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Iraq Suspends Oil Exports |
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December 2, 2000
LONDON (AP) - Iraq cut off its shipments of crude oil Friday in a fresh test of U.N. trade sanctions after the world body failed to authorize a new payment arrangement for Iraqi exports. Iraq, the third-largest producer in the Organization of Petroleum Exporting Countries, provides about 3 percent of world crude supplies. The United Nations imposed sanctions on Iraq to prevent it from using its oil revenues to rebuild its military capabilities after the 1991 Gulf War. Iraq appeared this week to try to bypass the embargo with its demand that it be allowed to sell oil for 50 cents per barrel below the world price, then have its customers pay a 50-cent surcharge into an Iraqi-controlled account in an attempt to gain greater control of its oil revenues. The U.N. sanctions committee rejected Iraq's request Thursday. Analysts said Baghdad timed its move to cause maximum disruption: Oil inventories are tight, and the United States - Iraq's chief nemesis - is preoccupied with efforts to determine its next president. All the same, energy markets seemed to scoff at the Iraqi suspension, as traders anticipated that major oil importers would offset any shortfalls in Iraqi crude by pumping oil from their strategic reserves. On the New York Mercantile Exchange, January contracts of light, sweet crude plunged $1.80 per barrel to close at $32.02, their lowest level in five weeks. Contracts of North Sea Brent crude dropped $1.12 cents a barrel to $30.76 on the International Petroleum Exchange in London. Mehdi Varzi of investment bank Dresdner Kleinwort Benson in London said the Iraqi action was a short-term problem, particularly because demand for oil is likely to wane early next year. ``Iraq is obviously trying to extract maximum political gain from the U.S.,'' he said. ``I wouldn't worry about this so much, so long as the West stays cool and releases oil from its strategic reserves.'' Robert Priddle, head of the International Energy Agency, advised oil traders not to exaggerate the importance of the Iraqi suspension. The IEA, headquartered in Paris, represents the interests of the world's wealthiest countries. ``This possibility has been much discussed and will come as no surprise to the market,'' he said in a statement. ``Major oil producers have declared their readiness to act to meet any serious shortages.'' U.S. Energy Secretary Bill Richardson said earlier that Washington would tap the U.S Strategic Petroleum Reserve to counter any halt in Iraqi exports. He added that Saudi Arabia, a U.S. ally and OPEC's largest producer by far, would boost its own output to help make up for any shortage. A U.N. oil-for-food program, launched in 1996, lets Iraq sell its oil on the international market so long as the proceeds are deposited in escrow and used only for imports of food and medicine. Iraq's maneuvering to finagle its prices is the latest evidence of an intensifying effort to chip away at the decade-old U.N. embargo. In October, Iraq campaigned successfully to be paid for its crude in euros rather than American dollars. |