Iraq's neighbours warned on sanctions

Economic sanctions have caused great suffering in Iraq

Baghdad is threatening to halt oil exports to Jordan and Turkey if they co-operate with a US plan to replace sanctions on Iraq with a tighter arms embargo coupled with relaxed controls on civilian goods imports.

Why should we sell oil at discounted prices or give it out free of charge?

Iraqi Deputy PM Tariq Aziz

According to the US plan, Iraq's illegal and sanctions-exempt oil exports to its neighbours would be brought into a UN system to pay for humanitarian goods.

The new sanctions regime is designed to keep strict controls on the Iraqi Government while shoring up declining international support for the sweeping economic embargo that has caused suffering to the civilian population.

Deputy Prime Minister Tariq Aziz made the threat to cut such exports to neighbours Jordan and Turkey in comments quoted by Iraqi TV.

Washington hopes to increase pressure on Saddam Hussein

Both countries currently pay for oil they receive directly to the government in Baghdad, rather than through an escrow account set up by the UN.

"If revenues of oil sales go to the escrow account, why should we sell oil at discounted prices or give it out free of charge?" Mr Aziz asked.

Diplomatic overtures

Diplomats say Washington has approached UN Security Council members about its new "smart" regime; the contents are expected to be incorporated in a UK-drafted resolution to be circulated next week.

The US hopes to have the new measures in place in time for the new six month phase of the oil-for-food deal which begins on 4 June.

Iraqi oil flow has been steadily increasing in the last five years

Jordan imports 4.8 million tonnes of Iraqi crude oil and products annually, which has been an important prop to the country's struggling economy.

Jordan's public stance is that it wants sanctions on Iraq to be lifted to alleviate the humanitarian crisis.

Cheap oil

Amman has categorically denied reports that it is discussing modified sanctions with the US.

"Half of Iraq's oil exports to Jordan is free of charge... while the rest is sold at discounted prices," Mr Aziz said.

Iraq exports oil to Turkey on trucks and via a pipeline that carries about 40% of Iraq's 2.2 million barrels per day of UN-monitored oil sales.

Mr Aziz said the oil-for-food deal would become "meaningless" if previously exempted sales to Jordan and Turkey came under UN control.