From gasoline to plastic: The oil companies’ business strategy that blocks environmental treaties

It was a dark night in the South Korean city of Busan. After a week of negotiations, on Sunday, December 1, what had been intuited for days was already clear: the meeting was going to close without the expected international treaty against plastic pollution. In the plenary session of the meeting, which is held under the auspices of the U.N. environmental agency (UNEP), it was agreed to postpone the negotiations until 2025. But it was also necessary to accept that for this last round next year, the starting point would be the draft that the presidency had released that same morning. The text, already articulated and with some issues that seemed resolved, was a step forward in these complicated negotiations, which began in March 2022. But Abdulrahman Al Gwaiz, who leads the Saudi Arabian negotiating team, took the floor to cut short any attempt at optimism. He asked that the entire text be put in brackets. That is, that nothing that appeared in this 22-page document be considered as agreed. Everything will have to be negotiated from scratch at the next meeting, he warned.

Behind these discussions is the question of whether or not to limit the production of plastic, a derivative of petroleum, to avoid pollution. This could have a direct impact on the business plans of many fossil fuel companies, which see the development of the petrochemical industry as a way to offset the drop in gasoline and diesel consumption that will be caused by the advance of electric transport in the world.

The Busan meeting was marked by criticism of some countries that are major producers and exporters of fossil fuels — such as Russia, Iran, and Kuwait — for blocking progress on this important treaty. The main target of these accusations was, precisely, Saudi Arabia. “Every time it spoke in Busan, Saudi Arabia reminded us that it was speaking on behalf of the 22 members of the Arab League,” says Rémi Parmentier, director of the environmental organization Varda Group, who has attended as an observer three of the five meetings held so far to try to close the treaty. He also points out that since the third session of the intergovernmental committee in charge of these talks in March 2023, “an increasingly well-organized opposition group has formed, under the tutelage of Saudi Arabia, Iran, and Russia.”

Another sentence that Al Gwaiz delivered at the forum helps to understand the core of the discussions: “There is no problem with the production of plastics, because the problem is pollution, not plastics themselves.” This idea, which was also repeated by other negotiators, such as the Kuwaiti delegate, directly clashes with what 100 countries (among which are the members of the EU and a large number of Latin American and Global North nations) are advocating. These countries demand that the future treaty contemplate measures to reduce plastic production as the main way to combat pollution. According to the OECD, if measures are not put in place now, global polymer production will have tripled by the middle of this century, and just over 10% will be recycled material, which will cause the pollution problem to continue to increase. That is why many experts and these 100 countries advocate putting limits on the production of virgin plastic.

On the other hand, that is a red line for Saudi Arabia and other countries heavily dependent on fuels. Plastics are seen in the fossil sector as an alternative to offset the decline in gasoline and diesel consumption, which the International Energy Agency predicts will occur this decade. “Now that demand for transport fuels is set to decline, oil producers are clinging to petrochemicals in the hope of creating an alternative market for reserves they have exploited, or still plan to exploit,” says Saidrasul Ashrafkhanov, a member of the British Carbon Tracker think tank.

Carbon Tracker has just published a report warning of the risks of this strategy, including for investors. “The oil majors are making risky bets that growth in petrochemical demand will offset the imminent decline in oil demand,” the report stresses. However, to do so, “petrochemical demand would have to grow steadily at a rate of 3.9% per year until 2035 to offset the decline in fuels,” it concludes, a rate that is difficult to maintain. The problem is that “oil and gas producers need this market to continue producing oil and gas,” Ashrafkhanov sums up. “We were glued to the TV as children and we have not turned out so badly.”

When it comes to producers, it is not just companies that are talking about countries. “Oil and gas account for almost half of Saudi Arabia’s revenue,” says Ashrafkhanov. “Hence the reports from Busan that Saudi delegates are opposed to limits on plastic production.” Saudi state-owned Aramco is the world’s largest oil company and is making the advancement of the petrochemical industry one of its future strategies. Bloomberg reported in October that the giant was halting two refinery projects in the Gulf while increasing its stake in several Chinese petrochemical companies. Aramco is also eyeing similar projects in India and South Korea. “It may not say it explicitly, but all indications are that Saudi Aramco is betting heavily on plastics,” says Ashrafkhanov. “The capacity of its chemical plants has almost tripled since 2019.”

“We have seen countries trying to delay the negotiations, this is unacceptable,” a representative of the Dominican Republic said a few days before the fruitless conclusion of the Busan conference. Similar reproaches from other negotiators were repeated during the days of meetings, although the delegates did not publicly single out any specific country. The Ecuadorian diplomat Luis Vayas, who is leading the negotiations of the treaty from the presidency of the U.N. intergovernmental committee, also refuses to single out anyone. “Each country has its positions, but they all negotiate in good faith,” he answers diplomatically when EL PAÍS asks him about the blocking tactics of some delegates.

Vayas acknowledges that in Busan there were “very distant positions” on some issues such as the limitations on plastic production, the limits on some chemical substances, and the financing that developing countries should receive. But at the same time, he highlights that progress has been made on other issues, such as the structure of the future treaty. While waiting for the decision on where and when the next meeting will be held — Panama has offered to host the event, which is expected to take place at the end of the first half of 2025 — Vayas is confident that “an agreement can be reached.” “We will have to make progress in the informal period,” that is, before the final meeting is held, he noted.

Parmentier is not very optimistic after seeing how even the countries that describe themselves as the most ambitious in these negotiations are making accusations “instead of trying to dialogue and negotiate in good faith.” “Unless the format of this negotiation changes to force a real dialogue, this process will go nowhere,” he predicts. And he warns: “Although the petrochemical industry in the Gulf countries plays a leading role, it is worth remembering that within the group of high ambition there are also some oil producing and exporting countries, such as Mexico and Canada.”

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