Small countries face ‘double whammy’ over prospect of war

Small Caribbean countries, many which are battling serious economic problems are now bracing themselves for a further fall out if the US goes to war against Iraq.

Minister of Foreign Affairs, International Trade and Civil Aviation of St Lucia, Julian R. Hunte in Trinidad earlier this week, said the general consensus of trade ministers at their caucus meeting last month and Heads of Government was that the region would be “devastated” by war with the increase in the price of fuel.

Like other Caribbean countries, St Lucia which is dependent on tourism was hard hit by the fall out of the 9/11 terrorist events in the United States in 2001 when visitor arrivals to the island plunged. “ If you compared those who did not travel after 9/11 and compare it to people from Europe who probably will determine that they will not fly because of the fear of terrorism and ...also US (visitors) it’s going to be a double whammy and the effects will be horrendous as it relates to the  economy. “So that every effort must be made to exhaust all the options before a  decision of going to war is concerned,” said Hunte who is due to take up a one year term post as President of the United Nations General Assembly in September.

A war will mean non-oil producing countries big and small, rich and poor will have to spend much more money for oil. With the world oil market stretched nearly to capacity, the Organisation of  Petroleum Exporting Countries (OPEC) have had little success in keeping a lid on oil prices.Crude oil prices have hit their highest levels since the Persian Gulf War of 1991. With a glut of oil worldwide on the eve of the Gulf War, prices spiked at more than US$41 a barrel by October 1990. But a few weeks after the US-led attack on Iraq in January 1991, oil was selling for less than US$18 a barrel.

Analysts estimate war in Iraq would remove about 2 million barrels of oil a day from the market. Some believe OPEC, which does not disclose its production, has the spare capacity to replace that oil. Others believe the cartel’s members are already pumping at full capacity. Ultimately, the price of oil will likely swing with the progress of a war. If fighting were to end quickly, prices would probably fall - though not as sharply as in 1991, given generally tight supplies. But if the conflict were to drag on or if oil facilities in Iraq or neighbouring countries were damaged, prices could remain high.

Last month Caribbean Community (CARICOM) leaders at the end of their Inter-sessional meeting in Port-of-Spain issued a joint statement calling on the US to exercise restraint on taking military action against Iraq and to give weapon inspectors more time to complete their work. The leaders were concerned about the consequences such a war would have on the world particularly on small developing states including those in the Caribbean. They expressed particular anxiety at the consequences a war would have not only for the region of the Middle East, but for the entire world, and the disproportionate burden that would be borne by small developing states,  including those in the Caribbean, which are ill-prepared to cope with the impact of a global recession provoked by volatile oil prices,  severe dislocation to their vital tourism and financial services sectors, and falling levels of investment, according to the statement.

Jamaica’s Trade Minister K.D Knights said higher oil prices will have a catastrophic impact on almost every aspect of his country which is beginning to see some recovery in the vital tourism sector. “We all know the consequences of war. That’s why the emphasis has been on disarming Iraq,” said Knights who was also in Port-of-Spain.” It will affect production, transportation, almost every aspect (of a country).” The Caribbean Hotel Association (CHA) is already setting in motion a number of preparedness and response measures on behalf of Caribbean hotels in light of the tensions in the Middle East and the resulting impact on the tourism industry. “From the experience of the Gulf War and the aftermath of September 11, 2001, a drop in demand is to be expected,” said CHA President Simon B. Surez. “On the one hand, the industry as a whole must be well prepared to weather a difficult period - whose severity will be determined by how protracted or swift is the conflict. On the other hand, it is those that respond proactively with targeted strategies that will have the edge,” said Surez, a hotelier from the Dominican Republic.

The Caribbean Hotel Association is moving forward on two fronts. First, CHA is encouraging its members to put in place policies that protect visitors whose trip is cancelled or who find themselves stranded in the Caribbean. Secondly, CHA is developing a public relations contingency plan to minimise  the negative impact on the Caribbean hospitality industry, by underscoring the region’s key attributes in the current climate, such as its geographical proximity to the United States, safety, and the diverse  offerings for families to travel and spend time together. “In today’s turbulent times, we feel more committed than ever to work in conjunction with the public sector for a common approach,” said St Lucia’s Berthia Parle, 1st Vice President of CHA and Chairperson of CHA’s Advocacy Committee. “We are encouraging Caribbean governments to identify and implement support plans.”Parle said.