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SPECIAL SUPPLEMENT ON THE IRAQI OIL SUSPENSION CRISIS (25/11-3/12/00) * Iraq to defend price mechanism, says oil minister * Ships refuse to pay Iraqi oil surcharge * Iraq strengthens resolve on December oil pricing * Iraqi plan threatens winter oil supplies * UN says buyers may lift Iraqi oil without price agreement * US makes goal to ship 23 mln bbls of emergency oil * Oil eases on US and Saudi assurances [small extract] * Iraqi oil export suspension looms from midnight [small extract] * Iraq: Oil Prices 'Noncompetitive' * Iraq halts oil exports [small extract] * Iraq Halts Oil Exports as Clash of Wills Continues * IEA and US hold the line as Iraq pressures the crude market * Why Saddam is flexing his muscles * Experts: Iraqi oil move shrewd, calculated * 'Bully' Saddam theatens to cut off oil supply [small extract] * Iraq dispute threatens oil inventories * OPEC's Rodriguez says no action planned on Iraq * Quick solution to Iraqi dispute unlikely, say diplomats http://worldoil.com/News/NewsStory.asp?ID=2977 * IRAQ TO DEFEND PRICE MECHANISM, SAYS OIL MINISTER NEW DELHI, India (AP, 28 Nov) - Iraq does not plan to change its price mechanism despite a United Nations rejection of Baghdad''s proposal to lower its oil prices, Iraqi Oil Minister Amer Mohammed Rashid said Tuesday. ``Our plan is to defend our price mechanism ... that we have suggested,'''' Rashid said, reacting to Monday''s decision by the U.N. Sanctions Committee. Rashid is accompanying Iraqi Vice President Taha Yassin Ramadhan on a five-day visit to India. ``Our exports in the last few months have averaged around 2.3 million barrels a day. I am confident of similar levels in December,'''' Rashid said. Iraq produces some 3 million barrels of crude oil a day. The U.N. Sanctions Committee decided Monday that Iraq couldn''t price its oil below fair market value, as Baghdad had proposed, leading to fears that exports may be threatened. The U.N. Sanctions Committee on Iraq agreed with an assessment last week by U.N. oil experts that the prices Baghdad submitted for December oil exports were too low and could not be approved. Iraq needs U.N. approved prices to export its oil each month. Diplomats at the U.N headquarters in New York said Monday the U.N. oil overseers would try to negotiate a new pricing mechanism with Iraq''s State Oil Marketing Organization before the end of the week. Iraq was able to continue exporting oil last month when its price formula was approved after the start of the month. The below-market prices that Iraq submitted are believed to be Baghdad''s attempt to compensate buyers of its crude for a surcharge of 50 cents a barrel Iraq wants them to pay into an Iraqi-controlled bank account, diplomats said. http://www.chron.com/cs/CDA/story.hts/business/759588 * SHIPS REFUSE TO PAY IRAQI OIL SURCHARGE HoustonChronicle, Nov. 29, 2000 NEW YORK (Reuters): Oil loadings in Iraq plunged Wednesday as customers withdrew vessels after refusing to pay a surcharge Baghdad is demanding on its crude exports, oil traders said. Iraq is demanding a 50-cent-per-barrel surcharge on oil beginning Friday. The country's State Oil Marketing Organization is not loading vessels that do not pay the surcharge, oil traders said. "We had a vessel in the (Gulf) port of Mina al-Bakr, but the vessel was not loaded by Iraq, so we took it out from the port," one customer said. Western ships have rejected Iraq's demand on the basis that it would contravene U.N. sanctions, which limit Iraq's oil sales revenues. http://www.timesofindia.com/301100/30inte1.htm * IRAQ STRENGTHENS RESOLVE ON DECEMBER OIL PRICING Times of India, 30th November DUBAI (Reuters): Iraq is fortifying defence of its December crude oil pricing, making a break in export flows virtually inevitable from Friday. The United Nations on Monday rejected the pricing as too low. "Our minister put things very clearly yesterday," an Iraqi oil official told Reuters on Wednesday. "We are sticking with our original price proposal." Oil Minister Amer Mohammed Rasheed told reporters in India that Baghdad would defend its price formulae ahead of a December 1 deadline. At the same time, Rasheed stressed that Baghdad wanted to avoid an interruption in export sales of some 2.3 million barrels per day (bpd) under the U.N. oil-for-food deal. Iraq has asked the U.N. to extend current eighth-phase oil sales volume from the six-month tranche's December 5 expiry to January 15 in order to avoid an export gap. Industry sources reckon Baghdad still has nearly 80 million barrels of unlifted crude oil contract volume remaining during the eighth phase. "It is not our intention to stop exports," the Iraqi oil official reiterated. "But we submitted the price mechanism and the United Nations rejected it." The official stopped short of blaming the world body for any potential halt in Iraqi oil sales under the U.N. oil-for-food programme. "We don't want to put it that way," he said. Western diplomats said on Tuesday that Iraqi barrels cannot be exported without an approved pricing plan, which could cause oil sales to grind to a halt from Friday. Customers of Iraqi crude oil are expecting a shortfall in flows in any case next month, after several lifters reported that oil marketer SOMO had cut their volumes apparently following the companies' refusal to cough up Baghdad's newly-imposed 50-cent per barrel surcharge. "Under these conditions, Iraqi oil is off limits," said a Western oil executive. "And now we cannot count on Iraqi supply." The Iraqi oil official said SOMO had not cancelled any crude oil liftings. He declined to say whether exports in December would continue to run at current levels. http://www.guardianunlimited.co.uk/international/story/0,3604,404858,00.html * IRAQI PLAN THREATENS WINTER OIL SUPPLIES by Brian Whitaker, and Luke Harding in New Delhi The Guardian, Thursday November 30, 2000 A new confrontation between Iraq and the UN has raised the spectre of oil supplies being disrupted this winter. Baghdad's aim is to divert about $420m (£300m) a year from the oil-for-food programme controlled by the UN and put the money directly into the regime's coffers. To that end it is ostensibly cutting its oil price but asking customers to pay a premium of 50 cents for each barrel into a special bank account in Jordan, with the implied threat that contracts will not be renewed if they fail to do so. The UN sanctions committee has rejected this plan, but talks on an alternative mechanism are continuing. In the absence of an agreement this month, legitimate oil supplies from Iraq - which currently exports more than 2m barrels a day - could begin to dry up. Some western diplomats believe Iraq is bluffing and would not, if it came to the crunch, be willing to halt oil exports for the sake of gaining more control over the money. But because prices in the petroleum market are currently high, Iraq has accumulated a cash cushion of around $11bn that would allow it to withstand a period without exports. Last night, Iraq and India announced a deal which Iraq's vice-president, Taha Yassin Ramadhan, hailed as a sign that the UN embargo against Baghdad had lost its meaning. "We will sell oil to any country which wants to buy it," he said on a visit to New Delhi. Under the agreement Iraq will increase its oil supplies to India and India will export surplus wheat to Iraq and help Iraq to upgrade its oil refineries and explore its oilfield at Tubah in the south. It is believed that the deal is a fixed-price commitment for at least 20 years. http://www.voila.co.uk/News/afp/eco/001130193035.coqh3pow.html * UN SAYS BUYERS MAY LIFT IRAQI OIL WITHOUT PRICE AGREEMENT UNITED NATIONS (AFP, 30th November) - - With the world facing an imminent halt to Iraq's oil exports, the UN said Thursday that buyers could take delivery of Iraqi crude without paying for it until a dispute over the price is resolved. The announcement came hours before a reported threat by Iraq to halt daily exports of about 2.3 million barrels of oil was due to take effect at 2100 GMT. Diplomats said Iraq had asked the UN to price its oil below market rates in order to absorb a surcharge which it has reportedly asked customers to pay, in breach of UN sanctions. "At at this point there is no agreed pricing mechanism for the month of December for the sale of Iraqi oil," UN spokesman Fred Eckhard said. "However, loadings of oil can continue without a pricing mechanism but until there are UN approved prices, no payments can be made for the oil lifted," he said. "Once there is an agreed pricing mechanism," he said, "payments including for the oil already loaded can resume into the UN-controlled Iraq escrow account." The account contains revenue from Iraq's oil sales, 66 percent of which is available for imports of necessities under the oil-for-food programme set up by the UN four years ago to alleviate the impact of sanctions. The authoritative Middle East Economic Survey (MEES) said Iraq intended to halt its oil exports from midnight Baghdad time (2100 GMT) on Thursday unless buyers agreed to pay a surcharge of 0.50 dollars a barrel. Revenue from Iraq's oil exports is expected to exceed 10 billion dollars in the current 180 day phase of the oil-for-food programme, which ends on Tuesday. But MEES noted that there is more than 11 billion dollars in the escrow account with BNP Paribas bank in New York, and said the financial cushion enabled Baghdad to talk tough. World demand for oil is currently 76 million barrels a day, but the market is tight and some analysts believe that if Iraq turned off the taps, the price of oil would soar. MEES quoted the Iraq State Oil Marketing Organisation (SOMO) as telling clients that the surcharge must be paid into a bank not controlled by the United Nations. UN officials and diplomats said that would violate the sanctions which the world body imposed on Iraq after it invaded Kuwait in August 1990. Iraq has not notified the UN about the surcharge, and diplomats said it would be rebuffed if it did so. But they said the surcharge was apparently disguised in SOMO's proposed December pricing formula, which it sent to the sanctions committee on November 22. Eckhard recalled that on the same day, the UN oil overseers advised the committee that SOMO's proposals did not represent fair market value. The price of oil on world markets fluctuates constantly. When Iraq submits its monthly pricing formula, it asks the UN to sell its oil at a fixed discount below the fluctuating price of benchmark oils. Iraq has two main types of crude, known as Basrah Light and Kirkuk, which are sold on three main markets: Europe, the United States and the Far East. UN officials said that the proposed price of Basrah Light on the European market for December was 4.55 dollars below the price of Brent North Sea oil, compared with 4.10 dollars for the first half of November. The price of Kirkuk crude proposed by Iraq was 3.50 dollars below Brent, compared with 3.30 dollars in November, they said. http://www.hoovershbn.hoovers.com/bin/story?StoryId=CoIxE0b9DtJmWndK0nZm * US MAKES GOAL TO SHIP 23 MLN BBLS OF EMERGENCY OIL Hoover's, November 30, 2000 18:02 by Tom Doggett WASHINGTON, Nov 30 (Reuters) - U.S. Energy Secretary Bill Richardson said Thursday the Clinton administration has reached its goal of shipping 23 million barrels of emergency oil from the Strategic Petroleum Reserve by the end of November. The department actually surpassed its goal, delivering 23.207 million barrels of the crude to energy companies in an effort to boost oil product supplies this winter. The total includes a final 450,000-barrel shipment that was scheduled for late on Thursday. "We beat the clock and we are waging a fight with Old Man Winter, and we are winning," Richardson said. The shipments are part of the Clinton administration's plan to loan 30 million barrels of emergency oil to energy firms, who will then refine the crude into heating oil and other petroleum products. The remaining 7 million barrels of reserve oil will be shipped in December, as scheduled, Richardson said. BP Amoco has received the most deliveries of reserve crude - 6.151 million barrels. The other companies that have taken the government oil are Marathon Ashland (4.655 million barrels); Hess Energy Trading (4.435 million barrels); Equiva (2.507 million barrels); Morgan Stanley Dean Witter (2.009 million barrels); Vitol (1.803 million barrels); Elf Trading (975,000 barrels) and Valero Energy (672,000 barrels). Most of the shipped oil has come from the reserve's West Hackberry site in Louisiana, which holds "sweet" crude that is easier for refiners to process because it contains less sulfur. The U.S. may have to dip into the emergency stockpile again. Richardson said the Clinton administration was ready to tap the U.S. reserve, if necessary, to counter a cut-off in Iraqi oil exports. Iraq has threatened to halt its exports of crude oil if the United Nations does not accept a new price formula for the country's December oil shipments. "We're ready to do it quickly," he said, when asked how fast the Energy Department could move the emergency stockpiled oil into the market. It would take about 15 days to get the oil out of the reserve and into the market, according to the department. http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3OL2W07GC&liv e=true&useoverridetemplate=ZZZUGORQ00C&tagid=ZZZNSJCX70C&subheading=global * OIL EASES ON US AND SAUDI ASSURANCES by David Buchan and Gillian O'Connor, Mining Correspondent Financial Times, December 1 2000 Oil prices in New York and London eased on Thursday after assurances from the US and Saudi Arabia that they would act to counter any halt to Iraqi exports. On the New York Mercantile Exchange, January crude was trading at $33.82 a barrel by the close, having hit a high of $35.10. In London, January Brent was down 80 cents at $31.88. [.....] http://news.24.com/News24/Finance/Markets/0,1466,2-8-21_948325,00.html * IRAQI OIL EXPORT SUSPENSION LOOMS FROM MIDNIGHT [.....] By Thursday, most ships that had been queueing for oil at Iraq's outlets Mina al-Bakr on the Gulf and Turkey's Ceyhan terminal had turned away. The Iran Seva and the Sea Song were expected to finish loading Kirkuk crude from Ceyhan later on Thursday evening. A customer still hoping to start loading Basrah Light crude at Mina al-Bakr on Friday said it had been informed that no oil would be available. Iraq's oil marketer SOMO has provided no loading programme for December and most of its customers already have found alternative supplies. Iraq pumps about 2.3 million barrels daily, 5% of world exports. [.....] http://www.wn.com/?action=display&article=4656530&template=worldnews/search. txt&index=recent * IRAQ: OIL PRICES 'NONCOMPETITIVE' The Associated Press, Fri 1 Dec 2000 BAGHDAD, Iraq (AP) ‹ Iraq has decided against raising its December oil prices because an increase would make its crude oil ``noncompetitive,'' the official Iraqi News Agency quoted an Oil Ministry spokesman as saying Friday. Iraq's decision came a day after the U.N. sanctions committee said oil companies can continue loading Iraqi crude onto tankers beyond Friday, but cannot pay for it until Iraq proposes prices for December that are in line with fair market value. The U.N. committee's decision left oil companies uncertain about whether to continue to fill their tankers after the start of the new month without knowing when they may be able to sell the oil on the market. ``Iraq is concerned about its wealth and the interest of its people, and whether the oil is Iraqi or of other nationalities it should be related to the market and subjected to its conditions,'' said the unidentified Oil Ministry spokesman. ``Therefore raising the prices of Iraq's oil makes it noncompetitive.'' The spokesman told INA that raising the price of Iraqi crude would deter buyers, and said any negative effects from not increasing the price will be blamed on the Americans and Britons in the committee. Iraq has been under sanctions since 1990 and needs the sanctions committee to approve its proposed prices to export oil each month. Last week, Iraq submitted prices that U.N. oil experts determined were too low ‹ and the committee rejected them. ``The Iraqi Oil Ministry calls for a dialogue with the buyers and we hope to make them understand the facts ... otherwise Iraq is determined not to relinquish its rights,'' said the Oil Ministry spokesman. Iraq's low price offer was believed to be an attempt to compensate buyers for a surcharge of 50 cents a barrel which Iraq wants them to pay into an Iraqi-controlled account. Companies appeared to be unwilling to pay the surcharge since it would be a violation of the U.N. sanctions, imposed 10 years ago following Iraq's invasion of Kuwait. [.....] http://www.thetimes.co.uk/article/0,,44883,00.html * IRAQ HALTS OIL EXPORTS The Times, 1st December The price of crude rose above $32 a barrel today, as Iraq halted oil shipments amid a payments row with the United Nations. A barrel of North Sea Brent reference crude pushed up as high as $32.19, compared with $31.88 at Thursday¹s close. [.....] http://www.washingtonpost.com/wp-dyn/articles/A10822-2000Dec1.html * IRAQ HALTS OIL EXPORTS AS CLASH OF WILLS CONTINUES by William Drozdiak Washington Post, Friday, December 1, 2000 BRUSSELS, Dec. 1 In a clash of wills with Western powers, Iraq halted all oil exports today after demanding that buyers of its crude must pay a surcharge into a government account rather than deposit all money with a United Nations program that provides food and medicine in exchange for oil. Baghdad's latest bid to undermine the U.N. sanctions regime, which was imposed 10 years ago after Iraq's invasion of Kuwait, appeared timed to extract maximum leverage from a tight world oil market. It comes as the United States and other Western industrial nations confront the cold-weather season with some heating fuel stocks at record lows. Shippers reported that oil deliveries had stopped late Thursday at Iraq's two key outlets, the Persian Gulf port of Mina al-Bakr and the Turkish outlet at Ceyhan. As the Middle East's third-biggest producer, Iraq has been selling about 2.3 million barrels a day roughly 5 percent of the world market's supply and traders warned that any prolonged suspension could trigger new upward pressure on oil prices. In London, the benchmark Brent crude price rose above $32 a barrel, bringing its gain this year to 26 percent. The Paris-based International Energy Agency, which is responsible for supervising oil stocks among 24 industrial nations, said it was prepared to take emergency action to coordinate the release of strategic petroleum reserves in order to keep markets supplied and thwart a further price spike that could deliver a blow to the weakening global economy. Robert Priddle, the IEA's executive director, appealed for calm and said "the importance of this development should not be exaggerated." He said the suspension in Iraqi exports could be compensated by the release of emergency inventories or by other major producers, notably Saudi Arabia, picking up the slack and putting more oil on the market. "The Saudis, in particular, have said they will make good any loss of supply, and we would look first to them to do that," Priddle said. With other large producers pumping flat-out to take advantage of high prices and heavy world demand, Saudi Arabia is believed to be the only country with enough excess capacity to plug the gap left by Iraq. Saudi oil minister Ali Nuaimi said in a recent interview that his country could bolster output by 1.8 million barrels a day within three months if circumstances warranted. But analysts say the Saudi royal family has been loathe to be perceived as doing the West's bidding at a time when the Palestinian uprising against Israel's military occupation has sparked a surge of anti-American resentment across the Arab world because of what is seen as Washington's indulgent support of the Israeli crackdown. "Right now the attitude of the Saudi leadership is likely to be very cautious," said Mehdi Varzi, director of oil research at Dresdner Kleinwort Benson in London. "The Saudis will probably make the case that it would be more politically acceptable for the United States and other Western countries to release their strategic reserves rather than have them come to the rescue." While the market is acting rather nervous with the approach of winter, given the low stocks of heating fuel and predictions of trouble for the global economy, Varzi and other experts say Western governments could minimize the damage if they do not break ranks and engage in panic-buying. But they noted that Iraqi dictator Saddam Hussein has managed to transform his case for lifting sanctions into a major international issue by taking advantage of the protracted uncertainty of the U.S. presidential election, the anxieties manifest in global stock markets, and the absence of any early resolution of the Israeli-Palestinian conflict. "Iraq could emerge as one of the world's biggest headaches in the coming year," Varzi said. "With emotions running high in the Arab world and the United States not thinking much about foreign policy these days, Saddam seems to be trying to push the world into a major crisis involving oil and politics." [.....] http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3XCFYV7GC&liv e=true&tagid=ZZZCWHK1B0C&subheading=energy%20%26%20utilities * IEA AND US HOLD THE LINE AS IRAQ PRESSURES THE CRUDE MARKET by Matthew Jones Financial Times, December 1 2000 Promises from the International Energy Agency and the US government that strategic stocks would be released if needed turned the crude oil market negative in London afternoon trading, despite Iraq fulfilling its threat to cease exports. By 1540 GMT, gains of over 40 cents on the January Brent contract on the International Petroleum Exchange had been reversed, leaving the contract 6c lower at $31.82 a barrel. [.....] Analysts said that while Saudi Arabia and other members of the Organisation of Petroleum Exporting Countries had the capacity to make up the shortfall, there could be a delay in this reaching the market. The IEA noted some major oil producers hold stocks close to big consumer markets. "There will not be a major shortage [of crude oil] but the timing of delivery will be affected which could mean that prices go up by 50 cents to a dollar a barrel in the short term," said Manouchehr Takin, a senior analyst at the London-based Centre for Global Energy Studies. Iraq exports some 2.3 million barrels of oil a day, about five per cent of world demand. Under the oil-for-food programme oil revenues go directly to a UN-controlled account in New York where it is used for approved humanitarian goods purchases. http://www.vny.com/cf/News/upidetail.cfm?QID=140633 * WHY SADDAM IS FLEXING HIS MUSCLES by MARTIN SIEFF, UPI senior news analyst WASHINGTON, Dec. 1 (UPI) - It was only a matter of time before an increasingly confident and aggressive Iraqi President Saddam Hussein made his first bold move back onto the world stage. Now he has done so. And there will be many more where that one came from. Saddam made that move Thursday, when he boldly turned off Iraq's oil production and world exports -- a full five percent of the global total. The Iraqi leader cited as his justification --or excuse -- the refusal of his customers to pay a 50 percent per barrel surcharge that he had imposed on them because of continuing United Nations embargoes. Saddam seems to have chosen his moment well, both in diplomatic and business terms. World oil prices remain high --around $30 a barrel. They would have gone much higher if Saudi Crown Prince Abdullah ibn Abdulaziz al-Saud -- the man Saddam is said to regard as his most serious foe in the Arab world -- had not used the Desert Kingdom's crucial role as "swing" producer for the world market to stabilize oil prices recently by boosting production. Winter is coming in the Northern Hemisphere, and it promises to be a colder one than usual in both Western Europe and North America. Reserves of heating oil, especially in North America, are unusually low. Also, the United States appears to be in a state of political paralysis, until the dispute over the Florida vote count is finally resolved and a new president is finally chosen. Saddam also knows that the next U.S. president still looks likely to be Texas Gov. George W. Bush, the son of the man who organized the international coalition against him and masterminded his greatest humiliation: defeat in the 1991 Gulf War. At least three of the top officials who worked closely with President George H.W. Bush to defeat Saddam and drive him out of Kuwait in 1991 are expected to hold top posts with Gov. Bush too if he moves into the White House on Jan. 20. Gen. Colin Powell, the former chairman of the Joint Chiefs of Staff, is expected to be Gov. Bush's first pick as secretary of state. Former Secretary of Defense Dick Cheney will be Bush' s vice president if his victory is confirmed. And former Undersecretary of Defense Paul Wolfowitz is widely viewed as the next Director of the CIA in a "Bush II" administration. Saddam may in part be making his move now rather than in a few weeks to take advantage of a politically crippled President Clinton during his lame duck period -- before a more aggressive, energetic, new and potentially more threatening Bush administration takes over to confront him. It is also striking that Saddam delayed his moves on the oil price until well after the actual Nov. 7 presidential vote. Had he taken this action before then, he knew he would have risked putting the failures and shortcomings of Clinton's Middle East policies -- especially on Iraq -- into the foreground and increased the odds that Bush would win the election. But the biggest factor behind Saddam's bold move does not appear to be political calculations about possible U.S. responses or the lack of them-or even the prospects for pushing global oil prices way up-although that latter point certainly must figure high on his agenda. The Israeli-Palestinian conflict that has raged over the past two months has demolished U.S. diplomatic influence in the Middle East, probably reducing it to a lower level than at any other time in the past quarter-century. And Saddam has taken full advantage of it. He has now effectively broken out of the long-crumbling "box" within which U.S. leaders have long claimed to contain him. Saddam is now improving his relations with -- and influence on -- Syria and Jordan, both of whom are ruled by inexperienced young new leaders who have good cause to fear him. He is a popular hero again throughout the Arab world for the first time since his shattering 1991 defeat, as he calls for holy war and mass mobilization to support the Palestinians against Israel. On Thursday-the same day Saddam announced the halt in oil production-his longtime, trusted top lieutenant, Deputy Prime Minister Tariq Aziz, visited Damascus to boost trade and other ties. The two countries pledged to double their current trade to around $1 billion a year. That kind of improvement in relations would have been inconceivable when tough, suspicious old President Hafez Assad was alive. He was Saddam's greatest political enemy in the world for 30 years, presiding as he did over a proud and fiercely hostile regime that challenged Saddam's lifelong desire to be the true, "orthodox" champion of the principles of the Ba'ath Party. But Hafez Assad died earlier this year, and his inexperienced young son and successor, current Syrian President Bashar Assad., looks unlikely to be able to keep the influence and power of more populous, militarily superior and wealthier Iraq out of his country the way his father did. Saddam is also making the most of improved relations and influence with Jordan. Young King Abdullah II is more forceful and appears to be more able than Bashar Assad. But he too understands the need to deal carefully and respectfully with Saddam. On Friday, a Jordanian airliner returned to Amman from Baghdad after carrying passengers on the first roundtrip flight in a decade. It was officially described as a humanitarian mission, carrying medicine and other aid to Iraq. But the widespread sense was that this description was just a sop to the United States, while the flight in fact marked the resumption of commercial air links in defiance of U.N.-imposed sanctions. Saddam almost certainly also enjoys the tacit support of China and Russia-the two Eurasian giants that have openly displayed their close new strategic partnership aimed at rolling back U.S. influence. When Aziz visited Damascus Thursday, he was on the way home from high-level consultations with Russian and Chinese leaders in Moscow and Beijing over the past week. Aziz held talks in Moscow Wednesday. It appears inconceivable that he and Saddam would have risked losing the support of Russia by stopping their production without clearing it with the Kremlin first. Also, a new Iraqi "oil shock" that boosted global oil prices would be welcome news to the Russian government of President Vladimir Putin. The partial economic recovery that brought him to the presidency and fueled his popularity over the past year owed more to increasing revenues from Russian oil exports than to any other reason. Russia can only benefit if the Iraqi move propels global energy prices higher again. Saddam's bold oil move may well succeed. But even if it does not, he is likely to take more aggressive steps after it. He faces a preoccupied and disorganized U.S. government distracted by a prolonged domestic crisis, and he enjoys growing popular support and serious influence around the Arab world with two global powers -- Russia and China -- which are sympathetic to his aims. That's not a bad position for a man who was supposed to be a failure, a loser and a global pariah. http://www.vny.com/cf/News/upidetail.cfm?QID=140641 * EXPERTS: IRAQI OIL MOVE SHREWD, CALCULATED by Joseph Boris WASHINGTON, Dec. 1 (UPI) -- Iraq's self-imposed oil embargo and its latest challenge to international sanctions was shrewd and calculated, but the world has prepared -- and this casts doubt on whether the move will succeed, energy analysts said Friday. Markets supported that contention: The price of benchmark Brent crude in London closed at $31.40 today, 48 cents per barrel lower than Thursday, after rising in early trading. The market reaction demonstrated confidence among traders that even with the onset of cold weather, North America and Europe are poised to absorb the disruption Iraq is seeking. A United Nations panel on Monday rejected an Iraqi bid to get consumers to pay a 50-cent surcharge directly, rather than into an escrow account as demanded by the U.N. oil-for-food program that allows Baghdad to export crude oil and spend the profits on humanitarian items. Analysts said it was unclear what specific goal the Iraqis had in mind in cutting off shipments to its two export terminals - in Ceyhan, Turkey, and the Persian Gulf port of Mina al-Bakr - but Iraq's long-term effort to get the U.N. sanctions lifted has been factored into the expectations of world leaders and oil traders for some time. "There's no surprise factor here," said Antoine Halff, a New York-based analyst with the Energy Intelligence Group, noting Iraq's recent success in challenging the sanctions by accepting flights from abroad and opening an oil pipeline into Syria. He said Iraqi President Saddam Hussein was taking advantage of increased Arab unity in support of the Palestinian uprising against Israel, by forcing a showdown with the West over the sanctions imposed after Iraq invaded Kuwait in 1990. On Thursday, Iraq again rejected calls to allow new U.N. inspections to determine if it has resumed acquiring weapons of mass destruction; a previous U.N. team left the country in December 1998 when Iraq stopped cooperating with the inspectors. "There are the usual divisions within the (U.N. Security) Council, and by making them confront this issue now, the Iraqis may just be trying to pressure the council to agree to some more moderate changes to the sanctions regime," Halff said. Iraq is the world's No. 2 producer of crude, after OPEC [? PB], whose 11 members include Saudi Arabia and Iran, the two largest producers in the Middle East. Iraq currently exports 2.3 million barrels per day, about 5 percent of world trade. But analysts said assurances Thursday from U.S. Energy Secretary Bill Richardson that the United States is prepared to dip into its Strategic Petroleum Reserve, and probable production increases by Saudi Arabia, would enable consumer nations to weather the effects - at least in the short term. The head of the International Energy Agency, Robert Priddle, said Friday that the Paris-based group was ready to call on its 25 member countries to draw down oil from their strategic reserves in order to stave off the consequences of Iraq's cutoff. "Major oil producers have declared their readiness to act to meet any serious shortages," Priddle said. Under the oil-for-food program Iraq, is required each month to submit proposed prices for its crude to a U.N. panel of oil market experts from various countries. On Monday the Iraqis put forth a plan for December shipments whereby its customers would pay into the U.N. escrow account a per-barrel price that was 50 cents below market value, to compensate the buyers for a surcharge paid directly to Iraq that Baghdad recently began demanding. The buyers, or "lifters," have balked at paying the surcharge because it violates the sanctions regime, and on Monday the U.N. panel refused to accept the Iraqi scheme, prompting the cutoff. The state-run Iraqi News Agency on Friday quoted an Oil Ministry official as saying the U.N. committee that oversees the sanctions should consider revising the regime," otherwise Iraq is determined not to relinquish its rights and stands by its positions." "They've thought about this carefully, there's no question about that," said Shibley Telhami, a senior fellow at the Brookings Institution in Washington and a political science professor at the University of Maryland. "But it's hard to know what the short-term effect will be. The extent to which the market has confidence in the remedy is doubtful, but whether (the Iraqi move) will be consequential is not clear right now. I assume it's all watch-and-see at the moment." Jim Placke, director of Middle East research for Cambridge Energy Research Associates, said this latest flare-up in Iraq's battle against the U.N. sanctions could merely be a maneuver to gain greater control over its export sale proceeds or, more ominously, an implication that it will begin violating the sanctions outright "My view is that it's a fairly serious development," Placke said. "The core issue is the continuation of sanctions and whether they're going to have any effect." For now, the reaction of Iraq's fellow Arab states to a potential shoring up of world reserves by the Saudis could determine whether Iraq's anti-sanctions gambit succeeds. "The Saudis have to be cautious for political reasons - they don't want to be seen as overtly taking over Iraq's share of the market, because of the intense opposition to the sanctions in the Arab world," said Guy Caruso, a senior energy analyst with the Center for Strategic and International Studies in Washington. "In a way, it does not sound like a threat (from Iraq)," he said. "But it's likely to garner sympathy in the Middle East, and it puts the international community in a position where it has to act, some way or another." URL ONLY: http://news.bbc.co.uk/hi/english/world/middle_east/newsid_1050000/1050117.st m * Baghdad is campaigning for an end to the no-fly zones by Middle East analyst Roger Hardy BBC, Friday, 1 December, 2000 http://www.telegraph.co.uk:80/et?ac=000579381554028&rtmo=psBbIB3e&atmo=99999 999&pg=/et/00/12/2/wirq02.html * 'BULLY' SADDAM THEATENS TO CUT OFF OIL SUPPLY By Anton La Guardia Daily Telegraph, Saturday 2 December 2000 [.....] Now Saddam is again testing Washington's resolve, trying to exploit America's distraction to break the international fetters. The Foreign Office has been fighting a rearguard action. It has leaked details of Iraq's efforts to develop weapons of mass destruction and stories of human rights atrocities. It has also told of the diversion of funds to government officials, releasing a satellite picture of a vast resort for the regime's cronies known as "Saddam City". But this propaganda offensive only serves to highlight the difficulty the West faces in trying to exert real pressure on Saddam - the regime enjoys the good life while the people go hungry and die of disease. However much the Foreign Office accuses Iraq of "playing politics" with the suffering of ordinary Iraqis, the UN sanctions are being increasingly called into question. [.....] Economic sanctions, far from punishing Saddam, are becoming an Iraqi tool to isolate the United States and Britain, especially in the Arab world. Tellingly, the West never imposed the same kind of blanket sanctions which hit ordinary people against Slobodan Milosevic. The trouble with the Iraqi situation is that America and Britain have become prisoners of the sanctions policy. After a decade of embargo it will be impossible to lift it without giving Saddam an overwhelming political victory. [I ENCLOSE THESE EXTRACTS TO SHOW THAT EVEN THE DAILY TELEGRAPH CAN SEE THE GAPING FLAW IN THE FO'S ARGUMENT PB] http://cbs.marketwatch.com/news/current/iraqoil.htx?source=htx/http2_mw * IRAQ DISPUTE THREATENS OIL INVENTORIES by Myra P. Saefong, CBS.MarketWatch.com, 2nd November NEW YORK (CBS.MW) -- Iraq has been making waves in the oil market recently. But its halt on crude-oil loadings at its ports in Turkey on Friday comes at a time when demand for crude and distillates hit an all-time, October high, according to Falih Aljibury, OPEC consultant for Banc of America Securities. Aljibury hosted a conference call for the brokerage Friday that emphasized the importance of Iraq's disputes with the United Nations over the last several weeks. With technical assistance and the proper equipment, Iraq could "easily produce" 4 million barrels per day, he said, noting that the country is a "wild card." "Iraq is not stable. There are political issues that might cause Iraq to cut its production," Aljibury said. However, if "you take 3 million barrels out of this tight market, you can well imagine what will happen to the price," he said. [.....] Despite OPEC's efforts to raise inventory levels, crude supplies remain at record low levels and oil prices remain in the mid-$30-barrel level, Aljibury said. The cartel has raised its production quota four times this year by more than 3 million barrels per day to virtually no avail. OPEC has managed its production and it is carefully watching the oil markets to make sure that its production doesn't exceed the demand of the market, Aljibury said, which could cause a supply glut in the market and drive crude prices down. But total petroleum demand for October averaged about 20 million barrels per day, a record high for any October in the U.S., Aljibury said. "Economic activities are high; demand for oil and its products are high; prices are high, yet inventories are at an all time low." Oil imports averaged over 9 million barrels per day -- a record high for October and refinery output averaged over 15 million barrels a day, a record for any October, he said. Yet crude oil stocks totaled "only" 283 million barrels in October -- that's below the same time of last year, he said. "Fuel-oil demand has been about 4 million barrels per day," he added, "while the stock has been 50 percent below that of last year." The market can't get much help from non-OPEC nations. "There is no non-OPEC production capacity left," he said. "With such prices and such demand, everybody would want to sell." "Economic activities are high; demand for oil and its products are high; prices are high, yet inventories are at an all time low," he said. http://finance.individual.com/display_news.asp?doc_id=RTL02a0648reuff&page=n ews * OPEC'S RODRIGUEZ SAYS NO ACTION PLANNED ON IRAQ Individual, December 2, 2000 4:57pm OAXACA, Mexico (Reuters) - OPEC President Ali Rodriguez said Saturday the oil cartel was not planning any immediate reaction to Iraq's decision to halt crude exports, and any action would depend on the impact on the markets. Speaking to Reuters in the southern Mexican city of Oaxaca, the Venezuelan energy and mines minister said he believed there was an excess of oil supply on world markets despite the decision of Iraq, which provides 5 percent of the globe's oil. ``There is a surplus of supply to cover whatever deficit occurs at this moment. Even with this (Iraq), there will not be a significant deficit,'' said Rodriguez, the current president of the Organization of Petroleum Exporting Countries. Rodriguez said he hoped the Iraq situation would be resolved soon, and recalled that the Middle Eastern nation, which dried up exports Friday, was among the oil-producing countries committed to OPEC's policy of stable prices. He added that talks Friday in Mexico City with new Mexican Energy Minister Ernesto Martens had been positive and the government of new President Vicente Fox had pledged to continue to cooperate with OPEC on supply. http://www.gulf-news.com/Articles/news.asp?ArticleID=3996 * QUICK SOLUTION TO IRAQI DISPUTE UNLIKELY, SAY DIPLOMATS United Nations | Reuters | 02-12-00 [.....] Some oil traders have said they do not expect the disruption to last long, and crude oil on the New York Mercantile Exchange fell $1.57 a barrel to $32.25 a barrel by 3:00pm EST. U.S. Energy Secretary Bill Richardson has said the lost Iraqi supplies can be made up from industrialised nation's strategic reserves and by increased output from the world's biggest producer Saudi Arabia. But it will take at least a month for Iraq's production shortfall to be offset by increased supply elsewhere, said Jareer Elass of oil consultancy Oil Navigator. "Although those barrels would more than accomodate the loss of Iraqi crude, the problem is that that additional volume would be unlikely to hit the market for at least a month," said Elass. The fact that oil flow was stopped at both Iraqi exports points - Gulf terminal Mina al-Bakr and Ceyhan in Turkey - also indicates that the suspension will last longer longer than a few days, UN diplomats and oil analysts said. "It's a different situation when Iraq stops (oil exports) from Mina because there is no storage there," said a Western diplomat. With no storage at Mina Al Bakr, Iraq's Basrah oilfields will be shut in, and it takes longer than a few days to bring that back on line, he added. Suspensions in the past several weeks from Ceyhan were less worrisome because the Turkish port has a capacity of eight million barrels in crude storage. UN spokesman Fred Eckhard, confirming that oil exports had stopped, said that the United Nations has not been informed by Iraq of its intentions in halting oil flow. Several diplomats and UN officials said that as long as the United Nations remains in the dark about Iraq's intentions, there can be no compromise to restart oil exports. Eckhard also said that UN oil-sale overseers are trying to get a response from Iraq's State Oil Marketing Organization (SOMO) about December oil prices for Iraqi crude. Earlier this week, the UN Security Council Iraqi sanctions committee rejected SOMO's December price proposals as too low. SOMO low-balled December prices in an attempt to account for the 50-cent-per-barrel surcharge on its crude beginning today. The United Nations said it can allow oil exports without an approved price plan with buyers to pay into a UN escrow account later. But that is moot for now, as long as Iraq has closed the oil taps. Raad Alkadiri of Petroleum Finance Co said that he sees no clear way out for Iraq or the UN Security Council to the current situation, but the longer the export halt, the weaker Iraq's position. "There are two dangers that this will go on long," said Alkadiri. "One is that it's clear that the Security Council is in no position to make any concessions to the Iraqis." "The second is the Iraqis are clearly confident of their position and may be overestimating the hand they hold in the market. (Iraq) may think they can stick this out for one or two weeks and the international resolve will fold," Alkadiri said. The UN-administered oil-for-food programme has been run in six-month phases since the programme's inception in December 1996. The current eighth phase expires Tuesday. The UN Security Council is expected to approve the ninth phase on Tuesday, regardless of whether Iraq will restart oil exports. As in the past, diplomats started with a proposed wide-ranging resolution but will likely next Tuesday approve a stripped-down version calling for six more months of oil sales largely as is, they said. -- ----------------------------------------------------------------------- This is a discussion list run by the Campaign Against Sanctions on Iraq For removal from list, email email@example.com Full details of CASI's various lists can be found on the CASI website: http://www.casi.org.uk