Confronted with Iraq’s latest move to disrupt its crude exports, the U.N. Security Council is still prepared to authorize the next six-month phase of the oil-for-food program that would begin on December 6th, diplomats tell Oil Navigator™.
However, the latest circumstances will likely mean that the council will not address several points under discussion and instead will move for a “clean rollover” to a ninth phase, without extending the current phase to January 15th as requested by the Iraqis weeks ago.
Council members had been wrestling with how to address Iraq’s insistence on charging its crude lifters a 50-cent a barrel premium that would be directed into a non-U.N. managed account, Baghdad’s push for 1.5 Euros per barrel from its sales of crude to be dedicated for production and infrastructure needs and the re-opening of the Syrian-Iraqi pipeline.
A Security Council source tells Oil Navigator™ that even France, Russia and China reject Baghdad’s efforts to command its lifters to pay a 50-cent premium into an unauthorized U.N. account. “It becomes an issue of the sanctity of the council and its resolutions,” says the source.
Iraq officially asked the U.N. on November 9th to allow state oil marketer SOMO to dedicate 1.5 Euros per barrel from its oil sales into a separate account overseen by SOMO to meet production costs, but most council members are opposed to this proposal.
The council is, however, considering legitimizing the re-opening of the Syrian-Iraqi pipeline as a third export route within the oil-for-food program, although this may not be included in the upcoming rollover resolution.
Because Damascus has been coy about whether the line has been restarted and about whether it plans to break sanctions, authorizing the line as an export option under U.N. control will force the Syrians to take a stand, one source points out.
Though there is still discussion about declaring the Syrian-Iraqi oil flow as a “concessionary” arrangement similar to the trade deal that Iraq and Jordan have, Washington doesn’t like this option.