified at $12.70. In 1979, the
Iranian Revolution resulted in the
1979 energy crisis. Saudi Arabia and other OPEC members managed to increase production sufficiently to replace that lost from Iran, but this did not prevent panic buying of oil. OPEC also maintained an official price, although the spot market led to oil prices being negotiated upward. Yamani claimed that Saudi Arabia would not sell over the OPEC price, but would remain committed to the reduction of oil prices.
Removal from office The panic buying during the 1979 energy crisis led to increased oil stocks which began to flood the market and resulted in price wars between oil-producing nations competing for market share. This in turn led to reduced income for Saudi Arabia. The beginning of Fahd's rule was marred by the reduced oil income caused by the
1980s oil glut. The restricted national budget also encouraged the use of oil in barter deals. In 1984, Saudi Arabia purchased ten
Boeing 747s to join the fleet of
Saudia Airlines, paid for using of oil. At an OPEC meeting in October 1986, Fahd sent his oil minister a cable demanding Saudi Arabia's oil quota to be increased and the price of oil set at $18, which Yamani refused to sign. On 29 October 1986, a brief announcement was made on Saudi television that Yamani had been dismissed. He was replaced by
Hisham Nazer.
Other activities In July 1982, Yamani founded
Investcorp, a private equity firm, with several other oil ministers and well-known financiers. The firm's initial investments included
Tiffany & Co.,
Breguet, a
Swiss watch maker, and
Chaumet, a
French jeweller. Yamani, himself known to be a watch lover, also became majority shareholder of
Vacheron Constantin in 1987. In 1996, Yamani's shares were then sold to Vendôme Luxury Group, owned by
Richemont. In 1988, Yamani established the
Al-Furqan Islamic Heritage Foundation under the Yamani Cultural and Charitable Foundation, which endeavours to preserve and publish historically important
Islamic works. In 1990, Yamani founded the Centre for Global Energy Studies, a
London-based market analysis group claiming to provide objective information on energy issues. Board members have included
Edward Heath,
Valéry Giscard d'Estaing, and
Denis Healey, all of whom were friends of Yamani. ==Personal life==