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1) More on oil futures 2) Boutros-Ghali on sanctions

People sometimes assume that, because of Saddam Hussein's great wealth, he
*must* be diverting oil-for-food monies or otherwise bleeding humanitarian
resources from Iraq.  In countering, it should be stressed that Saddam has
absolutely no access to OFF funds.  Instead, as noted yesterday, Saddam can
resort to other sources of income including the oil futures market.
Ironically, nine years of sanctions have vested in Saddam a unique degree of
individual leverage over oil market prices, as evidenced by this past week's
fluctuations stemming from the Iraqi OFF announcement.

This scenario is discussed in the following:

        Institute for National Strategic Studies "ECONOMIC SANCTIONS AGAINST
IRAQ (1990- )"
"Some oil traders (claimed) that Saddam and his entourage had also enriched
themselves by speculating in oil futures, manipulating the market to their
advantage by periodically sending false signals that they were about to
comply with Resolution 986. The prospect of a substantial increase in world
supply resulting from the sale of Iraqi oil would trigger a price drop in
oil futures, only for the price to soar up again, each time Saddam derailed
implementation of the oil-for-food program with another incident.
Reportedly, since the end of the Gulf War, Saddam had used $2 billion of his
covert income to build huge palaces for himself and his supporters."

<Note: This article also cites Thomas L. Friedman, "Follow the Money," The
New York Times, 13 October 1996, E-13>

        Iraq Since the Gulf War by Franklin Foer

c) "Unvanquished" by Boutros Boutros-Ghali, Random House, 1999
Page 209:  "Some speculated that Saddam was playing this game (negotiating
oil-for-food) as a way to manipulate the world oil market.  This was not
implausible.  Whenver the oil-for-food talks were reported to go well, the
world market price of oil fell in anticipation of Iraqi oil coming onto the
market; when Saddam Hussein broke off talks, the price of oil rose ...  I
did not, however, accept this theory.  Saddam Hussein thinks of himself as a
romantic hero confronting the forces of evil.  He is totally isolated and
shielded from hard information about world affairs."

More generally, here's a great quote from BB-G concerning the Iraq sanctions
(also page 209):  "Again we are confronted the fundamentally contradictory
character of sanctions: the innocent population suffers greatly but the
oppressive regime feels little or nothing, while the process only deepens
its control over the people."

Regarding the reasons for the 2-week OFF turn down, a very believable (and
exasperated) explanation comes from Iraq's Ambassador Hasan in the report at :  "What can you export in two
weeks? What kind of a distribution plan can you submit? What kind of
commodities can you bring to the country in two weeks? It's ridiculous to
extend it for two weeks this program with all of its complexities," Hasan

Drew Hamre
Golden Valley, MN USA

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