Syria sees no slow-down in Iraq oil imports-trade

www.forbes.com Reuters, 02.13.03, 6:30 AM ET By Jonathan Leff

LONDON, Feb 13 (Reuters) - Iraq, under heavy pressure to comply with U.N. directives or face a military assault, is set to continue illicit pipeline crude oil exports to Syria next month, regional oil traders said on Thursday. Baghdad has allowed the return of U.N. weapons inspectors to stave off a potential attack from the United States, but has maintained its lucrative oil trade with Syria -- in violation of the U.N.'s sanctions programme -- for over two years. Despite the threat of an U.S.-led attack, Iraq shows no signs of slackening supply in March, traders say. Syria has scheduled a heavy export programme of some 450,000 barrels per day (bpd) in March, almost equal to the country's domestic production capacity, term customers say. This implies Iraqi imports of some 200,000 bpd, which Damascus is thought to be buying at a significant discount with the cash going directly to Baghdad, outside the U.N.'s oil-for-food programme account used for humanitarian purposes. Syria uses that crude -- pumped through a decades-old pipeline that was recommissioned in 2000 -- in its refineries, freeing up additional volumes of local production for export at international prices, now over $30 a barrel. Domestic production is estimated at 550,000 bpd and Syria's refineries use around 300,000 bpd, although demand sometimes dips in the spring due to seasonal maintenance. Iraqi officials have denied the pipeline is operating but Syria's oil minister said last year they were continually testing the pipe and importing oil for internal use. Baghdad has recently cut off another stream of illegal revenue, truck exports to neighbour Turkey that were running as much as 50,000 barrels per day (bpd), officials there said. Under the U.N. programme, Iraq is allowed to export small amounts of oil to neighbouring Jordan. Syria has said it would bring the pipeline -- which it plans to upgrade -- under the oil-for-food umbrella when it was fully operational.

SUPPLIES UNCERTAIN Syria's term oil customers have been warned this year that their contracts may have to be cut short due to unspecified events in the region, but supplies in March are higher even than in February by some 75,000 bpd, traders said. "It looks like a full programme to me," said one lifter. Syria has scheduled 15 full 80,000-tonne cargoes of Syrian Light, six of heavier Souedie and three that combine the two, according to a survey of regional traders. Iraq's pipeline exports have cut into the volume of crude it appears capable of supplying through the U.N.-authorised ports of Ceyhan, Turkey, and Mina al-Bakr, on the Gulf, where past capacity had been estimated at around 2.2 million bpd. Despite heavy demand for the sour crude due to a strike in Venezuela, Baghdad appears to be hard pressed to maintain exports at anywhere above two million bpd, traders say. U.N. weapons inspectors are due to give a key briefing on Iraqi compliance on Friday as the U.S. struggles against European opposition to an early war to unseat President Saddam Hussein, whom it accuses of hiding weapons of mass destruction. Some traders fear an attack as soon as March, which may prompt Saddam to cut off U.N. exports, although they said it was unclear how it could impact the Syrian business. The UK has repeatedly called on Syria -- currently on the U.N. Security Council -- to stop violating sanctions with the imports but the United States has been quieter on the issue.