Posted on 13-5-2003
No
Iraqi Oil Rush
by Hans de Vreij, 9 May 2003
Ever since the outbreak of the war against Iraq in March, the
country's oil
exports have been suspended. The fact that hostilities have
ceased has
changed almost nothing; virtually no one wants to buy Iraqi
oil as long as
a series of questions pertaining to the ownership of the so-called
"black
gold" remain unanswered.
The storage tanks for Iraqi oil in the Turkish Mediterranean
port of Ceyhan
are full to the brim, but there are no buyers. Likewise, no
oil tankers
have been spotted at the Mina al-Bakr terminal, Iraq's sole
outlet in the
Persian Gulf. The United Nations Oil-for-Food program, established
after
the 1991 Gulf War, has been suspended for the time being. Under
that
program, Iraq was allowed to sell a limited amount of oil, the
revenues of
which were controlled by the UN and used for specific humanitarian
projects
and to repay Iraq's war debts to Kuwait and Saudi Arabia.
New fund
The US has now introduced a draft Security Council resolution
that proposes
to end the Oil-for-Food program and to replace it with a so-called
Iraqi
Assistance Fund. The Fund would be under control of the US with
assistance
from the UN, the International Monetary Fund, and the World
Bank. Oil
revenues could be used by the fund to help reconstruct Iraq
until the time
a new and internationally recognized Iraqi government is in
place.
Given the expected political and legal wrangling over this proposal,
it is
safe to predict that normal oil trade with Iraq remains impossible
for
quite some time to come. The international law firm Norton Rose
represents
major clients in the oil trade. Their leading Dutch energy lawyer
Weerto
Koster has advised these clients to remain cautious as long
as two key
questions remain unanswered: "Who has legal title to that oil
and is
therefore authorized to deal in it and, secondly, to whom should
I as a
purchaser pay in such a way that my obligations under the agreement
are
relinquished."
The persisting uncertainties over the ownership of Iraqi oil
cause an
additional problem, as Mr Koster explains: "Another, very large
part of oil
trade, of energy trade, is not in physical products but in financial
products - in derivatives. Futures, options and the like. And
that trade is
very risk-averse. It is very difficult to have a proper trade
in oil
futures when there is so much uncertainty as to the ownership
position of
the underlying physical product."
Non-profit sales
People have been asking if the US and the UK are even entitled
to sell
Iraqi oil. But a binding treaty that - although almost a century
old - is
still very much in force answers this particular question: the
1907
Convention of the Hague, that deals with the rights and duties
of occupying
powers. Philippe Spoerri is a legal advisor to the International
Committee
of the Red Cross: "To keep it simple I would say that you have
no right to
take out resources of money for your own profit, for your own
economy.
Thus, the line to keep is that you are doing it for the cost
of the
administration of the occupied or administered territory and
not for the
benefit of one's own economy."
Not surprisingly, the US has stressed that any exploitation
of Iraqi oil
will be for the sole benefit of the Iraqi people. A position
repeated in
the new draft Security Council resolution now tabled by the
US.
Yeah right.
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