With the world facing an imminent halt to Iraq's oil exports, the UN said Thursday that buyers could take delivery of Iraqi crude without paying for it until a dispute over the price is resolved.
The announcement came hours before a reported threat by Iraq to halt daily exports of about 2.3 million barrels of oil was due to take effect at 2100 GMT.
Diplomats said Iraq had asked the UN to price its oil below market rates in order to absorb a surcharge which it has reportedly asked customers to pay, in breach of UN sanctions.
"At at this point there is no agreed pricing mechanism for the month of December for the sale of Iraqi oil," UN spokesman Fred Eckhard said.
"However, loadings of oil can continue without a pricing mechanism but until there are UN-approved prices, no payments can be made for the oil lifted," he said.
"Once there is an agreed pricing mechanism," he said, "payments including for the oil already loaded can resume into the UN-controlled Iraq escrow account."
The account contains revenue from Iraq's oil sales, 66 percent of which is available for imports of necessities under the oil-for-food programme set up by the UN four years ago to alleviate the impact of sanctions.
The authoritative Middle East Economic Survey (MEES) said Iraq intended to halt its oil exports from midnight Baghdad time (2100 GMT) on Thursday unless buyers agreed to pay a surcharge of 0.50 dollars a barrel.
Revenue from Iraq's oil exports is expected to exceed $10 billion in the current 180-day phase of the oil-for-food programme, which ends on Tuesday.
But MEES noted that there is more than $11 billion in the escrow account with BNP-Paribas bank in New York, and said the financial cushion enabled Baghdad to talk tough.
World demand for oil is currently 76 million barrels a day, but the market is tight and some analysts believe that if Iraq turned off the taps, the price of oil would soar.
MEES quoted the Iraq State Oil Marketing Organisation (SOMO) as telling clients that the surcharge must be paid into a bank not controlled by the United Nations.
UN officials and diplomats said that would violate the sanctions which the world body imposed on Iraq after it invaded Kuwait in August 1990.
Iraq has not notified the UN about the surcharge, and diplomats said it would be rebuffed if it did so.
But they said the surcharge was apparently disguised in SOMO's proposed December pricing formula, which it sent to the sanctions committee on November 22.
Eckhard recalled that on the same day, the UN oil overseers advised the committee that SOMO's proposals did not represent fair market value.
The price of oil on world markets fluctuates constantly. When Iraq submits its monthly pricing formula, it asks the UN to sell its oil at a fixed discount below the fluctuating price of benchmark oils.
Iraq has two main types of crude, known as Basrah Light and Kirkuk, which are sold on three main markets: Europe, the United States and the Far East.
UN officials said that the proposed price of Basrah Light on the European market for December was $4.55 below the price of Brent North Sea oil, compared with $4.10 for the first half of November.
The price of Kirkuk crude proposed by Iraq was $3.50 below Brent, compared with $3.30 in November, they said.—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)