Iraq Says Suspending Oil Sales in Protest Against UN

By Huda Saleh Majeed

BAGHDAD (Reuters) - Iraq said on Saturday it would halt oil exports from Monday in protest against a United Nations Security Council resolution extending the U.N.'s oil-for-food program for 30 days instead of the usual six months.

"Iraq will halt exports of crude oil from ports on the Arab Gulf and the Mediterranean as of 8:00 a.m. local time (midnight EDT) until further notice," the state Iraqi news agency quoted an official source at the nation's oil ministry as saying.

"Iraq will stop oil exports under the memorandum of understanding because the Council has violated the spirit and the texts of the memorandum," the ministry said.

Turkey, one of the two export outlets allowed under oil-for-food, said Iraq had stopped pumping crude via pipeline to the southern Turkish port of Ceyhan.

"The oil flow was suspended from this morning," said a Turkish official.

Iraq is angry at Friday's Security Council vote that extended the oil-for-food program for a stop gap period of one month to allow time to consider a proposal by Britain and the United States for a revamp of decade-old sanctions against Baghdad.

The 30 day-period is intended for more negotiations on the U.S.-British plan that would lift restrictions on civilian goods imported by Iraq while tightening controls on military-related supplies and oil smuggling.

Sanctions have been in place since Iraq's invasion of Kuwait in 1990 and oil-for-food has provided limited relief for civilians since the program began in December 1996.

Iraq is worried that a crackdown on oil smuggled through neighboring countries Turkey, Jordan and Syria will stem cash generated direct to the government of President Saddam Hussein. Revenues from the humanitarian exchange are kept in a U.N. escrow account.

DOUBTS OVER OPEC'S RESPONSE

Saudi Arabia, the world's biggest exporter, pledged it would step in with fellow OPEC members to fill any oil shortage resulting from the Iraqi stoppage.

"What concerns us is the stability of the market. This is not the kingdom's position, but OPEC's position, which is to fill any shortage in the oil market," Saudi Oil Minister Ali al-Naimi told reporters in Riyadh.

But it remains unclear whether Naimi and other OPEC oil ministers, who meet in Vienna next week for scheduled talks on production quotas, will move immediately to compensate for the Iraqi outage.

"If the market calls for it we will increase but right now we don't need to raise production tomorrow," Nigeria's OPEC representative Rilwanu Lukman told Reuters.

"It depends how long it goes on for and the impact on the market," said Lukman, Nigeria's presidential energy advisor, added. OPEC had widely been expected at its June 5-6 gathering to maintain supplies to keep prices in its $22-$28 a barrel target range for a basket of its crudes. The group cut output by 2.5 million barrels daily earlier this year.

The basket was valued at $26.56 on Thursday and ministers may prefer to wait for prices to rise above $28 before triggering extra output under a prearranged agreement. Iraq is an OPEC member but has no production quota.

Ministers will be wary about increasing supply too quickly because Baghdad has suspended oil sales in the past and resumed exports within days or weeks.

"Last time it didn't go on very long and OPEC didn't need to do anything," said Lukman.

Iraq exports 2.1 million barrels a day, five percent of world exports, under the U.N. program which is due for renewal on June 3.

U.S. IS IRAQ'S BIGGEST CUSTOMER

The United States is Iraq's biggest customer, buying about a 750,000 bpd, with exports also flowing to Asia, Europe and Latin America.

Turkey's Ceyhan terminal has 2.5 million barrels in tanks, a Turkish official said. That's little more than enough for two days worth of normal exports from the port. Iraq controls sales from the other export point at the Gulf port Mina al-Bakr.

Baghdad has almost 300 million barrels of oil, equivalent to about 150 days at current export rates, in outstanding contracts under the U.N. program.

Previously, Iraq's U.N. envoy had said Iraq would honor those contracts.

Copyright 2001 Reuters News Service

http://my.abcnews.go.com/PRINTERFRIENDLY?PAGE=http://abcsource.starwave.com/wire/World/reuters20010602_192.html

-- Martin Thompson (mthom1927@aol.com), June 02, 2001

Answers

If we are getting 5% of our oil exports from Iraq, this is really bad news.

-- Loner (loner@bigfoot.com), June 02, 2001.

There are clear indications the Middle East may be on the brink of war. It certainly is closer now than ever. Could Iraq be acting in anticipation of such a war, starting the oil disruption early, to augment the war-induced disruption? This would be by worsening the initial supply situation as the war starts. Remember, Iraq's government hates the West and U.S., and oil disruption is a major weapon.

-- Robert Riggs (rxr.999@worldnet.att.net), June 03, 2001.

Iraq to stop oil exports Monday BAGHDAD (R) — Iraq said on Saturday it would halt oil exports from Monday in protest against a United Nations Security Council resolution extending the UN's oil-for-food programme for 30 days instead of the usual six months. “Iraq will halt exports of crude oil from ports on the Arab Gulf and the Mediterranean as of 8:00am local time (0400 GMT) until further notice,” the official Iraqi news Agency (INA) quoted a source at the oil ministry official as saying.

“Iraq will stop oil exports under the memorandum of understanding because the council has violated the spirit and the texts of the memorandum,” the ministry said.

Energy officials in Turkey, one of the two export outlets allowed under oil-for-food, said Iraq had stopped pumping crude via pipeline to the southern Turkish port of Ceyhan.

“The oil flow was suspended from this morning,” said one Turkish official.

Iraq is angry that the Security Council voted on Friday to extend the oil-for-food programme for a stop gap period of one month while it considers a proposal by Britain and the United States to revamp decade-old sanctions against Baghdad.

The 30 day-period is intended to give council members time to continue negotiations on the US-British plan that would lift restrictions on civilian goods imported by Iraq but tighten controls on military-related supplies and smuggling.

Sanctions have been in place since Iraq's invasion of Kuwait in 1990 and oil-for-food has provided limited relief for civilians since the programme began in December 1996.

Iraq is worried that a crackdown on oil smuggled through neighbouring countries Turkey, Jordan and Syria will stem cash generated direct to the government of President Saddam Hussein.

Saudi says OPEC will fill any gap

Saudi Arabia, the world's biggest exporter, pledged it would step in with fellow OPEC members to fill any oil shortage that could be created by the Iraqi decision.

“What concerns us is the stability of the market. This is not the kingdom's position, but OPEC's position, which is to fill any shortage in the oil market,” Saudi Oil Minister Ali Al Naimi told reporters in Riyadh.

But it remains unclear whether Naimi and other OPEC oil ministers, who meet in Vienna next week for scheduled talks on production quotas, will move immediately to compensate for the Iraqi stoppage.

OPEC has been widely expected to maintain current supplies to keep prices in its $22-$28 a barrel target range for a basket of its crudes. The group cut output by 2.5 million barrels daily earlier this year.

The OPEC basket was valued at $26.56 on Thursday and ministers may prefer to wait for prices to rise above $28 before triggering extra output. Iraq is an OPEC member but has no production quota.

Ministers will be wary about increasing supply too quickly because Baghdad has suspended oil sales in the past and resumed exports within days or weeks.

Iraq exports 2.1 million barrels a day of oil, five per cent of world exports, under the UN programme which is due for renewal on June 3. Oil export revenues are controlled through a UN escrow account.

http://www.jordantimes.com/Sun/news/news5.htm

-- Martin Thompson (mthom1927@aol.com), June 03, 2001.