Gulf states less affected than other oil producers

The UAE and other Gulf oil heavyweights will be less affected by the global economic crisis than other crude producers given their massive wealth and economic diversification programmes, a UAE bank said yesterday.

The state-run Emirates Industrial Bank (EIB) said the six Gulf Co-operation Council (GCC) countries, which control nearly 45 per cent of the world's extractable crude reserves, have enjoyed several years of oil boom, which allowed them to amass massive assets and fund mega projects in petrochemicals and other sectors.

In its monthly Arabic language bulletin, EIB said the GCC producers were the main beneficiaries of the sharp increase in Opec's revenues this year.

The bank said a surge in crude prices pushed up those revenues by nearly 33.8 per cent to a record $977 billion (Dh3.58 trillion) last year from about $730bn in 2007.

"If oil prices continue to decline or stabilise at their present low levels because of the global financial crisis, oil producers in general will suffer from economic problems. Many of them have built up huge financial reserves over the past five years of the oil boom but an important part of those reserves has evaporated due to the global crisis," the bank said in its December bulletin.

"But GCC countries could be in a better position as they have exploited the oil boom to build up their financial reserves and embark on mega infrastructure projects and large enterprises covering petrochemicals, aluminum and other development sectors as part of efforts to diversify their economies.

"As these projects will begin production within the next few years, they will largely support the GCC's economic diversification plans. The improvement and development of their infrastructure will also make them more attractive for foreign investment. All these developments will allow them to partly offset the possible negative effects of lower oil prices and the global financial crisis."

The report gave no breakdown for Opec revenues but according to the United States Energy Information Administration (EIA), the crude export earnings of Saudi Arabia, the world's dominant oil power, peaked at about $274bn in the first 11 months of 2008.

The EIA estimated revenues at $88bn for the UAE, about $77bn for Kuwait and nearly $36bn for Qatar.

The surge in these countries petrodollar income over the past four years sharply boosted their foreign assets, which peaked at about $1.46trn in June 2008. They stood at nearly $1.24trn at the end of 2007, about $933bn at the end of 2006 and $738bn at the end of 2005. The assets were estimated at less than $200bn at the end of 1999.

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