EU wants Saudi gas price talks before WTO accession
By Dominic Evans
RIYADH (Reuters) - Saudi Arabia's trade deal with Washington removes its biggest hurdle to joining the World Trade Organisation but a European Union official said on Saturday the oil giant must still address EU questions over Saudi gas prices.
The world's biggest crude exporter signed a bilateral market access deal with the United States on Friday in a low-key ceremony which should pave the way for Saudi accession to the WTO by December -- 12 years after it first sought membership.
The OPEC producer has already signed a similar accord with the European Union. But that deal, signed in 2003, left two issues outstanding.
"One related to insurance, which has now been cleared up, and the other was on (gas feedstock prices for) petrochemicals," said Bernard Savage, EU delegation head in Saudi Arabia.
He said petrochemicals producers in Saudi Arabia obtained natural gas -- a raw material in the production of petrochemicals -- at rates below international prices, putting producers in Europe at a disadvantage.
"We have been having discussions with the Saudis on this," Savage told Reuters, adding he did not believe the issue was an insurmountable obstacle to the kingdom's WTO accession.
"The objective is for Saudi Arabia to join the WTO formally at the Hong Kong ministerial meeting (in December). That is our objective and that is the Saudi objective," he said.
Joining the WTO will boost investor confidence in a country which is reaping the rewards of record oil prices but which has until recently, shown little urgency in liberalising its economy or setting clear a legal framework for business.
OPENING MARKETS
The U.S. deal requires Saudi Arabia to open its markets to more U.S. farm and manufactured goods as well as service firms in sectors including banking, telecommunications, energy, express delivery, transport and hotel and restaurant management.
In return economists say the kingdom can expect increased investment flowing from greater confidence in its commercial legal framework.
"Foreign businessmen feel there is a legal infrastructure they can rely on -- that there is a channel for disputes," said Brad Bourland, chief economist at Samba Financial Group.
Saudi Arabia first applied to join the WTO in 1993, when it was known as the General Agreement on Tariffs and Trade, and is one of the largest economies still outside the organisation.
Its efforts to join accelerated sharply in the last two years, partly to avoid being left out in the cold as Washington began talks on free trade agreements with Saudi Arabia's neighbours such as Bahrain, Oman and the United Arab Emirates.
It has had to overcome political resistance in the United States, particularly from pro-Israel groups which want an end to the Arab state's direct boycott of Israel.
As part of the deal, Saudi Arabia has promised not to enforce aspects of the Arab League boycott of Israel that apply to U.S. firms doing business with Israel, U.S. Trade Representative Rob Portman's office said.
Portman said the agreement will also ensure "greater openness, further development of the rule of law, and political and economic reform in Saudi Arabia". Washington has been pushing for reform in the conservative Muslim kingdom since the Sept 11 attacks, carried out by mainly Saudi hijackers.
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The current members of the WTO
Saudi Arabia signed on Friday a trade agreement with the United States, which was considered to be one the last major hurdles to the World Trade Organisation membership of the kingdom. Now, Saudis have to complete negotiations at the Geneva-based WTO on the formal accession document.

The deal opens Saudi markets to US farm and manufactured goods, as well as most services, including IT, financial, energy and tourism sectors. It also forced Saudis not to boycott US companies which are doing business with Israel.

The kingdom also promised to have normal trade relations with all 148 WTO members, which include Israel.

The other problem remains a Saudi-EU row over gas prices. The EU officials accused Saudi Arabia of selling the natural gas to their home petrochemicals at rates below international market prices, which could cause losses to the European producers.