Iraq Suspends Oil Exports in Challenge to UN Sanctions

Strategic Insights -

Iraq has made its strongest challenge yet to United Nations sanctions by suspending oil exports after demanding that buyers pay a surcharge into a bank account unsupervised by the UN. The move is part of a campaign to erode the sanctions and show the ineffectiveness of the UN Security Council. The Iraqi government is seeking to gain direct access to its oil money and has been exploiting divisions in the Security Council.

Key Takeaways:

  • Iraq suspended oil exports after rejecting the UN's proposed oil price for December, which is lower than the market price.
  • The UN rejected Iraq's proposal to pay a surcharge into a bank account unsupervised by the UN, which would circumvent the sanctions.
  • The UN sanctions committee on Iraq is due to meet to try and break the impasse and diplomats predict Iraqi oil exports will resume next week.
  • Iraq's request is supported by France but opposed by Britain, with a decision expected by Tuesday when the next six-month phase of the oil-for-food programme will be approved.
  • Iraqi President Saddam Hussein has been exploiting divisions in the Security Council and has previously won a reduction in the amount of oil money that goes to compensate Kuwait for losses incurred during the 1990 invasion.
  • Iraq is also set to sell oil to Syria outside the UN programme through a re-opened pipeline, which would breach sanctions.
  • Commodity markets have remained calm, with January Brent crude futures down 8 cents at $31.80 in mid-afternoon trading in London.

Statistics:

  • 2.3 million barrels per day: Iraq's daily oil exports.
  • 10 years: The age of the UN embargo on business with Iraq.
  • $31.80: The price of January Brent crude futures in mid-afternoon trading in London.
  • 8 cents: The decline in January Brent crude futures.

Sources:

• "Iraq Suspends Oil Exports in Challenge to UN Sanctions".

• Middle East Economic Survey, Walid Khadduri, editor