The US-led attack on Iraq is apparently having a mixed impact on letters of credit (L/Cs) used in regional trades.

There are reports of increased demand for L/Cs in some quarters, falling demand in others while some traders appear to have been caught out by the timing of Washington's decision to unleash military force on Saddam Hussain.

Mixed messages

In Dubai, local media reports that local traders have observed a rush to formalise and secure transactions through L/Cs to cover against unforeseen circumstances.

On the other hand, Dubai-based shipping agents say they have witnessed a slowdown in L/C flows since December last year.

Off guard

The timing of the conflict seems to have caught some Indian exporters offguard. With no UN inspectors left at Iraq's ports to certify cargo arrival, they are concerned about risks to current shipments, including in-transit shipments bound for Iraq.

Shipments are at various stages: awaiting clearance of the Indian port authorities, cleared by port authorities and bound for Iraq and already lying in the ports of Iraq awaiting approval of UN inspectors.

UN Inspectors

"We have asked the help of the Permanent Mission of India in the US to check with BNP Paribas of New York as to whether they will accept documents in respect of cargo whose arrival notices are not being stamped by UN inspectors, say in Umm Qasr port. The UN has asked their inspectors to leave the port," Mr Anil Agarwal, Co-Chairman, India-Iraq Joint Business Council, told reporters after a meeting with India's Commerce and Industry Minister, Mr Arun Jaitley.

He pointed out that the UN would have to take a policy decision on allowing humanitarian supplies and posting their inspectors to the ports of Aqaba port in Jordan or Tartous in Syria. Both Jordan and Syria are neighbouring countries of Iraq.

BNP Paribas is the only designated bank authorised to issue L/Cs against contracts awarded by the Iraq Government.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.