Turkey becomes first country to by Iraqi oil

Turkey becomes first country to by Iraqi oil

ANKARA (Reuter): Turkey yesterday snapped up the first batch of Iraqi crude on the world market for six years under a United Nations deal allowing Baghdad to sell a limited amount of oil to buy humanitarian supplies.

State-owned oil refiner Tupras said it had signed an accord with Iraqi state oil marketing body SOMO to take 75,000 barrels per day, equivalent to 3.6 million tons of oil a year, effective immediately.

The Turkish company statement gave no price for the deal. Iraqi Oil Minister Amir Muhammad Rasheed said earlier Iraq would give preference to Turkey in selling the oil and Iraq had sent two contracts to the UN secretary-general to enable Iraq to sell oil to international companies.

UN clearance on Monday for US$2 billion worth of Iraqi oil exports over six months paved the way for the deal with Turkey, one of the country's outside Iraq hit hardest by UN sanctions imposed on Baghdad after it invaded Kuwait in 1990.

Neighboring Turkey says it has lost $27 billion in trade because of the sanctions.

Under the UN deal, Iraq will use revenue from the oil sales to buy medicine, food and other humanitarian supplies. Part goes to compensate victims of the invasion of Kuwait and costs of the UN commission supervising the destruction of Iraqi weapons of mass destruction.

Turkish traders and businessmen are hoping for the lion's share of the renewed trade. Turkish companies already sell Iraq basic foodstuffs, mostly wheat flour, pulses and sugar, under UN auspices.

Other sanctions on Iraq remain in place. The oil sales and purchase of humanitarian supplies are subject to close UN monitoring. If all goes well, the Security Council may renew the oil-for-food deal when the initial six months expire.

But United States State Department deputy spokesman Glyn Davies said the deal did "not signal an end or the first step toward the end of the sanctions" against Iraqi President Saddam Hussein.

Iraqi President Hussein yesterday pressed a button to send oil exports through a pipeline to the Turkish terminal of Ceyhan on the Mediterranean.

Senior Turkish officials are expected at a ceremony at Ceyhan on Dec. 16 to celebrate the loading of oil tankers with Iraqi oil, the Turkish energy ministry said.

Tupras said a Turkish vessel was en route for Ceyhan to load the first oil. It gave no information on the oil's quality. Tupras has annual refining capacity of 27.6 million tons with refineries in the towns of Batman, Izmir, Izmit and Kirikkale.

Twelve million barrels of oil is trapped inside the twin pipelines, of which about 3.8 million barrels belong to Turkey.

Oil officials earlier said the smaller 40-inch-diameter pipeline would be used for Iraqi sales. This 986-kilometer line can carry up to 46.5 million tons a year.

Before the UN embargo Iraq pumped an average 1.5 million barrels per day of oil, about or nearly two-thirds of its total oil exports, through the pipeline.

Under the current deal Turkey's state-owned pipeline company Botas is expecting to earn around $50 million from transporting the Iraqi oil. Most oil exports must go via Turkey under the UN deal.

The rest of the $2 billion worth of Iraqi oil is to be loaded at Iraq's southern Mina al-Bakr oil terminal, from which oil was expected to flow on Friday or Saturday, Iraq's Rasheed said.