There was good news for the Yemeni economy in early January, when it was announced that the California-based Occidental Petroleum Corp. has signed an agreement with the country’s oil authorities to explore the 6,335 square-kilometer Block 44 in the Hadramaut province in the heart of the country. Block 44 lies north of Occidental's two other holdings in the country, at Masila and East Shabwa, which together already produce more than 250,000 barrels per day.
Also in January, the Yemeni government reported that it was hopeful of finalizing a deal with Indigas, a joint venture headed by the Gas Authority of India, for the supply of three million tons of liquefied natural gas (LNG) per year for a terminal that will be built at Trombay, near Mumbai. Indigas was set up in September 1999 to supply natural gas by pipeline to consumers in India’s populous state of Maharastra. It is expected to become operational during 2003.
But, while the economic news was uplifting, the same could not be said about what was happening on the political and security front. One bloody day in early January, nine people were shot dead at a mosque in the village of Zeideen, north of Sanaa, the country’s capital. Reportedly the massacre was the result of an argument between tribesmen over nominating candidates to run in next month’s municipal elections.
The mosque killing occurred against the backdrop of a deteriorating security situation. A day earlier, the son of Sanaa’s mayor was kidnapped and a week earlier five explosions rocked the southern city of Aden. Several sources have indicated that the Aden Abyan Islamist Army carried out these attacks in an attempt to pressure the government to release a number of their members currently in jail for being involved in terrorist activity.
All this has come at a time when Yemen’s reputation as a place where foreigners are welcome is at an all time low. Irrevocable damage was caused last October when 17 American sailors were killed in an explosion alongside the USS Cole, a US Navy warship anchored in Aden. The blast’s repercussions continue to reverberate and, just recently, five more suspects, including two Egyptians, were arrested on the grounds of possible links to the apparent suicide attack. Three more suspects are being sought, and the Yemeni authorities believe they have fled the country and would like them to be tried in absentia.
To date, the economic repercussions of the attack on the USS Cole have been limited. Saudi Arabia has lately agreed to advance $300 million in soft loans to Yemen to support its development projects. In addition, the Arab Fund for Economic and Social Development plans to finance ventures worth $297 million in the country. These funds will be used to build roads, upgrade the capital’s airport and implement other projects aimed at preserving the country’s cultural heritage. Furthermore, the World Bank has also offered Yemen a $20 million loan to carry out water and sanitary projects in rural areas.
The more than $600 million worth of international assistance will be added to Yemen’s growing energy revenues, which during 2000 reached $1.8 billion, nearly double the previous year’s level. Such revenues were, to no small degree, inflated by the rise in the price of crude oil, but it is also indicative of an increase in production. In 2001, the country plans to inaugurate numerous new energy projects, as it opens to foreign firms a potentially oil-rich, 44,000-square kilometer area ceded by Saudi Arabia following a border pact signed last June. Several companies, including the French Total and Canadian Nexen (formerly Occidental), have already submitted offers to explore the area.
One conclusion that could be drawn from the apparently paradoxical phenomena of political turmoil and economic development is that the two function independently of one another. But this is almost certainly not the case. Yemen is a country with potentially vast natural resources and the country’s economic achievements over the past year are only a fraction of what they could have been had the political and security situation been more stable.
Consider this: Although the Yemeni parliament approved new privatization laws in November 1999, it has made little progress to date in privatizing targeted firms such as Aden Refinery, three cement plants, the national telecommunications company, a pharmaceutical firm, and Yemenia, the national airline.
Authorities have cited a lack of interest from foreign investors as the main factor behind the stalled privatization program, and undoubtedly, the country’s precarious security situation does play a major role in deterring most multinationals from getting involved.
Yemen remains one of the Arab World’s poorest countries. With an average annual per capita income of approximately $280, the majority of its citizens look ahead to a bleak future. This most probably accounts partially for the state’s high incidence of terrorism. — (Albawaba-MEBG)
© 2001 Mena Report (www.menareport.com)
