War to cost $1tr for world economy

<a href=www.gulf-news.com>Read on... Abu Dhabi |By A Staff Reporter | 24-03-2003 Print friendly format | Email to Friend

The U.S.-led war on Iraq could cost the global economy more than $1 trillion in indirect losses and Opec is set to reel under low oil prices once the war is over and Iraq returns to the market in full force, according to an official study.

Citing independent western estimates, the study by the Zayed Centre for Coordination and Follow-up said rebuilding costs in Iraq alone could exceed $120 billion while severe losses are expected to result from global stock market turbulence, a decline in the value of the U.S. dollar, a possible trade war between the U.S. and Europe and a sharp drop in global investment because of an expected surge in terrorist acts.

Once the war is over, Iraq could start pumping crude oil at maximum capacity after the removal of the UN sanctions and this will depress prices and consequently the income of Opec, the study said.

"Iraq's return to the market will be at the expense of other Opec members, mainly Saudi Arabia, Venezuela and other key producers as they have to cut output to give way to additional Iraqi supplies.

"Given the slow growth in demand because of the slackening global economy due to the Iraq war, prices will sharply decline and this will put further pressure on other members to cut output. A fresh price war among producers is not ruled out because the Opec might be forced to change its policy of defending prices to defending its market share."