In a carefully calculated attempt to break out of the 10year-old sanctions regime Baghdad is threatening to cut oil exports on Friday if the UN Security Council continues to insist that all the country's oil revenues must be paid into a UN-controlled account.
Two weeks ago Iraq's State Oil Marketing Organisation told customers to remit into Iraqi designated accounts a premium of $0.50 a barrel over the selling price from December 1st, the companies to be compensated by means of a discount.
The authoritative Nicosia based Middle East Economic Survey (MEES) reported yesterday that negotiations between Iraq and the Council's Sanctions Committee are at a "crucial stage".
MEES stated, ". . . soundings indicate that until this problem is resolved a disruption of Iraq's oil supplies can be expected." A source in MEES told The Irish Times, "It is difficult for either side to back down."
Baghdad timed its challenge to coincide with the onset of winter in northern climes when fuel consumption peaks. If Iraq were to cut its exports of $2.3 million barrels worth of oil a day, the price would promptly rise from the current $33 a barrel.
While Saudi Arabia has offered to increase exports to partly compensate for the loss of Iraq's oil, it would take three months for the additional Saudi oil to reach the market. Shortages and high prices could persist until next March.
Iraq is in a strong position because it can forego oil revenues for many months.
Meanwhile, the Security Council is weakened by division. The US and UK support the maintenance of sanctions while China, Russia and France oppose.
