CAIRO, 15 March 2003 — Middle Eastern states took measures this week to weather the impact of a looming US-led war on Iraq on their economies. In Amman, Minister of Commerce and Industry Salah Bashir said Thursday Jordan was counting on increasing its exports to the United States to make up for lost revenue from a halt in sales to Iraq in the event of war.
Jordan is expected to suffer the most in the region for the duration of a war, as Iraq is its biggest export market, and Baghdad has been supplying it with crude oil at a highly preferential rates for Jordanian industry. Bashir also said Jordan was planning to continue using Israel’s port of Haifa to ship its exports to the United States, mostly goods produced in duty free zones that are exempted from US duties in line with a 1996 agreement.
In Egypt, interest rates on treasury bonds were hiked for the second week in a row, reaching more than 10 percent, and state imports were frozen for three months, in order to relieve pressure exerted on the local pound by the looming war. The Egyptian pound has lost more than 20 percent to the dollar since it was free-floated on Jan. 29. Analysts said dollar-holders are generally unwilling to sell over concern that a war on Iraq might tighten hard currency supply further by causing a slump in tourism and exports.
Egypt’s flag carrier EgyptAir said Sunday flights to some destinations will be re-routed to avoid dangerous skies, and some flights will be regrouped in order to cut costs, should a war break out. The company expects serious hardship due to its dependency on tourist traffic.
In Lebanon, the central bank’s foreign currency reserves have been boosted to about $10 billion following the disbursement of funds promised last November by international donors, its governor Riad Salameh said. “Lebanon has enough defenses to face the negative effects of a war on Iraq which are mainly higher energy prices and a disruption in exports to Iraq,” Salameh told AFP. Lebanon has already received $2.2 billion of the $4.4 billion in loans promised by the donors’ conference held in Paris.
On the oil front, Saudi Oil Minister Ali Al-Naimi reiterated in Moscow on Thursday that the Kingdom, the world’s top petroleum exporter, was ready to step up oil deliveries to world markets if war breaks out in Iraq. Saudi Arabia can produce a maximum of 10.5 million barrels a day (bpd), and in February the country was pumping to 90 percent of that capacity, the minister said, quoted by the Interfax news agency.
Naimi’s visit to Moscow followed a meeting of the Organization of Petroleum Exporting Countries in Vienna, where the organization decided to leave production ceiling unchanged at 24.5 million bpd despite the looming war.
In Kuwait, the state oil company KPC said Wednesday it has raised oil production to full capacity, 2.4 million bpd as an experiment over a short-term period to see if this level can be sustained should war in Iraq break out. KPC Chairman Nader Al-Sultan also said the emirate will not, in the event of a war, close other fields than those of Abdali and Riqqa, which were shut down last month because of their proximity to the Iraqi border.
