Iraq asks crude lifters for 50 cent premium November 15, 2000

(adds U.S. comment) LONDON, Nov 15 (Reuters) - Iraq has asked crude buyers to pay 50 cents a barrel over the official selling price for its crude into an account outside United Nations control, which lifters say is not feasible, trading sources said on Wednesday. They said state oil marketer SOMO informed all lifters a few days ago that companies failing to comply with its request from Dec. 1 would forfeit the right to new contracts. ``They've contacted everybody by phone. (They said) the ones who don't do it won't get new contracts,'' said one trader with a European company. But most traders said they were unable to pay the premium even if they wanted to because it would mean circumventing U.N. sanctions that require all payments for Iraqi crude to go into an escrow account under the oil-for-food programme.

A U.S. official reiterated the Clinton administration's stance that Iraq would not be allowed take control over any oil revenues.

``The bottom line is that Iraq will not get control of revenues or be allowed dual use items,'' Richard Roth, principal deputy assistant to the secretary of state, told Reuters in New York.

With many intermediary firms already lifting Iraqi crude, traders said it was unlikely oil exports would be suspended. ``It is going to create problems, technical problems and delays. Suspensions of exports? I don't think so,'' said another European lifter. ``Will they carry out their threat. Yes, I think they will, but we have already told them (SOMO) that we cannot do it,'' he added. ``The oil will come to us through other traders.'' Traders said they believed cash-hungry SOMO was trying to pressure clients to get its message through to the United Nations to release funds from its escrow account that it claimed were withheld and delayed. The move follows similar discussion of a 10 to 15 cent tariff that surfaced in October. That proposal was rejected by most lifters, and SOMO subsequently backed down. But some market sources feared a more resolute stance from Baghdad this time around. Iraq in recent weeks has raised a number of issues with the United Nations over oil-for-food, getting agreement for the payment of oil sales in euros rather than dollars and saying it wants to start deliveries to Syria outside the programme. ``We've seen a lot from SOMO lately... It looks like they're doing a lot of things to upset the oil market, upset the U.N. and the U.S.,'' said a source with a major oil company. The current eighth phase of the U.N.'s oil-for-food exchange expires on Dec. 5 and Iraq has made a formal proposal to extend the phase to Jan. 15. Oil-for-food allows Iraq to sell unlimited volumes of crude under strict U.N. supervision as an exception to Gulf War sanctions in exchange for humanitarian goods. Market sources said they believed SOMO was anxious to divert more funds from the oil sales to its own internal needs. To make its oil competitive with other crude oil sold in the Mediterranean market, SOMO would likely have to lower its official price to compensate for the 50-cent premium, thereby potentially reducing oil-for-food payments. And with winter in the northern hemisphere around the corner and Iraq selling around 5 percent of world exports, or some 2.4 million barrels daily, any interruption in the supply could have a significant effect on oil markets already on edge. ``If something happens to Iraqi flow in winter the market will skyrocket,'' said one trader. ``But I tend to think this is a bit of a tempest in a teacup.''

http://www.individual.com/story.shtml?story=d1115155.900

-- Martin Thompson (mthom1927@aol.com), November 15, 2000

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World: U.S. concerned about secret premium on Iraqi oil

The Associated Press WASHINGTON (November 17, 2000 6:54 p.m. EST http://www.nandotimes.com) - The State Department reacted sharply Friday to reports that Iraq is trying to demand that oil customers secretly pay a 50-cent-per-barrel premium into an Iraqi-controlled account and threatening to cut off oil sales if they refuse to do so.

"We are looking into this very closely," said State Department spokesman Charles Hunter.

U.N. Security Council resolutions require that revenues Iraq derives from oil sales be deposited in a U.N.-controlled escrow account for use in the oil for food program.

"Paying 50 cents or any other amount per barrel to Iraq would violate U.N. Security Council resolutions and rob the Iraqi people of oil-for- food funds," Hunter said.

http://www.nandotimes.com/no_frames/global/story/0,4382,500280829- 500440991-502842755-0,00.html

-- Martin Thompson (mthom1927@aol.com), November 18, 2000.