ABC News
DUBAI - Iraq
is likely to suspend oil sales worth 5 percent of world crude
exports from Nov. 1 if Washington objects to a plan by Baghdad
that it be paid in euros rather than dollars, an Iraqi source
said Thursday. "Iraq is unlikely to implement oil contracts
if the United States objects to euro payments for Iraqi oil and
Baghdad insists payment be made in euros," the source told
Reuters. "I see a problem," he added. "This is
a political issue and not a technical matter." He indicated
any suspension would be from Nov. 1.
Iraq was the
sixth biggest oil supplier to the United States in August, providing
749,000 barrels per day (bpd), U.S. government figures show. Its
U.N.-monitored sales account for 5 percent of world oil exports
of about 45 million bpd. The West"s energy watchdog, the
International Energy Agency, has said it would consider releasing
emergency stocks in the event of a supply shock such as an Iraqi
export halt. The world"s largest oil exporter, Saudi Arabia,
as well as other producers would increase their exports in the
event of any Iraqi shortfall, an OPEC delegate said. Saudi Arabia
has said it can increase its current output of 8.5 million bpd
by 2 million bpd and that it could take up to 90 days to attain
maximum production levels. The United Nations sanctions committee
will meet Oct. 30 to discuss a proposal from Iraqi oil marketer
SOMO that from Nov. 1 all letters of credit for crude oil payment
must be opened in euros rather than dollars. The committee, which
is to receive a written U.N. staff report on the issue by Thursday,
is split on whether it should allow a switch to euros or even
whether it has any right to weigh in on the matter, diplomats
in New York have said. NEXT 24 HOURS CRUCIAL The Middle East Economic
Survey (MEES) reported Thursday that a serious possibility existed
that Iraqi oil sales could be suspended next week due to delays
at the United Nations over whether to approve Baghdad"s euro
proposal. MEES said one indication of how Baghdad would react
would be whether state oil marketer SOMO is given permission by
Iraq to submit its November price formulae in the next 24 hours.
If it does, it can be taken to mean that a compromise is possible
and it intends to go ahead with its export schedule, the newsletter
said. Lifters of Iraqi barrels have told Reuters that they have
no objection in principle but they are worried about becoming
bogged down in a procedural wrangle. Baghdad has been exporting
about 2.3 million barrels per day (bpd) of oil in the current
eighth phase of a U.N. humanitarian oil-for-food exchange. The
eighth phase of the exchange ends on Dec. 5. Iraq"s oil exports
at current prices fetch around $60 million a day. Oil-for-food
revenues are currently deposited in a dollar U.N. escrow account
at Banque Nationale de Paris (BNP) in New York. That account,
after nearly four years of the program, now stands at around $10
billion, said industry sources. But BNP cannot issue a new, standard
euro format for letters of credit until instructed to do so by
the United Nations, customers said. Oil firms lifting Iraqi barrels
in early November must now get the necessary U.N. mandated paper
work in place. Some industry sources have said Washington, dead
set against euro payment, was proving the main stumbling block
at the U.N. But Baghdad was also playing politics as well, they
added. The Iraqi government decided last month to halt trading
with the dollar and replace it with the euro or any other currency.
Baghdad has said the move was to confront the "daily American-Zionist
aggression," an apparent reference to U.S. support for sanctions.
The U.N. oil-for-food deal lets Iraq sell oil over a six month
period on a renewal basis to buy food, medicine and other humanitarian
goods for the Iraqi people reeling under stringent U.N. sanctions
imposed for Baghdad"s 1990 invasion of Kuwait.
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