Saddam stops oil exports

Saddam Hussein today signalled his defiance of America and the West as he slapped a month-long ban on oil exports from Iraq.

The move looked like a deliberate counter-threat to George Bush and Tony Blair, who at the weekend sharpened their warnings that the Iraqi regime should be overthrown.

The announcement from the Iraqi president said that the export ban would begin forthwith and would continue for 30 days unless Israel withdrew its forces from Palestinian territory.

The double menace underlying the move is of a wider Arab disruption that could strangle oil supplies, and a direct link between America's campaign against Iraq and the continuing war between Israel and the Palestinians.

Saddam's decree was instantly implemented, with oil shipments from the Gulf and Turkish ports suspended at 10am. The secretary-general of the oil producers' association Opec said there could be an emergency meeting of the organisation.

At the same time, international pressure grew on Israel to pull out its troops, but with little sign that prime minister Ariel Sharon was ready to comply.

Iraq is one of the largest exporters in the Arab region, supplying two million barrels of oil a day. It accounts for one in 20 barrels used in the US and is its fifth-largest supplier.

Oil prices soared in the City and elsewhere, raising the prospect of petrol crashing through the 80p a litre barrier and approaching levels hit during the fuel protests 18 months ago. Only days ago BP, Shell, Texaco and Esso pushed the cost of unleaded up 1p a litre to 74.9p.

Experts said a further 3p a litre on top of that was expected from previous rises in the price of crude oil, while today's declaration by Iraq could easily see yet another two to three pence being added.

Dr Leo Drollas, deputy executive director of the influential Centre for Global Energy Studies, said: "It's quite possible we could be above 80p a litre in the next two to three weeks."

The latest price surge will put pressure on Chancellor Gordon Brown not to be too harsh on motorists as he puts the final touches to next week's Budget.

As crude oil soared US$1.12 a barrel to US$27.11 today, all eyes were on the remaining Opec states to gauge whether they will step up production to fill the gap left by Iraq.

Last week, when Saddam threatened a block on his exports of two million barrels a day, only Iran expressed any sympathy. Other exporters condemned use of the so-called "oil weapon". Muslim countries, however, will not want to be seen raising production in opposition to Saddam's declared "pro-Palestinian" move.

A spokeswoman for BP petrol stations said: "We will be monitoring the situation. Any sustained increase in the price of crude will be reflected at the pump."

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