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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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