October 13, 2003
World Media Watch
by Gloria R. Lalumia
BUZZFLASH NOTE: Once again, these are the views and perspectives of the individual papers, not of BuzzFlash or Gloria. They offer BuzzFlash readers a way of reading what other nations are saying about the crisis, whether we like it or not. We repeat: This is not an endorsement of their viewpoints.
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1//The Independent, UK--BLAIR ACCEPTS HE WILL BE 'CALLED TO ACCOUNT' FOR DECISION ON IRAQ WAR (Mr Blair accepted the warning of the Archbishop of Canterbury, Rowan Williams, who said last week that the Prime Minister would be "called to account" for his actions...But he backtracked over the issue of weapons of mass destruction, stopping short of claiming that they would be found by the Iraq Survey Group which is searching for evidence of Saddam's covert weapons programme. He said that his main case now was that Saddam's regime was engaged in a "huge operation of concealment".)
2//Daily Yomiuri, Japan--BASRA LIKELY SITE FOR SDF IRAQ DISPATCH (The government is working to finalize a plan to dispatch Ground Self-Defense Force personnel to Iraq under a special law enacted in July to extend support for the reconstruction of postwar Iraq, with Basra, a key city in southern Iraq, as a probable location for the GSDF mission, government sources said Saturday.)
News, Saudi Arabia--IRAQ: LIBERALIZING A SHATTERED ECONOMY
(The recent plans announced by the interim Iraqi
Governing Council to fully liberalize the economy and open
all sectors except oil to 100percent foreign ownership have
raised alarm among different Iraqi groups. Many rejected
the reforms as being premature and may end up with foreigners
controlling and/or owning the country's economic infrastructure
sold at low prices. The reforms were announced ahead of a
donors' conference for Iraq scheduled for Oct.23 - 24in Madrid
with the hope of raising some $ 70billion to finance reconstruction
over four to five years...The new rules are subject to "adoption
or replacement" by a future, elected Iraqi government.
Given the shock expressed by many Iraqi businessmen at the
speed and scale of the reforms, one should not rule out the
possibility that a future regime may choose to reverse these
5//The Moscow Times, Russia--DOORS OPENING WIDER FOR EXXON (But with Yusufov apparently giving the nod of approval for Exxon to come in just one day after law enforcers stepped up the pressure on Yukos CEO Mikhail Khodorkovsky in new raids, many observers were left scratching their heads as to what the Kremlin's endgame is. In those raids, investigators seemed determined to leave their mark, emptying entire filing cabinets and even kicking through a wall to seize a computer in the company's business compound in the elite Moscow region village of Zhukovka...Chevron is also rumored to be considering buying a stake as a race heats up between multinationals for a chunk of Russia's reserves.)
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Independent 13 October 2003
BLAIR ACCEPTS HE WILL BE 'CALLED TO ACCOUNT' FOR DECISION
ON IRAQ WAR
Tony Blair has acknowledged that he will be "called to account" over his decision to go to war in Iraq and has accepted that he will be judged on whether he can build a more stable and peaceful future for Iraqis.
Mr Blair accepted the warning of the Archbishop of Canterbury, Rowan Williams, who said last week that the Prime Minister would be "called to account" for his actions.
Mr Blair, in an interview with The Times today, defends his decision to launch a military strike against Saddam Hussein. "I believe that I made the right decision, but I accept it is a big responsibility. He [Dr Williams] was right than in the end you are, and should be, held to account for such decisions," he said.
He also admitted that he bears responsibility for starting the war and must now see through the process of reconstructing the war-torn country. "Those who started the war must finish the deed and we will. The judgement will be made by whether we make life better or not," he said.
But he backtracked over the issue of weapons of mass destruction, stopping short of claiming that they would be found by the Iraq Survey Group which is searching for evidence of Saddam's covert weapons programme. He said that his main case now was that Saddam's regime was engaged in a "huge operation of concealment".
He said: "Why have this concealment if there is nothing to conceal? I believe that when they interview all the different people they will find what we anticipated was the case, which was that he was in plain breach of the UN resolutions and had no intention of abiding by them."
He denied that relations with France and Germany, which opposed the war, had been seriously damaged.
BASRA LIKELY SITE FOR SDF IRAQ DISPATCH
The government is working to finalize a plan to dispatch Ground Self-Defense Force personnel to Iraq under a special law enacted in July to extend support for the reconstruction of postwar Iraq, with Basra, a key city in southern Iraq, as a probable location for the GSDF mission, government sources said Saturday.
The north part of Basra surfaced as a possible location for the GSDF mission because the government's fact-finding team, which returned home Wednesday, reported to the government that:
-- Law and order had been relatively restored in the city.
-- The need of people there for water, electricity and medical treatment was acute.
-- No other countries had reconstruction forces currently deployed in the area.
According to the sources, the team found that multinational forces led by U.S. and British troops were working to restore law and order in such cities as Basra and Nassiriya, another southern Iraqi city about 150 kilometers northwest of Basra, and that those cities, which were less damaged in the war, were relatively calm.
As for the GSDF's possible mission , the team found that there was a high demand for water purification and supply for U.S. and British troops.
"Operation of water purification vehicles around the clock should be considered," a member of the team was quoted as saying.
IRAQ: LIBERALIZING A SHATTERED ECONOMY
The package of economic reforms was made public by the interim finance minister at this year's annual World Bank/IMF meeting held in Dubai last month. Investors in any field, except for oil production and refining, would be allowed100 percent ownership of Iraqi assets, full repatriation of profits, and equal legal standing with local firms. Foreign banks would be welcome to set up shop immediately, or buy into Iraq ventures. Income and corporate taxes would be capped at 15 percent. Under new bank rules, six foreign banks will be allowed "fast-track" entry into the country and will be permitted full ownership of the local banks within five years. Tariffs would be slashed to a universal 5percent rate, with none imposed on such imports as food, medicine, books, and other humanitarian goods.
Other initiatives have already created an independent central bank, as well as, a trade bank backed by a consortium of 13 foreign banks and a $ 500million credit from America's Export-Import Bank. Together, the moves hold the promise of placing Iraq back into the global economy in record time. The new rules are subject to "adoption or replacement" by a future, elected Iraqi government. Given the shock expressed by many Iraqi businessmen at the speed and scale of the reforms, one should not rule out the possibility that a future regime may choose to reverse these changes.
Discarding of 40 years of national-socialist culture and replacing it with a liberalized private economy cannot happen overnight. The country needs to invest in education, health, infrastructure, public administration, police and army, a new legal system, a new currency, and a new constitution, besides putting in place an effective court system and a functioning democracy.
However, the situation is not hopeless. The Iraqis remain relatively well educated and the status of Iraqi women is better than in many Arab countries. Huge oil reserves and sufficient water resources are not the only assets that the country has, there are 4 million Iraqis living abroad who can contribute experience and money.
However, despite this wealth, Iraq has witnessed continuous deterioration since 1980 and its economy shattered by three wars, thirteen years of UN sanctions, mismanagement and massive corruption has become one of the least developed in the region. Iraq's oil sector remains in very bad shape. After averaging 2 mbpd in 2002 , oil production dropped from 2.4 mbpd in February this year, (i.e. before the US invasion of Iraq in March 2003 ), to 300, 000 bpd in May, 500, 000bpd in June, 700, 000 bpd in July and 1m bpd in August and September. Domestic oil consumption is estimated at 0.5m bpd.
The most serious constraints on Iraq's oil production and export capacity are sabotage, frequent power cuts and the looting of oil facilities, particularly in the southern fields. Furthermore, Iraq's main export pipeline, which carries oil from the northern fields around Kirkuk to the port of Ceyhan in Turkey, has been blown up on several occasions and there have been numerous attacks on the country's internal pipelines.
Iraq's oil production level so far this year has averaged 1.088m bpd, while Brent crude has been trading at an average of $28.5 a barrel during the first three quarters of the year. Assuming oil production cost of around $2 a barrel and another $3 a barrel discount of Iraqi crude to Brent crude, this leaves an average price so far this year for Iraqi crude of $23.5 a barrel. Iraq's total oil GDP would then come to around $9.3 billion at present levels of oil production and prices.
A series of GDP estimates in current US dollars for all the Arab countries including Iraq are published in the authoritative annual Arab Unified Economic Report prepared and edited by the Arab League, Arab Fund for Economic and Social Development and the Arab Monetary Fund. This report shows Iraq's GDP for 2001 at $ 81 billion, the third highest after Saudi Arabia and Egypt. These figures are based on official foreign exchange rate when converting GDP value of non-oil sectors from Iraqi dinars to US dollars. If the market rate of 2,500 dinars to the dollar were used, Iraq's GDP figure would not exceed $ 15 billion, and the country's total GDP this year would be in the range of $ 25 billion.
Iraq is heavily indebted country.
However, these are just two elements of a vast reconstruction program that could be as high as $ 100billion. Iraq's private sector is still in its infancy and given the country's underdeveloped financial and capital markets, economic growth will be mainly driven in the coming few years by government expenditures financed by oil revenues.
It may be premature to transform Iraq now into a virtual free-trade zone. As had happened elsewhere in the world, opening up the country is normally a gradual process and should be supported with political reform and stability. It is therefore essential that the Coalition Provisional Authority restore security and basic services, push reconstruction forward, and expedite the transition to an internationally recognized, sovereign Iraqi government. Joining the WTO and implementing the much needed liberalization reforms would then follow in due course.
JAPAN: THE RAPID RUN ON DOLLAR ASSETS
TOKYO - With the Nikkei stock average currently flirting with 11,000, up about 45 percent from its post-bubble 13-year low of 7,607.88 in April, it is starting to appear that a run on US dollar assets could well be causing the rise in Japanese stock markets.
The yen has surged through the psychological barrier of 110:US$1, creating a sense of crisis as the run on dollar assets gains momentum. Japanese authorities are cautious about intervening heavily before Prime Minister Junichiro Koizumi reaches an understanding on the currency in his meeting with US President George W Bush on October 17-18 in Tokyo.
According to one estimate, by Kyoto University Economics Professor Takamitsu Sawa, foreign investors have markedly improved the fundamentals of the Japanese economy by turning into huge net buyers of more than US$1.7 trillion in Japanese equities and assets and, by running away from their dollar positions, are thus generating a self-feeding cycle of further selling dollar assets and pushing up the Japanese markets even more.
The flight of global investors from the dollar has serious implications, not only for the health of markets such as Japan's, but because of the peril to the US economy and thus the global economy as well, for which the United States has acted as economic engine and importer of last the resort. The US must take in $55 billion per day in investment in government paper and securities to fund the enormous deficits in its fiscal budget and its current account, the total balance of goods and services it trades with other countries. The current account deficit is expected to hit more than $540 billion in 2003, with the fiscal deficit trending towards $600 billion when off-budget liabilities are factored in.
However, since the events of September 11, 2001, fiscal and military decisions by the administration of President George W Bush have raised concerns (see The end of American economic supremacy?, Sep 19) by both US fund managers and individual investors about the long-term health of the American economy. By diverting their investments outside the United States, these fund managers are corroborating a bleak long-term view of declining US economic strength, gradually running away from dollar assets to buy other assets or currencies like the euro, the yen and the yuan.
DOORS OPENING WIDER FOR EXXON
In the government's strongest endorsement yet of a possible sale of a stake in YukosSibneft to global oil giant ExxonMobil, Energy Minister Igor Yusufov said Friday that Russia would welcome such a deal as a "positive step."
"Of course, it fills us with pride that discussions are under way with the first company in the world, ExxonMobil," Yusufov said at a news conference for foreign reporters, AP reported.
His statements capped a week of growing murmurs of approval about an Exxon deal. First, President Vladimir Putin confirmed in an interview with The New York Times on Oct. 4 that talks on a sale were going on, but said that although the Russian government welcomed foreign investment, it expected to be consulted first.
Then, on Tuesday, an unnamed government source seemed to crack open the door for Exxon, telling Interfax there were no legal barriers for it to buy a large stake in YukosSibneft.
"There are increasing signals from Russia that it would welcome a deal. It seems that this could be coming to a head," said Paul Collison, senior energy analyst at Brunswick UBS.
But with Yusufov apparently giving the nod of approval for Exxon to come in just one day after law enforcers stepped up the pressure on Yukos CEO Mikhail Khodorkovsky in new raids, many observers were left scratching their heads as to what the Kremlin's endgame is. In those raids, investigators seemed determined to leave their mark, emptying entire filing cabinets and even kicking through a wall to seize a computer in the company's business compound in the elite Moscow region village of Zhukovka.
Some analysts have speculated that Khodorkovsky has been pushing for a sale of a stake in his company to a foreign oil major as a way of gaining protection from further Kremlin attack. The Yukos founder has been under fire from prosecutors since July when they jailed core Yukos shareholder Platon Lebedev on fraud charges and also opened investigations into alleged tax evasion, murder and attempted murder by company officials. Observers have seen the onslaught as a response to Khodorkovsky's financing of opposition parties amid a battle for position ahead of elections between two opposing Kremlin clans.
But others say that under such tense circumstances, the only way the normally ultra-conservative ExxonMobil could go in would be for it to receive assurances that Khodorkovsky's role in YukosSibneft would be diminished after the sale -- a prospect that could dovetail with Kremlin wishes to rein him in.
"[The sale of a stake to a foreign oil major] could be a double-edged sword for Khodorkovsky," said Alexei Mukhin, the director of the Center for Political Information. "On the one hand, it could make him untouchable. But on the other, it could end up diminishing his clout. That's what the Kremlin could be eyeing."
Chevron is also rumored to be considering buying a stake as a race heats up between multinationals for a chunk of Russia's reserves.
"If Exxon did come in, it would be in line with what Putin did with other troublesome businessmen," Collison said. "It would allow him to keep his wealth but exit the scene to some extent.
But others said the situation appears to be far from cut and dried. "The reason why they're nervous about Khodorkovsky is that by bringing in a foreign company, it would make him immune [to attack] and he would still have a political agenda," said Stephen O'Sullivan, co-head of research at United Financial Group. "Even if they bought him out completely, he would have $20 billion in his pocket, enough to fund any political campaign. I'm not sure that's going to make him any less troublesome."
otherwise noted, all original