Iraq accepts new UN oil deal

Iraq is preparing to resume oil exports

By Barbara Plett in Baghdad

Iraq has accepted another six-month extension of its oil-for-food deal with the United Nations and is preparing to resume oil exports.

Businessmen with oil-for-food contracts say they are coming under increasing pressure to give the Iraqis a direct 10% payment

Baghdad's official notice to the UN ended weeks of speculation about the fate of the programme and flow of Iraqi oil.

Iraq suspended exports at the beginning of the month in a dispute with the United Nations that formed part of a growing campaign to challenge the 10-year-old embargo.

Despite the oil income lost over the past days, Western diplomats in Baghdad said that the crisis had helped Iraq achieve one of its goals, access to cash.

Oil exports

Iraq's acceptance was relayed by the Foreign Minister, Mohammed Saeed al-Sahhaf.

In a letter published by the state news agency, he repeated many of Baghdad's complaints about the programme, which allows Iraq to sell oil under strict UN supervision to buy food.

The new deal allows for much-needed investment in the oil infrastructure

He noted that it was meant to be a temporary measure and accused the US and Britain of dealing with it as substitute for lifting the sanctions.

But he said Iraq would extend the agreement so as not to charged with negative behaviour.

At the same time there are signs that exports will resume after an 11-day suspension.

According to reports, tankers are queueing up in the Gulf near Iraq's southern port.

Cash benefits

Until now Iraq could only exchange its oil for goods, but in the resolution extending the programme the UN authorised Iraq to spend $1bn a year to repair and maintain its oil industry.

Security Council members recognise that Iraq needs cash to run its daily affairs, but have not yet agreed whether to deposit the money into an Iraqi bank account as Baghdad demands.

Iraq has been pushing for more though, filled with growing confidence that the embargo is eroding on its own.

Its recent dispute with the UN resulted from an attempt to get money straight from oil traders.

However, businessmen with oil-for-food contracts say they are coming under increasing pressure to give the Iraqis a direct payment of 10%.