UN willing to arbitrate between oil producers, consumers

The United Nations is willing to play a role in bringing together oil producing and consuming nations for discussion, said a UN official at the organization's department of economic and social affairs last week.

Although shortages of supply are currently a pressing issue in the international oil arena, Ian Kinniburgh, director of the department's development policy analysis division, believes UN Secretary General Kofi Annan could mediate between oil-producing and consuming nations if there were a need and if his efforts were seen as a means to bridge the gap between the two sides.

"The secretary general is always willing to act as an intermediary and play the role of an arbitrator," he told the Iranian News Agency (IRNA).

On the question of a possible dialogue between the UN and the Organization of Petroleum Exporting Countries, he said there is "always a possibility." Nonetheless, he reaffirmed Annan's "concern" about the continuing rise in the oil price and its effects on the economies of developing nations.

In a rare move, the UN secretary general issued a statement the previous week on the last day of the UN Millennium Summit and just before OPEC's ministerial meeting. In the statement, Annan expressed his concern over the "potential impact of high prices on the world economy," particularly "the poorer segments of developing countries," which he said would be hardest hit.

"This is certainly the first time in recent memory that a UN secretary general has intervened in the oil market," said Kinniburgh.

Annan's comment was in reaction to concerns expressed at the Millennium Summit, and particularly at a few roundtables where concern about the impact on oil-importing developing countries was raised by, in particular, Asian countries, the statement went on to say.

Kinniburgh would not dismiss the suggestion that Annan may even have had a few "one-to-one meetings" on the issue with some heads of state during the Millennium Summit.

The secretary general's concern comes as a new UN report, the World Economic and Social Survey, is near release. The report makes references to a UN study on the impact of rising oil prices on oil-importing countries.

IRNA said it obtained extracts from the document showing that, whereas a $10/bbl rise in the price of crude oil reduced gross domestic products in the countries of the Organization for Economic Cooperation and Development (OECD) by only 0.2-0.5%, in oil-importing countries of the developing world, the likely reduction in growth was 0.7%.

"These are only first-round effects though," warned Kinniburgh, referring to further problems such as a deteriorating balance of payments and rising debt-servicing costs, among others.

What concerns everybody is the "speed and magnitude of the rise in oil price," which, according to Kinniburgh, means that all countries�particularly those of the developing world�are ill-prepared to deal with it.