Geithner courts Arab creditors, sees a gradual rebound
DUBAI, United Arab Emirates - US Treasury Secretary Timothy Geithner reached out to Gulf Arab leaders yesterday, stressing to some of America’s top creditors that his country has a “special responsibility’’ to steer the world through a global recession that may finally be showing signs of easing.
A key aim of Geithner’s trip is to convince the major oil producers the United States still welcomes their business, and has plans to get itself out of a crisis stemming from what he said was an “unsustainable fiscal path.’’
“The force of the global recession is receding,’’ Geithner told Saudi Arabian business leaders in the commercial hub of Jiddah, the starting point of his first official visit to the Middle East. “Global trade is just starting to expand again.’’
But while noting the International Monetary Fund and other analysts have begun raising their growth forecasts for the second half of 2009 and into 2010, he cautioned the signs of improvement were fragile and the “process of repair and recovery is going to take considerably more time. This crisis has been brutal in the extent and severity of damage to economies around the world,’’ he said. “Given the extent of damage to financial systems . . . it seems realistic to expect a gradual recovery, with more than the usual ups and downs and temporary reversals.’’
Geithner’s Mideast trip was billed as a follow-up to President Obama’s recent overtures to the region. But the stop in Saudi Arabia - the Arab world’s largest economy and OPEC’s de facto leader - is also a clear reflection of the growing financial clout of the six-nation Gulf Cooperation Council.
The treasury secretary arrives for talks in the neighboring United Arab Emirates, the number two Arab economy, today.
What Geithner has to say in private to officials in the oil-rich region could help determine whether the Obama administration’s efforts to right the US economy succeed. The Arab Gulf states are major backers of US companies and government bonds and, as a group, are the biggest US creditors after China.
The weakening of the American economy has raised questions as to whether the dollar could remain the world’s top reserve currency, a key issue for the heavily leveraged United States. The slowdown also increased concerns major foreign creditors could look to more lucrative investments in strong developing economies outside the United States.
The Gulf states’ wealth skyrocketed during oil’s earlier boom years, but they have grown increasingly concerned as crude prices and the value of their investments soured.
Five of the council nations - Saudi Arabia, the UAE, Oman, Bahrain, and Qatar - peg their currency to the dollar. Kuwait uses a basket of currencies that includes the greenback.
Geithner, who was in London on Monday, said the Obama administration is committed to preserving the openness of the US economy. He said the nation realizes it has “a special responsibility’’ in protecting the value of the dollar, which remains the world’s dominant currency.