Global Policy Forum

The U.N. sanctions committee is notifying lifters of oil that any request by Iraq to pay a surcharge for its crude oil should not be met, a UN source said last evening. "The committee has agreed to have a letter sent to the buyers from the overseers on behalf of the committee on the issuance of a surcharge," said the UN source.

Iraq has asked crude lifters to pay an extra 40 cent per barrel surcharge to accounts outside of UN oil-for-food program, industry sources say. Iraq did not formally submit a request to the UN on the issue, and UN envoy Saeed Hasan has said talk of the surcharges was only rumours.

After overcoming objections from Russia, the Iraqi sanctions committee requested that the oil overseers provide the following communication to all buyers of Iraqi oil immediately:

1. The sanctions committee has not approved a surcharge of any kind on Iraqi oil.

2. Payments for purchasing Iraqi oil cannot be made to a non-UN account.

3. Therefore, buyers of Iraqi oil shall not pay any kind of surcharge to Iraq.

Exports from Iraq started again Wednesday after pricing disputes prompted Baghdad to halt liftings for 12 days. Three ships have loaded since then at Iraq's port at Mina Al Bakr.

Oil traders say that as of late yesterday, Iraq was still pressing for the surcharge but there was no sign that either of the two customers that have lifted the cargoes had paid the additional fee. Meanwhile, Iraq submitted the first contract in the ninth phase of the UN oil-for-food programme for approval Thursday, a UN source said yesterday. "They submitted the contract yesterday," said the UN source, adding that further details would not be available until a decision on the contract was made. The ninth six-month phase of the programme, which was started in 1996, was approved on December 5. The contract submitted for the ninth phase was a new contract, and not one of the outstanding from the eighth phase.

As of December 12, there were 56 approved contracts for the eighth phase pending, for almost 77 million barrels. The validity of these contracts is being extended on a case-by-case basis by the oil overseers on the request of Iraq's oil company SOMO and the buyers, according to the UN Office of the Iraq Programme.

Exports were restarted on Wednesday after Iraq put its 2.3 million barrels per day of oil sales on hold from December 1 as customers under the UN oil-for-food programme declined to meet demands of special surcharge payments. Iraqi officials have denied any request for surcharge payments, but the sanctions committee has nonetheless been in meetings this week drafting a condemnation of any payments made outside of UN accounts. During the eighth phase, 41 per cent of Iraq's exports went to Europe, 40 per cent to the United States, and 19 per cent to Asia.