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CNN Sunday Morning

Iraq to Cut Off Oil Exports

Aired June 03, 2001 - 07:08   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LINDA STOUFFER, CNN ANCHOR: Iraq says it will stop oil exports beginning tomorrow, and that could mean higher oil prices. But efforts are underway now to prevent the decision from having a ripple effect around the world.

CNN's Fionnuala Sweeney reports on this one.

(BEGIN VIDEOTAPE)

FIONNUALA SWEENEY, CNN CORRESPONDENT (voice-over): Iraq's decision to hold its oil exports in reaction to the U.N. Security Council's vote to extend the Oil For Food Program by 30 days is not totally unexpected.

TERRY TAYLOR, INSTITUTE OF STRATEGIC STUDIES: It's not a surprise. I think Iraq's tried to put pressure not just on the Security Council but on its immediate neighbors because Syria, Turkey, Jordan benefit from oil exports under the U.N. program.

SWEENEY: And for OPEC ministers meeting in Vienna next week where they had been expected to keep oil prices steady. Iraq's decision to hold its export of 2 million barrels a day presents a dilemma.

FADHIL CHALABI, CENTER FOR GLOBAL ENERGY STUDIES: Saudis have declared that they are ready to make up for that. The question is whether they can do it immediately.

SWEENEY: The existing U.N. Oil For Food Program allows Iraq to sell unlimited amounts of oil but strictly regulates how revenues from those sales may be spent on specific humanitarian goods such as food and medicine for its people.

TAYLOR: Saddam Hussein and his close coterie don't need the Oil For Food Program in order to sustain themselves in power. They make a lot of money out the black market, illegal exports, which of course, their neighbors also benefit from.

SWEENEY: The extension of the Oil For Food Program gives Washington and London more time to persuade other U.N. Council members such as Russia and China to accept their new, so-called smart sanctions proposals.

They're aimed at tightening border controls around Iraq and curbing oil smuggling and illegal Iraqi surcharges while allowing more commercial goods into the country.

TAYLOR: I think the difficulty actually lies not so much with Russia and China agreeing but trying to persuade allies in the region, that is Jordan, Turkey, Syria and so on, to actually be more rigorous in preventing the smuggling that's going out of Iraq.

SWEENEY: Baghdad strongly opposes the new proposals and is demanding a total listing of sanctions altogether. The question now is how and when the halt in Iraqi exports will impact oil prices.

CHALABI: It may not immediate but the psychology and the expectation of the market will be affecting.

SWEENEY: In a market which reacts not only to volume but also to expectations, the price of oil will depend on how long Iraq halts exports and how quickly Saudi Arabia can make up the short fall.

Fionnuala Sweeney, CNN, London.

(END VIDEOTAPE)

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