Iraq could suspend oil exports if the United Nations fails to convert to euros the billions of Iraqi dollars held in a special account, the central bank's deputy governor told a weekly published on Thursday.
"Iraq may suspend crude exports if the United Nations refuses to reply favourably to its request to convert into euros its account at the French bank BNP," deputy governor Abdel al-Ilah Boutros told Al-Zawra.
Boutros stressed the "importance of using euros, instead of dollars, for all future oil contracts that Iraq signs with its foreign partners."
An oil source in Baghdad told AFP that "Iraq has started to warn its partners that the contracts must be converted into euros or there will no longer be any contracts".
An Iraqi oil ministry expert, cited by the newspaper, said the revenues from Iraqi oil exports held in the BNP-Paribas account has risen to 20 billion dollars due to the slow UN process of approving Iraq's contracts.
"The conversion of these assets into euros will support this currency and boost the European market," the expert said. Iraqi Finance Minister Hekmat Ibrahim al-Azzawi announced last month a decision to ditch the dollar in foreign trade transactions.
"The dollar is the currency of an enemy state, and must be abandoned for other currencies, including the euro," he said. And the central bank announced Sunday it had begun to buy European currencies.
"The currencies which will be bought are the French franc, the German mark, the Austrian schilling, the pound sterling, the Dutch florin and the Italian lira," it said.
Baghdad, which accuses Washington of prolonging the crippling sanctions regime imposed on Iraq for its 1990 invasion of Kuwait, is exporting as much as 2.5 million barrels of oil a day. Since December 1996 the United Nations has allowed Iraq to sell oil to pay for imports of food and medicine. Under the decade-old sanctions regime none of the revenue is allowed to pass through Iraqi government hands.
Instead, it is paid into an escrow account at BNP-Paribas, which is paid a fee for operating the account.Iraq, which like other producers has traditionally priced its crude in dollars, has sold more than 34.5 billion barrels of oil since the oil-for-food programme was launched in December 1996, according to the United Nations.
The price of oil in London drifted downwards early Thursday after a brief upwards blip as analysts said the market was largely discounting Iraq's latest threat to suspend oil exports. "Most people feel that the threat of suspending exports is a rather extreme measure to take for a currency switch," said GNI brokerage analyst Lawrence Eagles.
But he noted that Iraq is one of the world's largest exporters, and "with the market tight, its contributions are important." The Brent North Sea benchmark crude ticked up as high as 31.86 dollars a barrel, before dipping to 31.66 dollars, down 13 cents on its closing value on Wednesday. – (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)