Iraq carries out oil threat

BAGHDAD, Iraq -- Iraq has carried out its threat of halting most oil exports in retaliation for a change in the United Nation's oil-for-food programme.

Oil running through an Iraqi-Turkish pipeline to Turkey's Mediterranean port terminal at Ceyhan stopped at 8 a.m. local time (04.00 GMT), sources close to the Iraqi Oil Ministry said.

Exports through Iraq's southern al-Bakr oil terminal were also shut off, the source added, the Associated Press said.

CNN's James Martone said diplomats perceived the action as a "slap to the United States" -- the biggest importer of Iraqi oil.

Oil exports continued to be carried by road to Iraq's neighbours Jordan and Turkey.

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Iraq imposed the indefinite halt on Monday in protest at the U.N.'s decision on Friday to extend by one month instead of the usual six months the programme under which Iraq can sell oil.

The extension is intended to allow the U.S. and Britain more time to secure Security Council backing for their so-called "smart sanctions" proposal which would allow civilian goods to flow freely into Iraq, except those that could be used for military purposes, and open up commercial and cargo flights.

Iraq wants all sanctions lifted.

The U.N. oil-for-food plan was set up in 1996 to help ordinary Iraqis cope with the effects of U.N. sanctions imposed to punish Iraq for its 1990 invasion of Kuwait.

Martone added that sources in Iraq said it will "renew production if the Security Council reverses its decision."

The Organization of the Petroleum Exporting Countries was ready to cover any shortfall in world oil production, Saudi Arabian Oil Minister Ali Naimi said on Saturday, but it is expected Saudi Arabia alone could cover any shortage.

OPEC is holding its regular meeting in Vienna on Tuesday, which Iraq's Oil Ministry senior undersecretary, Taha Humud Musa, will attend.

OPEC Secretary General Ali Rodriguez played down the potential impact of a disruption in Iraqi oil exports.

"We'll cross that river when we come to it," he said.

Iraq produces about 3.2 million barrels of oil per day, of which about two million barrels per day has been exported under the U.N. oil-for-food programme.

Iraq also pumps for domestic consumption and under a separate, U.N.-accepted arrangement for supplying oil to neighbouring Jordan.