Gulf considers economic aid for protest-hit Jordan - UAE

DUBAI Nov 20 (Reuters) - Gulf Arab states are looking at ways to help Jordan's ailing economy after a government decision to cut fuel subsidies sent energy prices soaring and led to street protests.

The Western-backed kingdom has struggled to reduce its budget deficit and secure a $2 billion loan from the International Monetary Fund.

It has also suffered gas disruptions from regular supplier Egypt following several sabotage attacks on a pipeline since last year's Egyptian uprising.

UAE Foreign Minister Sheikh Abdullah bin Zayed al-Nahayan said on Monday Jordan was facing an economic deficit due to its dependence on importing heavy fuel.

"We, in the UAE and the Gulf Cooperation Council, are studying ways to close or minimise this deficit," the state news agency WAM quoted Sheikh Abdullah as telling a news conference in Abu Dhabi with Jordan's Foreign Minister Nasser Judeh.

Talks to come up with a solution to Jordan's funding gap could take some time, he said.

Instability in Jordan, a U.S. ally with the longest border with Israel, would come at a volatile time for a region in turmoil from Syria to Gaza.

Jordan has so far largely avoided the kind of unrest that has toppled four Arab heads of state over the past two years. But the decision to lift fuel subsidies caused scattered protests which turned violent in many places.

Security forces detained 130 demonstrators who could be charged with threatening the state for calling for the downfall of King Abdullah.

Mindful of the public fury that exploded into street clashes in the depressed south after price hikes in 1989 and 1996, Jordan had been reluctant to raise fuel prices.

The rising energy bill after the disruption of cheap gas supplies from Egypt and a steep drop in foreign grants have pushed the aid-dependent kingdom to the brink of economic crisis. Its budget deficit is now $3 billion, or 11 percent of GDP.

"The cut in the Egyptian gas to Jordan for two years is the main reason for these situations which made us depend on heavy fuel which cost us more than $4 billion," Judeh said.

The bombing of the pipeline bringing Egyptian gas has forced Jordan to switch to costlier fuels for power generation. Saudi Arabia declined this year to repeat its payment of a $1.4 billion cash injection to stop the economy heading to the brink of collapse.

Last December, Gulf Arab countries decided at a summit in Riyadh to set up a five-year, $5 billion fund to help development projects in aspiring GCC members Morocco and Jordan.

The Gulf monarchies are seeking closer ties with Arab kingdoms outside the Gulf like Jordan as part of efforts to contain pro-democracy unrest that is buffeting autocratic ruling elites throughout the Arab world.