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Mar 12 - 25, 2001

OPEC set to cut output

OPEC ministers began gathering in Vienna on Thursday, set for fierce debate on by just how much they should reduce crude production.

A cut in output is almost inevitable, with the 11-nation cartel virtually unanimous in its wish to boost the price of crude.

The size of the reduction is likely to cause intense discussion however, with members pushing for between 500,000 barrels per day and 1.5 million barrels per day to be lopped off output.

On Thursday the benchmark Brent crude contract for May delivery traded up 28 cents at $25.12 on London's International Petroleum Exchange. OPEC's goal is to keep the price of a basket of crudes between $22 and $28 per barrel.

The cartel fears that production increases it pushed through last year will lead to a glut of oil as world economic growth slows in 2001, reducing demand for crude.

OPEC President and Algerian Energy and Mining Minister Chakib Khelil told Reuters on Thursday that a 1.5 million barrel cut would be the top of the range, though other delegates told the news agency the cartel would probably settle on a figure between 700,000 and 1 million.

There have been a number of significant downward forecasts of expected oil demand this week the International Energy Agency tweaked its forecast, having performed a similar downward revision earlier this year. Gloomier expectations for the United States, the world's largest economy, have been behind the revision.

OPEC chopped 1.5 million bpd in January, reflecting the unprecedented volatility in crude prices over the past two years. The cartel, which produces some 40 per cent of the world's oil, spent much of 2000 jacking up production to take the steam off prices which rose to 10-year highs above $35. Some two years ago the price slumped as low as $10 per barrel.

Under its production agreement, OPEC produces some 25.2 million barrels of oil per day, though Iraqi exports are not included because they are sold under the United Nations sanctions regime.

Russia, Iran sign Nuclear co-operation pact

Russia defied the United States on Monday and signed a series of agreements cementing military and nuclear co-operation with Iran during the first Russian-Iranian summit in more than a decade.

But President Vladimir Putin and his Iranian counterpart, Mohammad Khatami, failed to resolve a long-standing dispute over rights to oil riches under the Caspian Sea.

Putin defended a controversial decision to scrap an agreement with the United States barring arms sales to Iran, saying Tehran had a right to defend itself.

He also announced that Russia was prepared to expand co-operation on atomic energy with Iran, speeding up construction of the controversial Bushehr nuclear reactor that Washington fears will help Tehran develop nuclear weapons.

"Iran does not intend to arm itself with weapons which lie outside the boundaries of international agreements, by which Russia abides, and Russia does not intend to break its obligations," Putin said, referring to weapons of mass destruction.

"Russia is interested in cooperating (with Iran) for economic reasons," said Putin. "As for politics, Iran must be a self-sufficient, independent state which can defend its national interests."

Khatami for his part noted that Russia and Iran both had the right "to decide what is in our benefit and what is not".

Russia provoked US fury and threats of economic sanctions in November when it ripped up a secret 1995 pact with the United States outlawing military co-operation with Iran.

The co-operation treaty signed on Monday commits Russia and Iran not to use force or the threat of force against each other, and to prevent either country being used to harbour "aggression, subversive or separatist acts against the other".

Russia has been heavily criticized by the United States for building the Bushehr nuclear reactor, which was commissioned in 1994 and is still under construction.

Foreign investment law

Kuwait's elected parliament on Tuesday approved a draft bill for direct foreign investment, granting incentives as part of long-promised reforms to liberaliseand jump start a slow state-dominated economy.

The parliament of the OPEC member state approved the 22- article law after a line-by-line debate over the past few weeks.

It is due to hold a second and final vote on the law in two weeks.

During the debates some MPs blasted the government-backed law that is designed to encourage foreign funds to come to the Gulf Arab state, itself a major global investor and a key oil exporter.

Kuwait, with about $80 billion invested abroad and in some of the world's largest firms, has made over $6 billion in budget surpluses over the past 21 months due to a rise in oil prices.

But the economy has been slow and the local bourse dropped in January to a five-year low mainly due to a confidence crisis and lack of movement on the promised reforms.

Foot-and-mouth disease spreads to Middle East

The outbreak of foot-and-mouth disease that has rocked Europe spread to the Middle East on Wednesday, as Saudi Arabia and the United Arab Emirates reported finding 10 cases.

The cases were the first found in the Gulf states, which import most of their meat. UAE Agriculture and Fisheries Minister Saeed Al-Ragabani said eight imported cows were found to have the disease, and the official Saudi Press Agency said two calves had been diagnosed with the highly contagious disease in neighbouring Saudi Arabia. It was not yet clear where the imported cows had originated.

Countries around the world stepped up efforts to stay free of the disease on Wednesday, banning meat and grain imports from the European Union and increasing checks on travellers from Europe.

UAE Agriculture and Fisheries Minister Saeed Al-Ragabani said eight imported cows were found to have foot-and-mouth, the daily Al-Khaleej reported. Livestock imports now require prior approval, he said.

The Saudi Press Agency said Saudi Arabia had extended a ban on imports of beef and mutton products from Lebanon and Turkey to India, Iran and Taiwan.

Arabs call for protection force

Arab foreign ministers renewed an appeal on Monday for an international protection force for the Palestinians and warned the US against moving its embassy from Tel Aviv to Al Quds.

The foreign ministers were meeting at Arab League headquarters to prepare for an Arab summit in Amman on March 27, which is expected to focus on the Palestinian uprising against Israel and the crumbling UN sanctions on Iraq.

"Arab countries together address the United Nations Security Council, asking it to meet immediately to study ways to set up an international force to protect the Palestinian people," the Arab League said in a statement.

"Arab ministers have (also) decided to make direct contact with the United States, Russia and the European Union, to ask them to take a stand against Israeli measures, especially the blockade of the territories," it added.

Iraq's oil surcharge gambit a quiet success

Three months on, Iraqi efforts to recapture direct control over oil export revenues through an illegal surcharge appear to have met some success, oil dealers and Iraqi experts say. The victory may be as much political as fiscal.

Despite the loss of many of its best customers as direct clients, and condemnation by the United Nations that controls oil sales under 10-year-old sanctions, Baghdad has persevered.

A host of little-known companies have emerged to facilitate the sale of the oil at a time when the rest of the Organisation of the Petroleum Exporting Countries is turning down its taps.

With persistence and patience, Baghdad has managed to turn a sanctions-busting surcharge into a quietly accepted if not welcome aspect of buying Iraqi oil.

Saudi April oil sales to western, Asian customers steady

Saudi Arabia has kept crude supply to its major western and Asian customers unchanged for April, leaving customers to speculate on Saudi export policy ahead of Friday's OPEC meeting.

With the Organization of the Petroleum Exporting Countries widely expected to agree another 500,000 to one million barrel per day export cut, most buyers had expected to be informed of a reduction in monthly supplies from state company Saudi Aramco.

We're intrigued. Where are the cuts going to come from? said a trader at one oil major. With the Saudi nominations in April, we were hoping to get a glint of what OPEC was planning.

The allocations are the same as last month so we really don't know what they are up to, said another major buyer. Last time they made cuts, we got a hint of it when Saudi gave us less volumes in February.

Qatar signs gas project

Qatar and the United Arab Emirates signed an agreement Wednesday for the pioneer Dolphin gas venture to deliver Qatari natural gas at a cost of four billion dollars, Qatar's energy minister said.

Abdullah bin Hamed Al-Attiya told reporters that the "term sheet" agreement sets out all the terms and conditions of the project, but he refused to divulge the price of the gas.

IDB says $70 mln agreed for Palestinians

Two Arab funds have approved $60 million in aid to the Palestinian Authority, of which $15 million has already been paid, the Islamic Development Bank (IDB) said on Wednesday.

An IDB statement quoted the bank's President Ahmed Mohammed Ali as saying the two funds, set up at an Arab summit held in Cairo last year, had also approved another $10 million grant for the Palestinian Health Ministry.

The funds had earlier allocated $53 million for projects to support the Palestinian uprising against Israeli occupation.

The projects included rehabilitation of hospitals and clinics, rebuilding damaged houses and support for small industrial and agricultural projects in Palestinian areas.

STC signs $667 mln

The Saudi Telecommunications Co (STC) has signed a 2.5 billion riyal ($667 million) loan with regional banks to help finance its expansion, bankers said on Sunday.

They said four banks that were mandated in December to arrange the four-year loan completed the syndication in late January and later signed the loan with STC.

The mandated banks are Arab National Bank, Riyad Bank, Saudi British Bank and Arab Bank. The other banks that joined the syndication are Citibank, al-Jazira Bank, National Bank of Bahrain, the Saudi Investment Bank, Saudi Hollandi Bank and the Arab Investment Company.

Gulf Petrochemical

Gulf Petrochemical Industries Company (GPIC) said on Monday its net profit jumped more than four fold to $40 million in 2000 from $9 million a year earlier.

Syria expected to get UN council seat 2002

Syria has received the endorsement of Asian and Arab nations for a rotating seat on the prestigious 15-member UN Security Council next year, to the consternation of Israel.

Unlike the controversy over the Sudan last year, the United States, should it want to do so, probably will not be able to stop Syria's election by the 189-member UN General Assembly in October, diplomats said.

In the case of the Sudan, Washington was able to push the candidacy of Mauritius as the African candidate, in part because African nations split their vote.

Damascus, Tehran train link opens

The train inaugurating the Damascus-Tehran rail link left the al-Qadam station in the Syrian capital on Saturday, station sources said.

The train stopped in the northern Syrian city of Aleppo before heading to Tehran via Turkey, a source in the Aleppo station said, without giving the number of passengers on board. The weekly train link is 2350 kilometre-long and lasts 60 hours, at a cost of 35 dollars.

"It's a good price. The Syrian rail won't make any profit, but the aim is to promote relations between Syria, Turkey and Iran", an Aleppo station official said.

Qatar sees oil output cut

Qatar's Energy Minister Abdullah bin Hamad al-Attiya said he expects OPEC to decide on an output cut next week to make up for oversupply on the world market, in an interview published on Saturday.

"There is an excess of oil on the market that varies between two and three million barrels per day (bpd)," he told the London-based Arabic newspaper Al-Hayat.

"The average price for last month was less than $24 a barrels, and the cut in production aims to stabilize the market and prices while controlling supplies," said Attiya.