Iraq Cuts Off Oil

Iraq followed up on its threat to halt most oil exports, stopping the flow early Monday to all but neighboring Turkey and Jordan.

The indefinite halt was meant to protest a U.N. Security Council decision to extend by one month instead of the usual six months the program under which Iraq can sell oil. Baghdad has chafed at U.N. controls over its oil exports — its sole foreign exchange earner — that stem from sanctions imposed for Iraq's 1990 invasion of Kuwait.

War and sanctions have crippled the Iraqi economy, leaving many Iraqis dependent on government rations financed by the U.N.-supervised oil exports. Iraq has cash reserves, but it was unclear how long it could survive without further sales. It had been pumping about 3 million barrels a day.

Sources close to the Iraqi Oil Ministry, speaking on condition of anonymity Monday, said pumping oil through an Iraqi-Turkish pipeline to Turkey's Mediterranean port terminal at Ceyhan stopped at 8 a.m. local time. Exports through Iraq's southern al-Bakr oil terminal were also shut off, the sources said.

The sources said oil exports by road tankers to Turkey and Jordan were not affected. Iraqi Oil Minister Amer Mohammed Rashid had said Sunday that exports to Iraq's neighbors would not be affected by the protest.

A delegation headed by the Iraqi Oil Ministry's senior undersecretary, Taha Humud Musa, was dispatched to Vienna, Austria, for a regular OPEC meeting that starts Tuesday. Rashid, speaking to reporters Sunday, played down the meeting's importance, saying OPEC ministers have already agreed not to change production.

Asian and Middle East crude spot prices rose after Iraq stopped exports, Dow Jones Newswires reported Monday.

But Dow Jones quoted traders as saying the impact of Iraq's decision was mitigated by the OPEpledge to fill any gap. In addition, some buyers had already stopped buying Iraqi crude after Iraq first imposed a surcharge fee last December.

Rashid had announced Saturday that Iraqi oil exports would stop Monday and would not resume until the Security Council agreed on the usual six-month extension of the oil-for-food program. Rashid said Iraq has produced 3 million barrels of oil per day for the past two years, of which 2.3 million barrels per day were exported under the U.N. oil-for-food program.

The one-month oil-for-food renewal announced Friday was a stopgap to give council members time to study a plan — proposed by Britain, backed by the United States and rejected by Baghdad — to amend the sanctions against Iraq.

Since 1996, the oil-for-food program has allowed Iraq to use its oil earnings to buy humanitarian goods. Most other trade with Iraq is banned under the sanctions.

The so-called smart sanctions proposal would allow civilian goods to flow freely into Iraq — except for goods that appear on a U.N. list of items that could be used for military purposes.

The plan also permits commercial and cargo flights into and out of Iraq as long as they are inspected at their departure points. It is designed to tighten border controls around Iraq and to curb oil smuggling and illegal Iraqi surcharges.

Iraq wants all sanctions lifted.

By Sameer N. Yacoub
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