Iraq oil exports slip; minister quits

By Mariam Karouny and Gideon Long 1 hour, 32 minutes ago

BAGHDAD (Reuters) - Iraq's oil exports hit their lowest level since the war, according to figures released on Monday, heightening a sense of crisis as fuel supplies grow scarce and political leaders struggle to form a government.

Iraq exported 1.1 million barrels per day (bpd) of oil in December, a senior official said -- less than any month since exports resumed in mid-2003 after the U.S. invasion and about half the level seen during sanctions under Saddam Hussein.

Sabotage is damaging plants and blocking investment, keeping exports at a fraction of targets officials say should be met if Iraq's vast reserves are to provide its people with the prosperity that might draw the sting of civil conflict.

The oil official was speaking after Oil Minister Ibrahim Bahr al-Uloum announced his resignation in opposition to fuel price rises imposed last month as part of an aid deal with the International Monetary Fund that demands big cuts in subsidies.

The price rises have been unpopular among Iraqis, already struggling with poor basic public services and appalling violence on their streets.

At least 12 people, including two children, were killed by bombs and bullets on Monday. In the bloodiest incident, a suicide bomber rammed his car into a bus full of policemen, killing seven and wounding 13.

Sunni Arab and Kurdish political leaders met in the north to discuss the formation of a government capable of addressing these daunting problems in the wake of last month's election, which many Sunnis say was fraudulent.

If the new government is to revitalize the economy, economists say, it must harness Iraq's vast proven oil preserves -- the third largest in the world.

But successive governments have struggled to do so since the fall of Saddam, and the latest export figures suggest things are getting worse.

December's 1.1 million bpd was down from 1.2 million the previous month, said Shamkhi Faraj, Director General of Economics and Oil Marketing, who oversees Iraq's oil exports.

That compares with a post-war peak of around 1.8 million bpd in early 2005 and is well below exports under Saddam, when Iraq regularly exported 1.8-2.5 million bpd. Officials say Iraq could sell some 3 million bpd if the industry were not under attack and could double that in time.

Since the U.S.-led invasion, production has been hampered by guerrilla attacks on pipelines and refineries.

The government closed the country's main refinery in the northern city of Baiji last month following sabotage of a pipeline and threats of attacks against truck drivers.

That triggered a rush to petrol pumps as people feared they would be left without fuel.

Uloum's resignation as oil minister came after what looked like an old-style ministerial coup last month, when he was placed on leave against his will and replaced by Iraqi Deputy Prime Minister Ahmad Chalabi.

Uloum had opposed the December 19 fuel prices rises, saying they should have been introduced more gradually. The price of premium gasoline went up by 200 percent, with other fuels doubling in price.
However, given the level of subsidy, further price rises seem likely under the IMF's strictures.

The government remains committed to cutting fuel subsidies further to meet the demands of the International Monetary Fund, which agreed a landmark credit arrangement with Iraq on December 23.

The violence which claimed the lives of thousands of Iraqis and nearly 850 U.S. soldiers in 2005 continued, with a suicide car bomber targeting a bus full of policemen on a road between Baquba, north of Baghdad, and Kurdish Sulaimaniya.

Firemen found the charred bodies of seven policemen inside.

Two children were killed when gunmen opened fire on a car between the cities of Tikrit and Kirkuk.

In Baghdad gunmen attacked the convoy of the Turkish ambassador. Nobody was hurt.

In the latest of a series of bilateral discussions aimed at forming a new government, leaders from Iraq's main Sunni Arab parties traveled north to meet Kurdish leader Massoud Barzani.

They said afterwards they remained committed to joining a national unity government of Kurds, Sunni Arabs and the majority Shi'ites, whose representatives dominated the December 15 election.

The Sunnis, who were also expected to meet President Jalal Talabani later, welcomed the imminent arrival of four international monitors to check the results of the election.

Their findings are not however expected to have a major impact on the results, which suggest Iraq's next government will once again be dominated by Shi'ite Islamists.

Electoral Commissioner Farid Ayar insisted the team, whose international body has already declared the election fair, would not re-count the ballots but simply review the processes used.

(Additional reporting by Aseel Kami and Deepa Babington in Baghdad, Aref Mohemmed in Kirkuk, Faris al-Mehdawi in Baquba and Darren Butler in Istanbul)