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Mideast economies brace for Iraq war

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 per cent, 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 per cent to the dollar since it was free-floated on January 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 somes 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 dollars 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 said.

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-Nuaimi reiterated Thursday in Moscow 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 per cent of that capacity, the minister said, quoted by the Interfax news agency.

Nuami's visit to Moscow followed a meeting of the Organisation of Petroleum Exporting Countries in Vienna, where the oil cartel decided to leave production ceiling unchanged at 24.5 million bpd despite the looming war.

OPEC's oil ministers explained that the decision was as compromise between the expected hike in prices to be caused by a war and the seasonal decrease in demand in the second quarter with a warmer weather in the northern hemisphere.

In Kuwait, the state oil company KPC said 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.

Leading Saudi economist Ihsan Bu-Hulaiga said Monday Arab economies stand to suffer around $110 billion in direct losses by the end of the year if the United States wages war on Iraq.

The biggest chunk of the losses would be borne by the ailing Iraqi economy shedding around $20 billion, nearly a year's income, he said.

Meanwhile in Washington, President George W. Bush's administration has asked a group of US companies to bid on a contract to rebuild a post-war Iraq, USAID spokeswoman Ellen Yount said Monday.

But she declined to confirm other details of a Wall Street Journal report which said the contracts could be worth up to 900 million dollars.

The US government said Tuesday it had already awarded a $7.1 million contract for personnel support in a post-conflict Iraq to the Washington-based International Resources Group.

On a different register, the International Monetary Fund said Thursday in a report that the recession-struck Israeli economy, rocked by the Palestinian uprising and a global slowdown, needed a shot of peace to recover.