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UN Oil Report Addresses U.S. Holds' Explanations

The petroleum experts, established pursuant to Security Council Resolution 1284 (paragraph 30), 
reported on 20 March 2000 that holds pervasively and detrimentally affect Iraq’s oil sector.  In 
the section entitled “The Impact of Holds,” the experts’ report directly addresses several of the 
standard reasons that U.S. officials give for contract holds.  Note the experts’ excerpted 
conclusions, and then compare them to Ambassador James Cunningham’s (Deputy Permanent U.S. 
Representative to the United Nations) excerpted 24 March 2000 explanation for why the U.S. holds 
“oil-for-food” program-related contracts.  It seems as though the experts don’t conclude that this 
explanation brand is sufficient. 
or (pg. 98)

20 March 2000

The Impact of Holds


The lack of effectiveness of the spare parts and equipment program is now most apparent. The key 
problem areas are considered to be:

The lack of specificity in reasons given for holds. Non-specific reasons, such as "dual usage 
concern" and "not directly related to the repair of the Iraqi oil infrastructure for the purposes 
of increasing exports", effectively result in holds that cannot be removed and allocated funds 
cannot be utilized for other essential needs.

The lack of time limits. Delays for evaluation for "mission clarification" and holds "pending 
further clarification" remain in place seemingly indefinitely.

The lack of consistency regarding holds between phases. Spare parts and equipment approved, 
contracted and delivered in phase 4 are placed on hold in phases 5 and 6.

The lack of clarification of holds based on "1051"concerns. Without specificity, action cannot be 
taken to resolve such holds, nor can re-ordering of such items be avoided in subsequent contracts.
Deputy Permanent U.S. Representative to the United Nations, Ambassador James Cunningham, Remarks to 
UN Security Council, 
24 March 2000

Now I would like to say a few words about holds.  The United States was the original sponsor of the 
oil-for-food programme, just as we were an early supporter what was then called "the comprehensive 
resolution," which became resolution 1284 (1999).  Even as we insist on compliance, we continue to 
support oil-for-food and have played a key role in its implementation since its inception.  The 
oil-for-food programme works, and works admirably, despite manipulation by the Iraqi regime.  The 
great majority of goods requested -- about 90 percent over the life of the programme so far – are 

There is always room for improvement, however.  We will work in the Security Council and the 
Committee established by resolution 661 (1990) to put into action what works best.  We have a 
number of ideas on which we are already working, and some we will suggest today.

I want to thank the Office of the Iraq Programme for the work it has done both to improve the 
quality of contract submissions and to highlight holds of particular concern, as was done during 
the drought and with regard to foot-and-mouth disease.  As a result, the United States released a 
number of holds in both areas.  In his report the Secretary-General called for the removal of a 
hold on a critical dredging contract for the port of Umm Qasr; and we have done so.

I want to describe our policy, on reviewing and approving oil-for-food contracts.  The United 
States review of contracts is guided by two principles that are fundamental to the Security 
Council's consideration of Iraq: preventing Iraq from acquiring the means to again threaten 
regional stability and improving the Iraqi people's humanitarian situation. Maintaining a judicious 
balance between these two objectives is a very serious responsibility from which the United States 
will not shrink.

In fact, the great preponderance of all goods requested has been approved since the oil-for-food 
programme began.  Complaints about United States holds are focused on a small percentage of 
contracts presented to the sanctions Committee.

Our responsibility to the Security Council and to the region leads us to take this process very 
seriously.  Decisions on contract holds and releases of holds by the United States are taken after 
careful, technical scrutiny. Political priorities play no role.  While we recognize that not all 
Member States have the resources to assess thoroughly all contracts, it is clear, I regret to say, 
that some Member States that could do a thorough review have not.

Let us take a clear look at the holds the United States has.  We have about 1,000 contracts on hold 
out of the more than 10,000 contracts received by the Secretariat.  For more than one third of 
these contracts, we are awaiting requested information from the supplier about either the goods, 
the end use or the end user.  As the Executive Director of the Office of the Iraq Programme noted 
in its recent paper on holds, "some 50 percent of holds could either be avoided entirely, or the 
amount of time involved substantially reduced, if all concerned put more effort into the provision 
of appropriate and timely information."  These are called "US holds," but they are really holds 
caused by the failure to prepare an adequate submission.

We ask all Member States that are presenting contracts to the Committee established by resolution 
661 (1990) to ensure that contract information is as complete as possible when the contract is 
originally submitted.  For example, if one of your firms wants to sell pumps to Iraq you should be 
aware that some pumps are on the list stemming from resolution 1051 (1996) -- that is, the Security 
Council's agreed list of dual-use products.  We have to know the materials used in their 
construction to determine whether they are dual-use.  If that information is not in the contract, 
we have to put the contract on hold while the question is being answered.  Vague terms, such as 
"spare parts and accessories" or "laboratory equipment" will again draw questions.  Therefore, it 
would expedite the process and be much easier for everyone if we had the information in the 
original contract submission. So let us put those holds -- more than one third of the total -- off 
to the side.

There are nearly 400 holds on contracts which pose resolution 1051 (1996) or other dual-use 
concerns.  On dual-use items that do not fall under the provisions of that resolution, many times 
the concerns of our experts can be satisfied through additional information or monitoring 
arrangements.  But we are not prepared to act imprudently in providing items related to weapons of 
mass destruction, particularly in the absence of monitoring and disarmament in Iraq.

We place a heavy emphasis on ensuring that dual-use items, such as those on the resolution 1051 
(1996) list, are not permitted into Iraq.  Until the United Nations Monitoring, Verification and 
Inspection Commission (UNMOVIC) and the International Atomic Energy Agency (IAEA) are able to 
resume their responsibilities in Iraq, including monitoring of such goods, it would be 
inappropriate and, indeed, dangerous to approve contracts for most such goods.  We believe that 
every member of the Council should hold on such goods, particularly now that contracts are being 
marked as containing resolution 1051 (1996) items.

The Council agreed that items on the resolution 1051 (1996) list were serious enough inputs into 
weapons of mass destruction to require monitoring by the United Nations Special Committee (UNSCOM) 
or the IAEA if exported to Iraq.  Yet some members are not only approving these contracts, but 
complaining about United States holds on such items.  We would appreciate an explanation from other 
members, particularly those most critical of our holds on dual-use goods, providing information 
about their own criteria for
reviewing and approving contracts on resolution 1051 (1996) items and other dual-use items -- items 
which could enhance the Government of Iraq's ability to obtain, make or utilize weapons of mass 
destruction.  We are surprised that the Secretary-General's report did not comment favourably on 
the Council's decision that weapons inspectors monitor resolution 1051 (1996) items.

Where we can improve?  At the moment, the United States has 339 contracts on hold because we have 
not reviewed additional information that we have received. For these, the ball is clearly in our 
court.  This category is constantly in flux, as holds are cleared out on the basis of additional 
information and new contracts are placed on hold because of inadequate information.  Our staffing 
of these reviews has not kept pace with the recent sharp increase in the number of contracts 
presented and the new requirement to review contracts within a target of two days.  We admit that 
it is inappropriate to keep contractors waiting for lengthy periods for responses to their 
additional information, and we are tightening our procedures with a goal of much quicker response 

We are also examining our review criteria with the goal of concentrating our holds on the items of 
most serious concern.  We began a process this week to reexamine contracts on hold against these 
criteria.  About 90 contracts were reviewed.  Of these, about 70 will be taken off hold today.  
This is a large percentage of the contracts for which complete information is available and 
resolution 1051 (1996) items are not involved.  While I must admit that we began this process by 
looking at holds which we found the most questionable under our current standards, and that future 
meetings may not yield such a high percentage of holds removed, we are re-evaluating our holds in 
the light of current circumstances.  I will be talking more later about monitoring of oil-for-food 
goods, and how this can also help reduce holds.

There are other categories of holds, too.  We have on hold 14 oil-for-food contracts containing 
items destined for the unauthorized export facility at Khor al-Amaya.  When there are so many 
urgent needs in Iraq, it is unconscionable for the Government of Iraq to divert precious resources 
to a facility which the Council has not decided that Iraq may use.  We have repeatedly urged the 
Office of the Iraq Programme to withdraw these contracts in order to release funds for needed oil 
spare parts and equipment.

We are also holding 55 contracts for goods destined for the Basrah refinery, from which Iraq 
produces gas oil which it smuggles out of Iraq in violation of sanctions.  The profits from this 
illicit trade are used by the Government of Iraq to procure items prohibited by sanctions, 
including luxuries for members of Saddam's inner circle.  The Multinational Interception Force 
reported yesterday to the Committee the facts on Gulf smuggling.

We have 166 contracts on hold because they are linked to companies that have operated or are 
operating in violation of sanctions.  Some of these companies are Iraqi fronts, operating 
illegally, which funnel oil-for-food programme revenues directly to the highest levels of the Iraqi 
regime. Information about our concerns is provided to the country capitals submitting these 
contracts.  We ask submitting States to make every effort to ensure that all companies submitting 
contracts to the Committee established under resolution 661 (1990) are abiding by sanctions.

Finally, a small number of contracts -- 16 of them -- with irregular financial terms have been 
placed on hold. We regret that, to date, the sanctions Committee has been unable to reach consensus 
on the appropriateness of these terms.

The Council anticipated Iraqi attempts to abuse the humanitarian programme, and it wisely mandated 
a rigorous review process.  A relatively small number of problematic contracts have not been 
implemented, but the vast majority have been approved.  As the Secretariat reported in its analysis 
of holds, in most sectors, holds have caused relatively minor shortages.

In reviewing oil-for-food contracts, the United States has acted, and will continue to act, 
strictly and objectively in accordance with the arms-control policies defined by the Council in its 
resolutions.  Our holds are not politically motivated, nor are they driven by calculations of 
commercial prospect or gain.  Not all critics of our holds policy can say the same.
Nathaniel Hurd
Research Associate
The Boston Research Group (BRG) 
Cambridge, MA 02140
BRG Tel.: 617-492-4570
BRG Fax: 617-354-2832
BRG E-mail:

Personal Address:
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