Reuters
SHARM EL-SHEIKH, Egypt: Middle East oil producers seem correctly focused on putting more oil wealth into domestic development and this poses no threat to the U.S. dollar, U.S. Treasury Secretary John Snow said on Sunday. More than $200 billion of extra income has flowed to producers who belong to the Broader Middle East and North Africa (BMENA) initiative since oil prices began rising fast in 2003. It s important that these funds be used wisely and well, Snow told a news conference after meeting the group in Sharm El-Sheikh. Talking to a number of Gulf State ministers today, I think they re intent on doing that. The BMENA group was formed in 2004, with U.S. backing, to promote increased investment and development in the Middle East region. Most of its members are from the immediate region. Snow rejected a suggestion that there was a risk the U.S. dollar might decline in value if more Middle East oil money was kept at home rather than sent to the United States for investment and to buy U.S. Treasury debt. The American capital markets are deep, liquid, resilient and I think those markets will continue to attract capital from around the world … because of their ability to absorb large sums of savings from the world community. Snow met the BMENA members privately at a hotel on the sidelines of a World Economic Forum gathering where about 1,200 business people were discussing the same topic: how to stimulate investment and jobs in the Middle East to create more opportunities for its many young people. The Bush administration takes a special interest in BMENA, partly because the group was formed at the Sea Island, Georgia, summit of Group of Eight leaders in 2004. The United States also shares an interest in seeing jobs and prosperity increase so that terrorist groups are less likely to find the region a fertile recruiting ground. Before Sunday s meeting, U.S. officials described it as particularly topical because high world oil prices had brought a surge of revenue into the region that could be used for good or bad purposes. The oil money is giving the Gulf States a real opportunity to take action in their countries that will be in the long-term interests of their people, Snow said. He said he had the impression that they were being very prudent, very careful and very thoughtful as they considered to what uses that surge of petrodollars can be used for. Before the meeting, U.S. officials noted that on some past occasions, when oil prices jumped the money went into overseas bank accounts rather than being invested in social development and used to strengthen financial institutions. The Treasury Department said Snow wanted BMENA ministers to focus on steps to provide more credit for small and medium-sized businesses, improve regulatory practices in their financial sectors and propose specific, country-by-country reform plans for improving investment climates. Finance Minister Youssef Boutros-Ghali, speaking at the same news conference as Snow, said it took time to find ways to invest the huge new sums productively. You can t just wake up one morning and spend $250 billion, Boutros-Ghali said, adding that so far what was being done was wise and judicious, contrary to what happened in 1973 and 1979 when all of the windfall was squandered away, creating all sorts of problems for the economies and for the people. The United States also wanted the meeting to show that it was open for business despite the row in Congress after a Dubai-based company proposed to take over some managerial operations at U.S. ports. A huge U.S. current account deficit on trade with the rest of the world, about one-third of it for oil imports, gives Washington a strong interest in ensuring Middle East holders of petrodollars see America as a friendly place to invest them. So far, the United States sees no sign that the flow of petrodollars into investments and purchases of U.S. Treasury debt has suffered, U.S. officials say, though they are aware there is some skepticism among Middle East nations over whether they are fully welcomed as investors in America. Sunday s talks were attended by ministers from Russia, Britain, Japan and the United States as well as Middle Eastern and North African nations, and by officials from Germany, France, Canada and bodies such as the IMF and the World Bank. Snow, replying to a question about Iran, said it was important that Iran not acquire nuclear weapons and suggested that others should consider diplomatic and financial actions they have at their disposal to bring Iran peacefully back into the community of world nations. Snow arrived in Egypt on Saturday, and before he returns to Washington on Tuesday he is expected to meet Iraqi government officials to discuss efforts to rebuild its war-ravaged economy.
