Iraq pushes on the door of oil markets

Published November 12th, 2000 - 02:00 GMT

Iraq is trying to regain influence on world oil markets in the face of an international embargo by threatening to freeze its limited oil exports, analysts say. 

 

But so far, they added, the effort has been in vain. 

For several years, "Iraq has embarked on a constant effort to get out of its hole," said Peter Gignoux, director of the oil department for Salomon Smith Barney in London. 

 

Just days ahead of a meeting Sunday in Vienna of Organization of Petroleum Exporting Countries (OPEC) ministers, Iraq this week hinted it could suspend oil exports because of contracts being put on hold. 

 

Under a UN oil-for-food programme, funds are withdrawn from a special "escrow" holding account in New York to finance Iraqi import contracts, most of which need the approval of a Security Council sanctions committee. 

 

Iraq has been subject to sanctions ever since its 1990 invasion of Kuwait but the oil-for-food programme allows Baghdad to export crude oil under strict UN supervision to finance imports of humanitarian supplies. 

 

Last month, the UN allowed Iraqi crude oil exports to be bought in euros instead of dollars. 

 

Baghdad had let it be understood that it might interrupt its oil exports if the UN refused to give permission for the switch. Iraqi Oil Minister Amer al-Rashid described the US dollar as "the currency of an enemy state." 

 

"Saddam pushes in one direction, pushes in another, pushes, pushes, pushes," because it is a big producer and oil is its only weapon, said the Salomon Smith Barney expert. 

 

But Baghdad's influence on the markets has declined, said Leo Drollas of the Center for Global Energy Studies (CGES). 

 

"They make difficulties here and there, they make a lot of noise, but they are just playing a game, pushing on the door to see how far it is open and how far they can push it," he added. 

 

Iraq is a big producer and exports some 2.3 million barrels of crude a day, said Drollas, explaining some of the nervous market reactions to its suspension threats. 

 

"But they cannot allow themselves to stop. They need the money," he added. "The markets know that." 

 

The demand for exports to be denominated in euros instead of dollars was "purely political" but "financially absurd," he added, because of the big exchange commissions and the high costs of purchases. 

 

The six-monthly UN oil-for-food programme comes up for renewal on December 6.—AFP. 

©--Agence France Agence.  

 

© 2000 Mena Report (www.menareport.com)

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