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,"
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
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
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
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,
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
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
Sudan has been exporting some 20,000 barrels per day of crude oil since