SAUDI ARABIA: June 17, 2008


DUBAI - Saudi Arabia's emergency energy meeting next week brings together Western consumer countries threatened by soaring oil prices with Arab producers worried about scarce food supplies.


Record oil prices and their impact on the industrialised world will no doubt dominate the agenda, but food security could also feature as arid Middle East states worry about affordably feeding their rapidly growing populations.

Poor harvests, low stocks and rising demand have sent food prices to record highs, stoking protests, strikes and violence in Africa, Latin America, Asia and the Middle East. Dwindling water makes the issue more dramatic for the Gulf Arab region.

"We are entering a new arena here," said chief economist John Sfakianakis at Saudi-based SABB bank.

"Just as Saudi Arabia is saying to the world, we will supply you with enough oil, they want the world to say to them, we will supply you with enough food."

United Nations Secretary General Ban Ki-moon, in Jeddah on Sunday ahead of the summit, linked the issues seamlessly and called on participants to address the issues together.

"The issues of food prices, fuel prices and climate change should be addressed in a comprehensive manner," Ban said.

While the pursuit of food security is nothing new to the Middle East -- a region that enjoys less rainfall and imports more food than anywhere on earth -- the stakes are higher this time because of the role of oil.

High oil prices and the fact that they are likely to remain high means that the region is on a sustainable growth path in financial terms, its populations can expand and the level of wealth and overall economic growth can rise further still.

The high price of oil also means that the pursuit of food self-sustainability will fall from fashion, as the physical limits of the region, particularly in terms of water, make it unwise to grow wheat in the desert.


NEW TIES

Instead, with foreign currency pouring in and with the likelihood that it will continue for the forseeable future, food security for the Middle East means new ties to countries that are able to produce food affordably.

The Saudi government this week said it was in talks with Sudan, Egypt, Ukraine, Pakistan and Turkey to allow Saudi companies to establish projects for wheat, barley, soya bean, rice and animal fodder.

Bahrain is also said to be seeking to invest in rice farmland in the Philippines in a move to boost food security. The United Arab Emirates (UAE) has held strategic talks with Pakistan over a framework for investment in agriculture.

"A lot of these countries like Saudi Arabia and the UAE want to become more food independent, so they are trying to strike bilateral agreements in order to secure the import of food items," Sfakianakis said.

Food security no longer equates to self-sufficiency as population growth and the natural limits of the land -- due partially to drought, disease and conflicts -- have in many cases been surpassed.

Indeed, there is a consensus among economists that food self sufficiency is folly, leading to wasteful use of resources.

Witness Saudi Arabia's decades-old effort to grow wheat in the desert irrigated from deep and often irreplaceable aquifers; it recently announced plans to phase out the project.

Security for the Saudis has also long meant ensuring sustainable, steady demand for oil -- soaring oil prices could knock major economies into recession and depress demand.

"Saudi Arabia is interested in moderate oil prices because they have the largest proven oil reserves and they can continue to pump oil for a long time, so it is not in their interest to make the other energy alternatives economically feasible very soon" said Khalid Al-Dakhil, professor at King Saud University.

"They are not interested in high oil prices at all. In the long run it works against their interests." (Editing by Dominic Evans)


Story by Thomas Atkins


REUTERS NEWS SERVICE