Washington Report on Middle East Affairs, June 1990, Page 55

Trade and Finance

By John T. Haldane

Kuwait and USSR Sign Oil Agreement

Faisal al-Kazmawi, Chairman of the Board and Managing Director of the Kuwait Foreign Petroleum Company (KUFPEC), signed an agreement in Moscow in March for cooperation with Soviet companies. The Soviet oil exploration company, Technoexport, and KUFPEC are expected to sign a joint venture agreement soon. The two companies already are working together on exploration in Kuwait's Babra oilfield.

Mr. Kazmawi said that exploration opportunities for KUFPEC in two fields located in the Soviet Republic of Turkmenia are under consideration. The two sides also discussed cooperation in oil exploration in South Yemen. KUFPEC may be invited to participate in the development of production-sharing acreage in the northwest Shabwa area, which has been allocated to the Soviet Union by South Yemeni government.

Studies also will be undertaken to consider joint oil investment companies which would operate in third countries.

Algeria Pushing LNG Exports

Faced with a serious decline in its oil production, Algeria is embarking on a massive expansion of its gas industry through the 1990s, with pipeline gas and liquefied natural gas (LNG) exports to be greatly increased. In 1989, Algeria exported 14.9 billion cubic meters (bcm) of LNG, making it the world's second largest LNG exporter after Indonesia. Algeria already is the Middle East's leading gas producer, with an output of 44.2 bcm in 1988.

Algerian exports of LNG to the United States rose from zero in 1987 to 49.6 million cubic meters in 1988 and to 1.1 bcm in 1989. Sonatrach, the stage gas marketing company, could well be settling about 13 bcm/year of LNG in the U.S. market by the mid-1990s. The re-establishment of a strong gas export business with the U.S. is a key component of Algeria's drive to compete in established and new international markets with such countries such as Nigeria, Norway and the USSR.

Sonatrach plans to increase its liquefaction capacity from 30.5bcm/year to 35bcm/year by 1992. Western Europe and the U.S. represent Sonatrach's principal markets in the immediate future, but Algeria is anxious to develop new markets in India and the Far East. Assuming success in its marketing efforts to find export markets for 35bcm/year, a further expansion to over 50bcm/year is planned in the decade from 1995.

U.S.-Arab Chamber Sponsoring Visits

The National U.S.-Arab Chamber of Commerce is sponsoring two trade events in June. A delegation of about 12 members of the chambers of commerce and the private commercial sector from the United Arab Emirate (UAE) will visit several U.S. cities beginning in Washington and including Chicago, Cleveland, Atlanta and/or Detroit. The delegation will give briefings to the American business community about legal and economic developments in the Gulf Cooperation Council which make the UAE desirable for U.S. investment and trade.

A group of Saudi businessmen will visit Los Angeles the week prior to the opening of the cultural exhibition, "Saudi Arabia: Yesterday and Today." Following the pattern set in Washington, Atlanta, Dallas and New York, the group will meet with business and community leaders and host student roundtables at local universities.

Moroccan Outlook Brightens

Morocco, the Arab world's oldest monarchy, is making significant progress in restructuring its economy. Since 1980 it has received considerable financial backing from the International Monetary Fund, the World Bank, France, Spain and Saudi Arabia.

Morocco began the 1990s by passing a privatization bill and by starting to work on a foreign trade code, limiting state involvement in the economy and simplifying regulations, to be published this year. In January the government began the process of privatizing 113 of the country's 700 state-owned banks, hotels and industrial plants.

Rabat continues to improve the environment for foreign investors. There has been a move away from limiting foreign ownership of Moroccan companies to 50 percent and toward permitting foreign control of boards of directors. Import duties have been cut on raw materials and foreign exchange procedures and bank guarantees have been streamlined. As a result, foreign manufacturers are beginning to use Morocco as a base for exporting to the Middle East and Africa.

Morocco's economic resources include the world's richest phosphate reserves, a large workforce, a tourist sector which earns $1 billion annually, rich fishing grounds and an agricultural sector far more developed than those in most Middle Eastern and African countries.

According to the IMF, "Morocco's long-term prospects remain favorable, based on the authorities' firm commitment to a growth-oriented adjustment strategy."

John T. Haldane is an international economist and Middle East specialist who has served as a foreign service officer in Baghdad, Cairo and Beirut.