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To: Greywolf who wrote (91482)	6/11/2001 8:04:38 PM
From: Greywolf	Respond to of 95453

Iraq Suspends Oil Exports As Security Council Focuses On New Resolution, Iraq has gone ahead with its threat to halt oil exports under the UN oil-for-food program if the program is not renewed for six months and if there is any reference to the "smart" sanctions proposed by the UK and US in a new resolution. However, Baghdad is continuing its 300,000 b/d cross-border oil trade with neighboring countries with a view to ascertaining its neighbors’ reactions once the Security Council approves the smart sanctions. For its part, the Security Council – displaying a unanimity on Iraq rarely seen in the past few years – has agreed to extend the program for one more month until it completes its deliberations on the draft resolution put forward by the UK. Soundings indicate that the current standoff between Baghdad and the Security Council is likely to be lengthy and that the suspension of oil exports could be of long duration. President Saddam Husain confirmed on 7 June his country’s total rejection of the new sanctions, telling a visiting Russian official "our position [rejecting the draft British resolution] is a definitive one, which is why we are asking Russia to intervene to block its adoption. We refuse to deal with any resolution containing American or British ideas." Basically, Iraq will agree to nothing short of a resolution that lifts the embargo. Failing that, its policy is to continue implementing the oil-for-food Memorandum of Understanding while trying to erode the sanctions as much as possible. However, the proposed smart sanctions are intended to prevent Baghdad from pursuing this agenda and will cause a halt to oil exports of unpredictable duration until a face-saving compromise is reached – and while Baghdad has reversed its position many times before, it will be difficult to find a way anytime soon. It will also be difficult for Baghdad to pick and choose from the new program, as it did in the past, since the UK resolution is drafted in such a way as to prevent it from doing so. The Security Council, prompted by the US, has found a new consensus. It now appears that US Secretary of State, Colin Powell, secured Russian support for the new resolution at a meeting with Foreign Minister Igor Ivanov in Budapest on 29 May. As a result, the Security Council on 1 June approved resolution 1352 which provides, inter alia, for the extension of the 9th phase to 3 July, the consideration of new arrangements to facilitate civilian trade and economic cooperation with Iraq’s civilian sectors, improved controls to prevent the sale or supply of prohibited or unauthorized items and the prevention of the flow of revenue to Iraq outside the escrow account. The Security Council is now focusing on the smart sanctions, and it is expected that by the end of this week a text will emerge based on the UK draft resolution and various proposed amendments and that concrete negotiations on the new text will start soon afterwards. The Council is aiming to meet the 3 July deadline, but if it fails to do so intends to extend the oil-for-food program for a further month. The Wall Street Journal reported on 1 June that a major bone of contention among the permanent five is a 28-page confidential list of items the US wants to prohibit Iraq from buying without approval. The "goods review list," which includes items ranging from large-bore drilling equipment to sophisticated telecommunications gear and fast computers, would supplement two others that apply to military or dual-use equipment that Iraq is already banned from purchasing under previous international agreements. Permanent five representatives are meeting in Paris on 11-12 June to discuss these lists. On the oil front, France proposed last week to permit "civilian investments in Iraq by foreign companies, including into the Iraqi oil industry and production capabilities." The Netherlands supported this proposal, while the British expressed their reservations. Oil exports under the oil-for-food program stopped on 4 June, with Iraq exporting only 6.3mn barrels during the first three days of the month. In May, Iraq exported 2.27mn b/d. During the 9th phase of the program (from 5 December to 3 June), the sanctions committee approved 173 oil sale contracts for 569mn barrels (349mn barrels of Basrah Light and 220mn barrels of Kirkuk). Actual exports by Iraq during the same period totaled 286mn barrels, meaning that 283mn barrels remain to be rolled over to the 10th program once there is agreement to resume exports and if the Security Council does not delete name plate companies from the list, as it intends to do. Iraqi diplomats appeared to imply last week that Baghdad would honor signed contracts, but Ministry of Oil officials later explained that this would be the case only when exports resume.