Analysts: Mideast can't weather war so they welcome the peace from inspections agreement.
SUSAN SEVAREID
Associated Press
miami.com
CAIRO, Egypt - Middle East economies that have limped along for years are ill prepared to weather the turbulence of a U.S.-led war against Iraq, analysts say, and some weaker economies could collapse altogether.
The full impact of war on the region will depend on many variables: How long it might take to oust Saddam Hussein, whether Israel gets involved or the U.S.-led war on terrorism extends to Iran or Syria, and whether American forces remain as occupiers in Iraq. But any war could have dire consequences for some countries.
"The region will not emerge intact on the other side of this scenario, whether you have a short war or a prolonged war," said Anais Faraj, a London-based global strategist with Nomura International.
States neighboring Iraq, like Jordan, that depend on trade with Baghdad will be hurt worst, analysts say. Tourism, already in the doldrums, will take a bigger dive. Even some of the supposedly "oil-rich" nations could have troubles.
The Middle East's economy is already suffering. Privatization has gone so slowly that international investors long ago lost interest, and Western tourists have been frightened off by the Sept. 11 attacks and Israeli-Palestinian violence.
The shortage of tourists was obvious on recent day at Jordan's famed Roman ruins at Jerash, 30 miles north of the capital, Amman. Not even a 50 percent discount on the $7 admission drew many sightseers to the ancient site.
"There's high season and low season, but this is dead season," said Tarek Khazouz, manager of the empty Jerash Zaman restaurant, next to a triumphal arch dating to the 2nd century.
In Cairo, tour buses still take budget travelers in shorts and fanny-packs to the Khan el-Khalili tourist bazaar, but merchants say the wealthier Western tourists who spring for more than T-shirts or $2 trinkets are not coming.
"It's scaring tourists, the war situation," said Mohammed Khalaf, 32, owner of a carpet store.
In general, Middle East economies would enter a war scenario in poor shape.
Faraj, the London-based economist, said Egypt's growth "will be lucky to be about 2 percent this year," with the Gulf nations faring slightly better and the rest of the region likely to be slightly worse.
His judgment: Iraq could fragment economically as well as ethnically, Jordan is untenable and Saudi Arabia risks political upheaval.
"The upside is they get a Marshall Plan ... where the Americans invest heavily in economic security, but the downside is something like the Congo - total breakdown."
Even analysts who don't share Faraj's dark views agree that a prolonged war, particularly if it expands beyond Iraq, could place impoverished, resource-poor Jordan in a desperate economic position.
"Jordan will be the second-biggest loser (behind Iraq) if an attack on Iraq is launched, and the longer it takes to ensure stability in Iraq, the bigger the losses for Jordan will be," said Rajai Kossous, executive manager of the Amman-based Jordan Investment and Finance Bank.
Struggling under $7 billion in foreign debt, Jordan keeps its economy afloat and fills all its oil needs - about 100,000 barrels per day - through free and deeply discounted Iraqi oil. Payment is primarily through the export of flour, soap, vegetable oil and other goods.
Jordanian officials privately say they are asking other Gulf oil states to replace Iraqi oil should war erupt, but that would mean paying higher market prices. Jordan, a close U.S. ally, could also expect help from Washington if its stability were threatened.
Syria, Egypt and Turkey also could suffer if war erupts since deals that give their exports preferential treatment in Iraq likely would be upset by a change in government in Baghdad. Ultimately, however, they could benefit from a sanctions-free Iraq.
The other impact from a war could be on oil-producing states since oil prices are likely to fall after an initial "war-premium" spike. Some predictions are that prices, now in the $24 a barrel range, could drop as much as $12 a barrel - good news for consumer nations' economies but potentially devastating for Gulf oil producers.
But Walid Khadduri, chief editor of the Cyprus-based weekly Middle East Economic Survey, said he doesn't expect a price collapse because there isn't excess oil on the market and the Organization of Petroleum Exporting Countries would take all steps possible to avoid a steep fall. |
