Squeeze on Poor Lands

In the flurry of global concern about the energy crisis, one seriously hurt group of victims has been getting rel atively scant attention: the developing nations. Though these countries use comparatively little fuel, the hopes of their burgeoning populations are pinned firmly to the growth of oil-burning in dustries. The moment that Arab oil pro duction was cut back, their best-laid plans for industrialization began falling apart. Now the Arabs have eased the production cutbacks, but have simultaneously decreed astronomical price boosts that many poor nations of the Third World simply cannot afford.

No nation illustrates the bleak prospects so strikingly as India, which some what ironically has long been an ear nest champion of the Arabs' political cause. India's newest five-year plan, which calls for government and pri vate investment of $71 billion in industrialization, assumes that the price of oil will rise only to $4.75 per bbl. by 1979, the last year of the plan. In fact, the price already has shot up to $9 per bbl. Oil imports had been taking 10% to 11% of the foreign currency that India earns from exports; now the bill is likely to leap to a disastrous 80% of foreign earnings.

Like other developing countries, India is threatened by two fundamental factors. Rising prices and declining supplies of petrochemical fertilizers, along with the scarcity and high cost of fuel for agricultural machinery, could reverse the Green Revolution of farm productivity that had been giving India's masses hope of being better fed. Also, the high cost of importing fuel will force the government to cut oil imports to the bone and allocate the tight supplies. The steel, fertilizer and railroad industries will receive priority, but even the railroads are building steam locomotives rather than more efficient, but oil-burning, diesels. Overall, says Sarwar Lateef, a respected economics journalist, the impact of the oil crisis makes India's five-year plan an exercise in "cuckoo-land optimism."

Some other Asian economies will suffer because they are closely tied to Japan, which is cutting many of its exports 10% to 25% as a result of its own troubles in buying Arab oil at today's prices. Such countries as Thailand and Malaysia buy nearly all their steel from Japanese mills, but they are considered marginal customers who are the first to be cut off if shortages limit production. South Korea is perhaps most vulnerable of all. Its economic growth rate reached a remarkable 12% in 1973, but the Seoul government predicts that will be cut in half this year. Many Korean synthetic-textile plants have slashed production by 50% because of the difficulty of get ting petrochemicals from Japan, and others have shut down completely. That hurts especially because Korean textile and plastics plants, which also use petrochemicals, produce largely for sale abroad. A cut in exports is about the last thing that the Korean economy, already groaning under a heavy load of foreign debt, can afford.

Officials of some other countries hope to lessen the pain of the oil crisis by various measures. In Brazil the government is determined to keep the economy booming, even at the price of subsidies for gasoline distributors, calculated by some experts to run as high as $500 million. The long-range effectiveness of that strategy obviously is doubtful; some publications complain that the UP) government is shielding them f from economic reality with the same paternalistic censorship that it applies to books and films. Sri Lanka (formerly called Ceylon) more realistically plans to cushion the crisis by jacking up its own prices for bunkering fuel. The island nation sits at a critical junction of shipping lanes and refuels many passing vessels.

No Price Break. For the Third World as a whole, however, there is a grave threat that goes beyond the direct effects of the crisis. Though some countries hope to increase exports of specific products, total exports of the poor nations could fall painfully, if fuel shortages slow economic growth among their customers in the industrialized world. Some economists project a drop that will force the underdeveloped countries to borrow $15 billion from the rich nations this year. That would add to a debt burden that already is growing oppressive. One economist for an American bank in London predicts that five years from now, most of the foreign aid that underdeveloped countries get will go right back to the industrialized world in the form of interest and amortization payments on foreign debt.

To all this Third World gloom, there is of course one standout exception: the handful of underdeveloped countries that happen to be oil producers, including Iran, Indonesia, Nigeria, Venezuela and several Arab states, have struck a bonanza. Indeed, they could now afford to help their underdeveloped brethren, by setting a lower price on oil exported to poor countries than on petroleum sold to industrialized lands. In the past, however, oil producers have turned a deaf ear to pleas that they organize such a two-price market. They have argued, probably correctly, that it would lead to a black market that would siphon off the low-priced fuel to the rich countries.

Also, they have contended, price concessions to the poor nations would amount to a kind of foreign aid--and foreign aid is the business of the industrialized world.

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