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Thursday, 8 September 1983
Page: 576

Mr HAYDEN (Minister for Foreign Affairs) —by leave-A large number of issues are addressed in this very comprehensive report of the Joint Foreign Affairs and Defence Committee entitled: 'The Gulf and Australia' produced in April 1982. I wish to express appreciation to the Sub-Committee on Middle Eastern and African Affairs, and its Chairman, the honourable member for Cook (Mr Dobie), for the efforts put in to the compilation of this report. There are matters dealt with in the report on which some of my ministerial colleagues may well wish to comment further in due course. In my own remarks, I wish to emphasise that the report deals with an area of increasing importance to Australia. It covers the strategic significance of the Gulf area and the involvement of the super-powers there and gives close attention to the various regional concerns and factors. The main value of the report lies in its very careful and detailed consideration of the impact which all of these factors have upon Australia, and notably upon Australia's foreign affairs, defence and trade interests.

If I could deal first with the question of super-power involvement in the area, I note the assessment in the report that the increased military and political activity of the Soviet Union and the United States of America and their allies has seen the Gulf become an area of increasing tension and possible super-power confrontation which Australia cannot ignore. In addition to the super-power rivalry in an area of such economic importance to the world, the possibility exists that the tragic conflict between Iran and Iraq may escalate, threatening the oil exports of all the countries in the area.

In regard to the role of the Soviet Union, the report correctly notes that the Soviet Union has continued its policy of seeking Arab and international recognition of its claims, as a neighbour and super-power, to a legitimate role in the Middle East. The Soviet Union's influence in the region is still, however , secondary to that of the United States. The opportunities for it to increase its role and influence are limited by Arab and Iranian suspicions and by Islamic attitudes to communism. The Gulf states are also very aware of the continued Soviet occupation of Afghanistan. Since, however, a primary concern of Arab countries remains the attitude of the super-powers towards the Arab-Israeli dispute, the Union of Soviet Socialist Republics will continue to have certain advantages over the West and particularly the United States because of the perception that the USSR is inclined towards the Arab point of view.

The Soviet Union suffered embarrassment from its impotence during Israel's invasion of Lebanon and has made strenuous efforts to regain its influence in the Middle East. These efforts largely centre on its relationship with Syria. It has significantly increased the delivery of military supplies to Syria, in particular, surface to air missiles. Soviet prospects for injecting itself into the Arab-Israeli peace process remain limited, although it has an ability to disrupt any arrangements which exclude it. Soviet prospects for direct intervention in the Gulf itself also appear slight at present, but any escalation of the Iran-Iraq war could well change the situation.

The report notes the intention of the United States to maintain a military capacity in this area of vital interest to it. The American Administration has tried to develop a regional strategic consensus to combat Soviet influence. To this end the Americans have conducted military exercises in Egypt, Sudan, Somalia and Oman. It would also be true to say, however, that moderate Arab states may sometimes be reluctant to be seen to be too close to the United States because of the perceived failure of the Americans effectively to tackle the Palestinian question and prevent Israel from pursuing policies in the West Bank and Gaza which are seen as contrary to resolution 242.

The report has noted the importance of resolving the Arab-Israeli dispute. One effect of resolution of the dispute might well be a greater willingness on the part of moderate Arab states to be seen as pro-Western. The report includes a section relating to Australian strategic interest in the area. It notes that Australia has no direct strategic interest, but that it has a common concern, along with other countries, to secure an assured supply of oil and to continue to export to the area. If we widen the definition of strategic interest it might be possible to express some of our very real concerns in the area, which I see as the following:

We are vitally concerned that the West and the developing world should be able to pursue balanced economic development through access to reliable supplies of oil at reasonable prices.

We are vitally concerned that instability or conflict in the area could lead to heightened great power involvement with dangerous strategic implications.

Our communications with Europe, including shipping and air links, depend on the availability of direct and secure routes through the area.

The Islamic countries of the region have acquired marked political strategic significance in themselves because of their oil wealth and the growing influence in world politics of Islamic solidarity.

I note that the report raises the question of in- volvement by Australia in the steps being taken by the United States to improve its military preparedness in the north west Indian Ocean because of events in the Gulf area in the last few years. The report refers particularly to United States planning for a rapid deployment force and indicates a probability that Australia will be involved, perhaps only as a staging post, if the Rapid Deployment Force, or components of and air cover for it, are ever rushed to the Gulf in a westerly direction from the United States.

The present position is however that Australia clearly has its own independent views on developments in the Gulf and the Indian Ocean. In support of our own and general Western diplomatic objectives in the Indian Ocean, Australia deployed a carrier task group in 1980 and has made a number of single ship deployments since then. It is desirable that Australia demonstrate on a regular basis that it has an independent national role to play in the Indian Ocean. The report refers in detail to the very important trade and economic relationship between Australia and the Gulf, and I will comment briefly on some of the matters raised, noting once again that other Ministers are directly interested in the conclusions of the report.

In the area of trade and economic relations, the report comments that in general terms Australia is making adequate efforts to ensure continued increase of exports to the Gulf countries. Recent figures show that our exports to the Gulf continue to increase. Provisional figures indicate exports for the year to June 1983 were $1081m. This can be compared with $1051m to June 1982, and $916 to June 1981. Provisional figures for imports for the year to June 1983 were $ 1914m compared with $1936m to June 1982 and $1808m to June 1981.

Since the report was prepared an agreement on trade and economic and technical cooperation has been signed with Kuwait. Preparation of similar agreements with the United Arab Emirates and Qatar is at an advanced stage. The report comments on press speculation about Australia being a target for the investment and lending of petrodollars and expresses disappointment that more comprehensive and public figures from Gulf countries as suppliers of capital are not available. This is a matter on which the Treasurer (Mr Keating) might wish to comment at some future time. I note, however, that since 1976 foreign direct investment has been screened by governments of the day against a range of economic and other criteria to ensure consistency with Australia's interests.

The Minister for Trade (Mr Lionel Bowen) might like to respond to the comments in the report concerning language training for Department of Trade staff serving in the Gulf. I should just like to say that I share the Committee's concern that every effort should be made to ensure that, wherever possible, officers representing Australia overseas-whether with the Department of Trade or the Department of Foreign Affairs-should have at least a basic understanding of the language spoken in the country in which they are operating.

In regard to oil and its general economic significance, the report does us a useful service in bringing together a great deal of information which point up, correctly, the broad importance of the Gulf countries in the world economy. It is an importance which goes beyond their role as oil suppliers to embrace their significance as a market and as a source of investment funds. In its broad lines , and in the longer term, the report's analysis continues to look sound. It correctly signifies the continuing and probably even increasing dependence of the West on oil supplies from the region-despite all the efforts made over the last decade to change energy balances and reduce dependence on imported oil. It points, too, to the very limited latitude which Australia has to diversify its sources of supply.

In the shorter term, however, we have seen since the report was prepared the appearance of an oil supply surplus on a scale much larger than it was possible to anticipate, even as littte as two years ago. The economic recession and changes in oil demand caused by substitution policies and efforts to improve efficiency have had effects on the oil market which the Report correctly anticipated, but they have been of a considerably larger scale than it or any other observer was able to foresee. The combined effects of the price cut and reduced sales values have produced a major drop in Government revenue for the Gulf states. Indeed, what seemed virtually impossible just a few years ago has in fact happened: the massive financial surpluses of the Organisation of Petroleum Exporting Countries have not only been reduced; they have in many cases disappeared altogether.

In the longer term it is probable that there will be further real price increases as the oil market firms up. But it appears that in the short to medium term the prospects for general economic development, and in particular for an expansion in the Gulf states' trade, are now much reduced, that is, should there be no threat to Gulf oil exports. The implications for maintaining and expanding Australian commercial relations are obviously considerable and are under examination in relevant departments.

I should also comment on the reference in the report to the adequacy of energy reporting by our overseas missions. The report notes that problems which had been detected earlier had largely been resolved by early 1982. Since then the Department of Foreign Affairs has continued to work to refine its procedures to ensure that posts are kept briefed on oil market development and that they are given clear guidance on our reporting interests and priorities. The most recent oil market review incorporating an updated list of reporting requirements which was revised in consultation with the Department of Resources and Energy is on its way to posts abroad at the moment.

The report raises the question of Australia's cultural relationship with the Gulf area. While recognising the valuable work that has been done on Islam at some institutions-for example, units on the Islamic tradition within the Faculty of Asian Civilisiation at the Australian National University and the study of Middle Eastern Cultures at Goulburn College of Advanced Education-I would agree in general with the tenor of the report, that is, that more courses dealing with the modern history, politics and religion of Muslim countries at tertiary institutions would create greater Australian understanding of a region which is of vital political, economic and strategic interest. The Federal Government has limited influence on courses in this sector of education as tertiary institutions are largely autonomous. But I will suggest to my colleague the Minister for Education (Senator Ryan) that she examine what can be done in this area.

I conclude by noting that the Middle East remains an extremely volatile area and that I believe continued coverage of developments in the area by the Joint Foreign Affairs and Defence Committee will be of great value. I repeat: I congratulate the members of the sub-committee who have been responsible for a comprehensive and highly relevant report.