Will US politics hit Middle East plans?

10 June 2002 00:00  [Source: ICB]

Maximising the potential of their petrochemical sectors is increasingly a key strategy for a number of Middle East countries. These see industrial, economic and employment benefits flowing from a rapidly expanding petrochemical base.

And yet, externally, a number of geo-political upheavals and internal disputes clouds the picture for key players. The 11 September terrorist attacks on New York and Washington, and the Bush administration's declared 'war on terrorism' has changed everything. For the US, it has intensified its animosity towards Tehran, culminating in President Bush's declaration that Iran is part of an 'axis of evil'.

The country also features high up on the US's list of state sponsors of terrorism. Interestingly, the US approach contrasts sharply with that of the European Union which is keen to support and strengthen ties with reformist elements of President Khatami's regime.

EU countries are pushing hard for the establishment of a trade and cooperation agreement with Iran, which they hope will give European companies a clear advantage over those from the US. At the recent fourth Iran Petrochemical Forum in Tehran, many European companies were present and top executives from Shell and BP gave keynote addresses supporting greater partnerships with Iran. US petrochemical companies were noticeable by their absence.

The terrorist attacks have also strained relations between the US and Saudi Arabia. Legislators on Capitol Hill have noted that most of the hijackers were from Saudi Arabia and sections of the Saudi elite are believed to have links with radical Islamic groups, which are viewed as supporters of terrorism in the US. Influential voices in Washington, such as ex-CIA director James Wolsey, have called for a reduction in US dependence in Saudi Arabian oil and a withdrawal of US military forces from Saudi Arabian bases.

The next stage in the development of the Middle East's petrochemical sector will occur in a more complex and difficult global climate. However, leading players in the region are doing all that they can to create a favourable environment for investment and deeper involvement in the global marketplace.

Sabic's proposed acquisition of the petrochemical assets of DSM of the Netherlands is a huge step in the Saudi company's aim to become a leading global petrochemical player. In Iran, NPC executives will applaud parliament's ratification of the Law for the Attraction & Protection of Foreign Investment, which NPC president and deputy petroleum minister of Iran, has said is 'necessary to give more freedom to the economy and simplify investment law'.

Leading lights within NPC have argued for some time that for the country's petrochemical industry to fulfil its potential and flourish a more favourable economic climate is necessary. The new legislation allows for more direct foreign investment and gives greater protection to foreign and domestic investors, allowing for the repatriation of profits in hard currency.

Regional petrochemical front-runners Sabic and NPC have recently introduced new business models which they believe will increase their competitive edge and allow for greater penetration of global markets. Sabic has established six strategic business units in support of plans to improve customer service, enable faster decision making and increase business accountability.

Iran's marketing operation - Iran Petrochemical Commercial Company - is developing a new marketing strategy which it believes will allow for an expansion of market share and lead to greater market penetration. NPC has also stepped up efforts to support the downstream petrochemical sector by providing technical and financial assistance to potential investors and offering competitively priced feedstock.

Middle East petrochemical players are doing their part to ensure that their sector flourishes. But will world events conspire to derail their full potential?

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