UNITED NATIONS: A military conflict in the Middle East could trigger a major economic and humanitarian crisis in the already politically troubled region and would be felt well beyond those borders, according to senior UN officials and economic experts.

“A new conflict would create destruction and havoc within the region to both human life and physical capital,” says Ian Kinniburgh, director of the UN’s development policy analysis division. That destruction, he warned, would have “damaging effects” on the global economy, which underwent a sluggish and unstable recovery last year.

In a 61-page report, ‘The World Economic Situation and Prospects, 2003’, released last week, the United Nations catalogued a long list of negative fallouts from a Middle East war, including human casualties, humanitarian crises, destruction of physical capital and overall disruption of the countries directly involved.

“The major global economic impact of military action in Western Asia (the Middle East) would arise primarily as a result of its effects on the supply and price of oil, on consumer and business confidence worldwide and on macro-economic policies.”

The magnitude of these effects, the study said, would be directly related to the size and length of any conflict.

“A temporary rise in the price of oil would adversely affect oil-importing developing countries but would normally have only a limited impact on the world economy as a whole,” it said.

But, an “oil shock”, a markedly higher price sustained for six months or longer, would have a recessionary effect globally, not only though welfare losses, but also through further erosion of consumer and business confidence.

“Oil exporting countries might initially gain from higher oil prices, but experience indicates that those gains are often short-lived, and even negated, by the slowdown in the world economy that ensues if higher oil prices persist,” the study said.

The world market price of a barrel of crude oil has averaged about 28 to 30 dollars over the last 12 months.

Kinniburgh said a 10-dollar-per-barrel increase, if sustained for six months, “would reduce world growth rates by half a percentage point”.

Sheik Zaki al-Yamani, a former head of the Organisation of Petroleum Exporting Countries (OPEC), was quoted as saying last month that a Middle East war could jack up oil prices to 100 dollars per barrel.

Kinniburgh pointed out that because the anticipated vigorous recovery of the world economy in the second half of last year did not occur, the economy was projected to grow by only 2.8 per cent in 2003, down from the forecast of 3.8 just six months ago.

The US Office of Management and Budget said last week that the cost of the impending war with Iraq has been estimated at between 50 billion and 60 billion dollars, far below earlier estimates of 100-200 billion dollars. But it gave no reasons for the lower figures.

Unlike in the 1991 Gulf War, however, US taxpayers would bear the major costs of the next war. The 1991 war, which cost about 60 billion dollars, was funded mostly by Saudi Arabia, Kuwait and Japan.

According to the UN report, gross domestic product (GDP) will rise little globally in 2003. Japan’s growth rate is expected to go from minus 0.5 per cent in 2002 to 1.0 per cent; the US rate will change from 2.5 per cent to 3.0 per cent in 2003, and the EU rate will increase by 1.8 per cent, compared to 0.8 per cent last year.

Military action would not only harm countries in conflict zones but also have a “substantial negative impact” on economic activity in other Middle Eastern countries, through reduced trade and capital flows, lower workers’ remittances, a drop in tourism and impacts on domestic and international business as and consumer confidence.

During the 1991 war, a mass exodus of migrants from the Middle East to their home nations caused irreparable damage to the economies of several developing countries in the Indian sub- continent, including India, Pakistan, Bangladesh and Sri Lanka, and also the Philippines, Egypt, Jordan and Yemen. According to the Geneva-based International Organisation for Migration (IOM), about 10 million migrant workers currently labour in the Middle East, most of them from India, Pakistan, Bangladesh, Sri Lanka, Egypt, the Philippines and Indonesia.

They work mainly in Saudi Arabia, Bahrain, Kuwait, United Arab Emirates, Qatar and Oman.

According to the World Bank, Egypt’s total remittances from migrant workers amounted to about 3.8 billion dollars in 2000, mostly from the Middle East, while India’s total remittances the same year were about 11.6 billion dollars.

Bangladesh earned about two billion dollars from overseas remittances from the Middle East, the country’s second biggest foreign exchange earner after garment exports. —Dawn/InterPress News Service