To take effect, the agreement must be approved by the Security Council committee monitoring the sanctions against Baghdad. No oil has been lifted from Iraq since 30 November pending a resolution of the issue. The accord was reached yesterday evening between the Iraqi State Oil Marketing Organization (SOMO) and the United Nations oil overseers, spokesman Fred Eckhard said.

"The oil overseers, taking into consideration a number of factors, including the present fair market value of oil - as the price of oil has dropped since Iraq's initial submission of prices for December - as well as a considerable erosion of confidence in Iraq as a reliable source of oil supply, have recommended the acceptance of SOMO's new prices to the Security Council's sanctions committee," Mr. Eckhard told reporters in New York.

The sanctions committee is expected to rule on the issue later on Friday under its "no-objection" procedure.