French Proposal for Iraqi Oil Pricing, 21 June 2002

CASI has obtained the text of the French proposal for halting the decline in Iraqi oil exports, which has occurred due to a dispute between the Iraq's State Oil Marketing Organization (SOMO) and the UN Sanctions Committee. The dispute concerns alleged Iraqi surcharges on its oil sales and excessive retroactive pricing.

French Proposal For Iraqi Oil Pricing (21 June)

The Committee is gravely concerned by the information provided by the oil overseers that contract holders of Iraqi crude oil have insisted on excessive premia and that SOMO is not responsive to changes in the market.

At the same time, the Committee is equally concerned by the substantial reduction of exports of Iraqi oil which is the result of the combination between these continued excessive premia demanded by contract holders and the retroactive price setting mechanism which is the current practice of the 661 Committee. The Committee reaffirms its willingness to maximize the funding of the humanitarian program in order to meet adequately the basic humanitarian needs of the Iraqi population.

In this regard, the 661 Committee has decided the following:

1. Humanitarian Impact

The office of Iraq program is requested to submit to the 661 Committee, before 15 July, a written report on the present and expected humanitarian consequences of the revenue shortfall since the beginning of phase XI, in particular on the supply of food and medicine to the Iraqi population, which are the priorities of the Security Council.

2. Frequency of Price Setting

The Committee agrees to set the price of Iraqi oil for a period that cannot be shorter than 15 days and not later than 5 days before the beginning of this period.

3. Selection of Buyers on an Integrity Basis

The Committee agrees to establish criteria of integrity and reputation for the registration of companies on the list of national eligible purchasers of Iraqi oil. These criteria would include (a) proven credit worthiness and evidence of available capital, (b) evidence that the company had previous experience in the oil industry, (c) evidence from national authorities of the company’s date of registration.

The Committee urges Member States and observers to the UN to take all appropriate measures to apply these criteria to the companies under their jurisdiction. The Committee requests these Member States and observers to report accordingly, within 60 days, to the Committee on the implementation of these criteria, in particular on the withdrawal of national oil purchasers from the list that Member states and observers may have deemed appropriate to decide.

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