IEA: Appetite for investments in Middle East close to zero

Updated 26 February 2015

IEA: Appetite for investments in Middle East close to zero

TOKYO: The rise of the Islamic State (IS) in Iraq and Syria presents a major challenge for the investment necessary to prevent an oil shortage in the next decade, the International Energy Agency's (IEA's) top economist said on Tuesday.
While the IEA has sounded warnings that Middle East crude production will need to rise in the 2020s to meet predicted demand, Chief Economist Fatih Birol said there remain "myopic" views about the need for investment at a time when the fall in oil prices means energy companies are slashing new drilling.
US oil output from shale formations, while expected to rise in the short term even with the cutbacks in drilling and investment, will not be enough to meet demand. The traditional Middle East producers will need to meet the expected rise in consumption, Birol said, with Iraq expected to contribute about 50 percent of the additional oil needed.
That means "we now have a problem", Birol said, speaking to Japan's gas industry association four days after the IEA confirmed his appointment to replace Maria van der Hoeven as executive director when her term expires at the end of August.
"The security problems caused by Daesh (IS) and others are creating a major challenge for the new investments in the Middle East and if those investments are not made today we will not see that badly needed production growth around the 2020s," Birol said.
"The appetite for investments in the Middle East is close to zero, mainly as a result of the unpredictability of the region," he said.
IEA's most recent analysis suggests global upstream oil and gas investment will fall a record 17 percent in 2015 to about $580 billion, Birol said.
IS extremists have disrupted oil production in northern Iraq, although output in the south — where most of the country's crude comes from — has so far been largely unaffected.
Still, attacks by Islamist groups with suspected ties to IS are spreading, including to an oilfield in Libya in which France's Total has a stake.
Oil prices have rallied to around $62 a barrel from a six-year trough below $46 in mid-January, mostly on worries about falling rig counts in the United States and the outlook for future shale oil production.
US crude inventories have, however, continued to swell because of production already in place, with the stocks rising to a record high of nearly 418 million barrels in the week to Feb. 6, government data showed last week.


US trade offensive takes out WTO as global arbiter

Updated 10 December 2019

US trade offensive takes out WTO as global arbiter

  • Two years after starting to block appointments, the US will finally paralyze the WTO’s Appellate Body
  • Two of three members of Appellate Body exit and leave it unable to issue rulings

BRUSSELS: US disruption of the global economic order reaches a major milestone on Tuesday as the World Trade Organization (WTO) loses its ability to intervene in trade wars, threatening the future of the Geneva-based body.
Two years after starting to block appointments, the United States will finally paralyze the WTO’s Appellate Body, which acts as the supreme court for international trade, as two of three members exit and leave it unable to issue rulings.
Major trade disputes, including the US conflict with China and metal tariffs imposed by US President Donald Trump, will not be resolved by the global trade arbiter.
Stephen Vaughn, who served as general counsel to the US Trade Representative during Trump’s first two years, said many disputes would be settled in future by negotiations.
Critics say this means a return to a post-war period of inconsistent settlements, problems the WTO’s creation in 1995 was designed to fix.
The EU ambassador to the WTO told counterparts in Geneva on Monday the Appellate Body’s paralysis risked creating a system of economic relations based on power rather than rules.
The crippling of dispute settlement comes as the WTO also struggles in its other major role of opening markets.
The WTO club of 164 has not produced any international accord since abandoning “Doha Round” negotiations in 2015.
Trade-restrictive measures among the G20 group of largest economies are at historic highs, compounded by Trump’s “America First” agenda and the trade war with China.
Phil Hogan, the European Union’s new trade commissioner, said on Friday the WTO was no longer fit for purpose and in dire need of reforms going beyond just fixing the appeals mechanism.
For developed countries, in particular, the WTO’s rules must change to take account of state-controlled enterprises.
In 2017, Japan brought together the United States and the European Union in a joint bid to set new global rules on state subsidies and forced technology transfers.
The US is also pushing to limit the ability of WTO members to grant themselves developing status, which for example gives them longer to implement WTO agreements.
Such “developing countries” include Singapore and Israel, but China is the clear focus.
US Commerce Secretary Wilbur Ross told Reuters last week the United States wanted to end concessions given to then struggling economies that were no longer appropriate.
“We’ve been spoiling countries for a very, very long time, so naturally they’re pushing back as we try to change things,” he said.
The trouble with WTO reform is that changes require consensus to pass. That includes Chinese backing.
Beijing has published its own reform proposals with a string of grievances against US actions. Reform should resolve crucial issues threatening the WTO’s existence, while preserving the interests of developing countries.
Many observers believe the WTO faces a pivotal moment in mid-2020 when its trade ministers gather in a drive to push through a multinational deal — on cutting fishing subsidies.
“It’s not the WTO that will save the fish. It’s the fish that are going to save the WTO,” said one ambassador.