Iraq's only existing source of revenue is supervised oil sales

February 1, 2000
Web posted at: 12:52 a.m. EST (0552 GMT)

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BAGHDAD, Iraq (CNN) -- A six-member international oil experts team, which just concluded a two-week survey of Iraq's petroleum industry, must support the industry's dire need for spare parts, an Iraqi official said.

"Our exports have sharply dropped to between 1.5 and 1.6 million barrels per day from 2.3 million," said Oil Ministry Undersecretary Taha Hmoud. "This is caused by a delay in arrival of spare parts as well as because of rough weather."

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"I am sure that they (the team members) would back all our needs," Hmoud added.

The team had been sent by U.N. Secretary-General Kofi Annan to assess Iraq's needs for spare parts and equipment. It also examined the state of pipelines, refineries and offshore loading platforms in Iraq.

"No comment," remarked a team member when asked Monday about the outcome of the visit.

Under an oil-for-food agreement, supervised oil sale is Baghdad's only legal form of revenue. It is allowed by the United Nations to buy food and medicine from other countries.

One reason for the drop in exports is that Iraq has not been able to import equipment and spare parts needed to keep oil factories running

"We are not allowed to import spare parts freely, and only a few of those which are bought under the memorandum of understanding (the oil-for-food agreement) have reached us," Hmoud said.

"Our contracts with supplying companies of spare parts would be blockaded by the American and British representatives at the 661 (sanctions) committee," he said. The United States and its allies have argued that Iraq will use the imported oil equipment for making weapons.

But Hmoud argued that Iraq's sanctions-hit oil refineries were in desperate need of equipment.

"All of our refineries are working, but I must say that they are also suffering from some difficulties because of lack of spare parts," he said.

Hmoud said that Iraq still intends to observe the $5.26 billion ceiling on exports under the latest phase of the U.N.'s oil-for-food deal.

Iraq has the world's second-biggest oil reserves, but experts warn that after nine years of sanctions, exports could drop further

"In general we will be committed to the (oil-for food) memorandum of understanding," he said.

Even if Iraqi exports run lower than previously expected, current high international oil prices indicate sales are likely to reach $5.26 billion sometime in April.

The U.N.'s oil-for-food arrangement will be renewed again in June.

CNN Correspondent Jane Arraf and Reuters contributed to this report.

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