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Economic Sanctions on Iraq: Some comments by Milan Rai
5 June 2001

>Conclusions - final paragraph of this piece
If we are not careful, the 'smart sanctions' pill could be a powerful 
sedative, lulling the world's conscience to sleep. I believe we must re-
focus our attention. We must stop concentrating on 'holds' and 'lists', 
and concentrate our energies instead on the real causes of the 
humanitarian crisis. This seems to me the best way to explain to 
people how US/UK policy is failing the ordinary people of Iraq.

1) Introduction - A Grim Outlook
2) Zero Holds
3) Stronger Sanctions
4) Failing The People
5) Final Words

Comments welcome to

The US and UK are pursuing a strategy towards Iraq which, if not 
resisted vigorously, will succeed brilliantly in undercutting the 
international pressure to lift economic sanctions, while at the same 
time doing very little to relieve the suffering of the Iraqi people. This 
strategy can be summed up in four words: 'zero holds, stronger 

The intention seems to be that these re-invigorated sanctions, 
embodied in a new UN resolution currently under discussion, would 
continue for the indefinite future, despite the human toll involved. 
The international anti-sanctions movement faces a very bumpy ride 
ahead, and the outlook for the Iraqi people is rather grim, in my view.

Currently, Iraq is allowed to import certain, specified, civilian goods 
without interference, through the UN-controlled 'oil-for-food deal'. 
For other civilian goods, it has to seek permission from the UN 
Security Council Sanctions Committee. Each country in the Sanctions 
Committee is allowed to veto an application by placing it on 'hold' - 
perhaps indefinitely.

The US and UK have come under a lot of fire for their obstructive 
behaviour in the Sanctions Committee, as the two countries are 
almost entirely responsible for the $3.67bn worth of goods on 'hold' 
in the Sanctions Committee (as of 19 May 2001).

The FT has reported that 'the main aim' of the new British draft 
resolution on sanctions 'would be to reduce the number of holds'. 
(16 May 2001) 'No "holds" on contracts will be allowed, the [British] 
official said.' (AP, 17 May)

A British official told the New York Times that three procedures 
would be followed with 'questionable contracts' referred to the 
Sanctions Committee under the new system. The contracts, which 
might contain many different items, could be denied completely, or 
some items within the contract could be specifically denied, or the 
Sanctions Committee could ask UN monitors to track the goods to 
their destination in Iraq and check that they were being used in an 
approved manner. (NYT, 17 May)

As a sign of their intentions, the US lifted holds on $800m worth of 
goods on 1 June 2001. (AP, 1 June) Further releases of holds are very 
likely this month. 

The net result of the holds released, and the new system of simply 
denying goods rather than imposing holds, will be that the US and UK 
will be able to evade international and domestic criticism for the 
mountain of goods they are preventing Iraq from acquiring.

The fact that the new resolution also allows a much wider range of 
civilian goods into Iraq is also helpful to Washington and London in 
escaping their responsibility for the humanitarian crisis in Iraq.

Another aspect of the new UN Security Council resolution, due to be 
passed at the end of June, is its tightening of many aspects of the 
sanctions regime.

The sanctions have always been 'leaky'. Jordan has always had a semi-
legal barter arrangement with Iraq - trading construction materials 
and other goods for cheap Iraqi oil. Turkey also has been permitted 
by the great powers to engage in large-scale smuggling over the Iraqi 
border. Iran has also long co-operated with Iraqi More recently, Syria 
has re-opened a pipeline to buy Iraqi oil at discounted prices and 
trade is apparently going on over the Syrian border as well.

The resolution aims to legalise and regulate these arrangements by 
bringing them all into the oil-for-food deal, and channelling Iraq's 
hitherto illegal oil revenues through UN-controlled bank accounts. 
For example, Syria would pay for Iraqi oil by placing funds in a special 
UN account. Iraq could then use the funds from that account to buy 
approved civilian goods, but only from Syria. 

If adopted by all the neighbouring countries, this would mean that for 
the first time since 1991, no cash, no foreign exchange, would go 
through to Iraq. 

Stronger sanctions.

If all neighbouring countries co-operated, the resolution would also 
institute new tight border controls around Iraq.

Stronger sanctions.

For the past few months, Iraq has been charging oil brokers a lower 
price on oil bought through oil-for-food. It has been demanding an 
under-the-counter payment or 'surcharge' for each barrel of oil. This 
payment has been going directly to Baghdad, outside UN control. The 
new resolution has a mechanism for allowing only approved oil 
brokers (ones who will not pay the surcharge) to buy oil under oil-
for-food. It ends a stream of foreign exchange going directly to Iraqi-
controlled accounts.

Stronger sanctions.

The resolution also deals with the breakdown over the past year of 
bans on flights into Iraq. It imposes a new regime of controls and 
inspections on flights going into Iraq. 

Stronger sanctions.


The new resolution has been designed to repair some of the PR 
damage Washington and London have suffered over the past few 
years on this issue. No doubt there is some relation between US 
willingness to accept these proposals and the damage its reputation is 
sustaining in the Middle East over the Israel/Palestine conflict. Without 
holds, there will be much less criticism.

The new resolution is also well-crafted in terms of blocking up 
loopholes in the sanctions regime. Especially since Washington has 
made it clear that funds will be found to compensate neighbouring 
states against promised Iraqi retaliation. 

If Iraq cuts off trade with its neighbour's ailing economies, the US 
intends to divert money from the Compensation Fund (funded by oil-
for-food), suggests the Washington Post. (17 May) Funds may come 
from 'friendly countries' or institutions such as the IMF, according to 
the Economist. (26 May)

Where the resolution falls down is in relation to its stated objective: 
the welfare of the Iraqi people. 

'[A]id agencies say ordinary Iraqis are unlikely to feel much benefit 
from the new strategy. "It won't improve life for the ordinary Iraqi. It 
will be a dole, a handout to Iraq as a whole," said an officer with a 
high-profile aid agency, who requested anonymity. "It will do nothing 
to tackle the real issue - how to stimulate the internal economy and 
allow civil society to come back." (FT, 1 June)

While the resolution allows more civilian goods into the country, it 
does not allow economic revival, foreign investment, foreign loans, or 
wholesale reconstruction of the Iraqi oil industry.

It is clear that 'the US plan will not revive Iraq's devastated economy 
while control over Iraq's oil revenues remains in the hands of the UN, 
and foreign investment and credits are still prohibited.' (FT, 28 May 

 'To recover from its 11 years under the sanctions battering-ram - 
which has crushed the country's industrial and agricultural 
infrastructure - Iraq needs the freedom, and overseas investment, of a 
huge reconstruction effort.' (Economist, 24 Feb. 2001)

'[A]lthough the country would be able to import more, it would still 
be denied the free movement of labour and capital that it desperately 
needs if it is at last to start picking itself up... Iraq needs massive 
investment to rebuild its industry, its power grids and its schools, and 
needs cash in hand to pay its engineers, doctors and teachers. None 
of this looks likely to happen under smart sanctions." (Economist, 26 
May 2001)

The UN Security Council's own expert 'Humanitarian Panel' said in 
March 1999, 'the humanitarian situation in Iraq will continue to be a 
dire one in the absence of a sustained revival of the Iraqi economy'.

The Panel recommended - over two years ago - local purchasing of 
food for oil-for-food rations, reducing the proportion of Iraqi oil 
revenues diverted to compensation payments, foreign businesses 
taking 'responsibility' for reconstruction and infrastructure 
rehabilitation, and private foreign investment in the oil and other 
industries. None of this is allowed in the UK resolution.

On the last point, even the recent hawkish International Institute for 
Strategic Studies report on Iraq proposed 'Lifting restrictions on 
investment in Iraq's energy sector'. (Strategic Survey 2000/2001
Iraq Sanctions: Towards a New Policy) This is not in the resolution.

Without outside investment and loans, without economic revival 
through free civilian trade with its neighbours (exports apart from oil 
continue to be banned under the resolution), without direct access to 
foreign exchange, without reconstruction in the decaying oil industry, 
the outlook for millions of ordinary families in Iraq is grim. 

The Economist pointed out some months ago, as the outlines of the 
UK/US proposal were emerging that 'the British proposal of "smart 
sanctions" offers an aspirin where surgery is called for'. (Economist, 
24 Feb. 2001) 

While it is pitifully inadequate in relation to the humanitarian crisis in 
Iraq, the new resolution may deal a powerful blow to the 
international anti-sanctions movement by removing one of the major 
targets of criticism - the holds imposed by the Sanctions Committee. 

If we are not careful, the 'smart sanctions' pill could be a powerful 
sedative, lulling the world's conscience to sleep. 

I believe we must re-focus our attention. We must stop concentrating 
on 'holds' and 'lists', and concentrate our energies instead on the real 
causes of the humanitarian crisis. This seems to me the best way to 
explain to people how US/UK policy is failing the ordinary people of 

Milan Rai
Joint Coordinator, Voices in the Wilderness UK
29 Gensing Road, St Leonards on Sea East Sussex UK TN38 0HE
Phone/fax 0845 458 9571 Pager 07623 746 462
Voices website

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