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MEES: EMBARGO ON IRAQI EXPORTS LIKELY TO PERSIST

Oct. 10, 1994

Prospects that the United Nations will lift its oil embargo against Iraq have dimmed significantly, Middle East Economic Survey (MEES) reports. MEES said the UN Security Council is now unanimous in its demand that Iraq recognize sovereignty of Kuwait before a test period on reduction of weapons of mass destruction can begin. The test period is a condition for lifting the embargo.

Prospects that the United Nations will lift its oil embargo against Iraq have dimmed significantly, Middle East Economic Survey (MEES) reports.

MEES said the UN Security Council is now unanimous in its demand that Iraq recognize sovereignty of Kuwait before a test period on reduction of weapons of mass destruction can begin. The test period is a condition for lifting the embargo.

MEES also said Washington's decisions on Iraq are now being made by the National Security Council at the White House rather than at the State Department. The result is said to be a marked hardening of the U.S. line against Iraq.

Washington's tougher stance, coupled with Baghdad's continued requests for assurance on sanctions before it will recognize Kuwait's border, means there is little chance sanctions will be lifted by mid-1995, MEES said.

RUSSIAN ASSISTANCE

Meanwhile, MEES reported progress in Russia's plans to strike a deal for development of Iraq's giant West Qurna oil field and a range of downstream projects.

MEES reported Iraqi Trade Minister Muhammad Mahdi Salih and Russia's Foreign Economic Relations Minister Oleg Davydov signed in Moscow the first bilateral accords since sanctions were imposed in August 1990.

Once sanctions against Iraq are lifted, Russia is expected to invest about $10 billion in Iraqi industrial and oil projects. Some of the work will be a continuation of projects under way when the embargo was imposed.

Continued work will include development of West Qurna oil field and laying of a 345 km gas pipeline from Nasiriya to Baghdad.

New projects added at Baghdad's request reportedly include construction of 1 million cu m of oil storage, a lubricants plant, an offshore oil export terminal, modernization of refineries, and an 80,000 ton/year methanol plant.

The deal also provides for repayment of Iraq's $7 billion debt to Russia, largely through oil deliveries.

A second accord is said to involve revision of earlier work contracts for West Qurna field, relating to operations to be carried out by Russia until UN sanctions are lifted.