Iraq has submitted a formal request to the U.N. for an extension to January 15th of the eighth phase of the oil-for-food program, according to an Iraqi official on November 9th. The current six-month phase of the program will expire on December 5th, but Iraq wants to avoid a disruption in oil sales.
The official said that: “We have sent the request to the U.N. but we have not got a response back yet.” In June, Baghdad had requested an extension of oil sales volume for the seventh phase, which the U.N. approved at the last moment. Iraqi crude customers have indicated that state oil marketer SOMO has scheduled loading dates through mid-December, and Iraq has offered 15 million barrels of additional supplies to Russian oil companies attending the Baghdad trade fair this week.
Baghdad has reportedly also asked the U.N. to consider per-barrel deductions from its oil sales to fund production costs. Iraqi Ambassador to the U.N. Saeed Hasan sent a letter to U.N. Secretary General Kofi Annan requesting the deduction.
He asked permission for “the Iraqi State Oil Marketing Organization (SOMO) to incorporate in contracts for the sale of oil a provision to the effect that the sum of 1.5 Euros per barrel should be remitted to a special account designated by SOMO to meet the costs of the production, transportation and exportation of oil, the maintenance of oil-related installations and other essential expenditures within Iraq.”
Industry sources suggest that Baghdad’s latest proposal will be unlikely to meet with U.N. Security Council approval, particularly after the headaches the U.N. had over converting Iraqi oil payments from dollars into Euros earlier this month.
In addition, the U.S. and the U.K. are unlikely to endorse a situation in which SOMO would have the oversight of an individual account. In a separate letter to Annan, written by Iraqi Deputy Prime Minister Tareq Aziz on November 7th, Baghad had questioned the benefit to it of continuing oil exports while the proceeds from the sales are held in an escrow account in New York.