UN agrees Iraq payment in euros By Carola Hoyos, United Nations Correspondent, in New York and Ruth Sullivan in London
The United Nations Security Council on Monday agreed to allow buyers of Iraqi crude oil to pay in euros rather than dollars, ensuring that Baghdad does not interrupt its exports.
Baghdad had threatened to stop selling its oil if the conversion was not made by November 1, unsettling jumpy global oil markets.
Although diplomats saw even a short interruption as unlikely, a halt in the 2.3m barrels Iraq exports each day could have sent oil prices significantly higher, traders said.
Earlier, an increase in oil production of 500,000 barrels a day by the Organisation of Petroleum Exporting Countries from Tuesday failed to curb rising oil prices.
Opec's 2 per cent increase in output was announced by Ali Rodríguez, the cartel's president, who forecast that oil prices could fall in the second quarter of 2001 if stocks continue to rise.
But the December Brent contract on the International Petroleum Exchange in London closed last night at $31.14, up 19 cents, while in New York the Nymex December crude futures rose 7 cents to $32.81.
Saudi Arabia, the largest producer, will lead the countries raising output but analysts are not convinced other Opec members have the capacity to increase production.
Baghdad's demand for the change to euros was a protest against Washington's refusal to ease sanctions against Iraq.
While the US and UK were uneasy about caving into Iraq's president Saddam Hussein, the members of the Iraq sanctions committee - the 15 countries on the Security Council - established that the committee had no legal basis to block the change, and were unwilling to risk interrupting Iraqi oil sales.
The UK especially raised concerns about the impact of a conversion to euros on Iraq's oil revenues. They are used to repay the country's Gulf war debts and to buy food, medicine and oil industry spare parts, under UN supervision.
The UN secretariat, in an internal report to the sanctions committee, estimated that the conversion from dollars to euros would reduce the value of Iraq's oil by 10 cents per barrel, or $83m a year, due to the conversion costs incurred by consumers.
Iraq has not clarified whether it also wants $10bn from past oil sales converted to euros. The committee decided the UN needs to submit a more detailed impact assessment in three months.