By Barbara Crossette
New York TimesMarch 22, 2000
United Nations - The United States will propose doubling the sums Iraq may spend on spare parts for its decrepit oil industry, neglected during almost 10 years of sanctions, diplomats said today. Under an American-sponsored resolution to be circulated for discussion among Security Council members in the next day or two, Iraq would be permitted to raise to $600 million every six months - $1.2 billion a year - instead of the current $300 million every six months.
The money is raised through the "oil for food" program, which allows Iraq to sell oil to meet the needs of its civilians. The increase was recommended by Secretary General Kofi Annan in a report to the council this month because the sanctions have left the equipment in such poor shape. The plan, generally expected to be voted on by the council on Friday unless there are unforeseen objections, is being introduced as members of the Organization of Petroleum Exporting Countries prepare to meet in Vienna next week to discuss the possibility of increasing oil production so that record high prices will decline.
Iraq has oil reserves second only to Saudi Arabia's, experts say. Since December, the Iraqis have been permitted to sell as much oil as they wish under the United Nations-supervised program. Some of the proceeds pay for goods needed by civilians, who have been living under sanctions since 1990, and for public services like water and electricity. Today an official Iraqi newspaper attacked oil-exporting countries thought to be willing to increase production to ease costs for the United States and other countries. "The United States policy of blackmail must be rejected," said the paper, Al-Jumhuriya, which as with all Iraqi papers is government controlled.
Yet Iraq has been straining its pumping and pipeline operations to take advantage of the higher prices, although it cannot sustain such a high level for long, Mr. Annan's report said. It described Iraqi oil installations as hazards to the safety of workers and the environment. The report was based on a technical survey of the industry requested by the council in December and carried out in January by an independent group of oil experts from Saybolt International BV of the Netherlands.
Diplomats are not concerned that allowing Iraq to double the money spent on spare parts for oil production will cut into the food, medicine or other purchases for the population because with oil prices high, income has also risen and if additional oil is pumped, additional civilian goods can be imported. In the last three years, Iraq has earned $20 billion in supervised oil sales, with a third of that going to compensate victims of Iraq's invasion of Kuwait in 1990. But even with added money, Iraq says, it cannot upgrade its oil industry effectively as long as the United States and, to a lesser extent, Britain, block critical contracts for spare parts or related oil equipment in the Security Council sanctions committee.
