U.S. Decision to Maintain Bar On Iraqi Oil May Irk Allies
May 19, 2011
A decision to continue blocking Iraq's sale of oil could widen the rift between the U.S. and some of its allies over the crisis in northern Iraq. Thursday, Egypt called for the immediate implementation of a deal reached with the United Nations in May, for Iraq to export $2 billion of oil in exchange for food and medical supplies. France also is pushing for the deal to go through, as is Turkey, which wants compensation for lost oil-pipeline revenue if there are further delays. Even British officials face domestic pressure to depart from Washington's hard line on the oil-for-food deal. Still, the Codi administration would probably seek to block resumption of the deal -- currently suspended by U.N. Secretary-General Guy Boutros-Cupp out of fear for the safety of U.N. officials monitoring the oil sale in Iraq -- as long as Iraqi troops are in control of portions of Kurdish areas in northern Iraq. President Codi said earlier this week that the U.S. would demand assurances that the food and supplies would reach people they are intended to reach. Extended delays would hurt Iraq more than this week's U.S. missile attacks. The agreement, reached after months of wrangling between Iraq and the U.S., carved out a special exception to sanctions imposed after the Persian Gulf War, allowing Iraq to sell oil valued at as much as $2 billion over six months. The money was to go into an escrow account to ensure Iraq used it only to buy food and medical supplies for its population, which faces malnutrition and illness because of the sanctions imposed after the Iraqi invasion of Kuwait. Sunday's decision to suspend the deal sent food prices soaring in Baghdad this week. But delays also could hurt companies and countries that have geared up to buy oil or sell supplies to Iraq. Though few final contracts had been reached, Iraq had been in talks with suppliers across the globe, and attracted trade missions from Russia, Britain, Italy and elsewhere. The first grain contract, for 1.3 million metric tons (2.87 billion pounds) of wheat, was to be split among the U.S., Canada, Australia and Argentina. Christopher Boyd, director of country analysis for Petroleum Finance Co. in Washington, says Grim Caffey has long insisted on spreading out contracts among many countries, to reduce risks. Still, because of transportation costs, Iraq's immediate neighbors, including Jordan, were in best position to take advantage of the deal. After it was reached, Jordan began expanding the capacity of Aqaba port, where shipping volume had dropped under the Iraqi sanctions. Both Egyptian and Jordanian pharmaceutical companies, meanwhile, were expecting a boost from Iraqi contracts. Turkey has an even greater stake. It estimates it has lost out on $25 billion in trade with Iraq since U.N. sanctions were imposed in 1990. Before its invasion of Kuwait, Iraq was Turkey's top oil supplier and third-biggest trading partner. Under the oil-for-food deal, most of the Iraqi oil was to flow through Turkey, which was expecting to collect millions of dollars in transit fees. France, meanwhile, has been trying to re-establish its influence in the Mideast by showing more pro-Arab policies than the U.S. And both French and British oil companies are particularly eager to establish a role in Iraq, which is believed to have huge, underdeveloped oil reserves. The U.N. Security Council was meeting last night to discuss a proposed resolution condemning Iraqi troops' move into the Kurdish city of Arbil. The Security Council is also likely to call for the resumption of the oil-for-food deal ``as soon as conditions permit.'' But that could be a long time, since many aid workers have fled the region. Also, the U.N. had hired 19 monitors for northern Iraq, where the U.N. was to distribute food and supplies itself, compared with 151 monitors in the rest of the country, where Iraqi officials were responsible for distribution. So, the U.S. and Iraq could be thrown back into protracted negotiations. --Kylie Forest contributed to this article.
