Financial Times (Letters): Claims of an emerging Asia-Middle East alliance are unsubstantiated: “…that was long after Royal Dutch/Shell of the Netherlands/UK and Total of France in July 2003 signed a $2bn contract - in other words, if the facts are anything to go by, the energy reserves in the Middle East are being taken over by European companies, not Asian ones.”: Tuesday 11 October 2005

By Jacob Kirkegaard

Published: October 11 2005

From Mr Jacob Kirkegaard.

Sir, It was with some astonishment that I read Anthony Bubalo's assertion "Asia's alliance with the Middle East threatens America" (October 6) of an emerging energy-driven anti-American alliance between Asia and the Middle East. Certainly Mr Bubalo's analysis will benefit from some additional facts.

Mr Bubalo alleges that Asian private companies - unconstrained by human rights and nuclear proliferation issues - are rapidly replacing US commercial interests in the Middle Eastern energy sector and, as proof, he offers the cases of Sudan and Iran, as well as a case of a Chinese energy company's being "one of the first foreigners to gain gas exploration rights in Saudi-Arabia, after the withdrawal of a US bidder - ostensibly for commercial reasons".

While undeniably the US has in place unilateral economic sanctions against Iran and Sudan, preventing its companies from operating here, these two countries hardly make up the Middle Eastern energy sector - indeed they constitute less than 20 per cent of Middle Eastern total production. Yes, a loss to US energy companies, but clearly not the stuff new strategic alliances are made off.

Similarly, Mr Bubalo is jumping way ahead of the facts when discussing the Saudi Arabian gas sector. It is true that Chinese energy company Sinopec in March 2004, together with Lukoil of Russia, ENI of Italy and Repsol of Spain, won a series of gas exploration deals worth approximately $800m, but that was long after Royal Dutch/Shell of the Netherlands/UK and Total of France in July 2003 signed a $2bn contract - in other words, if the facts are anything to go by, the energy reserves in the Middle East are being taken over by European companies, not Asian ones.

His analysis further flies in the face of the revealed interest of many Middle Eastern countries to negotiate free trade agreements with the US. Such agreements already exist between the US and Jordan, Bahrain, Morocco and Oman, while negotiations continue with UAE and, later in the year, possibly Egypt. As trade relations with Asia at the same time remain ad hoc and strictly contract-by-contract, this if anything indicates a clear Middle Eastern interest for deeper and not just energy-related economic relations with the US, rather than any imminent eastward shift.

On the Asian side, Mr Bubalo talks of "Islamic Asia's growing interest in Islamic fundamentalism . . . [as] partly a response to what Asian Muslims see as the penetration of their societies by a decadent and highly commercialised American culture".

Now, this must seem rather curious statement seen from the perspective of the Malaysian government, which recently fought an election aimed principally at limiting the political influence of the genuinely Islamic fundamentalist PAS party in Malaysia, not to speak of the governments of Indonesia, the Philippines or Thailand, which all currently face Islam-linked domestic unrest.

More importantly though, recent competitive elections in Indonesia, Thailand, Malaysia and the Philippines clearly show that the "China Model" of open economic systems and closed political systems, of which Mr Bubalo talks, is gradually losing favour in Asia. In fact, this is one area of the world, where democracy is definitely spreading.

Similarly, Asian countries continue to rely on the US market for its exports and are, just as Middle Eastern countries, gradually deepening their trade links with the US. Already, Singapore has a free trade agreement with the US, while Thailand, Malaysia, the Philippines, Indonesia and Brunei have trade and investment framework agreements with the US. As such, both the economic and the political facts on the ground point in the complete opposite direction to Mr Bubalo's assertions.

Asia's rising energy demands will certainly more and more often put it in competition with a US constrained by its own short-sighted energy policies (and everyone else) over increasingly expensive energy resources, but to see an emerging Asia-Middle East alliance emerge from this, as Mr Bubalo does, is completely unsubstantiated by facts.

Jacob Funk Kirkegaard,

Research Associate,

Institute For International Economics,

Washington, DC 20036, US

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