U.N. and Iraq Agree on Oil Price

Friday, December 8th 2000, 12:00 am

By: News On 6

UNITED NATIONS (AP) â€” U.N. experts agreed Thursday to a proposal by Baghdad for the price of its oil, ending a weeklong dispute and opening the way for the resumption of Iraqi oil exports.

The experts said the Iraqi proposal reflected market value and recommended that the U.N. committee monitoring sanctions imposed after Iraq's 1990 invasion of Kuwait approve the price formula.

The committee, which has said it would follow the experts' recommendation, has until Friday afternoon to approve the prices for December exports. The new price formula was not announced.

Iraq halted its 2.2 million barrels a day of oil exports a week ago after the committee rejected its initial proposal as too low.

Diplomats and industry analysts saw the low price as an attempt by Baghdad to compensate buyers for a reported 50-cent a barrel surcharge it asked foreign oil buyers to deposit in an Iraq-controlled account. The foreign companies â€” which reportedly received faxed demands from Iraq's state oil marketing company â€” refused to pay because it would violate U.N. sanctions. Iraq later denied it ever asked for a surcharge.

Under the U.N. oil-for-food program, Iraqi is allowed to sell oil but all revenue goes into a U.N.-controlled escrow account used mainly to buy food, medicine and other humanitarian supplies for 22 million Iraqis trying to cope with the decade-old sanctions. The sanctions committee must approve the monthly oil prices.

In a sign Iraq may be preparing for a resumption of exports, U.N. officials reported Wednesday that Iraq had begun pumping oil into storage tanks at the Turkish port of Ceyhan, which it uses for oil shipments. Iraq also ordered at least one tanker into loading position at the Persian Gulf export platform of Mina al-Bakr, its other export outlet, the officials said.

U.N. experts and Iraqi officials haggled for days over a December price before reaching agreement Thursday night.

The Iraqi stoppage unexpectedly led to a fall in prices after the U.S. and its allies assured the oil markets that they stood ready to tap their emergency reserves to prevent a supply shortage.

The fall in prices and the loss of oil revenues put pressure on Baghdad to back down on the price, a Western diplomat said Thursday.

According to the U.N. Office of the Iraq Program, Iraq lost more than $500 million in revenues in the seven days its exports were suspended.

``Taking into consideration that prices have fallen since Iraq's first submission, and also the fact that buyers have lost confidence in Iraq as a reliable source of supply, the overseers would recommend'' that the prices be approved, a U.N. official said.