Iraq has officially informed nine countries that it is planning to resume full capacity pumping of crude oil for export through its pipeline to Turkey that can handle 600,000 barrels a day, according to a highly reliable source who has just visited Baghdad.
The first tanker is scheduled to load Sunday at the Turkish terminal with crude bound for France, the source said.
While French government officials took a wait-and-see view of the reports, a Western oil source with a long record of accurate reporting and analysis took Iraq's notification of its intentions at face value.
If Iraq does resume exporting 600,000 barrels a day, that would provide just the margin the world oil market needs to move from its current slight daily shortage to a slight surplus. The Paris-based International Energy Agency said today that the noncommunist industrialized world has been draining off its stock reserves at the rate of about 350,000 barrels a day since the Persian Gulf war produced a full impact on the international market.
The Western source said there had been no Iranian air raids around Baghdad or in other areas removed from the war zone for three weeks. Iraqi officials, the source said, are interpreting this to mean that Iran must be virtually out of aviation spare parts. The source noted that Iranian planes had damaged the crude-gathering pipe system near the northern Iraqi town of Kirkuk, where the line to Turkey starts, but that the system was repaired after a few weeks.
Iraq's reported notification of the resumption of oil imports may be a signal to Washington that it would be risking the renewed Iraqi oil supplies if it were to supply Iran with the $500 million worth of paid-up spare parts and other material that the Tehran government is demanding in exchange for U.S. hostages. European opponents of spare parts delivery by Washington have said that would give Iran the capacity to do further damage to Iraqi oil production.
The reported Iraqi decision to give France the first shipment of its renewed production is highly symbolic since France has been Iraq's only de facto Western supporter. France is understood to have been supplying spare parts and munitions to the Iraqis almost from the outset of the conflict.
Iraqi President Saddam Hussein said in a speech last week that Iraqi soon expected to resume production, that he realized his statement would be greeted with skepticism but that proof soon would be forthcoming.
France, Italy, Spain and Brazil have each been told that they will be getting 65,000 barrels a day from the line to Turkey, the source said. Yugoslavia, Romania, Greece and Cyprus were told that they would get lesser amounts, identical to their prewar supply from the pipeline, he said. Turkey, which was getting 200,000 barrels a day, reportedly also was told it could expect renewed deliveries.
Turkey, whose oil supply was almost exclusively from Iraq, was by far the hardest hit of the 20 IEA member countries when Iraq halted production days after the war started Sept. 22. It was speculated at the time of the cutoff that it was not so much an inability to continue some production as the danger of shipping crude oil under bombardment. Iraq is getting at least some of the oil for its war effort from neighboring Kuwait, diplomatic sources say.
Iraq was exporting more than 3 million barrels a day before the war, and it is generally calculated that the cut-off in Iraqi and Iranian exports cost the international market almost 4 million barrels a day.
This came in a period when both IEA and OPEX officials were saying there was a surplus of about 2 million barrels a day that was going into the record-level Western stockpiles, and the oil exporters' cartel was planning an across-the-board production cut of 10 percent to take the slack out of the market.
Instead, the oil exporters uninvolved in the war increased their production by about 1 million barrels a day.
Iraq is understood to have taken the position that other Persian Gulf countries that replaced Iraqi oil were doing so at Baghdad's behest and that the extra money they were earning belongs to Iraq. The Iraquis reportedly told the gulf Arab producers that it would expect them to settle up with Iraq after the war.
Iran continued to produce and export 150,000 barrels a day from its offshore fields around the Strait of Hormuz, Western oil sources said.
There is a report in oil industry circles than an East German tanker this week took on a load of Iranian crude from Iran's major loading facility at Kharg Island at the head of the gulf. The Khang facility was damaged by Iraqi bombers but is said to be still usable. There are even rumors that Western tankers are heading toward the area despite high insurance rates posted for tankers entering the Persian Gulf.
The reports of resumed production by both sides in the war raise the speculation that an at least tacit understanding may be developing no longer to attack each other's oil facilities.