Iraq has decided to abandon the illegal surcharges it imposes on oil through the UN-sponsored oil-for food programme, according to today's Wall Street Journal.
The paper's European edition reports today that Iraq has relinquished the kickbacks on oil which generated billions of dollars for Baghdad. The move is seen as another diplomatic move to halt US efforts to build a broad coalition to topple President Saddam Hussein.
The oil-for-food programme was set up by the UN in 1996 to funnel humanitarian aid to Iraq through UN controlled bank accounts and pay reparations for the Gulf War. The programme is said to have generated some $23 billion in official aid but Iraq also managed to circumvent the scheme.
Iraq sold the oil at below market prices through a chain of intermediaries before it was finally bought by the large oil companies, many of whom were US companies. Baghdad collected a surcharge of up to $0.50 a barrel for each of these transactions.
At its peak Iraq was selling 2.1 million barrels a day under the programme. But stricter price controls imposed by the US and Britain after the Wall Street Journalpublished details of the scheme earlier this year has reduced output to 900,000 barrels a day.
Whether this latest move coupled with Monday's concession on UN weapons inspectors is enough to ward off a military strike remains unclear but OPEC is now unlikely to raise production quotas when it meets tomorrow in Tokyo with the prospect of more Iraqi oil available on world markets.