Iraq war 'devastating for African growth"

news.bbc.co.uk Tuesday, 28 January, 2003, 19:43 GMT

South Africa warns of economic mayhem from costly oil imports

South Africa's President Thabo Mbeki fears that rocketing oil prices brought on by a Middle East war could condemn Africa to deep economic crisis, his spokesman has told BBC World Service Radio.

The impact could be severe enough to undo any benefits from a 2002 agreement for leading industrial countries to expand aid to Africa, said presidential spokesman Bheki Khumalo.

Worries about the impact of a conflict on oil supplies have kept prices in sight of $30 a barrel in recent weeks. Most analysts expect the outbreak of war would push prices sharply higher, but differ on for how long.

War with Iraq is would bring "devastating economic consequences" for Africa, playing havoc with inflation and causing budget problems for poor countries, said Mr Khumalo.

'Poorer and poorer'

For this reason, President Mbeki believes war is "not in the best interests of the peoples of Africa", he said.

Thabo Mbeki pushed hard for Nepad but the outcome fell short of pleas

Last year the G8 grouping of industrial nations agreed to step up aid, trade and debt relief to Africa in an anti-poverty pact known as Nepad, the New Partnership for African Development.

War "would put paid to all the high hopes raised by...Nepad...and therefore ensure that the people of Africa would continue to confront the reality of even further impoverishment," the president's spokesman said.

"What it does really is to move Africa off the radar screen of the entire world," he added.

South Africa's ambassador to the United Nations is leading a team of Non-Aligned Movement counties calling for more negotiations, he said.

South Africa wants Iraq to comply with UN resolutions demanding it disarm, he said.

Seeking new supplies

African oil importers such as South Africa, Kenya and Ghana would be vulnerable to any increase in prices, though oil exporting countries like Nigeria could benefit.

Oil exploration in Africa is expanding

International oil firms have stepped up exploration for oil in Africa in recent years, particuarly offshore from Nigeria and Angola.

So far they have not found any deposits big enough to alter global dependence on Middle East oil, a spokesman for Anglo-Dutch oil giant Shell said.

"The major resource holders...in the Middle East will still have the dominance in terms of their reserves," Shell spokesman James Harding told World Business Report.

'Short term problem'

But some oil executives think the oil prices are unlikely to remain at current levels for much longer.

TotalFinaElf chief executive Thierry said prices are likely to fall by mid-2003, as they have partly been driven up by a mass strike halting supplies from Venezuela, the world's fifth biggest exporter.

As long as any war in Iraq was brief, he said, "I don't think there would be too huge (an) impact on the oil price".

Oil prices rose on Tuesday as traders waited the US president's annual State of the Union address, sure to be scoured for clues on US intentions.

Benchmark Brent crude was trading 22 cents higher at $30.08 a barrell at 1746 GMT in London on Tuesday.

In New York, US light crude was 16 cents higher at $32.45 a barrel.