For educational purposes only

http://metimes.com/2K/issue2000-4/methaus.htm

Middle East Times January 28, 2000

Saudi Arabia prepares to bid 'sayonara' to Japanese deal Ghaida Ghantous DUBAI

Saudi Arabia is likely to transfer a crucial Japanese oil concession in the kingdom to its own state-run oil company Saudi Aramco if a renewal agreement is not reached with Japan, a Saudi industry official said on January 17.

Japan's Arabian Oil Co. Ltd.'s (AOC) oil drilling concession in the Saudi portion of the Neutral Zone expires on February 27, but the two sides are deadlocked over Saudi demands that Japan funds in its entirety a $2 billion railroad project in exchange for the renewal.

"If the current agreement expires, Aramco will take over on behalf of the Saudi government," the official said. "Aramco will sell the oil produced to its own customers."

Saudi Aramco has already asked its term crude buyers whether they plan to continue lifting crude oil from the Neutral Zone after February.

AOC's oil from the Neutral Zone, shared by Saudi Arabia and Kuwait, is Japan's premier upstream oil interest with 270,000-280,000 barrels per day of production, of which about 60 percent is exported to Japan.

Imports of Khafju and Hour crudes from the Neutral Zone account for about 3.5 to 4.0 percent of Japan's total crude imports, according to AOC and official Japanese data.

AOC's accord with Kuwait on the Neutral Zone expires on January 4, 2003.

AOC, whose own negotiations are being conducted separately from the government-to-government talks, said it would "patiently" continue talks with the Saudi government despite the failure of government-level talks over the weekend.

The Saudi industry official said it was "inconceivable that this negotiation could continue with the company without reaching a successful conclusion on the conditions that were rejected by the Japanese government."

Japanese International Trade and Industry Minister Takashi Fukaya met Oil Minister Ali Al Naimi, Crown Prince Abdullah and other ministers over the weekend, but the two sides failed to come to an agreement on renewing the concession.

Japan has rejected direct investment in the railroad project on the grounds that it would require using taxpayers' money for a private company's benefit and instead has offered a low-interest loan for the project.

AOC is owned 10.9 percent each by Saudi Arabia and Kuwait, with the rest owned by Japanese power companies, banks and private investors.

A Saudi economist said it was no surprise Saudi Arabia turned down the loan proposal.

"There is an allergy spread across the country against foreign loans," he said.

"Anyhow if the Japanese government's proposal is to give a subsidized loan, then they are already abandoning [their own rules] because they will use taxpayers' money to pay the difference between the current commercial rates and the subsidized rates," said the economist, who declined to be named.

Japanese Vice-Minister of International Trade and Industry Katsusada Hirose had earlier said that Japan made "maximum-level" offers to Saudi Arabia during the failed weekend talks on the concession.

However, Hirose said that possible further moves would be studied after Fukaya returned to Tokyo and another Japanese official said he expected another round of talks in the next 10 days.

Reuters

-- PA Engineer (PA Engineer@longtimelurker.com), January 31, 2000

Answers

Acording to a post yesterday , the Japanese government is in such a poor financial situation that they are trying to borrow money from the banks . The banks still have the " non-performing loans " from other asian countries to worry about , both past and present ones. WHO could possibly come up with what appears to be a 2 billion extortion payment for a railroad that will not serve any Jap interests ? Could the Japanese governmen/bankers be looking at the " straw that broke the camels (finincial) back " ? One more nation with no love lost for the Saudi family of blackmailers ! Eagle

-- Hal Walker (e999eagle@FREEWWWEB.COM), January 31, 2000.