SUNDAY, MARCH 03, 2002
Politics undermining Iraq oil industry: Report
AFP
NICOSIA: Threats to overthrow the regime in Baghdad and a confusing UN pricing structure threaten Iraq's ability to export crude oil at capacity, the Mideast Economic Survey reports in its Monday edition.
The industry newsletter said February exports under the UN oil-for-food programme were again expected to be low, at about 1.56 million barrels per day, or 640,000 bpd less than the target of 2.2 million bpd.
In January exports were 1.55 million bpd and 1.4 million bpd in December.
MEES said a similar shortfall was expected in March.
"This should not come as a surprise since European and some US-end users are shying away from Iraqi crudes because of the market uncertainties resulting from the retroactive pricing system being applied by the UN sanctions committee."
This was compounded by growing fears of a US military attack to topple the Baghdad regime, the weekly underlined.
"Several senior oil industry officials have also recently been arrested on corruption charges, delaying the normal procurement of oil equipment and services," it added.
MEES noted that speculation about US military intervention, an early March meeting between the UN Secretary General and Iraq's Foreign Minister on the return of arms inspectors and the May 31 deadline for a new UN programme for Iraq -- "all these developments have rattled the oil markets generally and customers of Iraqi oil specifically.
"Several end-users are under such circumstances reluctant to rely on Iraqi oil supplies, preferring instead to switch gradually to other sources of sour crudes for their refineries in order not to be short of supply when a new crisis erupts."
The head of the UN's humanitarian scheme for Iraq, Benon Sevan, warned the Security Council last week that excessive blocks on imports threatened to paralyse the programme.
The programme was established in December 1996 to soften the impact of a total trade embargo imposed on Iraq after it invaded Kuwait in August 1990.
Iraq is allowed to export crude oil under UN supervision and to use part of the revenue to import food, medicine and other necessities.
Sevan told the council that Iraq's oil exports were "some 35 percent lower than the assumed sustainable rate of export of 2.1 million barrels per day."
Unless exports picked up, revenue for the six-month phase of the programme that runs up to the end of May will be about one billion dollars short of budget, he said.
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