The United Nations has cracked down on the flow of Iraq's Basrah Light crude oil through an Egyptian pipeline in an effort to prevent mispricing, but traders say the move has throttled legitimate European sales.

While some players may have abused the privilege of using the SUMED pipeline to transport the crude from the Gulf to Mediterranean Europe, traders say the line was largely used for perfectly legal sales of Basrah Light to Europe.

"I think they're overstepping their mandate and limiting trade because of a few occurrences," said one trader active in Iraqi business. "We don't think they have the right."

Industry sources say traders have taken their complaints directly to the United Nations, saying the SUMED play should be exempted from a new requirement meant to guarantee that oil priced for one destination is not shipped to another.

It is a problem that has recently complicated the five-year-old oil-for-food programme to allow Iraq to export its crude, and the SUMED play is not the only one. Swiss trader Glencore's activities are currently being closely examined by the United Nations after a U.S.-priced cargo of Kirkuk crude - it lifted out of the Turkish port of Ceyhan in late February - ended up in Croatia, UN sources say.

A month ago the United Nations began requiring tanker captains to sign a document stipulating that they deliver their cargo to the agreed final destination. It is an effort to prevent traders from pricing the oil to one destination, like the United States, for which official prices are very high, and selling it to another, like Europe. The ploy could net the trader a $2 to $3 a barrel profit.

By using the SUMED pipeline, a trader could in theory sell Basrah Light originally priced for a U.S. destination to a European buyer at a significant profit thanks to freight savings and market discrepancies.

Use of the pipeline helps disguise the illegal play, but it is also a means of legitimately shipping large volumes of European-priced Basrah Light into Europe more cheaply than the Suez Canal or the lengthy voyage around the Cape of Good Hope.

The two million barrel per day SUMED mostly handles Saudi and Iranian crude, pumped in at the Red Sea terminal of Ain Sukhna and out again at the Mediterranean port of Sidi Kerir. But the UN clamp down on SUMED has frustrated many traders trying to sell Basrah Light into Europe, who say the crude via alternate routes is no longer economically viable. Europe took as much as five million barrels of Basrah in March.

"They're imposing restrictions on a fair business practice," said one trader. Although some sources said U.S.-bound crude was also being moved through the pipeline, most traders said the six to seven-day savings in transit time to the United States gained by sending crude through the SUMED is lost in port fees and delays.