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Jun 12 - 18, 2000

Saudis cautious on untested OPEC price band

Oil giant Saudi Arabia seems reluctant to stake its fortunes on an untested OPEC price stability pact when its existing formula for market management — close consultation among top producers — is working well, analysts said.

The kingdom, the world's largest oil producer and exporter, refuses to allow production policy to be dictated by a computer spreadsheet or the vagaries of a market that can be manipulated by speculation rather than fundamentals, the analysts said.

"The message the Saudis are giving is they do not want to be on automatic pilot, that OPEC is not a central bank adjusting production like interest rates," said Roger Diwan of Petroleum Finance Company.

Other OPEC observers argue the mechanism — which would automatically raise or cut output if the 20-day moving average price for a basket of OPEC crudes leaves a $22-$28 range — was born of a Saudi attempt to pacify Iran at the last OPEC meeting.

The truth, badly-needed just before an OPEC meeting on June 21, lies buried between a barrage of contradictory statements on OPEC output policy by the powerful Saudi oil minister which baffled the market on Monday.

Signs are that some major producers including Saudi Arabia are contemplating an output increase — but as the result of a decision by ministers rather than of an automatic trigger.

"It would appear as if Saudi Arabia has had a complete change of heart in the past week over the cause of the high oil price, perhaps because of political pressure or statistical evidence," brokers GNI said in a daily report.

"What it has clearly done though is removed any faith the market had in the price trigger mechanism — if it is not automatic under all conditions then it will not have the stabilising impact that was intended," GNI said.

Saudi Oil Minister Ali al-Naimi first said that OPEC did not need to raise output or allow the price stability device to act automatically because the current high price was artificial.

Government puts Lebanon economy on the edge

A major study released on Tuesday accused the Lebanese government of sweeping policy failures that have left the economy on the brink of disaster.

"Lebanon is facing a serious challenge in respect of continuing as a free-enterprise and prosperous economy," it said in a review of 1999, the first year of economic contraction since the civil war ended a decade ago.

"Recession, which has been evident for two years, requires new attitudes and policies," wrote economist Marwan Iskandar, editor of the report. "Lack of administrative reforms, neglect of investment incentives, alarming emigration, and Israeli raids have brought us to the verge of a serious crisis." The 20th annual edition of The Lebanese Economy was scathing about progress on the plan Prime Minister Selim Al-Hoss unveiled more than a year ago to halt the growth in public debt.

Instead of stabilising debt and beginning to trim it this year, it has ballooned to about 140 per cent of gross domestic product. The government has been spending about twice what it takes in and debt service alone consumed 98 per cent of revenue through the first four months of 2000.

"The incumbent Lebanese government, which took office at the end of 1998, has concentrated its policy efforts on narrowing the budget deficit at any cost," said the report.

"By the end of 1999 this objective had not been achieved while the approach adopted contributed to a severe economic recession.

"It is our earnest hope that policies will be devised to pull back the country from the brink of disaster. The time has not run out but is very close," Iskander wrote.

The report noted the government spent 816 billion Lebanese pounds ($540 million) less than budgeted in 1999 — with 700 billion of that the amount slashed from the 900 billion meant for development projects.

Qatar, UAE donate $600,000 for Aceh

Qatar and the United Arab Emirates on Wednesday donated a total of 600,000 dollars worth of humanitarian aid and 150 tonnes of dates for the people of the troubled Indonesian province of Aceh.

In a statement issued at the signing ceremony at the foreign ministry in Jakarta, UAE ambassador Mohammed Sultan Alsowaidi said the 100,000 dollars of UAE aid was in support of a truce between Jakarta and separatist rebels in Aceh which came into effect June 2.

Qatar Ambassador Yousef Hassan Al-Sai echoed the statement saying the 500,000 dollars Qatar was donating was in "support and sympathy for the people of Aceh."

Iran's non-oil exports take a plunge

Iran's non-oil exports, including rugs, pistachios, chemicals, copper and steel, were down 33 per cent over the past two months compared with the same period last year, the state-run IRNA news agency said.

The downward trend in April and May has triggered concern among financial officials in Iran, IRNA said.

In April and May, Iran sold 54 million dollars worth of rugs, 35 million dollars of pistachios, 26 million dollars worth of chemicals, 22 million dollars of steel and 13 million dollars worth of copper, the agency said.

Budget forcasts had been much rosier, IRNA said. Authorities expected to earn 121 million dollars from rug exports, 30 million dollars from pistachios, 110 million dollars for chemicals, 55 million dollars from steel and 12.5 million dollars from copper.

In March the United States lifted a 20-year-old ban on the import of rugs and pistachios from Iran, where carpet sales have had tough competition from India and Pakistan and other other regional producers.

But rug exports that amounted for 1.6 billion dollars in 1994 now barely earn 700 million dollars a year.

Kuwaitis face new realities

Kuwait on Monday told its citizens to prepare for the OPEC country's first income taxes and higher utility charges in order to reduce reliance on oil revenues in the country's finances.

"Kuwait's financial standing is comforting but economic reforms are essential and some are going to be unpopular," said Finance Minister Sheikh Ahmad Al-Abdullah Al-Sabah.

The former banker was speaking to reporters after a closeddoor parliament session which discussed Kuwait's financial standing, including the status of the country's foreign investments which are valued at over $80 billion.

In the 1999/2000 fiscal year to end-June, the oil exporter is expected to show a budget surplus of around one billion dinars ($3.3 billion) as Kuwaiti crudes have so far averaged over $22 a barrel, compared with a budgeted $10 a barrel.

Iraq hails new canal as victory over embargo

Iraq on Tuesday inaugurated a new canal between the Tigris and a drought-hit region, hailing its work as a victory over the decade-old UN embargo.

President Saddam Hussein's second in command, Ezzat Ibrahim, opened the irrigation canal to Diyala province in an official ceremony held at Khaless, 70 kilometres (40 miles) northeast of Baghdad.

"Completion of this project in a record time of not more than 45 days is a great victory for the Iraqis under embargo," Irrigation Minister Mahmoud Diab Ahmad said in a speech.

The 16-kilometre (10-mile) canal has been dubbed "the leader's gift", in honour of Saddam who ordered it to be dug in March.

Algerian parliament okays $1.8 bln deficit budget

The Algerian parliament on Sunday passed a revised budget for 2000 with a sharply lower deficit of 132.62 billion dinars ($1.79 billion), the official Algerian news agency APS reported.

The budget is based on an average oil price of $19 per barrel, $4 higher than in the initial budget approved last November.

The government drafted the new budget in response to the increase in world oil prices since March 1999.

"The new endorsed budget envisages a deficit of 132.62 billion dinars compared to a deficit of 229.73 billion in the initial budget," APS said.

The government expects to collect 720 billion dinars in taxes from the oil and gas industry this year according to the new budget, compared to 524 billion dinars projected in the initial budget. APS gave no further figures, and did not stipulate projected overall expenditure and revenue.

Oman central bank

The Central Bank of Oman has introduced a new regulation aimed at limiting the amount of credit senior bankers can extend to companies they control, a central bank official said.

"A bank can now only extend credit of (up to a maximum of) 10 per cent of its net worth to companies where senior officials (at the bank) own 25 per cent or more of the shareholding," the official told Reuters.

Analysts said the move was aimed at preventing top bankers from extending unjustifiable loans to finance their businesses.

ABC to sign for loan

Bahrain-based Arab Banking Corp (ABC), one of the Arab world's biggest banks, is due to sign a $400 million loan with regional and international creditors in London this week, a bank official said.

"The loan will be signed on Friday in London, and it has been increased to $400 million from $300 million," the official, who declined to be named, told Reuters.

ABC had earlier sought a $300 million syndicated loan, but raised the amount to $400 million after the facility was oversubscribed, the official said.

US, Jordan announce talks

The United States and Jordan will open talks on a new free-trade pact between the two countries, the White House announced.

"We have agreed to enter into bilateral free-trade negotiations," said White House spokesman P.J. Crowley, following a meeting between President Bill Clinton and King Abdullah II of Jordan.

The king, who was primarily here to discuss the Middle East peace process, agreeed to include negotiations on labor and environmental issues, Crowley said.

Exports via Gulf oil terminal

Iraq will soon start oil exports via a newly repaired oil terminal at the mouth of the Gulf in southern Iraq, a senior oil official said.

"We are about to finish the rehabilitation of Khor Al-Amaya ...and exports from the terminal under the oil-for-food deal will start soon at a capacity of 700,000 barrels per day," Rafid Al-Dibuni, head of the Southern Oil Company, told the weekly Al-Ilam (Information) newspaper.

Loan to Egypt

The Kuwaiti Fund for Economic Development will give Egypt loans totalling 500 million dollars over five years, a Kuwaiti diplomat in Cairo said.

"These credits are aimed at financing development projects for irrigation, electricity and education," the source said, without giving more detail.

FIB plans $8 mln Yemen branch

Bahrain-based Faysal Islamic Bank (FIB) plans to open a branch with $8 million capital in Yemen later this year, bankers said.

They said FIB would hold a 20 per cent stake in the new bank while the rest had been offered to Yemeni investors on private placement.

Iraq, Malaysia to strengthen economic cooperation

Iraq and Malaysia decided Sunday to strengthen their economic cooperation at the end of the fifth meeting of their joint economic commission.

"What we have done is very important for the cooperation between our two countries," Iraqi Industry Minister Adnan Abdel Majid said during a joint news conference with Malaysian Foreign Minister Hamid Albar.

"What has been achieved is not limited to economic cooperation, but also covers several other areas. We have decided to relaunch cooperation in the areas of industry, oil, trade, finance, as well as transport and communications," he added.

Privatising industrial estates

Oman is conducting a study into privatising its five state-run industrial estates to boost industrial efficiency and attract foreign investment, a senior official said.

The official said the Gulf state had already allocated 200 million rials ($519.5 million) to the development of industry.

Oman to raise May crude price by $3.71

Oman has decided to raise the May retroactive price of its crude by $3.71 to $26.66 per barrel, an oil and gas ministry official said on Sunday.

Rashed bin Khalid Al-Birwani, advisor for marketing affairs at the ministry, told the official Oman news agency the decision was taken due to the rise in world oil prices.

He said the price for April was $22.95 per barrel.

Sudan starts exporting refined oil

Sudan has joined the club of nations exporting refined oil products, seeing off Monday a Turkish tanker loaded with 20,000 tonnes of benzine for Malta, a newspaper reported Tuesday.

The official Al Anbaa daily said the ship was seen off from Port Sudan on the Red Sea in a ceremony attended by ministers and senior government officials who hailed the fact that Sudan has now switched from being an importer to an exporter of petroleum products.

Sudan has been exporting some 20,000 barrels per day of crude oil since last October.