Global Policy Forum

Iraq Says it is Free to Choose its Oil Prices

December 3, 2000

Iraq insisted yesterday it has the right to sell its oil at a price it deems suitable, sticking to a hard line a day after halting crude exports to back its insistence on a buyers' surcharge. "The oil is ours and we are free to choose the price which we see as suitable for our interests," Deputy Prime Minister Tareq Aziz told reporters. Iraqi oil exports dried up on Friday after Baghdad insisted that buyers of its crude pay a surcharge of 50 cents per barrel outside the terms of the United Nations oil-for-food programme. Iraq sells about 2.3 million barrels a day under the plan, five per cent of world oil trade.

The United Nations earlier this week rejected Baghdad's proposal for December price formulas. Traders, who said the prices were placed low enough to make room for a 50-cent surcharge, said a lengthy outage could put fresh pressure on high global oil prices.

Saudi Arabia, the world's largest oil producer, renewed an assurance that it would take steps to calm world oil markets. Iraq underscored its position yesterday by saying it would boycott companies and countries that sold its crude to states it regards as hostile. The Iraqi News Agency (INA) quoted a statement issued after a cabinet meeting chaired by President Saddam Hussein as saying the cabinet had taken the decision and referred it to the Revolutionary Command Council for approval. Although it did not name countries Baghdad considered hostile, the statement clearly referred mainly to the United States, which led the 1991 Gulf War against Iraq. Baghdad has blamed the United Nations for the halt in its exports, saying the world body's rejection of Iraq's pricing proposals had kept its customers from loading.

The United States imported through a third party 124.6 million barrels of oil during the first seven months of 2000, according to data released by the U.S. Department of Energy. Iraq was the sixth-biggest supplier of oil to the United States during the period, shipping an average of 585,000 barrels per day. This was more than Kuwait.

UN Secretary-General Kofi Annan had called for a review of the UN humanitarian programme for Baghdad in a report to the Security Council on Friday, saying Iraqi oil sales were generating more money than ever but its people were living in misery. Annan criticised the United States, without mentioning it by name, for blocking too many goods Iraq has ordered, and Iraq for leaving too much oil money in its UN-controlled escrow account rather than buying medicine for its people.

The report did not comment on Friday's halt in oil exports. Saudi Oil Minister Ali Al Naimi told the official Saudi Press Agency that the kingdom was discussing the situation in the oil market with Opec states and the International Energy Agency (IEA). "In case we are assured of a stoppage of supplies, then these consultations will develop into a clear and practical position which would ensure the stability of the oil market," he said.

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


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