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Excerpts from the Financial Times.

First, an entire article [hand typed from the web - one can't cut and
paste from the ft web-site] from yesterday's FT. Of all the stuff I've
seen in the last couple of days this is the best.
Note, in particular, 
(a) the contents of the first paragraph
(b) the beginning of paragraph six: "Diplomats, however, warn against
building up high expectations. Mr
Butler was upbeat at the start of his visit in an attempt to encourage the
Iraqis to co-operate."
(c) the discussion of the $300 million for spare parts that Iraq needs in
order to even try and meet the new thresholds in oil-for-food [paragraphs
13, 14 and 15]


>From "UN envoy warns of impact of sanctions" by Roula Khalaf, FT, June 15:

"United Nations sanctions on Iraq will have long-term adverse effects,
such as malnutrition of children, social deprivation and economic hardship
and the deterioration of infrastructure and education, that need to be
considered by the international community, according to Prakash Shah, the
United Nations secretary general's special envoy to Baghdad.

Mr Shah, appointed earlier this year to smooth relations between the UN
and Iraqi authorities also said he believed Baghdad would continue to
co-operate with Unscom, the commission charged with disarming Iraq, at
least until October.

Mr Shah was speaking during a critical visit by Richard Butler, the chief
UN weapons inspector, to discuss a road map of remaining disarmament steps
with Iraqi officials.

The Iraqi government expected Mr Butler's report to the Security Council
to break new ground and lead, at least, to a partial lifting of sanctions.

"The expectation is the next six-month report in October will be very
important and a crucial one in the activities of Unscom," he said. "Both
Butler and the Iraqis have expressed that they want to finish the work in
the coming few months. This is an opportunity and it will encourage them
to work together and narrow the gaps." After October, he said, Iraqi
co-operation would depend on the report.

Diplomats, however, warn against building up high expectations. Mr Butler
was upbeat at the start of his visit in an attempt to encourage the Iraqis
to co-operate. However he gave no indication yesterday of whether progress
had been achieved in the two-day talks, due to end last night. Preliminary
results indicate Unscom excavations could lead to confirmation of Iraq's
claim that it had destroyed 45 germ anc chemical missile warheads.

Moreover, since the February agreement between Iraq and Kofi Annan, the UN
Secretary general, presidential sites previously declared off-limits by
the Iraqis emerged from a preliminary inspection with no incriminating

However, the remaining gaps will not be easy to bridge. Mr Butler's road
map indicates that Unscom still has important questions on the long-range
ballistic missiles and chemical files, and it lacks a clear understanding
of Iraq's past biological weapons programme.

The road map is aimed at convincing Iraqis to provide evidence that allows
Unscom to verify the government's claims that all had been destroyed.
However, Iraq has maintained that the documents have either been destroyed
ot can no longer be found.

France, Russia and China now believe the time is nearing for Mr Butler to
produce a final report to the security council and for Unscom to focus its
work essentially on monitoring and verification rather than inspections.
But such a move would meet stiff resistance from the US and UK. "The
purpose of the sanctions is to make Iraq fully co-operate and get Iraq to
destroy all its weapons of mass destruction," said Mr Shah.

"Much has been achieved. Unsom worked for seven years, destroyed more
weapons than in the Gulf war by their own admission. They have done a
remarkable job and it is only appropriate this is recognised and Unscom is
able to put forward a report that lists the achievements so a political
decision can be taken by the council," he said.

The problem, however, is that Security Council decisions on Iraq appear to
deepen divisions and lead to impasse.

The $300 m (184 million pounds) Iraqi request for oil industry spare parts
to meet the expanded oil-for-food programme is a case in point.

Although the UN sent experts to confirm Iraqi claims that it needed the
funds to be able to pump $4.5 bn worth of oil in six months - under the
now expanded oil-for-food programme - the decision needed to release the
funds has been held up at the security council by the US, which wants to
add conditions onto the resolution.

Mr Shah will only say "some members" of the council have "political
questions" about the resolution and that the secretary general is
disappointed that the decision to release the $300 has not been taken,
though the expanded phase of the oil-for-food deal started on June 4.


Here's a brief excerpt from a piece in todays (16th June) FT,


 "OIL: Riyadh faces cash flow crisis. Saudis remain remarkably calm
despite warnings that the budget deficit could double. Robin Allen and
Robert Corzine report"

"Saudi Arabia, owner of a quarter of proven global oil reserves, will face
its fourth cash flow crisis in 10 years if the orice of Arab Light, its
main export crude, does not recover to $13 dollars a barrel.

Bankers and economists in Riyadh warn that the kingdom's 1998 budget
deficit could more than double to SR40 bn ($10.7 bn), and its current
account deficit, after two years of small surpluses, could soar to more
than $10 bn. The $13 dollar figure is already a downward revision from the
$14-$15 raget on which the 1998 budget revenues were based last January,
which envisaged a deficit of $4.8 bn.

... events over the past few days suggest more unpleasant surprises may be
in store for Saudi Arabia.

... Iraq must also be worrying Saudi officials. They expected that
disputes between Baghdad and the United Nations would lead to regular
stoppages this year of Iraqi exports under the oil-for-food programme. But
the export scheme has proceeded relatively smoothly [contrast this with
the above - Gabriel], and yesterday Richard Butler, chief weapons
inspector, raised the prospect that the oil embargo could be lifted as
early as this year..."


Gabriel Carlyle
Berkeley CA

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