Global Policy Forum

By Bernie Woodall

U.S. and British officials said Thursday they need more evidence that Iraq has dropped its illegal surcharge on oil exports before modifying a retroactive pricing policy that Baghdad blames for fallen sales this year.

Both nations want to see clear evidence that Baghdad has dropped the surcharge for an extended time, the officials said.

"We want to see consistency over a period of time, and not see (Iraq) reverting to their nasty habits of defying the international community by imposing an unapproved illicit surcharge," said a U.S. official.

A British official also said the Iraqi surcharge on oil sales must be clearly abolished for a period of time, but neither the U.S. official nor the British official was willing to give a hint as to how long that period must be.

Recently, both British and French attempts to find an alternative to current U.N. oil pricing policies were stopped because Russia refused to allow any changes. Diplomats from three nations on the U.N. Iraqi sanctions committee said they have seen no hint that Russia has altered its resistance to revamping pricing policies.

The United States and Britain in October 2001 began enforcing the so-called retroactive pricing policy, in which oil prices are set after shipments are made as a way to thwart the surcharge and to keep money from Iraqi President Saddam Hussein.

The Iraqi oil surcharge has been added to oil contracts that are under U.N. supervision since at least late 2000, industry officials have said. Iraqi oil officials are now saying they have scrapped the surcharge, although Baghdad has never officially acknowledged it.

U.N. sources say the surcharge, which at one point was as high as 50 cents a barrel, has been cut to selective companies in recent weeks.

A high-ranking Iraqi official said Thursday that Baghdad has sealed new supply contracts with European oil companies and expects higher U.N.-supervised exports as a result, Reuters reported from Japan.

"We have signed some contracts with European refiners and other deals are in the pipeline," a senior Iraqi oil official told a Reuters reporter attending OPEC's meeting in Japan. "We expect our export levels to increase now that we have secured more customers."

Such pacts to "end-user" firms, or those with their own refineries, would bypass middlemen oil firms the United States and Britain want to eliminate from sales because they help hide the surcharge that Baghdad has never officially acknowledged.

The pacts signed this week are the first to a Western company with its own refineries since 2000 before the surcharge was imposed, a Western oil industry official said Thursday.

In 2001, official Iraqi oil exports averaged 1.7 million barrels per day. This year, they have averaged 1.1 million bpd and fell to less than 400,000 bpd two weeks ago.

Some oil dealers see exports climbing toward 1.5 million bpd next month as Baghdad lines up more new customers and lures back U.S. refiners who refused to touch barrels tainted by the fee.

In 2001, U.S. oil firms took in about half of the oil Iraq exported in the U.N. oil-for-food program, with the top three consuming companies being Valero Energy Corp., ChevronTexaco Corp. and Exxon Mobil.

U.S. firms buy Iraqi oil via third parties after Baghdad barred them in 1998.Major oil firms such as Spain's Repsol and Cepsa , France's TotalFinaElf, Italy's ENI and Austria's OMV had stopped dealing direct with Baghdad after it introduced the surcharge.Copyright 2002, Reuters News Service

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