International Monetary Situation

Part of the debate – in the House of Commons at 12:00 am on 22nd February 1973.

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Photo of Peter Tapsell Peter Tapsell , Horncastle 12:00 am, 22nd February 1973

That may be so, but the other argument which naturally the Arabs themselves are examining carefully is whether they should not keep more of the oil in the ground which would have the opposite effect and push up the price still higher.

The significant fact is that the United States is becoming a very big importer of oil. The Soviet Union is about to become an oil importer. The likelihood is that the price of oil will continue to rise and oil will continue to be in great demand. However, I do not want to get sidetracked into a separate discussion, however interesting, of the future financing of the oil industry. I am concerned with the narrower point of the effect of these enormous surpluses on the international monetary situation as they build up in the next 10 or 20 years.

I suggest that those hon. Members who have suggested that the oil-producing countries have been a major contributor to the recent monetary crisis are being less than fair. As my right hon. Friend the Chancellor of the Exchequer said, it is very difficult to trace where the money comes from, which money moves where, or who is responsible for this monetary crisis. The fact is that not only have most of the Arab Governments, central banks and major Arab institutions behaved very responsibly in international finance over the years; most of them have made massive losses out of the recent international monetary crisis. In their terms, the simultaneous devaluation of the dollar and of sterling has been impossible for them to avoid. There is probably not a single Arab bank and certainly not a single Arab country which has not made huge overall losses as a result of this recent international crisis. It is not right for some hon. Gentlemen to suggest that the Middle Eastern oil producers have caused this crisis. That does not mean that there is not a great problem about their surpluses for the future.

I should like to consider possible ways in which international co-operation can work towards helping to solve this problem. Clearly, as a country's reserves continue to climb out of phase with the international system as a whole, it has an obligation to adjust its currency accordingly. But Middle Eastern oil-producing countries cannot be expected to continue to revalue their currencies indefinitely, because of the internal effect on their populations. They can contribute to the development of other countries and keep their own reserves stable by investing in industrial development on a world-wide scale and investing firmly in long-dated bonds overseas which the Governments of the countries concerned can use to develop those countries. This is as much in the interests of the Middle Eastern countries as everyone else's. I believe that many of their more responsible leaders see that.

It also gives an added urgency to the need for a fair settlement of the Arab-Israeli conflict towards which one hopes that the vast wealth of some Arab countries could be a helpful contributor.