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Iraq Offers to Sell Oil For $21 a Barrel

October 18, 1990

NICOSIA, Cyprus (AP) _ Iraq offered Thursday to sell its oil for $21 a barrel to all sides in the Persian Gulf conflict - including the United States.

The move prompted speculation that Baghdad was trying to divide the international coalition arrayed against it.

The announcement also appeared to signal that Iraq was feeling the pinch of the U.N.-ordered embargo on trade, which is being enforced by a U.S.-led naval blockade.

The $21 offered by Iraq’s Oil Minister Issam Chalabi, was OPEC’s benchmark price before the Iraqi invasion of Kuwait on Aug. 2. Oil prices have since soared as high as $40 a barrel on world markets.

Oil had been Iraq’s only significant source of export earnings and Baghdad is now unable to sell its crude on the open market. Iraq has already offered to give oil free of charge to Third World countries, but there have been no reports of any takers.

In remarks reported by the official Iraqi News Agency, Chalabi proposed that payments for Iraqi oil be put in an escrow fund because of the U.N. trade sanctions.

″We accept that the price of sold oil is not to be transferred to Iraq but to deposit according to a special arrangement, and Iraq will not deal with it normally until we get over this crisis,″ Chalabi said.

″In this decision we have contributed to reducing prices of oil in the world and ... assist in curbing the sheiks of petrol who benefit from this crisis,″ he said.

Diplomatic sources in Baghdad said the offer appeared a maneuver to divide the coalition against Iraq, enticing away poorer developing nations that have suffered most from higher prices.

A Nicosia-based oil industry analyst said the offer could be a temptation to poorer nations.

The analyst, who spoke on condition of anonymity, said some countries might view it as an opportunity to pay less for oil without breaking the trade embargo because cash was not transferred directly to Iraq.

″Of course, Iraq is trying to evade the embargo,″ said Jolly Kerkstra, spokeswoman for the Dutch Economic Affairs Ministry. She urged countries not to accept the offer made by Iraqi President Saddam Hussein.

Norwegian Foreign Ministry spokesman Bjoern Blokhus said no Norwegian company could buy Iraqi oil without being prosecuted.

″The idea collapses under its own illogic,″ Blokhus said. ″How could oil even be shipped out of Iraq? Personally, I can’t imagine many countries that would accept.″

Prior to the invasion, Iraq’s OPEC production quota was 3.1 million barrels of crude oil a day. Much of that, as well as Kuwait’s production of 1.5 million barrels a day, has been replaced on the world market by increased production by Saudi Arabia and other OPEC countries.

A prominent Kuwaiti economist, Jassem al-Saadoun of the al-Shall financial house, estimated Wednesday that the U.N. embargo was costing Iraq $54 million a day.

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