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FT articles on Iraqi oil infrastructure

Iraqi oil infrastructure crumbles as sanctions bite
Company protests that US and UK action hurts the industry, writes Robert Corzine
Financial Times 4 Feb 00
Oil and the army dominate Kirkuk. The birthplace of the Iraqi oil industry 70 years ago, it is still one of the world’s great natural treasure troves. But it is also a city that sits uneasily on the edge of rebellious Kurdistan.
Inside the fence surrounding the sprawling state-owned North Oil Company compounds, it is as though a slice of British colonial life of the 1950s and early 1960s has been preserved in aspic. Broad avenues lined with palm trees and cypresses lead to the ageing but immaculately maintained offices of the old British-dominated Iraq Petroleum Company.
Visitors can still enjoy a British breakfast served on English china under the original high ceiling fans at the NOC clubhouse, where the staff take obvious pride in a well tended garden. The serenity is broken by the roar of Iraqi jet fighters taking advantage of some of the air space not denied to them by the allied no-fly zones to manoeuvre overhead in the deep blue winter sky.
And just outside the compound, the Iraqi military presence is pervasive, with AK47-toting military police at most intersections, armoured cars outside key installations and soldiers manning machine-gun towers in the main street.
Although the oil industry and the army exist in such close proximity, NOC officials dismiss suggestions that equipment needed to maintain Kirkuk’s output could be easily diverted to military use.
This week a team of international oil experts working on behalf of Kofi Annan, the UN secretary general, completed a survey of Iraq’s oil industry suffering the effects of nine years of UN sanctions imposed after Iraq’s invasion of Kuwait.
Deficiencies in the process that allows Iraq to import limited quantities of oilfield equipment and services, to sustain a creaking industry whose exports are needed to finance the multi-billion-dollar UN humanitarian aid programme, were high on their list of priorities. Oil ministry officials in Baghdad say the UN team was generally sympathetic to the plight of Iraq’s oil industry, but there is deep scepticism about whether even a glowing report from the experts will ease the situation.
Baghdad claims the US and UK have deliberately undermined provisions in the process. Non-oil contracts, covering such areas as power generation and water purification equipment, have also fallen victim to concerns - again mainly from the US and UK - over their potential “dual use”.
Rarely in the history of sanctions has the international community been faced with devising a system that sustains and improves strategic civilian industries while ensuring that a still extensive military machine does not become an unintended beneficiary.
Iraq says its section of the strategic pipeline linking the giant Kirkuk oilfield in north-eastern Iraq to the Turkish port of Ceyhan could fail at any time because the UN has refused to approve the delivery of badly needed monitoring and controlling equipment.
NOC, which operates the 1m b/d Kirkuk field, says that without a new “tele-control” system, the risk of an accident or significant spillage on the pipeline - which runs for 1,000km on the Iraqi side of the border alone - has risen substantially.
“Without it you are blind,” says Adil Al Qazzaz, a senior NOC director. The problem is worse because the Turks have upgraded control facilities on their side, and the two systems are no longer compatible. “As far as the Iraqi-Turkish pipeline goes, we are living on our nerves,” says Manaa Al-Obaydi, NOC’s director of engineering.
Earlier this week Iraq warned that it might suspend oil exports if there was no progress in unblocking hundreds of civilian and humanitarian-oriented contracts that are either pending or put on indefinite hold by the world body because of concerns over the potential military application of some of the equipment involved.
Iraqi officials are especially critical of US and British representatives on the Security Council’s so-called “661 Committee”, which controls the flow to Iraq of foreign-made spare parts and equipment under the UN oil-for-food programme.
“Out of 377 contracts put on hold by the 661 Committee, 343 are on hold because of objections from the US representative,” according to a senior ministry official. A further 28 are on hold because of objections by both the US and UK, and four because of British objections only.
Representatives from the other Security Council members have asked that only a total of two contracts be put on hold.
“Why bother with all this?” said the exasperated official.
“Why not just do without?”
That view is echoed at the operational level in the oil fields. Although any decision to suspend oil exports would have to come from the highest levels of Iraqi government, life in the oil fields would be little affected: “If anything it would make life easier operation-wise,” said one NOC manager as he tucked a week old copy of Britain’s Daily Mirror newspaper into his briefcase. “We’d just go and play bridge.”
Moscow angry at tanker search
Financial Times 4 Feb 00
By John Thornhill in Moscow, Stephen Fidler in Washington and Robert Corzine in Baghdad
The Russian government on Thursday issued a fierce protest about the “unprecedented” detention of an oil tanker, which was stopped and searched by an international maritime patrol in the Gulf of Oman on suspicion of smuggling Iraqi oil.
Moscow insisted the ship was legitimately transporting Iranian fuel oil to the United Arab Emirates and was not busting UN-imposed sanctions on Iraq. The tanker, named Volgoneft-147, is owned by SFAT, a private Russian company, and registered in Cyprus.
Jeff Gradeck, a spokesman for the multinational interception force that boarded the tanker on Wednesday night, said it had been tracked leaving Iraqi waters and intercepted by a US navy ship.
“Russian-flagged vessels have been implicated in the illegal export of Iraqi oil in the past,” Mr Gradeck said.
US officials depicted the boarding as part of a long-standing multinational effort to stop Iraq selling oil outside the auspices of the UN’s oil-for-food programme.
According to Joe Lockhart, White House spokesman, the United Nations force, led by the US navy, questioned more than 2,400 ships last year, boarded 700 of them and diverted 19 ships to port. Each of the 19 tankers was emptied and the proceeds placed into the oil-for-food programme, designed to support humanitarian aid to the Iraqi people suffering under nine years of UN-imposed sanctions imposed after Iraq’s invasion of Kuwait.
However, US officials said Thursday’s was the first boarding of a Russian ship and followed an apparent increase in the number of Russian ships loading Iraqi oil.
Smuggling from Iraq of refined petroleum products such as kerosene, diesel and fuel oil has long been a flourishing in trade in both the south, where small ships and barges are most often used to carry illicit cargoes to other Gulf destinations, and in the north, where there is a substantial cross-border trade with both Turkey and the UN-administered Kurdish areas.
The maritime smugglers tend to skirt the Iranian coastline to avoid being stopped by allied naval patrols operating in international waters. But the northern smuggling operations are more open.
A steady stream of Turkish tankers can be seen on the main highway south of Mosul, Iraq’s northern business centre, to the refinery at Biji, 250km north of Baghdad.
The US has tolerated the northern trade mainly because it benefits both the Kurds and Turkey, which provides the main base from which US aircraft patrol the northern no-fly zone.
Wednesday night’s incident will come as a further blow to US-Russian relations, already battered by Nato’s intervention in Kosovo and western criticisms of Russia’s assault on Chechnya. Earlier this week, Madeleine Albright, the US secretary of state, held talks in Moscow with Vladimir Putin, Russia’s acting president, in an effort to restore good relations.
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