Exports threatened in Iraq war

By MATHEW DEARNALEY

Exporters were warned by a top diplomat in Auckland yesterday that war in Iraq was likely to dent their order-books unless Saddam Hussein surrendered within the first two months.

Richard Grant, deputy secretary of foreign affairs for external economic and trade policy, said a brief conflict would probably mean little more for the world economy than a sharp but short spike in oil prices.

That was the experience of the 1991 Gulf War - which lasted just 42 days - after which spot oil prices retreated quickly from a peak of more than US$30 a barrel.

But Dr Grant, a former high commissioner to London and ambassador to Paris, said a medium-term conflict of perhaps three to four months would spread the damage by depressing consumer confidence.

"That starts to be important for us because we rely very heavily on export marketing," he told a Northern Employers and Manufacturers' Association seminar entitled "Business in the New World Disorder".

He also noted that United States Federal Reserve chairman Alan Greenspan didn't seem to be losing much sleep over war fears, having devoted just five sentences to Iraq in 35 minutes of testimony this week to a senate committee.

Dr Grant said some experts were suggesting financial markets had already factored the effects of a short Iraq campaign into oil prices.

But questions surrounded the availability of Iraqi oil even if the conflict was brief, with one study suggesting the country's oilfields had fallen into such neglect that significant infrastructure investment was needed to release large quantities into the market.

The diplomat appeared to express stronger concern about North Korea's threats to develop its nuclear capability, given that New Zealand exported well over $1 billion a year in goods and services to South Korea.

Our economic relationship with South Korea, which sent 110,000 visitors here last year, had immense potential for growth but the threat from the north put at risk decades of hard-won prosperity.

The US Embassy's Deputy Chief of Mission, Philip Wall, said oil was not his country's motive for wanting to disarm Saddam Hussein by force if necessary.

"Saddam Hussein is already selling oil on the international market and quite frankly it would be cheaper for us to buy it than seize it," he said.

He said the US still hoped to bring about disarmament peacefully, but United States Secretary of State Colin Powell had pledged that even if conflict was necessary, Iraqi oil would still belong to its people afterwards and would not be exploited by the United States or anyone else.

Herald feature: Iraq