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June 18 - 24, 2001

Oil prices surge towards $30 on Mideast fears

Oil prices welled up towards 30 dollars a barrel on Monday after a powerful Saudi Arabian prince warned that the Israeli-Palestinian conflict was threatening to spread to other regional states.

The price of Brent North Sea crude for July delivery rose to 29.95 dollars a barrel in London dealing, from 29.44 at the close on Friday.

In New York a barrel of light sweet crude for July delivery gained 58 cents to 28.33 dollars, as floods in Texas raised a question over supply.

But uppermost in dealers' mind were the words of caution from Saudi Arabian Crown Prince Abdallah Ben Abdel Aziz, who raised the spectre of the Israeli-Palestinian dispute drawing in neighbouring Arab oil-producing states.

"We are all sitting on a powder keg, which could explode at any moment," he said in an interview with the Monday edition of the weekly Der Spiegel. "Such a war would not only affect Israel and the Arab states, but would be felt in many other parts of the world," he said.

"The price of blood being spilt in the region is reaching a level we cannot tolerate much longer," the Saudi Arabian crown prince said.

More than 600 people have been killed since a Palestinian uprising erupted last autumn. The outbreak of violence in September helped send oil prices to levels not seen since the 1990 Gulf War.

Oil market analysts said that the comments were clearly directed at a foreign audience and should be taken as a warning that even moderate Arab nations would not sit on the fence indefinitely.

"Clearly patience is running out in the Arab world and this comment re-established a link between Middle East tensions and the oil prices," said Lawrence Eagles, a commodities analyst with the GNI brokerage.

Arafat accepts CIA's truce plan

Palestinian leader Yasser Arafat and CIA chief George Tenet struck an agreement Wednesday on Tenet's plan for putting in place a lasting ceasefire and Middle East peace negotiations, a Palestinian official said.

"President Yasser Arafat and George Tenet arrived at an agreement on the US proposal on the basis of recommendations from the Mitchell report," Arafat advisor Nabil Abu Rudeina told AFP in the West Bank town of Ramallah where the meeting was held. He gave no further details.

Another Palestinian official, speaking on condition of anonymity, said Arafat had accepted all but a few points in the plan to end eight months of deadly Israeli attacks.

"The United States is pleased that a work plan has been accepted by both sides," a senior State Department official in Washington told AFP on condition of anonymity.

"Steps will be taken immediately to implement the work plan," the official said, noting Tenet, who had originally intended to return to Washington on Tuesday, would remain in the region until at least Wednesday for possible further talks.

Israel said Tuesday it accepted the Central Intelligence Agency chief's plan, which is aimed at forging a joint Israeli-Palestinian truce. The two sides have already declared ceasefires independently.

That would allow implementation of a series of confidence-building measures proposed last month by the US-led Mitchell commission aimed at returning the two sides to the negotiating table.

Tenet held the last-minute talks with Arafat before his planned return to the United States after days of coaxing the two sides into security talks without concrete results.

The Palestinian official, speaking on condition of anonymity, said Tenet had told Arafat that, if he left the region without agreement, "that could be seen as a green light for air attacks on Palestinian targets."

Iran to invest half of oil surplus in private sector

Iran will invest three billion dollars, half of last year's surplus oil revenue, in the country's private sector, central bank governor Mohsen Nourbakhsh said Wednesday.

"Fifty per cent of the revenues will be invested in the private sector, and the rest will be saved to support projects in the annual national budget in the case of a fall in oil prices," Nourbakhsh was quoted as saying by the official IRNA news agency.

The special surplus fund was created in March, with the 6 billion dollars in surplus revenues deposited in the central bank, Nourbakhsh said. He did not say where in the private sector the government would invest.

Nourbakhsh added that Iran's banking system was "to play an active role in encouraging the private sector." No private banks exist in Iran, but private investment companies do invest in different projects throughout the country.

Bahrain seeks $650 mln to modernise refinery

Bahrain Petroleum Co. (Bapco) said Saturday it is to hold talks with 15 foreign and local banks to raise 650 million dollars in financing for a refinery modernisation aimed at adapting to market demands.

Bapco officials, quoted by Bahrain's GNA news agency, said the funding would be raised by the end of 2001 and the project completed by 2004. The talks are to be held in June and July.

Bahrain produces around 40,000 barrels per day (bpd) of oil and receives the entire output of 140,000 bpd from an offshore field shared with Saudi Arabia. It exports only refined products, not crude.

The modernisation project will upgrade Bapco's low-sulphur fuel oil and fluid catalytic cracking sectors, which now use 30-year-old pneumatic technology, with state-of-the-art electronics.

The largest chunk of the investment will go toward lowering sulphur content to 0.05 per cent from 0.75-1.0 per cent.

The state-owned refinery was built in 1963 and its current capacity is 250,000 bpd. More than 90 per cent of its products are exported to Asia or other Gulf states.

World Bank approve $45 mln credit for Yemen

The World Bank approved a 40-year, 45 million-dollar credit for Yemen aimed at helping the country build and maintain a road network. "This project will support the government of Yemen's recently initiated decentralization process, as well as complementing and enhancing several community-based programs in Yemen, such as the Social Fund Project and the Public Works Project," the bank said in a statement. It said the credit will reduce the isolation of Yemen's rural population by ensuring that rural people have reliable access through the local, regional and national road networks.

Khatami ally returned as speaker

Iran's reformist-dominated parliament on Monday re-elected at its head two allies of President Mohammad Khatami. Mehdi Karubi, 64, was re-elected Majlis speaker, while Mohammad Reza Khatami, the president's brother who heads the nation's main reformist party, the Islamic Iran Participation Front, was re-elected as his deputy.

Mr Karubi secured 215 votes out of 238. Mr Reza, 41, was re-elected deputy parliament speaker with 157 votes.

Largest Islamic bank established

A Kuwaiti firm and a major Saudi Arabian group agreed to merge their banking and investment units to create one of the area's largest Islamic banking entities.

Saudi Arabian giant Dallah Albaraka Group (DBG) and The International Investor said in a joint statement received on Sunday that a memorandum of understanding was reached for a "ground-breaking $300-plus million deal".

The statement gave few details of the deal, but said it aims to "combine DBG's assets in a number of banking subsidiaries with TII.

"The deal will create the first Islamic financial services group to offer a full range of investment and retail banking services to clients across the Middle East and Africa."

Islamic trade fair opens in Jeddah

The first Islamic Trade Fair got underway on Saturday with calls to boost intra-Islamic trade and forge a common and united stand to face the onslaught of globalisation.

Governor of Makkah, Prince Abdul Majeed, inaugurated the fair. With more than 40 countries participating in the fair, Crown Prince Abdullah of Saudi Arabia in his opening remarks, read out on his behalf by the Makkah Governor Prince Abdul Majeed, said: "In the age of globalisation where competition is very fierce, survival will be for the fittest. Those who unite in economic blocks and prepare for the challenges will prevail."

Qatar welcomes

The Qatari press on Wednesday hailed Bahrain's lifting of the state of alert on the Hawar Islands, which were at the center of a long-standing territorial dispute, as a sign of bilateral cooperation.

"This move is witness to the desire of the two countries to turn the page of the past and begin a new era of cooperation," Qatar's Al-Sharq newspaper said.

Saddam digs in for another showdown with US

Saddam Hussein is digging in for another showdown with the United Nations over Anglo-American plans to revamp the 11-year-old sanctions against Iraq.

Western diplomats in the Middle East say the Iraqi president appears determined to pursue his crusade to get sanctions lifted, even if it means a prolonged halt of Iraqi oil exports and an eventual military confrontation with the United States.

After ordering a halt to most oil exports earlier this month, Saddam is closely watching the debate among the UN Security Council's permanent members over the proposed changes to sanctions imposed against Baghdad after its invasion of Kuwait in 1990.

Gulf Arabs look to Khatami to woo 'Great Satan'

Iran's re-election of President Mohammad Khatami will help bolster ties with Gulf Arab states but the moderate leader must act on his reformist intentions to turn his wary neighbors into friends.

Leaders from oil kingpin Saudi Arabia to the tiny island state of Bahrain have congratulated the moderate Khatami on his landslide victory, indicating they want to put an end to Iran's historical status as the "demon of the Gulf".

But analysts say a breakthrough in relations hinges on an improvement in Iran's ties with the Gulf states' ally, the United States, and the resolution of a dispute over three strategic islands Gulf Arabs say Iran has seized from the United Arab Emirates.

"The whole region is much more relaxed that a regime that is more liberal and open is now in Iran," said Nayef Obeid, analyst at the UAE-based Sheikh Zaid Center for Strategic Studies.

"The Gulf is looking to Khatami to live up to his image as a reformist and to improve ties but they will be primarily looking for actions and not words on these two fronts," he told Reuters.

Lebanon tears up GSM operators' contracts

The two GSM operators in Lebanon learned Tuesday that the government was tearing up their contracts half-way through in order to auction off its lucrative cellphone licences.

The government's privatisation committee said in a statement it "has decided to task the telecommunications minister with ending the contracts of these two companies." The companies, Cellis, which is controlled by France Telecom, and LibanCell, which has Finland's Sonera as a 14-per cent stakeholder, are to be compensated, it said. The contracts will be completely void in mid-September.

No reason was given for the decision, but a minister, speaking on condition of anonymity, said the government wanted to end a nagging dispute between the companies and the state over exploitation fees.

The two companies were given the contracts to operate the GSM network in 1994. The agreements were to run for 12 years.

Biggest Bromine Investment

Jordan Bromine Company Limited (JBC), (Private Free Zone) has broken the ground on its bromine and derivatives facilities in Safi, Jordan with the launching of a $100 mln investment project.

Site development and procurement as well as construction activities are underway for the project, company sources said.

Kuwaiti stocks hit 28-month high

The Kuwait Stock Exchange (KSE) surged three per cent to close the week Wednesday at a 28-month high despite profit-taking on the back of renewed investor confidence, analysts said.

The KSE index closed at 1,648.1 points, up 22.2 per cent on the year, but still down 41.9 per cent on its all-time high of November 1997.

Iraq oil still flowing to Syria

Iraq is maintaining illicit oil sales to Syria to secure vital hard currency despite Baghdad's vow to cut off most exports in its latest showdown with the United Nations over sanctions, industry sources said on Monday.

The sources said Syria was still exporting oil at a higher rate, evidence that it continues to receive extra supplies from Iraq via a recently refurbished pipeline.

"There are no signs that Syria is selling less oil to its customers. They have not notified customers of any real cuts," said one industry source.

"We have not received a telex from Syria saying there is less oil available. They are still getting oil from Iraq," said another.

Diplomats also said that major producer Iraq was still delivering crude to neighbour Syria.

The industry sources said Iraq currently was probably delivering about 100,000-150,000 barrels per day to Syria.

Aqaba city development

Jordan has shortlisted six global firms in the first phase of a project to choose a private property developer to manage and run the port of Aqaba's Special Economic Zone (SEZ), officials said on Sunday.

The winner picked from a shortlist of six firms chosen from an original 13 applicants would to be nominated by mid-September to manage the transformation of Aqaba into a first class regional investment hub, the officials said.

Cirrus stake

The Bahrain-based First Islamic Investment Bank (FIIB) announced Sunday it has signed an agreement to acquire an "major stake" in the US group Cirrus Industries Inc.

In a statement published in Manama, FIIB chairman Atif Abdel Malek estimated the value of the deal between the Islamic bank and Cirrus, which specialises in the manfacture of private jets, at around 133 million dollars (156 million euros).

Iraq exploits three new oilfields in south

Iraq's Southern Petroleum Company (SPC) announced Sunday that despite the embargo, it was exploiting three new oilfields in the south, where it hoped to double output to 400,000 barrels per day (bpd).

"SPC has developed three new deposits with a current production of 200,000 bpd, which is half of the production capacity we will reach next year," SPC chairman Abdel Beri Mahmud Shaukat said, quoted by the Al-Basra weekly.

He said the Mina Al-Baqr terminal in southern Iraq now had a crude pumping capacity of around 1.4 million bpd, "despite the obstacles raised by the United States and Britain about the development of this terminal." Iraq had used the Mina Al-Baqr terminal and one at the Turkish port of Ceyhan for its oil exports, as part of the UN's oil-for-food programme, thus violating the embargo imposed after its 1990 invasion of Kuwait.