'So, you want to talk about oil.' As understatements go, this one was worthy of a laconic Clint Eastwood. For the man sitting on the other side of a fruit-strewn table, dressed in a well cut three-piece suit, is none other than His Excellency Sheikh Ahmed Zaki Yamani, a man whose name is synonymous with black gold.

It is late on Friday evening and Yamani is tired. He has flown in from his home in Saudi Arabia's seaside city, Jeddah, to address the Royal Institute of International Affairs on the future of the oil market.

As ever he had barely spoken what was on his mind before his words were flashing around the world's newswires. The man who dominated the oil market as oil minister of Saudi Arabia in the Seventies is no longer a decision-maker at Opec, but he still has it in his power to captivate market traders, executives, politicians - even presidents - with his views.

His presence in London comes at a fragile time for the world economy, as concerns mount that further jumps in the oil price could tip slowdown in to global recession.

So, yes, we did want to talk about oil.

As it happens Yamani does not believe that his commodity was directly responsible for the US economy putting on the brakes: 'The slowdown in the US cannot really be attributed to the high price of oil. The reason we have a problem now within the US economy is corporate earnings, which are shrinking.'

However, he believes higher energy costs are a significant factor in slowing US corporate earnings: 'The corporates are paying more for their energy bills. It is not a direct reflection on industry - but it is on corporate earnings.'

Against this backdrop he questions the wisdom of Organisation of Petroleum Exporting Countries taking steps to shore up the price of oil by making cuts in production of up to 2 million barrels per day when it meets on Wednesday in Vienna.

He believes increasing the price could worsen the economic situation in the US - with knock-on effects in the Far East and Europe - to the long-term detriment of producers, as industrialised nations seek other sources of oil, and of power.

In this, he has remained consistent for 30 years: in the Seventies he was not persuaded of the benefits to Opec of hiking crude prices by the 400 per cent that came about in 1973. The importance of North Sea oil and the fall in Opec's contribution to global production, from 70 per cent to less than 30 per cent, are testimony to his wisdom.

Nevertheless, Yamani is only too aware that Opec has the power to influence events in the current climate. He thinks there is a 50 per cent chance that Opec will follow Saudi Arabia's lead and agree to cuts of 1.5 million barrels per day (bpd).

However he has made it clear that a cut now would be unwise, because Iraq has reduced its own production from around 1.2million bpd to around 600,000.

Yamani is especially concerned about the hawkish role played by Venezuela since the arrival of Hugo Chavez as its President. Chavez and his Oil Minister - new Opec Secretary-General Ali Rodriguez - have galvanized the cartel over the past two years in a successful attempt to treble an oil price that had slumped to less than $10. He believes this policy derives from Venezuela's moves to cut investment in new production.

'In Venezuela it is a new government with a new philosophy. When they came they stopped investment in upstream and the capacity of Venezuela came down. Instead of having 800,000 barrels a day surplus, it disappeared. Now it cannot produce any more [than it is currently].'

Yamani believes that if hawkish tactics are employed, they will have seriously detrimental implications both for Venezuela and for Opec as a whole.

'There are countries which want to extract every last barrel. They are part of a group who would like to have a higher oil price - Venezuela, Libya, Algeria and Iran.'

As a result of pressures between these countries and 'core' states with huge reserves such as his own Saudi Arabia, he believes Opec itself may begin to unravel.He says candidly: 'Opec will be less in number.'

By when?

'Probably by the end of the decade. Iraq, Kuwait, Saudi Arabia, Iran, the United Arab Emirates and Venezuela will be there in future.'

The sheikh says he does not miss the day-to-day cut and thrust that characterised the Seventies oil crisis. However, it is with a smile that he adds: 'When you deal with oil you have to take so many other things into consideration.'

The suggestion is that politics, rather than economics, is the key. And the fascination of oil diplomacy clearly animates him more than the numbers, which he can rattle effortlessly off the top of his elegant head.

The key political question in his mind now is the same as it was in 1973 - relations between Israel and its Arab neighbours.

'It is very worrying,' he says. 'Barak is cornered. He brought back his Foreign Minister from Paris, met him in the airport and said "Go and talk to the Palestinians." The man is desperate.'

He singles out the period between 20 January, when President Clinton leaves office, and 6 February, the date of Israeli elections, as especially sensitive times, given recent Middle Eastern history.

The implications for oil prices are unquantifiable. But Yamani ventures: 'Perhaps people will panic and think they have to buy oil.'

However, he is at pains to point out that the global polit ical backdrop is now very different.

His voice quickens further when he reminisces about the era of great oil diplomacy in the Seventies and his contemporary, former US Secretary of State Henry Kissinger.

At this point he makes an extraordinary claim: 'I am 100 per cent sure that the Americans were behind the increase in the price of oil. The oil companies were in in real trouble at that time, they had borrowed a lot of money and they needed a high oil price to save them.'

He says he was convinced of this by the attitude of the Shah of Iran, who in one crucial day in 1974 moved from the Saudi view, that a hike would be dangerous to Opec because it would alienate the US, to advocating higher prices.

'King Faisal sent me to the Shah of Iran, who said: "Why are you against the increase in the price of oil? That is what they want? Ask Henry Kissinger - he is the one who wants a higher price".'

Yamani contends that proof of his long-held belief has recently emerged in the minutes of a secret meeting on a Swedish island, where UK and US officials determined to orchestrate a 400 per cent increase in the oil price.

These extraordinary insights come as US/Opec relations once again return to the spotlight: President-elect George W Bush last week warned Opec of the implications of a price hike.

When asked whether oil had proved to be a blessing or a curse for oil-producing countries, the Sheikh smiled enigmatically: 'I am worried about the future. If you get money so easily, you relax and you lose your muscles.'

He believes that the oil age will end not for lack of oil, but because of technology. His concern for the long-term economic prospects of his people is clear.

For him, that cut on Wednesday may be the first step in the wrong direction.

Fast facts

'Yamani or your life,' cried one headline during the oil crises of the Seventies. That reflected Sheikh Ahmed Zaki Yamani's role as the public face of the Opec oil-producer's cartel.

Yamani was Saudi Oil Minister from 1962 to 1986. During that time he escaped the assassin who killed King Faisal, and survived kidnapping by Carlos 'The Jackal'.

He now chairs the respected Centre for Global Energy Studies, famous for its exhaustive knowledge of world trends. He also runs the Al-Furqan Islamic Heritage Centre in south London.

Last year Yamani said that the oil prices were destined to crash in the long term and, the world would never use up the last drop of oil, because it would not need to: 'The Stone Age did not come to an end because we had a lack of stones, and the oil age will not come to an end because we have a lack of oil.'