West rethinks strategic threats
By Carola Hoyos and Javier Blas
Published: June 21 2008 03:00 | Last updated: June 21 2008 03:00
For decades Washington has seen oil as an issue of national security, worrying that a rogue Middle East country would withhold America's lifeblood as Arab countries did during the 1973 oil embargo.
Now US and European politicians are linking oil - and record food prices - to a new international strategic threat: instability in developing countries.
During the past few weeks senior officials have quietly begun to shift their emphasis of the fuel and food crisis from viewing it as purely a humanitarian and social problem to a concern that governments could fall as hungry and fuel-deprived people take their anger to the streets.
Haiti's prime minister was sacked by the national assembly earlier this year following food protests, Pakistan told Saudi Arabia it could not pay its oil bill this month, and this week China joined a growing number of Asian nations taking the unpopular decision to slash costly fuel subsidies.
Josette Sheeran, executive director of the World Food Programme, has warned that riots in more than 30 countries were "stark reminders that food insecurity threatens not only the hungry but peace and stability itself".
She added that only seven meals separated civilisation from potential anarchy and that some of the world's "gold-standard, new, fledgling democracies" were under the most pressure.
Lee Hsien Loong, prime minister of Singapore, said at last month's opening of a security conference attended by Robert Gates, the US defence secretary, that the stresses from hunger and famine could result in social upheaval and civil strife.
"Between countries, competition for food supplies and displacement of people across borders could deepen tensions and provoke conflict and wars," Mr Lee said.
But it is only now that this thinking has transferred into foreign policy. The most visible signal of this move is tomorrow's oil summit in Jeddah, Saudi Arabia. For the first time 40 ministers and 20 oil executives will meet to discuss what is causing high oil prices and what can be done about them.
Saudi Arabia has realised that it could be blamed for political upheaval in developing nations. The issue is especially acute when it comes to Muslim countries, such as Pakistan, Malaysia, Morocco, Indonesia or Egypt, since Saudi Arabia regards itself as a leader in the Muslim world.
Saudi Arabia fears it could be made the scapegoat for economic woes even in the developed world. In the US, the kingdom's most important customer and ally, Riyadh worries that it will beblamed for deepening the economic crisis as the candidates vying for the White House look to deflect responsibility and win voters in November's presidential election.
The kingdom yesterday confirmed that it would increase its oil output by 200,000 barrels a day to about 9.7m b/d, the highest level in more than 25 years.
Adam Sieminski, of Deutsche Bank, said that with Saudi Arabia appearing to favour lower oil prices and backing that up by pumping more oil, relief to the crisis may be in sight. "With luck, oil prices can be capped below $140 a barrel," he said.
But limiting the oil price at $140 a barrel and halting the rise in food prices will be of little consolation to those who worry about the stability of developing countries.
*Venezuela went back on its decision to skip a meeting of energy producing and consuming countries in Saudi Arabia this weekend after the host country insisted it attend, Venezuela's oil minister said yesterday, Dow Jones reports from Caracas .
On Thursday, Rafael Ramirez had said Venezuela would not attend the meeting.
"In the end, we will go. In the end, Saudi Arabia asked us to go as [one of the] founders of Opec," Mr Ramirez said.
Copyright The Financial Times Limited 2008
Security fears over food and fuel crisis
By Carola Hoyos and Javier Blas in London
Published: June 20 2008 22:02 | Last updated: June 20 2008 22:02
Western countries have upgraded the food and fuel crisis into a national security concern as they fear record high energy and agriculture commodity costs are destabilising key developing regions of the world.
The concerns come as the world suffers for the first time since 1973 from the confluence of record oil and food prices. Corn, soyabean and meat prices jumped this week to all-time highs, while oil prices hit a record of almost $140 a barrel.
This shift toward a national security concern will become apparent at Sunday’s oil meeting in Jeddah, Saudi Arabia, where ministers are expected to warn that developing countries are cracking under the burden of record oil and food costs.
Saudi Arabia, the world’s largest oil producer and the only country able to raise output, has recognised the danger after developing countries, including US-ally Pakistan, pleaded for a reprieve from oil payments.
Morocco was forced last month to ask for an $800m loan from Saudi Arabia and United Arab Emirates to cushion the impact of oil and cereal imports.
One Washington official said: “What we have been watching is behaviour [that indicates] China, India, Indonesia, Vietnam [and] Malaysia simply can’t bare the burden on the central budget and that the medium to long-term confluence of oil and food prices is just too much.” He added: “It is leading to a real security issue where the streets are talking to the president.”
Martin Bartenstein, Austria’s economics minister who is travelling to Jeddah, said on Friday that the risk of social tension caused by high oil prices driving inflation to double digits will be a main tenet of his argument.
“It is very high on our agenda,” said a senior diplomat from a larger European nation.
Senior active and former US, European and United Nations officials said they had met US White House staff on the issue for briefings having been prompted in part by the unrest that toppled Haiti’s government and more recently after several Asian countries risked popular anger by cutting fuel subsidies.
Additional reporting by Daniel Dombey in Washington
Copyright The Financial Times Limited 2008
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