North Yemen has many reasons for playing down oil potential

As the newest oil producer on the Arabian Peninsula, North Yemen is conspicuous only for a determination to play down its potential. The first and last official hurrah was in July 1984, when President Ali Abdullah Saleh announced a flow of 7,800 barrels of oil and 50 million cubic feet of gas a day from the nation's first test well.

Since then, the government and the successful prospector, Hunt Oil Company of the United States, have been silent. Hunt is said by observers here to have explored four fields with a capacity of producing from 200,000 to 400,000 barrels a day within four years. But North Yemen's longer-term oil future has been left to the speculation of foreign businessmen, diplomats, and the overseas aid community.

President Saleh has several reasons for keeping the lid on information about the nation's reserves:

Even if the resources are extraordinary, it could take four years or longer to develop them for export if the world glut continues. A more immediate concern is how to husband this otherwise poor country through the interim.

At least half of Yemen's 2 million workers are in neighboring Saudi Arabia, and the last thing the president wants is a stampede for home. Yemenis in Saudi Arabia sent their families almost $1 billion last year -- a figure equal to almost one-third of the gross national product.

While most of the money bypassed the treasury, it helped Yemenis to start small businesses and buy land, equipment, and other benefits beyond the capacity of the domestic economy. The government can ill afford to have these workers at home, unemployed and disgruntled.

Saleh is also keen to preserve Yemen's favored-nation treatment as a so-called least developed country. Donors have been willing to overlook foreign remittances boosting the annual average per capita income from a qualifying low of $420 to about $1,500. But the oil find is forcing some to rethink their position.

``We have just begun a new four-year planning cycle for Yemen and aid will be maintained at current levels through that period,'' says Jan Roos, the Dutch charg'e d'affaires. ``But beyond that we might have a new set of circumstances.''

Among those considerations, according to British and American officials, could be a swing from cash grants and loans to less flexible arrangements for technical assistance, coupled with smaller loans or a steep rise in interest rates from today's concessional 21/2 percent.

Dragoslav Zdravkovic, who heads the United Nations Development Program in the capital city of Sana, agrees that oil money could put a crimp in Yemen's aid budget. But, he adds, a stronger economy would probably mean more rather than less activity in social development. ``The needs here are enormous and they won't disappear overnight,'' he says. ``Seventy-five percent of the population is illiterate. The infant mortality rate is one of the highest in the world. The development agencies will stay, but the y might ask the Yemenis to pay more of their share.''

According to Scott Robinson, a former British civil servant in Yemen now working with the Shell Oil Company, the opening of an oil refinery next year could save the country about $120 million a year from its current $400 million balance of payments deficit.

``I have a gut feeling that they have at least as much oil as Oman, and perhaps considerably more,'' Mr. Robinson says. ``The interesting thing to me is that when Oman found oil it had very little else. Yemen already has roads, schools, hospitals. So that oil -- while it might not be all that significant in terms of world prices in the near future, as it has been for countries like Saudi Arabia and Kuwait in the recent past -- will have very considerable influence on Yemen's capacity for development.''

Oil will also give a psychological lift to President Saleh, whose interest in better relations with his counterpart, Ali Nasser Muhammad in South Yemen, makes his northern Saudi Arabian neighbors very nervous. South Yemen is a Marxist state with close ties to the Soviet Union.

The fear of a unified Yemen with left-wing leanings and a population of 13 million is a constant in Saudi politics. Saudi Arabia feeds millions of dollars a year into North Yemen's budget and gives considerable indirect aid to foster better ties. Given the Saudi desire to maintain ties with noncommunist North Yemen, it is apparent that financial independence is not something the Saudis wish for their neighbor.

British and American observers appear less concerned by talk of unity and say that the present North- South Yemen ties are preferable to the conflict of the late 1970s when South Yemen sponsored raids on the north.

``The Soviet Union provides a lot of military aid and the Americans, although they provide less military aid, are the major donors of civilian aid,'' says one British expert. ``I don't think they particularly love the Americans, but I don't think the relationship with the Soviets is a natural one at all. As long as both sides are prepared to continue giving, then the Yemenis will tug their forelock to both.''