Global Policy Forum

Iraq Halts Oil Exports

December 1, 2000

Iraq has gone ahead with its threat to halt oil exports in its latest onslaught on United Nations sanctions. The Iraqi oil ministry blamed the UN for the stoppage, saying the organisation had rejected a request for an increase in the price and called for more talks.

Crude oil prices rose after Iraq cut supplies through the Turkish port of Ceyhan and the Iraqi Gulf port of Mina al-Bakr. Iraq has been exporting an estimated 2.4 million barrels of oil a day, some 5% of world trade, almost all of it through the Ceyhan terminal.

The move was the latest twist in a deepening dispute between Iraq and the United Nations over international sanctions imposed on Baghdad 10 years ago. Iraq on Thursday threatened to halt supplies to the already nervous oil market unless buyers paid a 50 cent a barrel surcharge into an Iraqi bank account, which would break UN sanctions.

The world benchmark Brent crude blend rose 30 cents a barrel to $32.19 in early trading in London on Friday.

US action

The US had earlier said it and its allies would take swift remedial action if Iraq halted oil exports. Energy Secretary Bill Richardson said Washington was ready to release more oil from its strategic petroleum reserve, and would do so quickly if needed.

The UN says the surcharge Iraq requested would be illegal because it would break Gulf War sanctions that require all income from oil transactions to pass through the United Nations under its oil-for-food programme.

"The US is prepared to respond to Iraq if they take these steps," US Energy Secretary Bill Richardson had said. "We have good, fast contingency plans." He added that several oil-exporting countries in the Middle East, including Saudi Arabia, had pledged to compensate for any shortfall. However that extra output could take weeks to feed through.

In the meantime, consumers in the northern hemisphere are facing a winter with limited fuel supplies that could be about to get much tighter.

Iraqi confidence

Reports say the already high level of oil prices has boosted Iraq's funds for purchases of food and medicine to about $11bn, enabling Baghdad to sustain a halt in oil sales for some time. Iraq, which has the world's second biggest oil reserves, has been growing steadily more confident in recent months amid widening cracks in the sanctions regime.

Earlier on Thursday, Baghdad again rejected new weapons inspection proposals. Deputy Prime Minister Tariq Aziz responded with a blunt "No" when asked whether Baghdad would accept a mission under recently-appointed chief inspector Hans Blix. His remarks came a day after UN Secretary-General Kofi Annan said he planned to start talks with Iraqi officials early next year aimed at breaking the deadlock over weapons inspections.

Inspectors have not been allowed into Iraq since the US and the UK launched air raids on Baghdad nearly two years ago. The UN says sanctions imposed on Iraq after its invasion of Kuwait in 1990 will only by lifted when inspectors have verified that Iraq no longer maintains alleged weapons of mass destruction.

More Information on the Oil-for-Food Program
More Information on Sanctions Against Iraq


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