Global Policy Forum

By Farouk Choukri

Iraq halted oil exports under UN control on Monday, wiping more than two million barrels a day off world markets and sparking price rises as Baghdad upped the stakes in a battle against "smart" sanctions.

"Crude exports stopped at 8:00 am (0400 GMT)," a source at the oil ministry said. Iraq announced Saturday that it would suspend exports, apart from road tanker deliveries to neighbours Jordan and Turkey, in a bid to scupper US-British efforts to impose a new sanctions regime. "Iraqis are determined to win a decisive victory in this battle to open the way to the final and overall elimination of the embargo," said the ruling Ba'ath party daily Ath-Thawra. Halting oil exports "is the right choice to safeguard the sovereignty and independence of Iraq," it said.

The UN Security Council extended for one month on June 1 the oil-for-food programme under which Iraq has shipped crude to buy basic goods since December 1996. Details of the smart sanctions are to be worked out by July 4. But after 11 years under international embargo, Iraq responded furiously.

Oil Minister Amr Rashid explained Sunday that Iraq would only resume UN-supervised oil exports through its two outlets at the Turkish Mediterranean port of Ceyhan and the Mina al-Baqr terminal on the Gulf if the United Nations renewed for a regular six months the oil-for-food deal.

Diplomats in the Iraqi capital have told AFP the government could last several months without oil exported under UN control because of billions of dollars held in escrow accounts and major stocks of food due to a good harvest. The renewal should not be "linked to the US-British project" to modify the sanctions regime in force since Iraq's 1990 invasion of Kuwait, Rashid insisted.

Britain has put forward a draft resolution that would abolish the embargo on civilian trade with Iraq, while tightening a weapons ban and controls on smuggling outside the oil-for-food deal. Aiming to put pressure on the United Nations with the halt in exports, Iraq has shrugged off a Saudi offer to make up for the shortfall on world oil markets ahead of an OPEC meeting in Vienna starting Tuesday.

In London, oil prices opened higher Monday with the benchmark Brent North Sea crude for July delivery climbing to 29.48 dollars a barrel in early trade from 29.07 dollars on Friday. Oil prices in Asia rose sharply.

OPEC itself downplayed Iraq's move, as a delegate in Vienna told AFP that the 11-nation cartel would not allow itself to be "taken hostage" by Baghdad's action.

Ali Rodriguez, secretary general of the Organisation of Petroleum Exporting Countries, said: "We have to wait and see what's happening. ... The effect is on the future market; for the time being, the supplies are sufficient for demand."

Iraq clarified that oil exports delivered by tanker-trucks to Jordan and Turkey outside the confines of the UN programme would continue. It also pumps around 150,000 barrels per day to Syria, according to the industry press.

But Rashid said Iraq would not honour outstanding contracts under the six-month phase of the programme that ran out Monday, until "after the resumption of oil exports." After another break in exports last December, Baghdad still has outstanding commitments to ship almost 300 million barrels.

The UN oil-for-food programme was set up to alleviate the suffering of Iraq's 22 million population, most of whom live off rations.

US Defense Secretary Donald Rumsfeld opened talks in Turkey on Monday with Iraq high on the agenda, as Washington bids to rally its allies in the region to back smart sanctions. Rumsfeld acknowledged that cutting off supplies to Iraq that could be used in a weapons of mass destruction programme while sparing the Iraqi people hardship was "a complicated task at best."