Iraqi oil supplies are once again at the center of oil market concerns.
Oil prices last week fell below $30/bbl for the first time in 4 months, as markets counterintuitively shrugged off Saddam Hussein's cutoff of Iraqi oil exports amid a procedural squabble with the United Nations Security Council over monitoring of its oil-for-aid program (see Market Movement, Newsletter, p. 5).
In addition, a top United Nations official last week urged the council to rethink the current economic sanctions against Iraq in order to streamline the delivery of humanitarian aid to that country, according to a report from the Organization of Petroleum Exporting Countries' news agency, OPECNA.
Shortly after midnight Nov. 30, Iraq stopped exports of 2.3 million b/d through the ports of Mina al Bakr on the Persian Gulf and Ceyhan, Turkey, under the UN-supervised oil-for-food program. Several tankers reportedly were left lined up at anchor waiting to load Iraqi crude.
Iraq threatened such action after UN officials rejected its demand that buyers pay a 50¢/bbl surcharge into an Iraqi bank account.
Meanwhile in Vienna, departing OPEC Sec. Gen. Rilwanu Lukman tried to defuse growing concern over Iraq's longer-term plans, saying he had had assurances from Iraqi Oil Minister Amer Mohammed Rasheed that his country had "no intention" of halting its crude oil exports. Lukman explained that the suspension of oil from Iraq was the result of delays in the UN's approval of the country's new pricing formula for the next tranche of oil exports. Without an approved pricing formula-and, therefore, without ratified crude prices-Lukman said Iraq had been left without the "necessary letters of credit" to continue exporting oil.
Benon Sevan, the UN's executive director of the office of the Iraq program, speaking after a closed-door meeting of the council in New York, said the oil-for-food scheme put in place at the end of the Persian Gulf war had become "much more complex" since its introduction.
"We cannot go on applying similar procedures that were valid at the time, when it was only food and medicine," he said, noting that among the changes to the UN relations with Iraq was its involvement in the rehabilitation of the country's infrastructure. Sevan said the committee, set up by the council to monitor the sanctions against Iraq, should "review its procedures and make the necessary adjustments to assure that applications are approved more expeditiously, so that supplies can arrive in Iraq on a timely basis."
He also appealed to council members to refrain from politicizing the human aid relief effort in Iraq, saying this only works against Iraq's ability to "maintain its distinct humanitarian identity."
The present phase of the UN's oil-for-food initiative expired Dec. 4.