Iraqi Oil Minister Amer Rasheed on November 28th said that Baghdad would defend its December crude contract prices, but would not halt exports.
Rasheed said that: “We will continue to defend and defend until we are victorious against those who have unjust responses to our demands.” However, he added that: “We have no intention of interrupting any supplies.”
The U.N. sanctions committee rejected Iraq’s crude price formula for December on November 27th on the grounds that the prices were below market value, presumably to accommodate the 50-cent premium that Iraqi state marketing arm SOMO intends to require its crude customers to pay into a separate account outside U.N. control beginning December 1st.
Under the oil-for-food program, all revenues from Iraqi crude sales are deposited in an escrow account at a French bank in New York.
Iraq has reportedly cancelled some December shipments after its customers have refused Baghdad’s request for the premium to be paid into a direct account in violation of sanctions.
The current price formula is set to expire on November 30th, and a new pricing scheme must be approved by December 1st for liftings under the oil-for-food program to continue uninterrupted. The sanctions committee will have to decide whether to allow oil sales to continue without approved prices.
The U.N. is waiting to see whether SOMO will resubmit prices ahead of the December 1st deadline, but some industry sources have indicated that the sanctions committee will try to negotiate a new pricing mechanism with SOMO by December 1st.