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Prospect of US-Iran conflict threatens Gulf economies - France 24


Perspective of US-Iran conflict threatens Gulf economies

Dubai (AFP)

The Gulf economies, already depressed by low crude prices, could be affected even more if Tehran retaliated against the assassination of General Qassem Soleimani, which could disrupt oil exports, analysts said.

After the death of the Iranian high ranking officer Friday in an American strike in Baghdad, the oil prices knew a rise which continued on Monday.

"With the threat of reprisals from Iran, there is an increased risk of attacks on oil installations and other targets" in the Gulf States, which would lead to a further increase in oil prices, the agency said. AFP MR Raghu, analyst at the Kuwait Financial Center.

"However, high oil prices may not translate into higher incomes, as more than 20% of the world's oil supply goes through the Strait of Hormuz", which Iran has threatened to block , he emphasizes.

Gulf states that host major US military bases could be the target of attack, particularly Saudi Arabia and the United Arab Emirates in cold weather with Tehran.

Airstrikes on major Saudi Aramco oil facilities in September cut crude oil production by the world's largest oil exporter by almost half.

Ryad and Washington accused Iran of being behind the attacks, which were claimed by Yemeni Houthi rebels backed by Tehran.

Meanwhile, a series of mysterious attacks on ships in Gulf waters last year, which the United States and its allies blamed on Iran, have also fueled tensions and fears for the security of the country. global oil supply.

A further disturbance would lead to a drop in production and exports and, consequently, a decrease in income which could paralyze regional economies largely dependent on black gold.

- Growth at half mast -

Since the mid-2014 oil crash that cost them hundreds of billions of dollars, the Gulf countries, led by Saudi Arabia, have posted persistent budget deficits, weak economic growth and declining foreign investment, which forced them to go into debt.

In October, the International Monetary Fund (IMF) reduced its economic growth forecasts for the Gulf in 2019 to just 0.7%, from 2% the previous year. Saudi Arabia fell to a meager 0.2% due to low oil prices, production cuts and geopolitical tensions.

According to London-based Capital Economics, the price of Brent would drop "to $ 150 a barrel" if Iran decides to close the Strait of Hormuz.

"Any restriction on the ability of the Gulf countries to export oil would cause their economic growth to drop, which will not be offset by the rise in oil prices," Saudi economist Fadhl al-Bouenain told AFP.

But "the transition from a range of 60 to 70 dollars to a range of 70 to 80 dollars per barrel will be much more likely," said Edward Bell, a commodity analyst at Emirates NBD, the second largest bank in the Emirates.

Even if the Strait of Hormuz was closed, some Gulf countries, mainly Saudi Arabia and the Emirates, have alternative passages in the Red Sea and the Arabian Sea. Oman is located outside Hormuz.

The east-west Saudi oil pipeline, with a capacity to transport five million barrels a day to the Red Sea, was hit by Houthi drones in the summer of 2019, which caused a disruption for several days.

On Monday, the rating agency S&P Global estimated that "any escalation would remain contained", stressing that its assessment "already takes into account a certain level of regional geopolitical volatility".

© 2020 AFP

Source: france24

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