Global Policy Forum

By Rym Brahimi

The U.N. official overseeing Iraq's oil-for-food program wrapped up his four-week visit to the country Sunday, saying several aspects of the program must be addressed "very urgently" with the Security Council back in New York. Benon Sevan, executive director of the U.N. Office of the Iraq Program (OIP), said the council's retroactive pricing policy and an increased number of holds placed on vendor contracts are having serious effects on the program's success.

It was Sevan's first visit to the country since August 2000. The oil-for-food program, begun in 1996, allows Baghdad to use a portion of its revenue from petroleum sales to purchase humanitarian relief, including food and medicine. In recent months, the Security Council instituted retroactive pricing for Iraqi oil exports. The policy was intended to penalize Iraq for selling the oil below market price and then applying a surcharge that was kept out of the humanitarian program.

Under the retroactive policy, the Security Council's Sanctions Committee sets the price of Iraqi crude oil at the end of the month, after the oil has been exported. U.N. officials say it has been successful in halting most of the unauthorized kickbacks.

But Sevan said the Security Council's policy is having a detrimental effect on oil exports because it deters buyers -- who can't find out the price of oil until after it is purchased -- and is unevenly applied. For example, Asian buyers may still purchase Iraqi oil at a fixed rate, while those in other regions cannot. In the past 60 days, Sevan said, Iraq has exported 1.5 million barrels a day. Its normal average is 2.2 million barrels.

Sevan held three meetings with the Iraqi oil minister to discuss the situation, and said he would take it up with the Security Council upon his return to New York. Sevan said the oil-for-food program -- intended to be temporary when it was implemented -- needs constant readjustment. Without it, he said, it is not achieving its goal.

"As long as the sanctions are in place, we have to ensure the program delivers what it was made for," Sevan said. Another problem he discussed with Iraqi officials was the "saga of holds" on the contracts Iraq must sign with private companies to receive the humanitarian supplies.

All contracts come to the OIP in New York for processing and to the Sanctions Committee for con sideration. The committee puts contracts on hold when members are unsure about the agreement and need more time to review it. Sevan said there has been an increase of such holds in the past few months, resulting in very few contracts going through. That has created a domino effect of problems for the humanitarian program, he said.

Major items may arrive for a project but are left sitting in a storage facility because the contract for trucks has not been approved, he said. Sevan called on the committee to remove such inconsistencies from its review process. He also called on suppliers to improve their applications, saying many of the contracts are drawn up too quickly and therefore lack appropriate information.

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