(AsiaNews/SCMP) – If oil prices remain high many Asian countries risk losing the economic gains made after the 1997 financial meltdown. Analysts and government officials have already warned that the rapid rise in crude oil prices is already affecting the economies of several countries.

Following today's news of Shiite leader Moqtada al-Sadr's rejection of the Iraqi government's ultimatum oil prices have come close to the record-breaking US$ 49-a-barrel mark in New York.

Asia's fastest growing economies are highly dependent on oil imports. According to Kenji Kobayashi, director of the Oil Markets and Emergency Preparedness Office of the International Energy Agency, "Asia produces only 10 per cent of the world's oil, [but] uses more than a quarter of global supplies. Sustained oil prices of US$45 a barrel and above will cause inflation in coming months followed by a hampering of economic growth."

Because inflation has already started to dampen consumer spending and hit corporate profit margins, Asian governments have already begun cutting taxes and implementing energy-reducing measures. According to Manu Bhaskaran, Singapore-based head of the Centennial Group consultancy's economic research practice, China, India, and Thailand could suffer the most from rising oil prices. Indonesia, Malaysia and Singapore are better placed to weather the eventual economic storm.

China – India - Thailand

China is the world's third largest oil importer and like India is having a hard time managing rapid industrialisation. Energy demands are rising constantly to keep up with economic growth. The country is already expected to pay an extra US$ 8.8 billion (€ 7.1 billion) to import the 880 million barrels of oil it needs this year. Reports released yesterday suggested that China was willing to pay Russian rail fees to ensure continued supplies from troubled Russian oil giant Yukos.

In India high inflation is especially worrisome. To forestall it the government cut customs and excise duties on many petroleum products. Finance Minister Palaniappan Chidambaram said petrol and diesel customs duties would be reduced from 20% to 15% which should knock off 1% from inflation. Oil imports cost India US$ 15 billion last year –about 3% of Gross Domestic Product (GDP).

Oil prices could play a role in next year parliamentary elections in Thailand. A recent study by the International Energy Agency concluded that if oil prices stayed high till 2005, Thailand could lose 1.8 % of its GDP.

Malaysia – Indonesia - Singapore

As an oil-exporter Malaysia is less likely to suffer from high oil prices. Never the less, the government announced last week that it would "review subsidies because losses to the government were becoming a burden."

Indonesia, the world's largest natural gas producer, has become a net oil importer earlier this year. Its domestic oil and gas industry is corruption-riddled and requires reforms. And the government announced its intention to review the expensive fuel subsidies on petrol, diesel, and kerosene (the latter widely used by poorer Indonesians as a cooking fuel) and examine a plan to restructure government-owned oil company Pertamina. Economists estimate that Indonesia will spend more than € 4 billion on subsidies this year.

As a major world oil refining centre Singapore would gain from higher prices thanks to increased refinery margins. Higher global prices would also mean more oil and gas exploration in its immediate region.

Philippines – Taiwan - Japan

Recently elected Filipino President Gloria Macapagal-Arroyo is considering a controversial petrol tax to boost government coffers. As an exporter the country could be affected by eventual lower oil imports from China and the United States.

Lower imports from these two countries also explain lower industrial growth in Taiwan whose output rose by only 8.4% in July compared to 15.7% in June.

The same situation obtains in Japan where economic growth in June stood at 1.7% instead of the expected 4.1%.

Still, there are some optimists. According to Park Cyn-young, economist with the Asian Development Bank, the impact of rising prices should not be as severe as those of the 1970s and 1980s. "Even at US$50 a barrel, Asian countries will be able to cope," Ms Park said. (MA)