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write letters to the FT and Independent

Below you'll find copies of articles on Iraq's suspension of oil exports
from The Independent, The Washington Post and the Financial Times.

Letters can be e-mailed to The Independent at
and to the FT at

The point to stress, I feel, is that the link between the humanitarian
crisis and the weapons inspectors needs to be broken.



>From The Independent :

Iraq ends 'oil for food' programme 

By David Usborne in New York 

23 November 1999 

Iraq accused Britain yesterday of championing a "colonialist resolution"
in the United Nations Security Council aimed at resuming weapons
inspections in the country. In a related protest, Baghdad began to shut
down oil exports authorised under a special UN programme to supply Iraqis
with food and medicine. 

In a sharpening of diplomatic tensions between Baghdad and the UN, the
Iraqi government vowed it would not co-operate with a two-week extension
of the so-called "oil-for-food" regime that was agreed in the Security
Council on Friday, calling the agreement "meaningless". Unless the
argument is resolved, Iraq could eject UN humanitarian workers from the

The oil-for-food regime was due to be rolled over for six months at the
end of last week, but was instead extended for just two weeks because
Russia wanted the terms of the deal improved for Iraq. The fort night's
roll-over is a stop-gap measure while all sides try to resolve the

The oil dispute comes as the five permanent members of the council
continue to wrangle over a new resolution to reinstate weapons

Iraq's oil minister condemned the draft resolution on weapons inspections
that was drawn up by Britain, saying it was a "colonialist resolution that
is aimed at imposing new conditions on Iraq for many years to come". 

>From The Washington Post :

Oil Prices Spike on Iraq Move

By Martha M. Hamilton
Washington Post Staff Writer
Tuesday, November 23, 1999; Page A1 

Oil prices surged to their highest level since the end of the Persian Gulf
War yesterday after Iraq suspended oil exports, throwing already nervous
oil markets into a turmoil that analysts said may send prices higher than
$30 a barrel. 

Stable oil prices have been the norm for much of this decade and have been
one of the fundamental factors underlying the United States' longest-ever
economic expansion. But oil prices have swung sharply in the past year and
closed yesterday above $27 a barrel in trading on financial markets,
compared with a 12-year low of just under $11 last December.

"The best inflation news is behind us," said Cynthia M. Latta, DRI-McGraw
Hill's principal U.S. economist. She noted that low energy prices have
insulated the U.S. economy from other price pressures during the long
economic boom, helping to dampen overall inflation.

Oil industry analysts said the cancellation of Iraqi sales could push
prices higher in the coming weeks. Latta said those higher energy costs
could slow the U.S. economy and add to inflation pressures, though how
much depends on how long the price spike lasts. Transportation fuel costs
already have increased substantially, she said, although not all of the
increase has been passed on yet in the prices of goods and services. 

The Labor Department reported last week that so far this year, prices of
gasoline and home heating oil have increased at a 30.9 percent annual
pace. Gerald D. Cohen, an economist at Merrill Lynch & Co., noted that
airline fares jumped by 5.3 percent last month, but he added that fare
prices are volatile and had fallen sharply in the previous two months. 

Trilby Lundberg, publisher of the Lundberg Survey of gasoline costs, said
gasoline prices increased 2.5 cents over the past two weeks to reach a
nationwide average price of $1.2774 for self-serve regular. If oil prices
were to climb to $30 a barrel, the price could increase by an additional 8
cents per gallon, she said. 

Rising oil prices hit more broadly than just at the pump. Petroleum makes
up a quarter of the cost of many plastic bags, half the cost of certain
fertilizers and 5 percent of the cost of nylon. Manufacturers consume oil
in big gulps to produce an array of products. 

Oil experts said yesterday that Iraq's decision to cut off supply comes at
a time when oil-producing countries are enjoying increased leverage.
Global demand for oil is increasing now that several Asian economies are
rebounding from last year's crisis and production cutbacks orchestrated by
the Organization of Petroleum Exporting Countries (OPEC) are sticking.
Yesterday the January-delivery contract for light, sweet crude climbed as
high as $27.20 before closing at $27.07. 

"If you basically have no Iraqi oil for two to three weeks, you have a
major problem in the oil markets," said Roger Diwan, managing director for
markets and countries for the Petroleum Finance Corp., an industry
consulting and research firm. 

Iraq has been exporting 2.2 million barrels of crude oil per day, or about
3 percent of total global supplies. 

OPEC members had been debating whether to extend production cuts beyond
March 30, out of concern that higher oil prices at some point might
diminish demand, but more recently indicated a willingness to keep the
cutbacks in place until June. 

"What better time to squeeze the market than when inventories have been
drawn down and OPEC is creating all kinds of uncertainty?" said Philip K.
Verleger Jr., an oil industry consultant. 

Iraq canceled its exports after rejecting a two-week extension of the
United Nations program that allows Iraq to sell limited quantities of
crude oil to buy food and medicine. The program, which has been extended
six times previously for 180 days at a time, expired on Sunday. 

Members of the U.N. Security Council had been seeking a broader agreement
with Iraq but weren't able to reach an agreement by the time the oil
export agreement expired. 

Diplomats said Baghdad appeared to be trying to put pressure on the
Security Council to ease the sanctions. But they also said they expect
Iraq, the world's second-largest oil exporter, to resume the sale of more
than 2 million barrels of oil a day in two weeks. 

U.N. officials said the decision will have virtually no immediate impact
on deliveries of humanitarian assistance to Iraq. More than $2 billion
worth of goods, including spare parts for the oil industry, have been
approved for delivery to Iraq. And there is $2 billion more in the U.N.
account used to buy humanitarian goods. 

U.S. Secretary of State Madeleine K. Albright said today that Baghdad's
action was a "cynical" ploy to use the people of Iraq to extract political
advantages from the council. 

Ann-Louise Hittle, director of world oil for Cambridge Energy Research
Associates, said the balance between supply and demand was sufficiently
tight that just the uncertainty over how long Iraq may be out of the
market is enough to raise prices. In the fourth quarter, supply is
expected to be 75.1 million barrels a day, with demand of 77.4 million
barrels a day. 

Where prices end up will depend not just on how long Iraq stays out of the
market and what OPEC decides to do in response but also on the winter
weather and on whether any supply glitches develop at the end of the year
as a result of year 2000 problems. 

Special correspondent Colum Lynch contributed to this report from New

) 1999 The Washington Post Company 


>From The Financial Times :

Iraq sparks world oil price rise 
By Robert Corzine in London

World oil prices leapt to a nine-year high yesterday after Iraq began
implementing a weekend threat to halt 2.2m barrels a day of exports under
the United Nations oil-for-food programme.

The Iraqi move appeared to be intended to exploit divisions in the UN
security council over the international community's sanctions regime
imposed on Iraq after its 1990 invasion of Kuwait.

It came as security council members negotiated ways to relax mandatory
sanctions on Iraq in exchange for Baghdad agreeing to a new arms control
regime. The US and Britain have argued that any easing of sanctions should
only go ahead after Baghdad has demonstrated that it will co-operate with
UN arms inspectors. France, Russia and China have advocated a more relaxed

In London, oil prices opened at $25.90 a barrel, the highest level since
the 1991 Gulf War, after Amir Mohammed Rasheed, Iraq's oil minister,
confirmed that Baghdad would not agree to a proposed two-week extension of
the current phase of a programme under which Iraq is allowed to export oil
to fund food and medicine imports.

In late trading the January futures contract for Brent oil, an
international price benchmark, was quoted at $25.58 a barrel, 51 cents up
on Friday's close.

The Iraqi decision highlighted Baghdad's ability to disrupt world oil
markets in spite of the tight sanctions regime.

Diplomats pointed out that until Baghdad made its surprise announcement on
Saturday, Iraq had been working normally with UN staff on details of a
new, seventh, six-month phase of the oil-for-food programme, due to start
shortly. Under the programme Iraq is allowed to sell $5.2bn worth of oil
every six months.

Kofi Annan, the UN secretary-general, yesterday expressed optimism that a
way would be found to defuse the latest crisis over sanctions.

The security council is trying to agree on a new sanctions package that
would allow for foreign investment in Iraq's oil industry, while ensuring
that the arms embargo stayed.

Madeleine Albright, the US secretary of state, said Iraq had once again
"shown its true colours . . . by turning down the possibility of having
more food and medicine for its people by selling more oil".

A prolonged suspension of Iraqi oil exports could have a big impact on
world oil prices, which have more than doubled this year as a result of
production cuts by leading exporters and a decline in surplus inventories
in the main consuming countries. It could also exacerbate global inflation


Also from the FT (Comment and analysis, 23rd November) :

A cynical move by Saddam 

The United Nations Security Council has been moving at a snail's pace
towards agreement on a more humane and sensible sanctions regime on Iraq.
But its five permanent members are getting nearer a consensus. It is thus
bizarre for the Iraqi leadership yesterday to shut off oil exports simply
because the present sanctions system has been renewed for another

What we appear to be witnessing, in fact, is another instance of the
cynicism of President Saddam Hussein who is putting pressure on the
Security Council by deliberately squeezing his down- trodden people yet
again. Even from Saddam's own viewpoint, the tactic could backfire. As
legal authority for the latest six-month phase of the oil-for-food
programme for Iraq expired on Saturday, Baghdad was claiming that the US
had orchestrated the two-week extension of sanctions in order to put
pressure on other Council members. But Russia, the nearest Iraq has to a
friend on the Security Council, backed the rollover.

The use of trade embargos for political purposes has worked even less well
in Iraq than elsewhere. Imposed on Iraq for invading Kuwait, sanctions
have if anything consolidated Saddam's power by encouraging smuggling and
putting illicit profits into his hands. Sanctions no more shake Saddam's
regime than the western warplanes which, according to Iraq, were again
yesterday attacking targets in the so-called no-fly zone in southern Iraq.

The plight of ordinary Iraqis has steadily worsened. The oil-for-food
programme, that has allowed Iraq to sell about $5bn worth of oil every six
months in order to pay for UN-vetted and distributed food, medicine and
essential goods, has not helped much. Much of the oil sale proceeds, at
least until the recent rise in oil prices, were going on repairs to
decaying oil and farm equipment rather than to medical supplies. In
recognition of higher oil prices, the half-yearly limit on oil revenues
has now been shelved pending agreement on a new sanctions regime.

For the past five months, debate has centred on a draft resolution
proposed by Britain and the Netherlands. This would remove the ceiling on
oil sales, improve the UN's distribution of food and medicine inside Iraq,
and progressively suspend UN controls on the export and imports of other
goods - as and when UN arms inspectors are permitted back into Iraq and
can gradually certify the country clean of weapons of mass destruction. A
"snap-back" provision would allow re-imposition of sanctions in the event
of Iraqi backsliding.

It is not ideal. Sanctions are very hard to fine-tune. But the Anglo-Dutch
proposal offers a worthwhile chance of breaking the impasse without
rewarding Saddam's intransigence.

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