Iraq to halt oil exports unless 50-cent surcharge accepted

Published November 30th, 2000 - 02:00 GMT

Iraq intends to halt its oil exports from midnight Baghdad time (2100 GMT) on Thursday unless companies agree to pay the 50 cent-per-barrel surcharge it has demanded, the Middle East Economic Survey said. 


Baghdad's State Oil Marketing Organization (SOMO) has sent a fax to buyers saying that unless they pay the surcharge into a special account from December 1 they will lose their cargoes, the Nicosia-based newsletter said. 


SOMO "will stop exports of oil (approximately 2.4 million barrels per day) under the oil-for-food programme from Ceyhan and Mina al-Bakr as of midnight Thursday Baghdad time unless the companies agree to pay a surcharge," it said. 


"How long the dispute will last is not clear at this stage. Baghdad these days is talking tough and is likely to be counting on the 11 billion dollars and more available to it in the escrow account," MEES said. 


The escrow account at the BNP-Paribas bank in New York, which holds monies deposited by the United Nations from Iraqi oil exports, is used to pay for Baghdad's imports, which have to be UN approved under the oil-for-food programme. 


The industry report said the UN looked in a difficult position over Iraq's moves, all part of a campaign to kill off the 10-year sanctions regime imposed for invading Kuwait. 


"The UN sanctions committee faces a real dilemma. If it allows a deflated price formula, then it will effectively be approving the erosion of sanctions. Rejecting the formula, on the other hand, risks contributing to market instability," MEES said. 


The United Nations on Tuesday rejected Iraq's proposed pricing formula for sales of its oil under UN supervision in December because it did not reflect a fair market value.  


UN officials have said the request for a premium was not made through the UN and that any company which paid it could open itself to charges of violating the sanctions imposed on Iraq during the 1990 Gulf War. 


UN spokesman Fred Eckhard said SOMO had been asked to submit new proposals. MEES said the impact of a halt in Iraqi exports on the market was not clear. 


"While there is plenty of crude oil in the market, an Iraqi stoppage would be likely to halt any possible downslide in prices. 


"How much of a price rise a stoppage would be likely to cause would depend on the weather in the coming period, how much new oil other producers could place in the market and how soon, as well as whether or not IEA (Interrnational Energy Agency) member countries felt it necessary to use their strategic reserves," MEES said. 


On Monday, the industry newsletter said, "Iraq's current strategy is to try to establish independent accounts outside the control of the UN, while the (UN) sanctions committee affirmed informally on November 18 that it would not be able to do so."—AFP. 

©--Agence France Presse. 


© 2000 Mena Report (

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