Global Policy Forum

Oil Minister Amer Rashid said on Wednesday that Iraq was ready to renew the UN oil-for-food programme if no amendments were made that could damage Baghdad. "If the memorandum of understanding is extended without the introduction of any measures or paragraphs harmful to Iraq, Baghdad will react positively," Rashid told reporters. "Otherwise, Iraq will halt its crude exports," he warned after talks with Algerian Energy Minister Chakib Khelil, who is also president of OPEC (Organisation of Petroleum Exporting Countries).

The current six-month phase of the oil-for-food programme, launched in 1996 to allow Baghdad to export crude under UN supervision to finance imports of humanitarian goods for its 22 million population, expires on June 3. It comes at a time when the UN Security Council is discussing a US-backed British proposal to abolish the 11-year-old embargo on civilian trade with Iraq while seeking to tighten a ban on sales of arms and military technology. Russia, Iraq's closest ally on the 15-member Security Council, has insisted on detailed discussion of the British draft resolution that could block its adoption before June 3.

Rashid declined to specify if Iraq would accept a one-month extension of the current phase of the programme to give Washington and London more time to win Moscow's support for their proposal. Iraq has repeatedly said it would block any UN resolution to revise the sanctions regime imposed on Baghdad for its 1990 invasion of Kuwait, warning it "will not sell a single barrel of oil under the oil-for-food programme" if the resolution is adopted - a threat that could remove around 2.1 million barrels a day from world markets.

Iraq Serious in Threats - Diplomats

Iraq will carry out its threats to halt oil exports and in effect break ties with the United Nations if the Security Council adopts a resolution on "smart" sanctions, diplomats in Baghdad warned on Wednesday. "I think we're heading for a new crisis if this resolution is voted in, and it will be, barring a Russian veto," one Western diplomat told AFP. He said Iraq considered the draft resolution a "unilateral break" in the UN oil-for-food programme, which was launched in 1996 to ease the effects of international sanctions on Iraq's civilian population with revenues from oil sales. "The Iraqis will then think they have the right to cut ties with the United Nations and stop oil exports and contracts sealed under this programme," he warned. "The Iraqi threats are serious. They will halt crude exports while trying to continue oil smuggling."

The British-US proposal seeks to end oil smuggling between Iraq and its neighbours — Iran, Jordan, Syria and Turkey as well as Gulf countries — the revenues from which bypass the United Nations and go straight into Baghdad's coffers. The "smart" sanctions "will weaken the regime by depriving it of the money generated by oil smuggling. This money has contributed to boosting the regime over recent years," the diplomat said.

"The Iraqis will carry out the threat immediately without batting an eyelid," another diplomat said. "I think the main objective of this resolution is to reduce the margin of manoeuvre of the regime and to cut economic links it has developed with its neighbours…It is also determined to shoot down the propaganda of the Iraqi regime on the suffering of its people because of the embargo…The Iraqis are convinced that the Americans want to provoke a new crisis by proposing a resolution they know is unacceptable to Baghdad."

Russia, Iraq's closest ally on the 15-member Security Council, has insisted on detailed discussion of the British draft resolution that could prevent its adoption before the current six-month phase of the oil-for-food programme expires. "It is difficult seeing Russia change its position quickly," Babel newspaper, headed by President Saddam Hussein's elder son, Uday, said on Wednesday.

Meanwhile, Oil prices held firm in London as the market kept an eye on Iraq's threat. A barrel of Brent North Sea crude for July delivery hovered around its overnight closing level of $29.17. In New York, the light sweet crude July contract gained 28 cents to $28.66 a barrel on Tuesday.