Yemen sees new era in ties with Saudi

Saleh

SANAA, Yemen (Reuters) -- Yemeni President Ali Abdullah Saleh said on Thursday his country's relations with its rich northern neighbor Saudi Arabia were set for a major improvement that would include joint oil projects.

Saleh was speaking a day after the Saudi-Yemeni Cooperation Council (SYCC) held its first meeting in 13 years on Wednesday and announced that Saudi Arabia had agreed to reschedule Yemen's $331 million debts to it and extend $300 million in fresh loans.

"I believe that this is a start that will be followed by more important steps towards partnership and mutual interest leading to trust," Saleh told Reuters in an interview at the presidential palace in Sanaa.

"Such joint projects covering various sectors will make the Yemeni and Saudi citizens the guardians and protectors of those joint interests, despite the political differences that might arise between the two leaderships of the two countries," he said.

Saudi Arabia had frozen all aid to its poor southern neighbor after Yemen was seen as siding with Iraq after its 1990 invasion of Kuwait. It also expelled hundreds of thousands of Yemenis in retaliation.

Saudi-Yemeni relations have been improving since the two countries signed a border agreement in June this year, ending a long-running dispute which had occasionally erupted into armed clashes since the 1930s when tribal homelands and frontiers in the region were poorly defined.

Saleh said surveys in the area that was handed over to Yemen under the June border pact gave "promising" results that showed there were good quantities of oil. He gave no further details.

Asked what projects Yemen hoped to sign with Saudi Arabia, Saleh said: "If there is oil on the joint border, then there will be joint investment. If Saudi Arabia finds oil on its side of the border and wants to pump it to the Arabian sea through Yemen, then we welcome that."

"We have a pipeline that can take Saudi and Yemen oil to the Arabia sea," he said referring to the line built by Canadian Occidental, now called Canadian Nexxen, that carries some 250,000 barrels per day (bpd) of Yemeni crude to al-Sheher port.

It has a capacity of 400,000 bpd.

"This way, Saudi Arabia will have a third outlet for its crude in addition to the existing outlets in the Gulf and Red Sea," Saleh added.

Yemen, one of the Arab world's poorest nations, hopes improved relations with its neighbor, the world's largest oil exporter and the region's wealthiest economy, will boost investments and improve its general economic situation.

The SYCC statement, published by Saudi and Yemeni newspapers on Thursday, said the new loans would help finance development projects in Yemen.

"The two sides agreed that a delegation from the Saudi Development Fund will visit Yemen to discuss with officials at the finance and planning ministries rescheduling Yemen's debts to Saudi Arabia," the statement said.

"The Saudi side promised to extend to Yemen $300 million in the form of loans to finance some development projects," it added.

The two countries also agreed on other cooperation steps in education, agriculture, health, trade and investment.

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