Saddam taps back into the oil world

People danced in the streets of Baghdad yesterday as Iraq pumped its first oil for export since sanctions were imposed when it invaded Kuwait in 1990. The official Iraqi News Agency said: "President Saddam Hussein pressed the button in Kirkuk's Number One pumping station at 11.25 Baghdad time, declaring the return of Iraqi oil to the international market."

The announcement was premature, as a fault in the pumping-station in Kirkuk, in the heart of Iraq's northern oilfields, delayed for several hours the export of the first of 580,000 barrels a day of crude oil, which will be pumped through Turkey to its oil port at Dortyol.

Iraq has been able to start exporting limited quantities after six years because of the UN Security Council's plan under which Baghdad will export $2bn of oil every six months. Under a UN-monitored scheme, the the money will be spent on food and medicine for Iraqis, compensation for victims of the invasion of Kuwait and UN operations in Iraq.

The US agreed last year to limited sales to relieve pressure on humanitarian grounds within the UN Security Council for the total lifting of sanctions. President Saddam initially considered the monitoring of his oil exports and the distribution of aid as an invasion of Iraqi sovereignty and delayed final agreement. It is likely, however, that the improved ration for 20 million Iraqis will strengthen his regime.

In giving the go-ahead for the plan, Boutros Boutros-Ghali, the UN Secretary- General, said: "This is a victory for the poorest of the poor of Iraq, for the women, the children, the sick and the disabled." Unicef believes 4,500 children under the age of five were dying each month from hunger and disease.

In theory, complete lifting of sanctions will only come when a UN special commission verifies Iraq has no more weapons of mass destruction, but the US is likely to oppose this, to prevent Iraq regaining its previous economic and political strength.

The oil price dipped slightly on news of the Iraqi exports but world demand is expected to be strong enough to support the 580,000 barrels a day it will ship. Before the invasion of Kuwait, Baghdad exported three million a day. The first crude pumped is to be bought by Turkey.

Some $1.32bn of each $2bn from sales will go for humanitarian supplies, including $260m for goods for Iraqi Kurdistan. It is unclear how this will be distributed, as Kurdistan is divided between Massoud Barzani's Kurdistan Democratic Party and Jalal Talabani's Patriotic Union of Kurdistan, which have just fought a civil war.