Chalabigate

Iraq has about 8-9 million barrels sitting at the Turkish port of Ceyhan unable to be shipped because there was no authority with which deals can be made.

But with all sanctions lifted except those on arms, and the Oil-For-Food programme extended for another six months, the floodgates are open.

Even the Russians are happy, since the resolution appears to make it easier to ensure that several lucrative oil contracts - not to mention the billions Iraq owes Russia in bilateral debt - are honoured by giving the UN a wider role than previously expected.

Back to work

The head of the reconstituted oil ministry, Thamir Ghadbane, believes that it will take a couple of weeks to get things moving.

Certainly by mid-July, the hope is to be exporting about 600-700,000 barrels a day, with another 300-400,000 barrels produced for domestic consumption.

A few months after that, export levels could be back up to the prewar level of 2.5 million barrels a day.

The proceeds will be channelled into a trust fund over which the US and the UK have control - although the UN Security Council resolution dropping sanctions at least gives UN representatives an advisory role.

The US, staggering under swelling budget deficits to pay for tax cuts at home, has said it wants much of the cost of Iraq's reconstruction to be paid for by its oil revenues.

Hurdles

But even that could prove a challenge, given the damage done to oil facilities during the US-led war - admittedly much less than some had feared - but also by a dozen years of sanctions before.

"The realisation this morning that we're still not past internal structural problems limiting export capability is pushing oil prices higher," Mike Rothman, senior market analyst at Merrill Lynch, wrote in a note to clients.

In New York, a barrel of crude oil was fetching more than $29, a 20% rise from the price when US troops rolled into Baghdad last month as US stocks remained tight going into the first long weekend of the summer.

In theory, that could trigger an expansion in pumping by the oil cartel Opec, which says it aims to keep prices between $22 and $28 a barrel.

In the club

And it is still unclear when - if at all - the US will let Iraq get involved with Opec at all.

The more suspicious members of the cartel think Iraq could be the key Washington DC uses to snap Opec's hold on world oil.

"It seems the United States is going to raise Iraqi production from 2.5 to 6.5 million bpd so that Saudi Arabia no longer leads world oil policy," said Iranian Oil Minister Bijan Namdar Zanganeh, who fears "a modification in the power links between countries and thus in regional balance".

But some observers were more sanguine.

"The United States has an interest in seeing Opec not break up, because the market truly has a need to be regulated," said Moncef Kaabi, research director at CDC.

"I think that OPEC will withstand (the Iraq situation), even if it goes through a very bad time."