Iraq restarts oil exports

Iraq accounts for 5% of the world's crude oil exports

Iraq has started loading three tankers at Mina al-Bakr in the Gulf and at Ceyhan in Turkey, marking Baghdad's return to the oil export market after a five-week suspension.

Iraq and the United Nations signed an agreement on Tuesday to extend the oil-for-food programme for a further five months, paving the way for a resumption of oil exports.

It is a temporary arrangement pending a total and unconditional lifting of the embargo

Minister of State for Foreign Affairs Naji Sabri

Baghdad suspended exports on 4 June in protest against a joint US-UK proposal to revamp sanctions imposed on it following its 1990 invasion of Kuwait.

In London, the oil price fell sharply as traders were reassured by an unexpected rise in US crude stocks indicating that Iraq's export freeze had not caused a shortfall in oil supply.

False start for 'smart' sanctions

The US and Britain want to ease restrictions on civilian goods while tightening them on arms, but the plan was dropped last week after Russia said it would veto it in the UN Security Council.

Mina al-Bakr and Ceyhan are the only two ports allowed to export crude under the UN programme.

Iraqis say sanctions must be lifted

Iraq exported 2.2 m barrels per day (bpd) before the suspension and according to UN estimates, the oil-for-food programme has lost $1.3bn in the four weeks that oil sales were halted.

Facing a veto by Russia - Iraq's key ally on the Security Council - Britain and the US agreed to support a simple extension of the oil-for-food programme, something Baghdad had demanded before it would restart its oil exports.

The programme will remain unchanged until the next phase expires on 30 November.

Applying pressure

Washington and London said they would use the next five months to press for Russian support of their "smart sanctions" plan.

But Moscow - which is owed billions of dollars by Iraq for arms supplied prior to 1990 - wants to see an end to the embargo.

Correspondents say the cash-strapped giant's only hope of seeing at least some of that debt repaid is if sanctions are lifted and Russian firms are allowed to invest in Iraqi oilfields.

Iraq is also pushing for a suspension or lifting of the sanctions, but under Security Council resolutions, sanctions cannot be lifted until UN inspectors certify that Iraq has dismantled its weapons of mass destruction and long-range missiles.

Weapons inspectors left Iraq ahead of US-British air strikes in December 1998 and Baghdad has barred their return.

The Iraqi Government says it has eliminated its weapons programmes and has demanded the immediate lifting of sanctions.