Russia And US Divided Over Iraq Aid

The US and Russia were at odds on Thursday night over how in Iraq, while halting Baghdad's flouting of UN sanctions. The five permanent members of the UN Security Council are expected to meet next week to try to save the UN oil-for-food programme, which is suffering a $2bn shortfall. That deficit threatens to undermine UN humanitarian efforts. Under the programme, Iraq is allowed to export crude oil provided the proceeds after the repayment of war debt are spent on food and medicine. But Iraqi crude exports have fallen to 630,000 barrels a day, though the country has 2m b/d capacity. According to the UN, lack of funds meant $2.4bn of goods could not be purchased. The expected meeting - which will involve the US, UK, France, Russia and China - comes as the US State Department is exploring setting up a network of US humanitarian relief organisations in Iraq. The UN sets Iraq's crude oil prices. Diplomats blame the low exports on illegal surcharges levied by Baghdad as well as the restrictive pricing policy the US and UK have instituted to combat the 15-45 cents per barrel extra Iraq demands. The US and UK fear that the illegal surcharges could be used to rebuild Iraq's weapons programme. Russia, Iraq's main ally on the Security Council, is pushing for a change in pricing policy. It argues that Iraq has dropped its surcharge. This is not accepted by the UK and US. Oil companies are beginning to feel the effect of Iraqi oil exports' unpredictability. Last week, Bill Greehey, chief executive officer of Valero, an independent US refiner, wrote to Spencer Abraham, US energy secretary, urging the US to change its pricing policy. He said the measure tightened world crude oil supplies and increased prices. Adding to the UN humanitarian programme's woes was Baghdad's recent decision to stop oil exports for several weeks to protest at the treatment of Palestinians in their conflict with Israel.