Another myth bites the dust - facts are such a nuisance when they get in the way of a good rant and rave session:
03/21 03:27
French-Iraqi Trade Belies Commercial Interest Theory (Update1)
By Gregory Viscusi
Paris, March 21 (Bloomberg) -- U.S. Secretary of State Colin Powell says France's business ties to Iraq help explain why it's opposed to using force to disarm President Saddam Hussein.
``There are commercial interests that everyone has to consider,'' Powell said March 18 in response to a question asking for his views on France's position.
Richard Perle, chairman of the Defense Policy Board, which advises the U.S. government, says France is protecting oil investments in Iraq. Senator John McCain says ``calculated self interest'' is behind the positions of France and Germany, which pushed to continue with United Nations weapons inspections as the U.S. and U.K. moved toward military action.
The facts are that French oil companies have no binding agreements to develop Iraqi oil fields. French exports to Iraq last year fell to 0.15 percent of total exports from 0.2 percent the year before. The Middle East last year accounted for 3 percent of both French and German exports. Only 0.5 percent of French direct investments are in Arab countries -- while 25 percent are in the U.S.
That's only slightly more than the U.S., which sends 2 percent of its exports to the Middle East and has 0.1 percent of direct investment there.
French companies, including Total Fina Elf SA, Europe's biggest oil refiner, could be excluded from Iraq after a U.S. conquest. The U.S. government is seeking domestic bidders for reconstruction contracts worth more than $1 billion.
`Pretty Stupid'
``If the Germans and the French are looking after their economic interests, then they must be pretty stupid,'' said Brigitte Granville, head of international economics at the Royal Institute of International Affairs in London. ``Neither is going to be a winner economically and they are aware of that.''
French President Jacques Chirac yesterday called for an end to the U.S. and U.K. attacks on Iraq in order to avert ``a human catastrophe.'' German Chancellor Gerhard Schroeder said: ``The wrong decision has been made.'' Today, troops crossed into southern Iraq and Baghdad was struck by as many as 25 Tomahawk missiles.
Robert Hunter, a senior adviser at U.S. policy research center RAND and the U.S. ambassador to the North Atlantic Treaty Organization from 1993 to 1998, said French and German opposition is based on political concerns: that the U.S. will extend its campaign to other Middle Eastern countries, that the U.S. will renege on reconstructing Iraq and pursuing peace in the Israeli- occupied territories, and that war could stir terror attacks.
``Serious countries like the U.S., France and Germany don't make decisions of war and peace over money or oil contracts,'' Hunter said.
Independent Path
Of the 15 largest companies on the Paris stock market, only oil company Total gets more than 3 percent of its revenue in the Middle East. Some, such as retailer Carrefour SA and insurer AXA SA, have no operations in the Arab world.
Besides Total, all of them do more business in the U.S. -- where there have been calls for retaliation against French businesses -- than in the Middle East.
``Why the hell should a U.S. municipality outsource its water utility to a French company?'' said Hans Peter Portner, a fund manager at Pictet & Cie. who manages about $240 million worth of stock in water utilities such as Vivendi Environnement SA and Suez SA, the world's two largest.
Suez handles the water supply of 12.5 million Americans, including those in San Antonio. Vivendi runs the Indianapolis water system, among others.
``It could be an issue of some patriotic feelings toward some French companies,'' Portner said. ``There are concerns in the market that this could be the case.''
Unsigned Contracts
Total, France's largest company, could lose out in Iraq if the U.S. imposes a new regime. Total started negotiating with Iraq right after the 1991 Gulf War and in 1998 reached an agreement to develop two fields in southern Iraq, Bin Umar and Majnoon, with a combined potential to produce 1 million barrels a day.
While Perle said in a Feb. 14 speech in New York that the deal is worth $50 billion, the contracts were never signed because of UN sanctions. Iraq and Total never agreed on the production- sharing percentages, making it impossible to value the contract.
``After 13 years of waiting, Total must have come to the conclusion that having Saddam Hussein around isn't good for business,'' said Francois Heisbourg, founder of the French Foundation for Strategic Research. ``On purely commercial terms the French should be militating for the overthrow of Saddam Hussein.''
Christophe de Margerie, head of exploration and production at Total, said during a Feb. 20 press conference that Total doesn't have any rights to Bin Umar and Majnoon. It could develop them one year faster than its competitors because of its access to geological surveys.
Trade and Politics
The level of trade with Iraq doesn't indicate policy toward the country. In 2001, France exported goods worth 659 million euros to Iraq, making it the largest exporter to the country with a 14 percent market share. Just behind was Australia with 10 percent of the market, then China at 9.2 percent and Italy at 7.6 percent. The Chinese government opposes U.S. policy on Iraq. Australia and Italy support it.
In 2002, French exports to Iraq fell 28 percent to 473.5 million euros from 2001 as Iraq favored imports from neighboring Arab countries, said Serge Boidevaix, president of the French-Arab Chamber of Commerce. French exports to Iraq in 2002 were slightly larger than those to Cyprus and slightly less than those to Malta. France exported two-and-a-half times as much to Israel.
Among French companies in Iraq, Alcatel SA, Europe's largest maker of telecommunications equipment, won a $76 million contract in September 2001 to upgrade Baghdad's phone network. France's largest carmaker PSA Peugeot Citroen sold 6,000 cars to Iraq in the past two years of worldwide production of 5.9 million cars.
`Mutual Suspicion'
Germany exported 404 million euros worth of goods to Iraq last year, less than it exported to Gibraltar or Bosnia and about 0.06 percent of its total exports.
The U.S. is the largest importer of Iraqi oil, taking two- thirds of its exports some months, according to Energy Intelligence.
``If you ask many French why the Americans are going to war they will say oil, and if you ask Americans why the French oppose the war they will say oil,'' said Heisbourg. ``You have a perfect mirror image of mutual suspicion.''
Iraq used to be a major client for France. Alcatel built Baghdad's telephone system in the 1980s. France was building Iraq a nuclear reactor that Israeli jets destroyed in 1981. France sold $9 billion of military equipment to Iraq from 1978 to 1990, making it the second-largest supplier behind Russia during Iraq's 1980-1988 war with Iran, according to the Institute for International Economics.
By not backing the U.S., France is unlikely to win back its position as Iraq's favored trading partner in any postwar period.
Reconstruction
The U.S. Agency for International Development invited U.S. companies to seek $1 billion in Iraqi reconstruction work using rules that accelerate the selection process. Bidders include Fluor Corp., Bechtel Group Inc., Washington Group International Inc., Parsons Corp., Louis Berger Group Inc. and Halliburton Co.'s Kellogg Brown & Root Inc.
French and German opposition to U.S. policy isn't likely to help win them markets in Arab countries outside of Iraq either, analysts said.
``It might make Chirac popular in the Palestinian territories and in Algeria but that's not very profitable,'' said Michael Bruter, lecturer on European Politics at the London School of Economics. ``The larger, richer Arab countries like Saudi Arabia and the UAE are already very close to the U.S. and the French can't expect to depose the Americans in those countries thanks to Chirac's position.''
The U.S. accounts for 21 percent of Saudi Arabia's imports, compared with France's 4.4 percent and Germany's 7.4 percent. In Kuwait, the U.S. provides 16 percent of imports, Germany 10 percent and France 5 percent.
U.S. Contracts
``We didn't get any gain from the last Gulf war and we took part in that one,'' said Charles Edelstenne, chief executive of Dassault, in a March 12 interview with Bloomberg Television. ``I don't see any gain from this one.''
French and German companies are worried about losing customers in the U.S. ``In the interest of the German automotive industry and the interest of our companies, it's essential to overcome the tension that has now come to bear on German-American relations,'' said Bayerische Motoren Werke AG Chief Executive Helmut Panke at the Geneva Car Show March 5.
Ernest-Antoine Seilliere, president of the French business association Medef, said in an interview with RTL radio March 18 that many French business leaders are concerned about relations with the U.S. ``Within our ranks are many companies that say that maybe it wasn't necessary for us to raise our tone and provoke,'' he said, adding that ``French interests in Iraq are very slim.''
German opposition to the war might have one profitable element. ``For the Germans, the only economic benefit is that by not supporting the war, no one can make them pay for it,'' said Bruter.
The U.S. ended up paying just $7 billion of the $61 billion costs it incurred in the 1991 war. Germany paid about $6 billion, Japan $10 billion, and Kuwait and Saudi Arabia $16 billion each, according to the U.S. Congress. |
