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Jordanians Worry about Economic Impact of Possible War Against Iraq - 2003-03-19

Jordan is already taking measures to offset any negative economic impact of war in neighboring Iraq. The country is heavily dependent on Iraqi oil imports and business leaders fear investors will shy away from a region in turmoil, as they did after the first Gulf war. For Jordanians like Sheikh Suleiman Mohammed Khatab in the southern city of Ma-an, bad times will only get worse. Mr. Khatab talks about the despair of Ma-an's jobless youngsters as he sips endless cups of tea in his small and simple cement home.

Mr. Khatab, who heads one of the tribes that dominate the impoverished area along Jordan's border with Saudi Arabia, is a source of advice and help.

"People here are already suffering from a bad economy," he said. "There is a lot of poverty, a lot of unemployment. The government is investing but not enough. We feel left out."

Ma-an was the scene of unrest last November. Residents blame it partly on simmering anger over deteriorating economic conditions. Mr. Khatab says war in Iraq will mean even less government help.

Government officials know the war will take a toll in Jordan. But economists figure it won't be as bad as the 1991 Gulf War when Jordan paid a heavy price for not supporting the U.S.-led coalition against Saddam Hussein. At that time, Jordan lost much of its foreign aid and trade with Europe and the United States.

This time Jordan is remaining quietly on the sidelines and expects Western aid and new free trade agreements with the United States to help compensate for its losses.

War will cut off Jordan's supply of cheap Iraqi oil and that will force it to buy oil on the open market at higher rates.

Trade Minister Salaheddin al-Bashir says consumers will end up paying for the increase.

"The budgetary impact because of that will be significant and I see no option but there will be rise in the price of energy in this country if the interruption is there," he explained.

Mr. al-Bashir notes that war also will disrupt cross-border commerce with Iraq, which accounts for nearly one fourth of Jordan's trade revenues. Last year exports to Iraq totaled about $400 million.

Economist Marwan Kardoosh says the disruption will put a heavy strain on Jordan, just as it did after the last Gulf War.

"In 1990 and 1991 the Iraqi economy was very much our bread and butter," he said. "Jordanian industry historically has been geared to the Iraqi market. Trade, our exports and imports combined were extensively with Iraq."

Tourism, a key source of revenue, has plummeted as Israeli-Palestinian violence continues to deter travelers from the region. The one exception these days is a flood of foreign journalists who have filled some of Amman's central hotels and restaurants to cover the war in neighboring Iraq.

Trade Minister al-Bashir also worries about the impact on Jordan's efforts to boost trade with Europe and the United States.

"We're seeing in the last two months some hesitance and drop of U.S. buyers of goods mainly out of Jordan, probably from concerns that the goods won't arrive on time or that the regional instability would impede the logistical support that this country is giving to goods exported to the U.S. market," said Mr. al-Bashir .

Still, economist Marwan Kardoosh looks beyond the war and sees a brighter future.

"Jordan, being the closest in terms of geographic proximity and having historical ties with the Iraqis, would have, Jordanian businesses, the opportunity to capture [market] in Iraq trying to rebuild what is ruined during the war or trying to do more extensive business ties with the Iraqis because these ties were limited after 1991," he said.

Mr. Kardoosh predicts long-term benefits from a more stable Iraq next door. But he estimates short-term losses at more than $1.5 billion in losses from decreased trade, tourism and business ventures while a volatile Middle East still appears a risky investment.