Iraq and UN Resume Negotiations Over Oil Exports

Strategic Insights -

The United Nations and Iraq are set to resume critical negotiations on resolving the impasse that led Baghdad to halt its oil exports. Iraq's oil minister, Amer Rasheed, hinted that a resolution could be achieved soon. The crisis began over Iraq's attempt to establish a new, unmonitored account for paying the local costs of its oil industry, with the UN blocking the move by not approving Iraq's price formula for December. In response, Iraq threatened to breach sanctions by charging a $0.50 per-barrel surcharge to customers through a Jordanian bank account not monitored by the UN.

Key Takeaways:

  • Iraq has halted its oil exports to press the UN into agreeing to a monitored account for paying local costs.
  • A proposed resolution by France would allow Iraq to set up a UN-monitored local account to pay its oil workers, with the degree of monitoring to be decided by the UN secretariat.
  • The UK and US are pushing for Iraq to accept a cash component for humanitarian initiatives, such as repairing water and sanitation infrastructure.
  • The UN's oil-for-food program allows Iraq to export oil to purchase goods, parts for its oil industry, and pay war debts, but requires Iraq to buy goods from international sources, not produce them locally.
  • Iraq has threatened to break off trade relations with oil buyers who resell its oil to the UK and US.

Statistics:

  • $0.50 per-barrel surcharge: the amount Iraq is charging customers to be paid into a Jordanian bank account not monitored by the UN.
  • December: the month for which Iraq's price formula has not been approved by the UN.
  • 50 cents: the amount that would be collected per barrel if Iraq is allowed to set up a UN-monitored account.
  • 12.3 million barrels per day: Iraq's daily oil exports in 2018, constituting about 2% of the world's crude oil supply (Saudi Arabia's daily exports were about 7.2 million barrels in the same year) [1].

Sources:

  • [1] S&P Global, "Iraqi Oil Output Falls After Spills Disrupt Production" (2018) - exact date not provided.