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The following article is published on the web site of the Oxford Institute of Energy Studies (Monthly Comment for November 1999). If you would like to comment on this article, please direct your comments to me, and I will forward them to Dr. Rosser. http://associnst.ox.ac.uk/energy/index.html ******************** SUSPENDING SANCTIONS ON IRAQ: MAKE HASTE, SLOWLY by Dr. Kevin Rosser Oxford Institute for Energy Studies Iraq's decision on 22 November to suspend oil exports, helping to send oil prices to highs not seen since the Gulf war, underscores the continuing turmoil surrounding international policy on Iraq. By all accounts the UN economic sanctions imposed on the country nine years ago after the invasion of Kuwait have reduced it to hardship. Having led Iraq into a disastrous war with Iran from 1980-88 and perpetual battles with the Security Council since 1990, the regime sheds a river of crocodile tears over its people's suffering as if it had no responsibility for their plight. The main architects of the policy, the USA and the UK, accuse Baghdad of exaggerating the pain in order to gain sympathy but privately realise sanctions are debilitating Iraq's society. So Saddam Hussein must be savouring the irony this month as the permanent members of the Security Council try to hammer out a compromise on a draft UK-Dutch resolution to suspend sanctions which Iraq already declares it will reject. How is it that the United States and its allies appear to be in a bigger hurry to ease sanctions than the Iraqi government itself? The answer reveals a lot about the shortcomings of international policy on Iraq and the regime's own determination to outface its punishers, whatever the cost. It also suggests that the strategy of containing Iraq through restricting its ability to export oil is beginning to crumble, with uncertain consequences for the market. There is no question sanctions are hurting. One commonly cited estimate puts the value of Iraq's foregone oil exports alone at $100 billion. The country is divided into two parts, the government-controlled central and southern regions, and three autonomous Kurdish provinces to the north. Studies by the UN and private relief agencies show that while humanitarian conditions in the north have stabilised due to the accessibility of international aid, those in government-held areas, where four-fifths of the population live, have deteriorated sharply. For a country that once boasted one of the highest standards of development in the Middle East, the descent into squalor has demoralised the populace, which is more concerned with daily survival than overthrowing the government. Far from disabling the regime, sanctions have become its life support system. The government's control of the black market and the food distribution system gives it powers of reward and punishment to augment an already fearsome internal security apparatus. This has bought it breathing space to exploit Iraq's humanitarian misery in the Security Council and wear down the UN consensus on containment. Moreover, compared to five years ago, when Iraq was banned from selling oil and forced to admit UN weapons inspectors, the situation today could hardly be more different. Iraq is now allowed to export up to $10.5 billion worth of oil a year. In December 1998 it succeeded in expelling the inspectors from Baghdad, incurring a US and UK bombing campaign but no cancellation of the oil-for-food programme. This is significant because the regime wants sanctions lifted so Iraq can reassume its regional mantle, but not at the cost of relinquishing its weapons of mass destruction - essentially the deal on the table in New York this month. Aware that the agony of Iraqi people is eroding the Security Council's resolve, the government is in no rush to see sanctions suspended now if prolonging them means a deal on its own terms later. Meanwhile sanctions have become a political millstone for the United States. They have failed to unseat the regime or compel it to abandon its nuclear, chemical and biological weapons. At the same time, Washington knows that dropping sanctions unconditionally would be touted as a victory by Saddam and remove any remaining incentive he has to co-operate with the weapons inspectors. The oil-for-food programme begun in 1996 to soften the blow of sanctions and shore up political support is hampered by delays and accusations of obstruction. On the Security Council, France, Russia and China dislike US unilateralism and are keen to resume business with Iraq - a split the regime has widened by promising oil production sharing agreements to all three once sanctions are lifted. More worrying still, popular sympathy for Iraq's people is running high in the Middle East, where even such traditionally dependable allies as Turkey, Egypt, Saudi Arabia and the Gulf states are at pains to distance themselves from the American position. In the US itself Iraq policy is no less divisive. From the left there is growing criticism of sanctions' harshness, while the Republican-dominated Congress, which last year authorised $97 million to fund Iraqi opposition groups, is clamouring for tougher action to topple Saddam Hussein. A few legislators have even spoken of arming the opposition, seemingly forgetting the fraught record of past interventions in places like Cuba, South Vietnam and Nicaragua. The looming presidential campaign narrows the administration's room for manoeuvre even further. If it allows sanctions to remain in place, it runs the risk of appearing callous and stretching international consensus to the breaking point. If on the other hand it is seen to go soft on Saddam, Republican hard-liners could pounce and corral the administration into adopting a more activist approach to subverting Iraq's government. From the administration's viewpoint, suspending sanctions is attractive because it defuses humanitarian criticism and puts the focus back on Iraq's weapons. And if Iraq tries to renege, sanctions can be reinstated and the blame laid at Baghdad's door. Whatever the outcome, the implications for oil are unsettling. Iraq was thought to be maximising current production capacity when output peaked in September at 2.8 million b/d; production fell last month to about 2.5 million b/d. Of this, 550,000 b/d is for domestic consumption, 70,000 b/d is earmarked for Jordan, and the remaining 1.8 million b/d is available for export. The oil-for-food programme created by UN resolution 986 has contributed to market volatility in two ways. Firstly, because the resolution defines a revenue rather than a volume ceiling, Iraq is effectively immune to the price changes that concern its neighbours so long as it has the production capacity to meet the ceiling. Secondly, decisions affecting production levels are driven primarily by the unpredictable political dynamics of sanctions and only secondarily by market considerations. On two occasions when renewal of the six-monthly oil-for-food phases ran into snags at the UN, in June and December 1997, some 700,000 and 1 million b/d respectively were abruptly removed from the market and then restored a few weeks later. The latter case coincided with the Security Council's decision in February 1998 to increase the revenue ceiling from $2 billion to $5.2 billion every six months, followed by another resolution in March allowing Iraq to increase production to make up for past delays and low prices. This paved the way for a production increase from 1.7 million b/d in February to 2.4 million b/d by August, contributing significantly to the supply overhang that resulted in the oil price crisis of 1998. As recently as this month, Iraq's announcement on 22 November that it would halt exports in protest at the Security Council's two-week extension of the oil-for-food programme helped to send crude prices to their highest level in years. Even if sanctions are suspended, the periodic renewals that would continue to be part of the new arrangements mean there is no guarantee that similar disruptions could not recur. Indeed, because suspension would give Iraq the opportunity to repair damaged facilities and expand capacity, the market's exposure to the messy politics of sanctions would be all the greater. There is an argument to be made for revising the UN's approach to Iraq so that its objectives are met more effectively. It is worth recalling that an entire generation of young Iraqis has known nothing but deprivation, isolation and embitterment these past nine years, a Versailles-like legacy that may well outlast the regime of Saddam Hussein. Containing Iraq is an unenviable task. But the time may have come to admit that sanctions - in their present form - are doing more injury to innocent people and to the moral authority of the sanctioners than to the regime itself. A new policy is needed if the UN is to have a chance of success. -- ----------------------------------------------------------------------- This is a discussion list run by the Campaign Against Sanctions on Iraq For removal from list, email email@example.com Full archive and list instructions are available from the CASI website: http://welcome.to/casi