Japan hopes that moving on a bilateral deal that could eventually lead to Saudi Arabia's admission to the World Trade Organization will help convince Riyadh to renew a Japanese government-backed company's oil-drilling rights, government sources said Monday. A 40-year agreement giving Tokyo-based Arabian Oil Co. exclusive drilling rights in the Khafji oil fields located in the former neutral zone between Saudi Arabia and Kuwait expires at the end of February. Riyadh is demanding that Tokyo take part in a project to build a 1,500-km mining railroad in return for the pact's renewal. Tokyo is refusing, saying the project is costly and unlikely to be profitable. The WTO carrot is Tokyo's latest proposal to end the deadlock. Saudi Arabia requested membership into the WTO's predecessor, the General Agreement on Tariffs and Trade, in 1993, and bilateral talks with Japan on trade liberalization began in 1995. WTO membership requires bilateral market-access accords with major trading partners as well as the completion of multilateral talks with the WTO secretariat. Government sources said Tokyo is hoping to extract concessions, including lower tariffs for high-tariff items such as electrical products and clarification of rules regulating foreign capital's entry into the Saudi construction market. Arabian Oil is the nation's largest oil producer.
