Global Policy Forum

By Edith M. Lederer

The Security Council approved a six-month extension of the U.N. humanitarian program for Iraq on Tuesday, aiming to get more aid to its neediest people and provide the country's ailing oil industry with up to $530 million in additional funds. But whether Iraq actually gets the money will depend on whether it is willing to cooperate with the United Nations, which is required to monitor how the funds are spent. Working against a midnight deadline before the program expired, the 15-member council reached a compromise agreement Tuesday night after a contentious debate between Iraq's supporters led by France and its opponents led by the United States. The resolution was approved unanimously after Washington signed off on the deal.

Iraq is allowed to sell oil under the four-year-old U.N. oil-for-food program, provided the money goes for food, medicine and other humanitarian supplies and equipment to rebuild its frayed oil infrastructure. The program was launched to help ordinary Iraqis cope with the effects of U.N. sanctions imposed to punish Iraq for its 1990 invasion of Kuwait. Under Security Council resolutions, sanctions cannot be lifted until U.N. inspectors certify that Iraq's nuclear, chemical and biological weapons programs have been dismantled along with the missiles to deliver them. Iraq is demanding the immediate lifting of sanctions and has barred the return of U.N. weapons inspectors, who pulled out ahead of U.S. and British airstrikes in December 1998.

The resolution will increase the funds available for humanitarian purposes by 5 percent and it earmarks the money for the most vulnerable Iraqis. It establishes lists of pre-approved items with the aim of expediting the shipment of humanitarian aid. It exempts contracts for electricity and housing supplies from mandatory approval by the U.N. committee that monitors sanctions.

The key compromise was on the issue of allowing Iraq to receive a large chunk of oil revenue to be spent locally to improve its oil industry. The United States and Britain wanted to ensure that any cash be made available to all sectors of the Iraqi economy. In the compromise, the council asks Secretary-General Kofi Annan to make arrangements to allow oil-for-food funds to be used by Iraq to buy locally produced goods for civilian needs and to allow up to $530 million to be used for maintaining and improving the country's oil industry. The resolution also requires the Security Council to approve the arrangements.

Iraq's supporters also pressed for $15 million in oil revenue to be earmarked to pay Baghdad's U.N. dues and arrears, which now total $11 million, but the United States strongly opposed any such diversion of oil-for-food money. The final resolution expresses the council's readiness to consider allowing such a payment if Iraq cooperates in implementing all council resolutions - but does not authorize any payment.

In another compromise, references to the smuggling of petroleum and petroleum products - which the United States and Britain wanted to include - were dropped.

The oil-for-food program has generated $37 billion in revenue, and $24 billion has gone to humanitarian programs. Currently, contracts valued at $2.5 billion have been placed on hold, and there is $4.7 billion available to purchase supplies.

While the council debated extending the oil-for-food program, Iraqi and U.N. oil experts were trying to reach agreement on a pricing formula which would enable Iraq to resume oil shipments. Iraq halted oil exports last Thursday after U.N. experts rejected its proposed prices for December as too low - and its U.N. ambassador said shipments will not resume until the United Nations approves new prices. Iraqi Oil Minister Mohammed Rasheed told the Organization of Petroleum Exporting Countries that Iraq hoped to resolve the impasse "in the next day or two," the OPEC News Agency reported. U.N. oil experts gave Iraq's state oil marketing organization a new set of prices Tuesday afternoon for its consideration, U.N. officials said. Iraq is OPEC's third-largest exporter and provides about 3 percent of global crude oil, about 2.3 million barrels a day.

Meanwhile, crude prices continued to drop as traders bet that any prolonged stoppage would be made up for by other oil producers. World oil prices have dropped sharply in spite of Iraq's export stoppage, partly because the United States and other major importers said they would make up for any Iraqi crude by pumping from their own strategic oil reserves. January contracts of light, sweet crude fell again Tuesday to $29.53 a barrel, down $1.69 in trading on the New York Mercantile Exchange. North Sea Brent crude slipped $1.55 a barrel to $27.79 on the International Petroleum Exchange in London.