IRAQ SANCTIONS MONITOR Number 171 Thursday, December 14 2000 IRAQI OIL EXPORTS SET TO ROLL FOR SECOND DAY DUBAI, Dec 14 (Reuters) - Iraqi crude oil exports were set to roll for a second day out of Mina al-Bakr port, but Baghdad kept quiet on whether a second customer had been excused from its controversial demand for a surcharge. An Iraqi oil official was tight-lipped about the identity of the customer, due to load Basrah Light crude oil later on Thursday. "A third ship is to load later today at Mina al-Bakr," the official told Reuters by telephone from Baghdad. When asked which company was set to load, he said: "Let us see in two to three hours." About two thirds of the oil from Mina al-Bakr has been imported into the United States while the rest generally heads into Asian markets. He declined to be drawn on whether Iraq had dropped its demand for a 40-cent per barrel surcharge to be paid outside the United Nations oil-for-food deal, which most Security Council members view as a violation of sanctions on Iraq. The surcharge request caused a 12-day break in some 2.3 million barrels per day (bpd) of Iraqi oil sales after customers refused to pay and break U.N. sanctions, imposed after Iraq's invasion of Kuwait in 1990. Two Indian Oil Corp (IOC) tankers were loaded on Wednesday at Mina al-Bakr. IOC used diplomatic channels to convince Baghdad to exempt the company from the surcharge, an Indian industry source said on Thursday. "This has been handled by the External Affairs Ministry since Tuesday," the official told Reuters. "We sense a preferential treatment but we only know our gains, not whether it is going to be extended to others," he said. Russia, one of Iraq's staunchest allies, blocked a U.N. committee on Wednesday from ordering buyers not to pay the surcharge. U.S. officials had proposed the Security Council's Iraqi sanctions committee ask oil companies "not to pay a surcharge of any kind to Iraq." An Arab diplomat said on Wednesday that Iraq stands by its position that it has not asked crude oil customers to pay the surcharge. While lifters are queueing at the Mina al-Bakr terminal, there has been a notable lack of activity at the Turkish Mediterranean port of Ceyhan, Baghdad's other U.N. authorised export outlet providing crude mostly for European-based users. Some oil traders wonder whether Ceyhan will witness any loadings during December because the price of Kirkuk now looked uncompetitive versus rival Russian Urals grade, which was valued around Dated Brent - $2.35/-$3.00 per barrel for deliveries into the Mediterranean market. The Iraqi oil official noted the deterioration in the Urals price and said state oil marketer SOMO was preparing to take action on the December Kirkuk price to Europe of Dated Brent - $3.55 for loading free-on-board Ceyhan. "After we submitted the December price mechanism, Urals changed drastically," he said. "We will do something definitely, but SOMO is still studying the matter." The Iraqi oil official also sought to calm lifters' concerns that Baghdad would prevent deliveries of its crude oil into the United States. "There is no such thing at all," he said. Baghdad threatened recently to punish any company or country supplying its crude oil to countries it regards as hostile. The United States, held in contempt by Iraq, has been importing about 750,000 bpd of Iraqi oil from third parties. __________________________________________________ IRAQ MAY HAVE FILLED TANKERS BUT OIL IS STILL NOT FLOWING HOUSTON - Iraq filled its first export tankers after a nearly two-week suspension, but the move apparently doesn't signal a resumption of exports. "Until somebody changes their mind, Iraqi oil is still not flowing," said Larry Goldstein, president of the Petroleum Industry Research Foundation. Experts say Iraqi leader Saddam Hussein is still pressing for buyers of Iraqi oil to pay a surcharge of 40 cents a barrel. Such a direct payment to Iraq violates United Nations sanctions. But officials of the state run Indian Oil Corp. said Baghdad dropped that surcharge request. Some officials say Iraq made the exception following a large oil-for-grain deal struck last month during a visit to India by senior Iraqi ministers. Iraq suspended oil exports of 2.3 million barrels a day Dec. 1 after buyers refused to pay a surcharge. Despite the delay, oil markets remained largely unfazed. Yesterday, crude prices on the January contract fell 94 cents to $28.74 a barrel on the New York Mercantile Exchange. At the U.N., Russia blocked a committee from telling buyers of Iraqi oil not to pay the surcharge. U.S. officials had proposed that the Security Council's Iraqi sanctions committee ask oil companies "not to pay a surcharge of any kind to Iraq." The U.N. allows Iraq to export oil provided the revenue goes into a U.N. account set up after the Gulf War. This revenue allows Iraq to import food and medicine among other items. ________________________________________________ IRAQ SAYS THIRD SHIP TO LOAD OIL AT MINA DUBAI, Dec 14 (Reuters) - An Iraqi oil official said a third tanker is due to load crude oil from the Gulf port of Mina al-Bakr later on Thursday, one day after Iraqi oil sales resumed - ending a 12-day halt in exports. "A third ship is to load (Basrah Light crude oil) later today at Mina al-Bakr," the Iraqi oil official told Reuters by telephone from Baghdad. Asked which company was set to load, he said: "Let us see in two to three hours." He refused to be drawn on whether Baghdad had dropped its demand for a 40-cent per barrel surcharge. The Indian Oil Corp, which loaded two ships at Mina al Bakr on Wednesday, did not pay the surcharge, an Indian industry source said. Liftings of Kirkuk grade from the Turkish Mediterranean port of Ceyhan have yet to commence, with some oil traders doubting whether loadings may restart during December because the December Kirkuk price now looks uncompetitive versus rival Russian Urals grade. The Iraqi oil official noted the deterioration in the Urals price and said state oil marketer SOMO was preparing to take action. "After we submitted the December price mechanism, Urals changed drastically," he said. "We will do something definitely, but SOMO is still studying the matter." ________________________________________________ INDIA USED DIPLOMACY TO GET IRAQI OIL NEW DELHI, Dec 14 (Reuters) - India used diplomatic channels to convince Baghdad to release oil to Indian Oil Corp and exempt the state-run company from a crude surcharge payment, an Indian industry official said on Thursday. But the official said he was not aware of whether other buyers of Iraqi crude would be offered preferential treatment. "This has been handled by the External Affairs Ministry since Tuesday," the official told Reuters. "We sense a preferential treatment but we only know our gains, not whether it is going to be extended to others," he said. An IOC-chartered tanker began loading Basrah Light crude on Wednesday, the first customer to receive Iraqi oil since December 1 when Baghdad halted exports because of a pricing dispute with the United Nations and its customers. Iraq wants buyers to pay a 40-cent per barrel surcharge over prices already agreed with the United Nations. The surcharge is to be paid directly into an Iraqi account. But buyers have been refusing to pay the premium because payments direct to Iraq would contravene U.N. rules that call for all proceeds from Iraq's oil sales to be deposited into a U.N. escrow account. Indian officials have insisted that IOC has not violated any U.N. sanctions to get Iraq's go-ahead to load crude. "We're not violating any U.N. sanctions. India will not violate any U.N. sanctions," an Indian official said on Wednesday. "Indian Oil is not paying any surcharge." Some traders have speculated that India was able to get extra leverage over the surcharge during a visit to New Delhi by Iraqi officials late in November, when the countries agreed an oil-for-wheat barter deal. Dealers are now waiting to see whether Baghdad will exempt others from the tariff. On Wednesday about eight vessels were banked up behind IOC's two vessels at the port of Mina al-Bakr on the Gulf. No activity has been spotted yet at Ceyhan in Turkey, Iraq's second crude export outlet. Iraq's demand for the fee had been seen as its boldest move yet to wrest back some control from the United Nations over oil export revenues after 10 years of sanctions imposed after Baghdad marched into neighbouring Kuwait. ________________________________________________ UN-IRAQ PANEL DELAYS SURCHARGE DECISION UNTIL THURSDAY United Nations (Platt's)-13Dec2000/1245 pm EST/1745 GMT Experts from the UN Security Council's sanctions committee on Iraq Wednesday failed to reach an agreement on a letter that would warn buyers of Iraqi crude not to pay a surcharge to the Iraqi government, diplomats who attended the meeting told reporters. Several diplomats said there was no disagreement on the substance of the letter, which was proposed by the US, but said Russia warned that Iraq would have a "violent reaction" to such a communique. The diplomats said Russia did not explain what it meant by that term. The proposed letter warns buyers the sanctions committee has not approved any surcharge for Iraqi crude and that since payment cannot be made to any non-UN account, the surcharge payments would be illegal. United Nations (Platt's)-13Dec2000/1245 pm EST/1745 GMT The committee is scheduled to meet again informally Thursday morning, and a US diplomat said he expects the letter will be approved after the Russian delegation consults with Moscow on whether to back the letter. ____________________________________________________________ LIFTING OF IRAQ SANCTIONS NOT PROFITABLE FOR RUSSIA SAYS DUMA DEPUTY SHOKHIN The lifting of sanctions against Iraq will not be profitable for Russia, Duma Deputy Alexander Shokhin said at a conference on the oil industry and its role in expanding production. Announcements that the lifting of sanctions against Iraq will give Russia the possibility of receiving many billions in debts and benefiting from participation in restoring the Iraqi oil industry are groundless, he said. Shokhin said that the main source of Iraqi revenue is oil exports. If these exports are not regulated by international sanctions, a glut of crude will appear on the market, which will lead to falling world oil prices and, consequently, a reduction in Russian revenue from crude exports," he said. The deputy stressed that he is not calling for sanctions against Iraq to be tightened, but at the same time he is recommending that we do not rush to lift them. Since the Gulf War in 1990, the UN Security Council sanctions committee has regulated exports of Iraqi oil. According to Bloomberg Energy, Iraq exports on average about 2.5 million barrels of oil per day. Export revenue is used to carry out humanitarian supplies to Iraq and also to pay reparation. Commenting on the issue of Russia joining OPEC, Shokhin noted that the current position of the government, whereby Russia supports the decisions of the cartel without joining it, is correct, as oil export quotas would limit Russia's revenue. __________________________________________________ IRAQI DELEGATION DUE TO TURKEY BAGHDAD, Dec 13 (A.A) - An Iraqi delegation headed by Iraqi Foreign Ministry First Undersecretary Nuri Al Veyis, will visit Ankara on Friday. An official from the Iraqi Foreign Ministry told A.A correspondent on Wednesday that the delegation comprised of five people, will attend the tenth political consultation meetings between Turkey and Iraq which will continue until Tuesday and will hold contacts for the improvement of the bilateral relations. The last political consultation meetings which are held semiannually, was held in Baghdad in June. A delegation headed by Foreign Ministry Undersecretary Faruk Logoglu had participated in the last meeting. Meanwhile, another delegation headed by Iraqi Transportation Ministry Undersecretary will pay a visit to Ankara on Monday. This delegation is expected to discuss starting operation of the Baghdad-Mosul-Ankara railway line during its contacts in Ankara. ________________________________________________ IRAQ TO SUE US, UK SANCTIONS COMMITTEE MEMBERS Text of report by Iraqi radio on 13 December Jamil Ibrahim al-Tikriti, senior undersecretary of the Transport and Communications Ministry, has once again expressed Iraq's determination to file a suit with the International Court of Justice demanding compensation for human and material losses sustained by the Iraqi people as a result of the continued illegal no-fly zones and the obstruction of Iraq's contracts in the field of communications. In a statement to the Iraqi news agency, Al-Tikriti said the suit will be filed against the US and British representatives in the UN Security Council's Sanctions Committee because of their constant obstruction of the endorsement of Iraq's contracts in the field of communications. He added that the illegitimate ban on aviation to and from Iraq and the bad state of the Iraqi communications network, which was destroyed by the treacherous 30-state aggression of 1991, have caused many accidents claiming thousands of Iraqis, Arabs and foreigners as victims. Responding to remarks by Mark Mathews, spokesman for the British Foreign and Commonwealth office, last month, in which he claimed that Iraq wants to use communications equipment in the Iraqi armament programme and insisted that Iraq's lawsuit will be lost and is only political propaganda, Al-Tikriti said: How can Mathews claim that the lawsuit will lose? What documents did he base this judgment on? Can he show us any documents to verify his claims? Can he refute the statements made by a UN specialist team which affirmed that the equipment is for civilian use, keeping in mind that one of the members of that team was a British national? ________________________________________________ EGYPT AIR SET TO START WEEKLY CAIRO-BAGHDAD FLIGHT Text of report in English by Egyptian news agency MENA Cairo, 13 December: Egypt Air decided to operate a weekly regular flight between Cairo and Baghdad after the holy month of Ramadan [around 25th December], said a Civil Aviation Authority (CAA) source. The flight will be the first between the two Arab capitals since the Iraqi invasion of Kuwait in 1990. Egypt has received the permission of the Jordanian civil aviation authorities to pass the Jordanian airspace for one year, said the source, adding that the UN Sanctions Committee is being contacted via the Foreign Ministry to have its approval in principle. The step follows suit with similar ones taken by a number of countries which have already operated flights to Baghdad especially that the UN resolutions do not prohibit civil flights to the Iraqi capital, added the source. Charter flights taking off every Tuesday will be operated between Iraq and Egypt until the operation of the regular one, according to an Egypt Air source. The Mariam Appeal Tel: 00 44 207 40 5200 Fax: 00 44 207 403 3823 tel: +44 (0)20 7403 5200 fax: +44 (0)20 7403 3823 email: [EMAIL PROTECTED] web: www.mariamappeal.com
