Gordon Brown in Gulf to seek world bailout plan support

LONDON – Prime Minister Gordon Brown embarks on a mini-tour of oil-rich Gulf states on Saturday, but could struggle to win support for his plan to boost funds available to nations hit by global economic chaos.

By (AFP)

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Published: Thu 30 Oct 2008, 9:28 AM

Last updated: Sun 5 Apr 2015, 2:27 PM

Brown will head to Saudi Arabia, the United Arab Emirates and Qatar in a four-day visit and is likely argue to that Gulf states should be among the biggest donors to an expanded International Monetary Fund (IMF) bailout scheme.

'It's the countries that have got substantial reserves, the oil-rich countries and others who are going to be the biggest contributors to this fund,' Brown said before the trip, adding he also wanted China to contribute.

'I am going to the Gulf at the weekend and it is one of the items that will be in the discussions with all the international leaders.'

But the Organisation of Petroleum Exporting Countries (OPEC), whose top producer is Saudi Arabia and which counts the UAE and Qatar as members, says it sees no reason its members should bail out a crisis which originated in the US.

And experts say that even if Gulf states do step in to bail out countries hit by the downturn, they would probably not want to do it through the IMF .

Adam Dixon of consulting firm Oxford Analytica said they might prefer a 'piggyback strategy' where they top up funds for countries like Pakistan from the IMF, which they see as dominated by the US and G7 countries.

'In terms of funneling it (the money) through the IMF, I don't think so,' he told AFP.

The IMF, which has or is about to bail out Hungary, Ukraine and Iceland, currently has a 250 billion dollar bail-out fund, but Brown wants this extended to stop economic 'contagion' spreading to other countries.

His trip to the Gulf comes ahead of a meeting of G20 leaders in Washington including Saudi Arabia's King Abdullah on November 15 which will likely discuss a restructuring of the world financial system, including the IMF.

The Gulf states, whose main economic driver is oil, have been hit by its price dropping below 60 dollars a barrel this week from record highs of nearly 150 dollars in July on fears of falling demand because of the slowdown.

Brown drew the ire of OPEC and Gulf leaders for speaking against OPEC's decision at an emergency meeting last week to cut oil output by 1.5 million barrels a day from November in a bid to buoy up prices.

Dixon said that, although most Gulf states were still flushed with cash, they would probably use the falls in oil prices as 'the excuse' if they did not want to back Brown's plan.

OPEC's Secretary General Abdalla Salem El-Badri said Tuesday it was 'surprising' that OPEC countries, which produce around 40 percent of the world's crude, were being asked to 'bail out' the economic crisis.

'This crisis created in the (United) States must be solved within the States,' he told an oil conference in London. Later he said he would not rule out another oil production cut.

Qatar's energy minister and deputy premier Abdulla bin Hamad al-Attiyah added at the same event that Britain and the US should not criticise the output cut without suggesting how more people could be encouraged to buy oil.

'You can't say to me 'don't do it, you're the bad boy' but with no solution,' he said.

Meanwhile, Energy Minister of the UAE, His Excellency Mohamed bin Dhaen Al Hamli said low oil prices were 'very dangerous' for the world economy, adding that a 'reasonable' price was needed to ensure continued investment.

As well as fears about how high oil prices could hit the global economy, Brown is facing pressure at home to reduce household fuel and petrol bills as householders face a likely recession in Britain.


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