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"let the oil flow" (fwd)

An article from Saturdays FT followed by a letter of mine.


OIL: Iraq cuts deals by 10% over parts shortfall

By Laura Silber at the United Nations in New York
Iraq is to cut oil contracts by 10 per cent because of delays in receiving
spare parts to shore up its oil industry, Benan Sevan, chief of the United
Nations oil-for-food programme, said yesterday.

In a briefing to the Security Council, Mr Sevan urged the UN sanctions
committee, comprised of the 15 Council members, to stop dragging its feet
in approving $300m for spare parts.

But Bill Richardson, US ambassador to the UN, told reporters that
Washington would continue to block all contracts it considered

The US has been slow to approve contracts for equipment it claims could be
used for purposes other than oil industry repairs.

In remarks to the Council on the current phase of the UN humanitarian
programme, which runs from May 20 to November 25, Mr Sevan said the Dutch
Saybolt consulting company hired by the UN to monitor the export of oil,
had informed him of Iraq's decision to reduce oil contracts.

"Although Iraq has increased its production of oil through the first
months of the current phase, the oil overseers have advised that Iraq is
informing its customers that contracts for the sale of oil during the
second half of the current phase will have to be reduced by an average of
10 per cent," he told the Council, adding that the reason was "the lack of
oil spare parts".

Under an enhanced UN "oil-for-food" plan, aimed at easing the plight of
the Iraqi population hard hit by eight years of sanctions, the Security
Council last February more than doubled the amount of oil Iraq can export
to $5.2bn every six months in exchange for food and medicine.

But Mr Sevan said the new distribution plan could not be fully implemented
unless Iraq was provided with the capacity to enhance its production and
to enhance its capacity to export oil.

He said the "capacity of Iraq had been adversely affected by many years of
neglect of the oil fields and pumping stations".

After the Council session, Mr Richardson, however, said: "The problem with
the oil-for-food programme has not changed.

"Iraq refuses to manage the programme efficiently, refuses to
co-operate...continues to use the humanitarian issue as a political

The US and Britain support the humanitarian programme because it lessens
the pressure to lift sanctions.

Washington recently has made clear that sanctions will remain in place
indefinitely until Iraq co-operates with the UN mission to dismantle its
arsenal of proscribed weapons.

With oil prices low, Iraq's oil revenues will fall far short of the $5.2bn
of oil it can sell. Earlier this week Mr Sevan put the amount at $2.86bn.

Under the enhanced distribution plan, Mr Sevan said that the UN had
managed to increase the daily per capita calorie intake of the Iraqi
population to 2,000 per day.

This falls short of the target amount of 2,300 but it represents a
significant increase from 1,400 calories per day reported before the
oil-for-food programme deliveries began some 18 months ago.


---------- Forwarded message ----------
Date: Mon, 7 Sep 1998 01:26:47 +0100 (BST)
From: Gabriel Carlyle <>
Subject: "let the oil flow"

The fact that the UN Sanctions Committee has been "dragging its feet" in
approving contracts for $300 million worth of spare parts for Iraq's oil
industry should come as no surprise ("Iraq oil contracts cut by parts
shortfall", FT, September 5th/6th).

Early last month Denis Halliday, the UN Humanitarian Co-ordinator for
Iraq, described these spare parts as "an essential part of the revenue
increase needed for [the enhanced "oil-for-food"] programme", noting 
that these were "fundamental" and "a pre-requisite" for the programmes
successful implementation.

Back in June an anonymous US official was quoted as
saying "Lets have $300 million every six months. Our attitude is "let the
oil flow", as long as the rehabilitation work is monitored closely" ("US
softens stance on cash", FT, June 19th).

Unsurprisingly the reality has been somewhat different - with
the US Ambassador to the UN, Bill Richardson, now saying that the US will
continue to block all contracts it considers "frivolous" (FT, September

In fact Mr Richardson spelt out US policy very clearly after a Security
Council meeting on the 17th August - in remarks that, to my knowledge,
have yet to be reported in the British press - when he warned that
"sanctions are going to stay on for ever" ("UN Renews Economic Sanctions
Against Iraq", New York Times, August 21st). His more recent remarks
simply serve as an addendum - that the US will also do whatever it can to
 stem the trickle of oil permitted under 1143.

The underlying imperative is to prevent Iraqi oil from coming back onto
the market in significant quantities. That its pursuit is causing
thousands of additional child deaths in Iraq each month is a matter of

Gabriel Carlyle
Junior Research Fellow
Magdalen College
Oxford OX1 4AU.

tel. 01865 - 276012.

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