Isra-Mart srl:Report: Water shortages to damage growth and stoke international tensions

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Water scarcity could undermine the rapidly growing industrial sectors of China and India, while Europe remains far from immune to water shortage threats, according to new research published to support World Water Day.

A quarter of the world's largest companies are thought to be at risk from water shortages already, but whole economies are at risk of disruption as a result of increasingly scarce water supplies, says a report published today by risk analysts Maplecroft.

In particular, the report warns that the fast-expanding economies of China and India are already having to address concerns over water supply, and the situation in the Middle East and North Africa is even more pressing.

Poor levels of water security in the region could lead to further increases in global oil prices and heightened political tensions, the report says, noting that any shortages could severely disrupt supplies as water is commonly used to force oil out of wells.

The report rates six of the 12 Organisation of the Petroleum Exporting Countries (OPEC) members – Algeria, Iraq, Kuwait, Libya, Saudi Arabia and the UAE – in the highest risk category, while Qatar and Iran are also listed as being at high risk of water shortages.

Maplecroft said that these countries together accounted for about 30 per cent of global oil production in 2009, while all the countries listed in the report as extreme and high risk collectively accounted for 45 per cent of oil output.

Professor Alyson Warhurst, chief executive of Maplecroft, added that control of water sources was likely to exacerbate cross-border disputes in the region as countries take potentially provocative measures to safeguard their supplies.

However, she argued that water risks could be reduced by making better use of new technologies, such as desalinisation plants. For example, the report notes that Saudi Arabia plans to provide 10m cubic metres of water per year through a solar-powered desalination plant.

"For business, there are three considerations," added professor Warhurst. "First, studying water security is a helpful indicator of risk of societal instability. Second, water security is worsening in countries of high growth like India and China, and business sectors that are intensive in water use will need to consider their impacts. Third, there are good examples of business initiatives to enhance water security for communities in water-stressed regions, and the lessons of good practice need to be more widely disseminated."

In a separate study, the EU warned the problem of water demand exceeded availability is not limited to Mediterranean member states and is set to get worse over the coming years.

Water scarcity did occur in much of southern Europe during 2009-10, the EU stupdy says, with the Czech Republic, Cyprus and Malta reporting continuous supply problems.

However, France, Hungary, the UK, Portugal and Spain also reported droughts or rainfall levels lower than the long-term average, while a further four countries, the Netherlands, Sweden, France and Romania, experienced "local limited water scarcity occurrences".

It adds that water shortages are a growing problem across the bloc, and the EU expects the effects of climate change will mean most regions will face either medium or severe levels of water stress by 2050.

The World Bank estimates that $180bn of water infrastructure investment is needed each year until 2030 to meet demand for fresh water. In response, the European Commission is preparing a Water Blueprint for 2012 to address the problem of water efficiency.