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The bulk of the revenues paid on oil go to
the companies who refine, market and distribute it, and
government taxes. Media in the United States continues to
frame its language on the cost of gasoline in such a manner that
the nations generating the raw material are at fault, rather
than speculation, refiners, marketing costs and the use and
the actions of American, British and the Israeli military in the region
The facts I've seen and original documentation proving such
while assisting economic and Middle East expert Tanya C Hsu on
her upcoming book, (due in Spring 2009) Ultimate
Betrayal: In the Name of Oil, speak otherwise.
What I saw in Palestine, Jordan and Saudi
Arabia during my stay was double digit inflation, the slashing
of budgets, especially related to cultural endeavors, resulting
in the cutting of programs and cancellation of contracts
several years old. I watched in horror as my
American dollars continued to lose power against the Euro and
other currencies. Shopping I noticed how basic necessities such as coffee,
olive oil and fruit escalated in cost with
their prices changing week to week.
Housing was a major issue. While working
on the book we were informed we'd need to vacate the apartment
we occupied in downtown Riyadh. There literally was
no place to move, forcing us to leave the country to finish the
last few chapters in another location. Our apartment building
was scheduled to be razed to make room for a 5-star hotel this
summer. None of the tenants, including three members of the
Royal family residing there, were able to find suitable housing
due to the shortages when we left.
Everything that I witnessed and saw, much
of which was actively discussed among those I met in the
government and private industry is reflected in this report by
Moody. It's something that is being glossed over in the
US, yet it is a direct result of the weakened dollar. The
effects on real estate, the advancement of credit and the
destabilization of whole countries due to social unrest and the
escalating cost of food directly affects business and real
estate markets here.
Consider too this implication. When a
military tank uses 8-gallons of gas to travel one mile, most
fuel saving efforts and accusations by Americans, given our
conduct and use of oil appear hypocritical overseas as well as
self-serving.--Laura
Lewis, Couples Company
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Moody's reports: Middle
East inflation surge sharpens fiscal and political risks
DIFC, June
05, 2008 -- High and accelerating inflation could
potentially hit some Middle East sovereign ratings as it
sharpens political and economic risks, Moody's Investors
Service says in a new Special Comment. The ratings of
poorer, non-oil-exporting countries are more likely to be
affected in the shorter term by high inflation because of
their enhanced social and fiscal vulnerabilities. However,
even the ratings of affluent, oil-exporting sovereigns could
be affected over the longer term if high price growth
persists.
"The Middle
East is currently experiencing a strong resurgence of
inflation. While accelerating price growth is a global
phenomenon, the Middle East region has been particularly
affected because of a preponderance of fixed or heavily
managed exchange rates, an oil-fuelled liquidity expansion,
widespread infrastructure bottlenecks and a reliance in most
countries on food imports," explains Tristan Cooper, a
Moody's Vice-President / Senior Analyst and author of the
report. According to the IMF, the Middle East experienced
the highest average inflation rate of all global regions in
2007, at 10.4%, and this is expected to accelerate in 2008.
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Although
inflation is seldom a direct driver of Moody's sovereign
credit ratings, it can affect them indirectly through three
main channels -- fiscal, political and economic -- and
Moody's is beginning to observe such trends among Middle
Eastern sovereigns.
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Given enhanced
sensitivities to the risk of social unrest, some
governments in the Middle East are finding it
difficult to maintain fiscal discipline. Inflation's
tendency to aggravate political risk is clearly less
acute among oil-exporting countries, which currently
have the capacity to expand fiscal expenditure and
offset the erosion of citizens' purchasing power.
However, poorer countries have less room for manoeuvre, and therefore the
political and fiscal consequences of inflation are of
greater short-term concern," Mr Cooper observes. The analyst
adds that, although accelerating inflation has yet to impact
real economic growth in the region, which remains strong,
there is a risk that it could undermine activity if
sustained." |
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"As would be expected, the ratings of non-oil exporting
countries that are poorer, fiscally constrained and already
experiencing high rates of inflation are more likely to be
affected in the shorter term than those of the more affluent
Gulf oil-exporters. High rates of inflation are of
particular concern in Egypt (whose Baa3 local currency
rating is on negative outlook) and Jordan given their social
and fiscal vulnerabilities. Lebanon's very low B3 rating
already encapsulates a high degree of political and economic
risk," Mr Cooper explains.
Moody's report (Click to download full PDF)
explains in more detail how inflation can affect sovereign
ratings indirectly as well as discussing the implications
and drivers of the current surge in inflation in the Middle
East.
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