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[casi] Movements on retroactive pricing of Iraqi oil

Dear all

FT reported (7 June 2002 p. 12), 'Iraq cuts its oil surcharge' from 25-
30 cents a barrel to 15 cents per barrel. Now movement from UK
(see below).



Britain Proposes New Iraq Oil Pricing
11 July 2002
By Edith M. Lederer Associated Press


Britain is pushing a new proposal to try to reverse a precipitous drop
in Iraqi oil exports that fund the U.N. humanitarian program for Iraqi
civilians, Western diplomats say.

The British proposal would change the current system of pricing Iraqi
oil at the end of every month to allow select companies advance
notice of prices. U.N. officials, Iraq and Russia blame the delayed
pricing policy for a 25 percent drop in Iraqi oil exports this year,
which has created a revenue crisis for the humanitarian program.

The problem began in late 2000, when the Iraqi government
introduced illegal surcharges as high as 50 cents on every barrel of oil
as a way of partially circumventing U.N. control over its only source of
hard currency.

The proceeds from Iraqi oil sales are the main source of revenue for
the 5-year-old U.N. humanitarian program to alleviate the suffering of
Iraqi civilians living under sanctions imposed on Iraq after its 1990
invasion of Kuwait. It allows Iraq to sell unlimited quantities of crude
oil to purchase food, medicine and other humanitarian goods.

At the insistence of the United States and Britain, the Security Council
committee monitoring sanctions against Iraq has since October set oil
prices at the end of every month - rather than the beginning - to
prevent Iraq from taking advantage of fluctuations in the oil market to
impose an illegal surcharge.

Washington and London maintain the so-called retroactive pricing
policy has worked in cutting illegal payoffs to Saddam Hussein's
government. But both countries have expressed readiness to consider
alternatives that would have the same effect and address the concern
of critics who contend that the policy has created undue uncertainty
in the oil market and discouraged traders and oil companies from
purchasing Iraqi oil.

The British proposal, circulated Tuesday to the 15 members of
sanctions committee, would create a dual system for pricing Iraqi oil:
Traders on a "Green List" would be told the price of Iraqi crude
before it was loaded while companies not on the list would continue
to learn the price they would pay after they had already picked up the

Two weeks ago, France proposed setting oil prices every two weeks
and adopting stricter standards for traders.

The sanctions committee discussed the French proposal late last
month but members were divided and no agreement was reached.
The committee is expected to take up both the French and the British
proposals at a meeting on Thursday, diplomats said

The big question is how Russia, Iraq's closest ally on the Security
Council, will react. In the past, Russia has blocked proposals that
would set criteria for oil companies.

At the heart of the British proposal is an effort to tighten controls on
the more than 1,000 oil companies from some 83 countries that are
currently registered with the United Nations to purchase Iraqi oil
through the oil-for-food program

The vast majority are little-known oil traders that Western diplomats
contend are more inclined to pay kickbacks to Iraq than larger, more
established international oil companies.

Britain said it expects many of the companies currently involved in
buying Iraqi oil to meet standards of respectability, experience, and
standing in the industry to qualify for the list.

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Milan Rai
Joint Coordinator, Voices in the Wilderness UK
29 Gensing Road, St Leonards on Sea East Sussex UK TN38 0HE
Phone/fax 0845 458 9571 local rate within UK
Phone/fax 44 1424 428 792 from outside UK
Pager 07623 746 462
Voices website

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