'There will be delays in new project financings - their big markets in Asia are in crisis,' says Henri Guillemin, senior vice-president at Credit Agricole Indosuez. 'Projects will be delayed and we are already seeing it at Saudi Aramco and in Qatar.' Guillemin believes that any delays will be short-lived but Houtekier is less sanguine. He also expects financing costs to rise sharply. 'Most Middle East projects were aimed at Asia where the purchasing power will be down for the next five years,' he says. 'Even the good project financing has been difficult,' he adds, citing the long gestation of the recent $720 million loan secured by Al-Jubail Petrochemical Company (Kemya) in Saudi Arabia, which was met entirely by the original arranging group.

The French appetite for lending in the region appears undiminished but higher pricing and improved margins will be the key to their participation in forthcoming deals. Says Houtekier: 'We have to be careful in this crisis market to get the right returns. You automatically review all your lines and all your costs and the Middle East is certainly not excluded from our review - the pricing will have to go up.'

Societe Generale has played a role in syndicated loans this year for a Bahraini bank and Aluminium Bahrain (Alba). It was joint arranger of a three-year $100 million loan for Bahrain International Bank and arranger of an eight-year $400 million borrowing by Alba to finance its latest expansion. Having participated as an arranger for both Qatargas and Ras Laffan LNG, Societe Generale is currently acting as financial adviser to Qatar General Petroleum Corporation on the $430 million loan for Qatar Vinyl Company which is now in syndication. The bank is also in line for the mandate to raise finance for the $2,000 million South Pars gas project in Iran, in which Total is the lead partner of National Iranian Oil Company (MEED 9:10:98, Iran).

The liberalisation of Middle East financial markets, which is enabling foreign banks to acquire majority stakes in local joint venture banks in some markets, is spurring an acquisition drive among French banks. Credit Agricole Indosuez already has joint ventures in Saudi Arabia and Morocco and branches in Bahrain, Yemen and the UAE. Despite this geographical spread, the bank is keen to expand in Egypt where it has been pursuing an acquisition for at least two years. 'There's something missing in our coverage,' says Guillemin. In contrast to other emerging markets in the region, Egypt has the virtue of size and Guillemin says the bank wants to adopt a higher profile there. Credit Agricole has been talking to Misr American and another local bank with the hope of closing a deal by the end of this year. The 22 per cent decline in the Cairo stock exchange in 1998 makes an acquisition more feasible; Credit Agricole had previously considered the asking prices for bank stakes to be much too high.