May 30, 2002
Iraq has formally agreed to a six-month extension of the newly revamped U.N. oil-for-food humanitarian program, a U.N. official said Wednesday. The program was created to alleviate the suffering of Iraqi civilians living under sanctions imposed on Iraq after its 1990 invasion of Kuwait. It allows Iraq to sell crude oil to purchase food, medicine and other humanitarian goods. Iraq exchanged letters with the United Nations on Tuesday renewing a 1996 memorandum of understanding that established the program, said Benon Sevan, head of the program. The new phase took effect at midnight EDT Wednesday.
Skeptics in the United States say it is too easy for Iraq to duck the restrictions on oil sales. On Wednesday, the General Accounting Office, the watchdog arm of the U.S. Congress, accused Iraq of smuggling oil and using surcharges to raise some $6 billion in illegal revenue between 1997 and 2001. Saddam Hussein's government uses the money to buy goods prohibited by U.N. Security Council sanctions, the GAO report said.
The Iraq-United Nations agreement came two weeks after the Security Council extended the program for a routine six-month period and adopted measures designed to streamline its operations. To ease the flow of humanitarian supplies into Iraq, the council approved a new set of procedures which will allow Iraq to import everything except a list of goods with potential military uses. Items on the list would have to be approved by the Security Council committee monitoring sanctions against Iraq before Baghdad could purchase them.
Iraq criticized the new system, saying it would hamper its economic development. But the Iraqi government later said it would go along with a new phase of the program. Sevan told the Security Council Wednesday that the new system will do little to ease Iraq's humanitarian situation as long as the oil-for-food program faces financial difficulties as a result of reduced Iraqi oil exports.
As of May 22, the shortfall in funds for the purchase of humanitarian supplies was over $1.8 billion, he said. Sevan said Iraq oil exports had declined by nearly 500,000 barrels a day this year largely because of a pricing policy enforced by the United States and Britain through the sanctions committee. Under the policy, the committee approves Iraq's proposed oil prices at the end of a shipment period rather than at its start.
American and British diplomats say they've insisted on the pricing policy in an effort to prevent Iraq from imposing an illegal surcharge on its oil customers.
But Sevan urged the committee to resolve the pricing policy issue. "Unless the question of the pricing mechanism for setting the price of Iraqi crude oil is resolved urgently, all other efforts and decisions taken to expedite the approval of humanitarian supplies for Iraq may unfortunately remain academic," Sevan told the council.
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