Oil price jumps as Iraq halts exports

Hussein says embargo protests Israeli action against Palestinians

April 09, 2002|By Michael Slackman | Michael Slackman,SPECIAL TO THE SUN

CAIRO, Egypt - Iraq suspended oil exports yesterday to protest Israeli military actions in the West Bank, a strategic decision that caused the world price of crude to jump and increased pressure on Arab regimes to take action against Israel and the United States.

In a speech beamed by satellite to all corners of the Arab world, Iraqi President Saddam Hussein sought to present himself as the only Arab head of state willing to act on behalf of the Palestinians.

His go-it-alone embargo is expected to have a far greater impact on the tense political landscape of the Middle East than on world oil supplies.

The price of oil increased by about $1 to $26.98 a barrel after the Iraqi announcement, but it closed in New York at $26.54, a 33-cent increase.

Perhaps a more telling barometer of the decision's impact came in a statement issued by the radical Islamic group Hamas. It accused Arab leaders of treason against "Allah and the nation of Islam," praised the Iraqi gesture and called on other regimes to follow suit.

"The question of oil as a political tool really is becoming very relevant now," said Radwan Abdullah, a political analyst in Amman, Jordan.

But even if the immediate crisis calms, America's interest in the region might already have been permanently damaged. Moderate regimes have historically argued to a skeptical public that ties with the United States gave them a means to advocate the Arab cause. But these days, the perception is that Arab voices are going unheard in Washington.

For months, as U.S. officials tried to round up support to topple the regime in Iraq, Hussein also sent his emissaries to lobby in Arab capitals. His surrogates even reopened talks with the United Nations about allowing weapons inspectors back into Iraq.

Yesterday, Hussein delivered Iraq's message.

"The Iraqi leadership declared the complete stoppage of oil exports starting from this afternoon for a period of 30 days, when we will further decide policy, or until the Zionist entity's armed forces have unconditionally withdrawn from the Palestinian territories," he said.

Playing to feelings of hurt pride and victimization among Arabs, he said Israel and the United States had "belittled the capabilities" of Arabs.

Iraq exports 2 million barrels of oil a day, or just 4 percent of what is available on the international market. Most of its oil is purchased by the United States and Europe. The price increase was more a reflection of jitters over the worsening situation in the region than on the loss of Iraqi crude on the market.

Even if OPEC does not make up the shortfall, it is expected that other producers such as Russia will step in. The only way for Iraq's move to really hurt the industrialized world would be if it kicked off a trend.

That has not yet occurred. Kuwait immediately announced it would not stop pumping oil. Sources in the Persian Gulf region said that Saudi Arabia had not agreed to go along.

Iran and Libya have both supported the concept of using oil as a political weapon, but they did not give any indication yesterday whether they would cut back.

Iraq is still functioning under sanctions imposed after the 1991 Persian Gulf war. It is allowed to sell crude only under a U.N. oil-for-food program.

With about $1.7 billion available in the program fund, there should be little immediate impact on critical imports, said Hasmik Egian, an official at the U.N. office that supervises the Iraqi sanctions.

Iraq could be strapped for cash if the cutoff continues for 30 days or more. Iraq already overestimated its anticipated oil income for the year's first quarter, Egian said.

Michael Slackman writes for the Los Angeles Times, a Tribune Publishing newspaper.

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