IRAQ SANCTIONS MONITOR Number 156 Thursday, November 16, 2000 NEWS LATEST++++++++++TONIGHT+++++TONIGHT+++++++TONIGHT GEORGE GALLOWAY MP will be hosting the premiere of the Big Ben to Baghdad bus film tonight - that is, if he isn't locked up for breaking sanctions! As ISM subscribers knew first, George - together with Catholic priest Noel Barry, hereditary peer Lord Rea and five others - blew a hole in 10 years of British sanctions against Iraq by flying into the country from Britain. This is the first flight from Britain since sanctions were imposed a decade ago. George will be flying back from Jordan today and will launch the 60-minute film at the Brunei Theatre in the School of Oriental and African Studies in London at 6.30pm on Thursday. Be there to celebrate _______________________________________________________ INVITATION The Arab Club of Britain announces the premiere showing of the film "Big Ben to Baghdad". The epic journey through three continents, ten countries and 15,000 miles from London to Baghdad in a veteran double-decker London Routemaster bus. The Mariam Appeal chairman Mr. George Galloway MP will be joined by politician Tony Benn MP and Sabah Al-Mukhtar, President of the Arab Lawyers Association for debate following the film. The film will be shown at the Brunei Theater at the School of Oriental and African Studies SOAS, at 630 p.m. on Thursday, 16th November, 2000. Nearest Tube station is Russell Square, London WC1 Admission free but donations are welcome _____________________________________________________ Czech ministry reveals participants in secret mission to Iraq - daily. Text of report in English by the Czech news agency CTK Prague, 16th November: The Czech Foreign Ministry has revealed the names of participants in a widely criticized mission to embargoed Iraq in January, which it organized, the daily `Lidove noviny' writes today. Deputy Foreign Minister Hynek Kmonicek, who took part in the mission together with Prime Minister Milos Zeman's aid Miroslav Slouf, told the daily that Pavel Tkacik and Jiri Lukes from the Vitkovice joint-stock company, Ladislav Baranek for ZTS Petroleum and Stampa, controversial Czech-American entrepreneur Milan Jedlicka and an unnamed representatives of a big company from Prague took part in the trade mission. The mission was to help especially the Vitkovice company come to an agreement with Iraq on paying back outstanding debts. "No agreement in which Iraq would admit its debts has been signed so far," Kmonicek said adding that it is no longer necessary to keep the composition of the mission secret. The ministry has changed its approach after Foreign Minister Jan Kavan faced the accusation of hiding information on the Iraq mission, the daily writes. "By revealing the information, they have admitted that they breached the law. It is scandalous that Kavan lied to the public for almost one year. I expect him to apologize," Senator Michal Zantovsky, who filed the suit, said. He said that he however would not withdraw it because the name of the Prague entrepreneur had been kept secret. Slouf took part in the mission to confirm to Zeman that Iraqis want unacceptable concessions in exchange for the Czech Republic's participation in the renewal of damaged refineries. Slouf proposed participants in the mission. Jedlicka who represents the US company Magna Oil was to be the one who trades in oil, has contacts in the UN and can place Iraqi oil at the world market, according to Kmonicek. Though Lukes confirms Jedlicka's participation in the mission, Jedlicka himself denies it. Baranek confirmed already in September that he had participated in the mission. Source: CTK news agency, Prague, in English 0831 gmt 16 Nov _____________________________________________________ Iraq resumes oil exports from Turkey after delays. LONDON, Nov 16 (Reuters) - Iraqi oil exports from the Turkish port of Ceyhan have resumed after being suspended for three days due to delays in issuing letters of credit (LCs) based in euros, said industry sources on Thursday. One vessel is due to finish loading late afternoon on Thursday local time and another around 4.00 am (0200 GMT) on Friday morning, they said. "There are more ships waiting there turn," the source said but added that problems with LCs continued. The delay in crude oil tanker loadings since last Sunday was caused by problems with issuing letters of credit, which last week switched from being based in U.S. dollars to euros. "It looks to be an internal problem at the bank backing the euro LCs... They have been unable to confirm it," said one trader. "It's a bit confusing, even to the lifters." One trader said he had supplied a dollar-based letter of credit for a lifting last week, with a promise that final payment would be in euros. But it seems new LCs are now required in euros, trading sources said. Last Tuesday, Ceyhan crude loadings were suspended for about 24 hours, also because of payment issues, sources said. _____________________________________________________ Oil near 5-week high, spooked by low stocks, Iraq. SINGAPORE, Nov 16 (Reuters) - Oil prices hovered near five-week highs in Asia on Thursday, bolstered by low heating oil stocks in the United States and concerns over Iraqi exports. New York Mercantile Exchange (NYMEX) crude futures traded at $35.48 per barrel at 0440 GMT, down 10 cents after surging 71 cents in New York to settle at $35.58. U.S. crude futures rose as high as $35.65 during New York trading, its highest level since October 13. _____________________________________________________ IRAQI LEADERSHIP "EXTREMELY POSITIVE" ABOUT RUSSIA'S SUPPORT IN LIFTING SANCTIONS - SHAFRANIK. MOSCOW. Nov 15 (Interfax) - The Iraqi administration is "extremely positive" about recent statements by Russian President Vladimir Putin, who said he supported lifting the international sanctions off Iraq. Yuri Shafranik, the head of the committee in charge of international, scientific, cultural and business cooperation with Iraq, who returned from Baghdad a few days ago, announced this to the press on Wednesday. "It is necessary to start off with small projects, for any action there should be some reaction, and this in turn should lead to the expansion of contacts and increase in the scale of projects realized," Shafranik said. He went on to say that only the direct losses suffered by Russia in the course of the ten years during which the economic sanctions against Iraq have been in place come to a "minimum" of $30 billion. Such a situation is unacceptable, he said. In his opinion, Shafranik continued, it is time to "formulate goals clearly, to outline the political will and the national interests" of Russia in Iraq. "We must not lose Iraq," he said. ______________________________________________________ RUSSIAN OIL COMPANIES MAY PRODUCE OVER 20 MLN TONNES OF OIL IN IRAQ - SHAFRANIK. MOSCOW. Nov 15 (Interfax) - Russian oil companies may potentially produce not less than 20 million tonnes of oil on Iraqi territory, Yuri Shafranik, president of the committee for international, cultural business and scientific cooperation with Iraq, said. At a meeting with journalists in Moscow on Wednesday Shafranik, who is director of the Central Fuel Company, expressed the opinion that the Russian government should show the political will to get Russian oil companies into Iraq. Shafranik also said that Zarubezhneft should receive the status of coordinator of operations by Russian oil companies in Iraq. In response to questions about the possible tearing up of a contract with Lukoil for the development of the Western Kurna deposit in Iraq, announced recently by Iraqi Oil Minister Amer Rasheed, Shafranik said that this is not a problem with Lukoil, but is caused by the general political situation around Iraq. "While the sanctions are in place, Lukoil does not have the political possibility to implement projects in Iraq. It is Russia's task to act so as not to lose this project. There are only two or three deposits this large in the world," he said. Earlier Rasheed announced that the Iraqi government is ready to stop the contract to develop the Western Kurna deposit if Lukoil does not start to implement the agreement. A Russian consortium containing Lukoil, Zarubezhneft and Mashinoimport signed an agreement on the development of the second stage of the Western Kurna oil field. Investment in the project amounts to $3.8 billion. Lukoil owns 70% participation in the Russian consortium, while Zarubezhneft and Mashinoimport own 15% each. ______________________________________________________ Putin calls for speedy lifting of UN's Iraq sanctions. Moscow (AFP)-15Nov2000/936 am EST/1436 GMT Russian President Vladimir Putin expressed his desire for a speedy lifting of UN sanctions against Baghdad in a letter to Iraqi President Saddam Hussein, the Kremlin announced Wednesday. In the message, delivered to the Iraqi leader by Russian Foreign Minister Igor Ivanov on Tuesday, Putin also called for a halt to US-British bombing raids against Iraq. Putin "stated the Russian leadership's firm intention to obtain a rapid political settlement to the Iraqi problem, including the lifting of sanctions against Iraq," according to a statement. "The importance was stressed of launching a constructive dialogue between Iraq and the UN about implementing the international community's resolutions, as well as the need to halt the illegal bombing of Iraqi territory in the so-called no-fly zones." ______________________________________________________ Iraq asks crude lifters for 50 cent premium. LONDON, Nov 15 (Reuters) - Iraq has asked crude buyers to pay 50 cents a barrel over the official selling price for its crude into an account outside United Nations control, which lifters say is not feasible, trading sources said on Wednesday. They said state oil marketer SOMO informed all lifters a few days ago that companies failing to comply with its request from Dec. 1 would forfeit the right to new contracts. "They've contacted everybody by phone. (They said) the ones who don't do it won't get new contracts," said one trader with a European company. But most traders said they were unable to pay the premium even if they wanted to because it would mean circumventing U.N. sanctions that require all payments for Iraqi crude to go into an escrow account under the oil-for-food programme. A U.S. official reiterated the Clinton administration's stance that Iraq would not be allowed take control over any oil revenues. "The bottom line is that Iraq will not get control of revenues or be allowed dual use items," Richard Roth, principal deputy assistant to the secretary of state, told Reuters in New York. ______________________________________________ Iraq economy - External sector outlook. COUNTRY BRIEFING FROM THE ECONOMIST INTELLIGENCE UNIT While sanctions remain in place, the dictates of the oil-for-food programme restrict Iraqi import spending to under 70% of the country's export earnings, with the balance financing payments to the UN compensation fund and other services costs, such as use of the Turkish oil-export pipeline. However, with levels of informal trade-particularly oil smuggling-increasing, the current account is fluctuating outside of these boundaries. Based on our oil-price and production assumptions, we expect Iraq's total (legal and illegal) exports to earn US$21.5bn in 2001, falling to US$17bn in 2002, as lower oil prices are only partly offset by increased production. This will produce current-account surpluses of US$838m in 2001 and US$617m in 2002. Iraq finance - Exchange rate outlook. COUNTRY BRIEFING FROM THE ECONOMIST INTELLIGENCE UNIT The official exchange rate will remain at ID0.311:US$1, although at some 6,500 times the black-market rate, it will not reflect the currency's true value. Reform to the exchange rate is unlikely while sanctions are in place, as the UN restrictions hold Iraq's legal foreign-currency earnings in an external escrow account. The free-market rate, which currently stands at ID1,970:US$1, will reflect conditions in the local black market, rather than the state of the economy as a whole. The black-market currency rate will strengthen slightly against the US dollar, as higher prices for smuggled oil exports increase the supply of foreign currency. However, the dinar's value will continue to fluctuate in line with political shocks, as well as the government's ill-judged attempts to inject demand into the local economy. Iraq economy - Inflation outlook. COUNTRY BRIEFING FROM THE ECONOMIST INTELLIGENCE UNIT Inflation will remain high over the five-year forecast period, but price growth should begin to ease, as increased supply under the oil-for-food programme reduces shortages. In the absence of national data, anecdotal evidence bears out our previous suggestions that inflation is slowly falling, and is now under 100%. We expect inflation to average 80% in 2001, falling to 60% in 2002. The inflation rate is volatile, rising sharply when the distribution network breaks down or political crises threaten the supply system. However, drought in 2000 is unlikely to have a major impact on food prices, as most foodstuffs are imported. Indeed, the need to sell undernourished livestock off cheaply has put some downward pressure on meat prices. Iraq economy - GDP growth outlook. COUNTRY BRIEFING FROM THE ECONOMIST INTELLIGENCE UNIT The absence of economic data for much of the past two decades makes it impossible to assess GDP with any accuracy. As a guide, we expect real growth to reach 14% in 2001, falling to 5% in 2002. This forecast is in line with our projections for Iraqi oil production, which remains uncertain. A recent report by a team of UN-appointed oil experts who visited Iraq in January points to a sector in urgent need of investment. The report predicts an annual decline in production of 5-15%, unless immediate remedial action is taken. Other observers are more upbeat, indicating the acceleration in the delivery of spare parts, following changes to the approvals procedure. We expect average oil production in 2001 to reach 3.1m barrels/day, an increase of 11.9% on 2000, as promised spare parts are delivered. Assuming that the process of upgrading continues in 2002, a 4.8% increase in output, to an average of 3.25m b/d in 2002, seems likely. It should be noted that Iraq's high GDP growth is taking place from an extremely low base; in real terms, the economy will be smaller than in 1989, despite a significant rise in the population. The likelihood of sharp geographical variations should also be noted: the three northern governorates-where humanitarian relief is administered directly by the UN and associated agencies-will continue to benefit from a more efficient and equitable distribution process. Humanitarian conditions in these areas have improved enormously since the advent of the oil-for-food agreement, boosting private-sector confidence, and generating construction and even some light manufacturing activity. _______________________________________________________ Syrian foreign minister on absence from Euro-Med meeting, ties with Iraq. Syrian Foreign Minister Faruq al-Shar'a said on 15th November that Syria would not be attending the Euro-Mediterranean meeting in Marseille because the EU presidency had not accepted its conditions for attending. Al-Shar'a criticized the forum for failing to pay enough attention to the political circumstances in the region. Speaking at a news conference, he also condemned Israel for its use of "brute force" against the Palestinians, and said that Syria was moving step-by-step towards restoring full diplomatic relations with Iraq. _____________________________________________________ Six dead in northern Iraq motorcycle bomb blast. ISTANBUL, Nov 15 (Reuters) - A motorcycle loaded with explosives blew up outside a coffee shop in the Kurdish-held enclave of northern Iraq, killing six people, a spokesman for a Kurdish party said. The Kurdistan Democratic Party spokesman told Reuters the blast took place on Tuesday afternoon in the city of Arbil and injured a further 17 people at the cafe. "A serious investigation is taking place," the Turkey-based spokesman said, adding that it was not clear who planted the device or why. Northern Iraq is ruled by two feuding Kurdish parties. Baghdad has had no formal control over the region since it broke away in the wake of the 1991 Gulf War. _______________________________________________________ Emboldened Iraq tests sanctions, dialogue. LONDON, Nov 15 (Reuters) - Encouraged by Islamic support, U.S. distraction and high world oil prices, Iraq is growing increasingly bold in its efforts to break a decade-old stranglehold of U.N. economic sanctions. But Western diplomats and experts say that despite recent symbolic political gains, the core sanctions that deny President Saddam Hussein control over Iraqi oil revenues and bar foreign investment to develop his oilfields remain firmly in place. "If he gets a few more flights to Baghdad and statements of support from Islamic countries, so what? The bottom line is we control the money," a senior Western official said. In the latest challenge to sanctions, oil traders said on Wednesday that Iraq had asked crude buyers to pay 50 cents a barrel over the official selling price into an account outside United Nations control. State oil marketer SOMO informed all importers a few days ago that companies failing to comply with its request from December 1 would forfeit the rights to new contracts. Most traders said they would be unable to pay the premium, even if they wanted to, because it would mean circumventing U.N. sanctions that require all payments for Iraqi crude go into an escrow account under the oil-for-food programme. "That would be a clear breach of sanctions and I don't believe oil companies would do that," said Toby Dodge, a research fellow on Iraq at Britain's Royal Institute for International Affairs. With the United States sidetracked by the presidential election and the collapse of its Israeli-Palestinian peace efforts, Iraq has been making steady diplomatic gains in the last two months. It has broken a de facto air travel embargo with help from Russia, France and Arab countries and resumed domestic flights long blocked by Western-imposed no-fly zones in northern and southern Iraq. Baghdad has won wider political support in the Arab and Moslem world, outraged by perceived U.S. bias towards Israel. Iraq's Revolutionary Command Council Vice-Chairman Izzat Ibrahim has attended Arab and Islamic summits, and high-profile visitors to Baghdad have included Venezuelan President Hugo Chavez and Russian Foreign Minister Igor Ivanov. Syria, which fought in the U.S.-led Gulf War coalition to drive Iraq out of Kuwait in 1991, announced on Wednesday it would restore full diplomatic relations with its neighbour, run by a rival branch of the pan-Arab Baathist party. But Western experts say these gains do not help Saddam escape from the core sanctions, which can only be eased by a Security Council resolution that would require U.S. assent. "I don't think Iraq has really broken loose. The only thing that counts is that the proceeds of oil sales continue to go through the U.N. accounts," said Professor Gary Sick of Columbia University, a former U.S. policymaker on the Gulf. U.N. Secretary-General Kofi Annan met Ibrahim in Qatar on Monday and agreed in principle to renew a dialogue between the United Nations and Iraq. But diplomats familiar with the talks said Annan insisted there was no question of circumventing Security Council resolution 1284, which requires Iraq to admit and cooperate with new international weapons inspectors before sanctions can be suspended. Under that resolution, which Saddam has rejected, the United Nations would retain control of oil revenues, taking a portion to compensate Kuwait for Iraq's 1990 invasion, even after sanctions on imports of civilian goods were suspended. Diplomats said the Iraqis hoped to negotiate a Memorandum of Understanding with Annan to break the deadlock over sanctions, but the Security Council would have to back any deal. U.S. sources said the next administration might be willing to ease civilian import restrictions on Iraq and abandon the southern no-fly zone, in a bid to ease Arab pressure, but it would not agree to relinquish U.N. control over Iraq's oil revenues - Saddam's central goal. With world oil prices close to a 10-year high because of tight supply, early cold weather in North America and Middle East tension, Iraq's average exports of almost 2.3 million barrels a day are vital to the market. That has prompted some Western media to speculate that Saddam could blackmail the world by halting crude shipments. However, Iraqi officials have said in the past they would not withhold oil from the market, and traders said it was unlikely that exports would be suspended in the dispute over SOMO's demand for a premium. The Iraqis are looking for other ways to subvert the embargo, including smuggling out more oil through the Gulf and Turkey and trying to open new export routes outside the U.N. system, but Western experts do not see major success. The Western official said Iraq was doing roughly $16 billion of exports a year under the oil-for-food programme and smuggling out oil products worth an estimated $1 billion a year, mainly through Iranian territorial waters and in tankers to Turkey. Baghdad hopes to start pumping crude oil to Syria soon along a repaired pipeline that has been closed since 1982, but experts say Damascus is unlikely to accept Iraqi efforts to sell the oil outside the oil-for-food programme. The United States is watching the plans closely. "We've been in intense discussions with the government in Damascus. We are not opposed to oil going through the pipeline as long as it meets the export regime controls," said Richard Roth, U.S. principal deputy assistant secretary of state for Near Eastern affairs. "As long as the money is put into the U.N. system, we don't have a problem," Roth told Reuters in New York. ____________________________________________________ US warplanes strike Iraqi radar system. WASHINGTON - US F-16 fighters attacked a radar system in southern Iraq Monday in retaliation for artillery fire at coalition aircraft patroling a no-fly zone in the south, US military officials said. The attack was the second since Saturday when US Navy F/A-18s and F-14 fighters struck an anti-aircraft battery near the port of Basra in response to ground fire against coalition aircraft, said Major Joe Lamarca, a spokesman for the Tampa, Florida-based Central Command. "All coalition aircraft have returned safely and target battle damage assessment is ongoing," the Tampa, Florida-based US Central Command said in a statement. In Baghdad, a military spokesman charged that the US and British planes targetted civilian targets and were driven out by Iraqi anti-aircraft fire. "Enemy planes bombed civilian installations in Basra before Iraqi missiles and anti-aircraft fire forced the enemy planes to flee," the spokesman said, cited by the official Iraqi News Agency. He said other US and British planes carried out raids in the northern provinces of Erbil and Dohuk. Lamarca said the F-16s used precision guided munitions in the attack on the anti-aircraft artillery battery near Ash Shuaybah in southern Iraq, he said. British GR-1 Tornados flew reconnaissance for the mission. The United States and Britain have launched intermittent air strikes on Iraqi air defenses since December 1998 when Baghdad said it would not recognize the no-fly zones in northern and southern Iraq. Baghdad said that seven Iraqis were wounded in raids Saturday on civilian targets in the south. AFP. _____________________________________________________ 61 Foreign Flights Have Landed in Iraq Since August - Minister. BAGHDAD, November 14 (Xinhua) - A total of 61 foreign planes have landed at Iraq's Saddam International Airport since it was reopened in August, Iraqi Minister of Transport and Communications Ahmad Murtadha Ahmad Khalil said Tuesday. Among them, 29 were from Arab countries and the rest from other countries including Russia, France, Turkey and Iran, Khalil said. The climax came on November 1, when six planes, carrying foreign officials and business delegations to participate in the Baghdad International Fair, touched down at the airport. A majority of these flights did not get prior permission from the United Nations Sanctions Committee or just notified it, as there is no U.N. Security Council resolution banning civil flights to and from Iraq, Khalil said. However, the United States and Britain, who dominate the U.N. Sanctions Committee, have argued that the sanctions on Iraq cover an air embargo and all flights to and from Iraq must get approval from the committee. Iraq has been under sweeping U.N. sanctions ever since it invaded its tiny neighbor Kuwait in August 1990. On August 17 this year, Iraq challenged the air embargo by reopening the Saddam International Airport, 10 years after its closure. In another bold move to break the air embargo, Iraq resumed domestic flights from Baghdad to Mosul in the north and to Basra in the south on November 5. Both Mosul and Basra are located inside the so-called no-fly zones, set up by the U.S.-led Western allies following the 1991 Gulf War. Faced with an growing international demand for canceling the air embargo, the U.S. and Britain changed their tones by saying the no-fly zones are only aimed against Iraq's military planes. _____________________________________________________ Iraqi minister upbeat on resumption of domestic, external air transport. Text of report by Iraqi radio on 14th November Transport and Communication Minister Ahmad Murtada Ahmad has stated that a number of international airlines are currently preparing to reopen their offices in, and resume their normal activities to, Iraq, now that the Iraqi State Enterprise for Civil Aviation has completed steps to prepare and operate the Saddam International Airport and the Basra and Mosul airports both technically and managerially. The minister told the Iraqi News Agency that the air trips from outside Iraq are continuing every day and that the ground services, the loading and unloading, and fuel supplies are currently carried out and presented to the planes free of charge in support of their initiative to break the unjust blockade. The minister added that he expects regular external flights to resume shortly. He said that the Iraqi Airways Co has resumed its domestic flights to Basra and Mosul. He noted that since its opening on 17th August and as of 11th October, Saddam International Airport received 61 planes, of which 29 were Arab planes, and 32 foreign planes of various nationalities. He pointed out that the halt in the traffic movement in the past was caused by the fact that our international and domestic airports were not qualified to receive them. tel: +44 (0)20 7403 5200 fax: +44 (0)20 7403 3823 email: [EMAIL PROTECTED] web: www.mariamappeal.com
