Oil glut could hurt Western security interests. Jordan, Pakistan, and Egypt are three areas of concern
The current depression of petroleum demand and prices is expected by most analysts to continue for several years. Between 1979 and 1984, free world demand for oil dropped 10.4 percent. While consumers welcome this trend, the long-term implications for Western security commitments in the third world are ominous.Skip to next paragraph
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The glut's impact on oil-producing countries themselves is obvious, and has received substantial press and scholarly attention. Saudi Arabia, for instance, has cut production by some 5.4 million barrels a day since 1980. It can no longer shield its populace from the economic effects of this situation by drawing down reserves.
But what about the potential effects of this drop in income on stability in resource-poor countries that supply labor and receive aid from the petroleum giants? Many of these countries are crucial to the Western world's security. Three examples are Jordan, Pakistan, and Egypt.
Jordan: An estimated 41 percent of Jordan's work force has been exported in recent years, mostly to oil-producing states. Also, Jordan depends on allocations from richer Arab states for defense and budget support. These sources of foreign exchange are decreasing or in jeopardy because of the oil glut and the Iran-Iraq war.
A sense of economic malaise is shared by Jordanian businessmen of all strata. ``Private businessmen are worried about the future, and few contracts are being let,'' observed a trading and construction company manager in Amman, the Jordanian capital, recently. ``Travel is down significantly,'' complained a travel agency owner.
Hard statistics reinforce these impressions. The fact is that Jordan has few resources other than its relatively talented people. And when demand for their services is down, the country's economy suffers.
These economic symptoms have not prompted serious political discontent. But they increase the potential susceptibility of groups within Jordan to manipulation.
Pakistan: Remittances from Pakistanis working overseas from the mid-1970s through 1984 accounted for the single largest source of foreign exchange for the government of Pakistan. The total number of legal and illegal Pakistani workers in the Middle East proper probably exceeds 1 million -- between 5 percent and 7 percent of the total Pakistani labor force. Reduction of the flow of these remittances is of unusual importance.
At the same time, the government faces pressure in a number of areas: separatist pressures in Sind and Baluchistan provinces; some 3 million Afghan refugees; widespread political hostility toward the authoritarian President Muhammad Zia ul-Haq; a tradition of military interference in politics in times of public disorder.
Many observers believe that Pakistan's stability since Zia's assumption of power in 1977 is largely attributable to improving economic conditions. Decreasing remittances and other transfers from Saudi Arabia and the Persian Gulf states threaten this economic health.
Egypt: Egypt earned about $2.8 billion in oil sales and $3.4 billion in remittances from Egyptians working abroad in fiscal year 1984. Egyptian authorities report a significant drop from both sources of income this year.
Cairo's basic political dilemma is sustaining healthy economic growth without further alienating either leftists or the country's large number of potentially subversive fundamentalists.
The plight of Egypt's politically volatile lower-income strata is superficially helped by substantial state subsidies which produce artificially low prices for such everyday commodities as bread, heating fuel, gasoline, and other basic energy products. These subsidies have introduced distortions into Egypt's economy, using capital needed for investment purposes and hobbling the prospects for genuine growth.
The government is trying to reduce these subsidies gradually, in a manner that does not arouse severe political opposition. The fall in revenues because of depressed petroleum conditions renders this vital effort much more politically dangerous and difficult.
The writer was a government official for two decades before becoming a consultant on international affairs. He recently visited the Middle East.