Global Policy Forum

By Nicole Winfield

United Nations - Secretary-General Kofi Annan recommended Wednesday that Iraq be allowed to double the amount it can spend on oil industry spare parts and equipment from money earned through oil exports. Endorsing Iraq's own request, Annan urged the Security Council to allow spending of the extra $300 million on equipment to help improve what he called the "lamentable state" of Baghdad's oil industry.

US and British officials, however, have already said they favor spending any surplus proceeds from UN-supervised oil sales on food and medicine for Iraqis, indicating council approval may not be forthcoming. Britain and the United States were studying the recommendation, officials said.

Iraq has been barred from selling oil on the open market since UN sanctions were imposed after its 1990 invasion of Kuwait. The UN oil-for-food program, however, lets Iraq sell up to $5.26 billion in oil every six months to buy food and medicine for Iraqis. The Security Council also has allowed Iraq to spend $300 million from those proceeds to buy parts and machinery to repair its oil infrastructure, still damaged from the Gulf War and dilapidated from years of neglect from sanctions.

Because of high oil prices, Iraq will have surpassed the United Nations' limit on oil sales before the end of the current six-month phase, Nov, 20. Earlier this month, the Security Council authorized Baghdad to keep exporting oil beyond that target, to make up for shortfalls from previous phases.

In a letter to the Security Council, Annan said $300 million of the extra money should go to buy more spare parts during the current six-month phase - a doubling of what has currently been authorized by the council.

The head of the U.N. humanitarian program, Benon Sevan, noted in a letter to Iraqi Ambassador Saeed Hasan that Annan also has recommended that excess money be used to improve nutrition, water and sanitation for the country's people.