Trade Embargo Already Putting Squeeze on Iraq

An unprecedented international embargo, in which the United States has enlisted nations as diverse as the Soviet Union and Singapore, Britain and Brazil, effectively has shut down Iraq’s vital oil industry and is well on the way toward strangling its food supply, according to government officials and private monitors.

From Turkey, where officials turned ships away Tuesday from Iraq’s main oil export terminal, to New Orleans, where a ship loaded with $12-million worth of Iraqi-bound rice is stranded in port, the embargo’s effectiveness can be measured in cargoes blocked, oil lines plugged and tankers sailing empty.

Banks are turning off credit, insurance companies are refusing coverage for Iraqi-bound tankers. Shipping firms are spurning business with Baghdad.

Without any shots being fired or a naval blockade being established, “I think we’ve already shut them down,” said Philip Verleger of the International Institute for Economic Studies in Washington.

The success of the sanctions so far marks the first time ever that the international community has managed to use economic pressure to punish a nation for violating the much-scoffed-at “rules” of international law.

“If this international lesson is taught well,” aggressors may “behave differently in the future,” President Bush told a news conference Wednesday.

The embargo is crucial to the campaign against Iraq, for while American troops are now in the Middle East to keep Iraqi President Saddam Hussein from pushing into Saudi Arabia, it is the trade sanctions that are designed to force Hussein out of Kuwait, Bush said.

“There are some indications that he is already feeling the pinch,” Bush said. “Nobody can hold out forever.”

How long Hussein can stay his course is an open question. And some experts doubt that the world community can sustain the will to keep the boycott going if Iraq tries to wait it out. But in the short run, there is no doubt about the campaign’s effectiveness.

The embargo has succeeded so far where previous similar efforts failed for several reasons, international trade experts said.

First, Iraq’s economy is fairly simple--oil out, food in. Oil, in particular, is transported in bulk and easily traced. Shipping industry officials and governments know the position of every tanker in the world and can easily track their destinations.

In addition, Iraq has only three export facilities and few friendly neighbors to help it evade sanctions.

When the United Nations imposed sanctions on Rhodesia in 1967, South Africa helped its neighbor by transshipping and relabeling Rhodesian goods. Later, when South Africa was targeted with sanctions, smaller African neighbors helped the white minority regime export its products.

And when the Ronald Reagan Administration tried to cut off Libya’s oil flow, many industrial nations declined to join the effort.

This time, the number of nations that have endorsed the sanctions against Iraq, including all the industrial powers, makes enforcement far easier.

And pledges from other producing nations to increase their oil output, coupled with the fact that oil stocks are currently at “a nine-year high,” will reduce pressure for cheating, said Robin West of the Washington-based Petroleum Finance Co.

High-level government committees in Washington, London, Brussels, Tokyo and other major capitals have been meeting this week to write a web of regulations designed to trap Iraq’s commerce and prevent leaks. U.S. and European Community regulations are expected today.

If Iraq does try to hold out, the first real pain caused by the sanctions could be in the nation’s food supply. Compared to other OPEC nations, Iraq is heavily dependent on food imports.

Iraq is particularly dependent on imported grain. It has stockpiled just over two months’ supply of wheat, as well as nine days’ supply of corn and 38 of barley, both of vital importance as food for farm animals, according to a confidential analysis prepared last month by the U.S. Embassy in Baghdad and made available to The Times.

Iraq imported 234 kilograms (nearly 515 pounds) per person of cereal last year. By comparison, Iran imported 108 kilograms per person and Algeria 159, according to David Pendlum of the U.S. Department of Agriculture. Iraq has substantial agriculture of its own, but imports have been a key tool in keeping the population content with Hussein’s rule.

The United States has been a major source of food, particularly of rice, for Iraq. Industry analysts, however, said that Australia, whose exports to Iraq had been growing, probably would be hit hardest by the export ban.

Iraq is even more dependent on cash generated by oil, which makes up more than 90% of its exports. And with banks refusing to extend credit, underwriters cutting off insurance and tankers turning back on the high seas, the oil lifeline has been cut.

For now, some oil is still flowing through two Iraqi pipelines--one through Turkey to near the port of Yumurtalik on the Mediterranean, the other across Saudi Arabia to the port of Muajjiz just south of Yanbu on the Red Sea. But the oil is merely filling the vast storage tanks at the ports, which will reach capacity within days, industry sources said.

Before the Kuwaiti invasion, Iraq exported about 1.5 million barrels per day of crude oil through Turkey, another 900,000 barrels daily through Muajjiz and roughly 300,000 barrels from its port of Mina al Bakr at the top of the Persian Gulf.

Now “there are absolutely no takers for Iraqi crude oil,” said Peter Kemp, a London-based oil industry analyst. “It is proving impossible to pump any more oil down the pipeline.”

The Turkish government has banned shipments from its pipeline. Whether Saudi Arabia follows suit remains unclear but may be a moot point. No tanker has called at Muajjiz since before the Iraqi invasion of Kuwait last Thursday, industry sources said, and only one tanker, a ship scheduled to load crude oil for India, still appears to be headed toward the port. India, heavily dependent on Iraqi and Kuwaiti oil, has not said whether it will join the international boycott.

Soon, said an American oil executive in Jidda, Saudi Arabia, “the tanks will all be full, and there will be no choice but to shut the pipeline down . . . it’s only a matter of literally days before that happens.”

Staff writers Tom Redburn in Washington and Kim Murphy in Cairo contributed to this story.

OFFSETTING THE OIL EMBARGO If the United Nations ol embargo is effective and halts the flow of Iraq and Kuwait oil sales, can it be made up?

The Shortfall: The amount of oil removed from the world market by the U.N. embargo Estimates in millions of barrels a day Iraq: 3.1 Kuwait: 1.5 TOTAL: 4.6 Who Can Make it Up? Excess capacity of OPEC member that could be immediately brought to market Estimates in millions of barrels a day Saudi Arabia: 2.0 Venezuela: 1.0 United Arab Emirates: 0.8 Gabon/Equador/Qatar: 0.2 Iran: 0.2 Libya: 0.2 Nigeria: 0.2 Algeria: 0.1 Indonesia: 0.1 Source: Cambridge Energy Research Asso.