IMF, US Treasury chiefs visit Gulf amid oil price slowdown

RIYADH: Saudi Finance Minister Ibrahim Al-Assaf (right) and International Monetary Fund (IMF) Managing Director Christine Lagarde arrive for a press conference following a meeting with Gulf Cooperation Council (GCC) finance ministers in the Saudi capital yesterday. —AFP

DUBAI: Oil-rich Gulf countries face further economic strain as crude prices remain low, requiring them to cut back spending and raise money other ways, the heads of the International Monetary Fund and the US Treasury have said in recent visits to the region. Both IMF Managing Director Christine Lagarde and Treasury Secretary Jacob Lew traveled to Saudi Arabia to speak to the kingdom's rulers, as well as other officials of a regional bloc called the Gulf Cooperation Council.

The nations face increasing strains on their petroleum-powered budgets. Oil prices, above $100 a barrel in mid-2014, have been halved since and now trade under $50. That's forced countries in the region to abandon or slow construction projects, cut salaries and benefits and combine government ventures. On Wednesday, Lagarde said more needs to be done in Gulf countries, including lifting expensive government subsidies on fuel and starting a region-wide value-added tax. While every country in the region has cut back some on fuel subsidies, Lagarde warned that prices remain too artificially low. The region-wide value-added tax also likely remains years away from being implemented.

"The reforms that the GCC countries have been implementing over the past year in response to the decline in oil prices are impressive," Lagarde said in prepared remarks. "Continued fiscal adjustment will be needed over the medium term." Lew yesterday said the challenges provide an opportunity for the GCC "to diversify its economy, expand opportunities for your people and widen the financial base in order to make available additional resources to meet growing development needs." Lew also applauded efforts by Gulf countries to cut funding to militant groups.

US 9/11 law

A United States law allowing victims of the September 11, 2001 attacks to sue Saudi Arabia could have "serious implications" for shared US-Gulf interests, a top Obama administration official said yesterday. US Treasury Secretary Jacob Lew made the comments at the opening of a meeting with finance ministers from the six-nation Gulf Cooperation Council, whose most powerful member is Saudi Arabia. The US Congress voted overwhelmingly in September to override President Barack Obama's veto of the Justice Against Sponsors of Terrorism Act (JASTA).

Fifteen of the 19 Al-Qaeda hijackers who carried out the 9/11 attacks that killed nearly 3,000 people were Saudi, but Riyadh denies any ties to the plotters. JASTA allows attack survivors and relatives of terrorism victims to pursue cases against foreign governments in US federal court and to demand compensation if those governments are proven to bear some responsibility for attacks on US soil. Lew said JASTA "would enact broad changes in long-standing international law regarding sovereign immunity that, if applied globally, could have serious implications for our shared interests."

He said the Obama administration has proven its determination to hold people responsible when they commit "horrendous acts", but "there are ways to do that without undermining important international legal principles." In opposing the law, Obama said it would harm US interests by opening up the US to private lawsuits over its military missions abroad. Saudi Arabia and its Gulf allies have also expressed concern about erosion of sovereign immunity, a principle sacrosanct in international relations. But the potential implications go far beyond the Gulf.

Some British, French and Dutch lawmakers have threatened retaliatory legislation to allow their courts to pursue US officials, threatening a global legal domino effect. Riyadh and Washington have a decades-old relationship based on the exchange of American security for Saudi oil. Lew later met King Salman to discuss economic and financial cooperation between the region and the US, the official Saudi Press Agency said. Global oil prices have fallen by roughly half over the past two years, forcing crude-exporting Gulf states to raise local energy prices, control public sector wages, and reduce capital spending in response to fallen revenues.- Agencies