WHERE DOES IRAQ'S MONEY GO?

["Suzy Kane" <suzykane@DELETETHISnewmex.com>]

Dear all:  

The following article is scheduled to appear in the March-April 2002 issue
of NONVIOLENT ACTIVIST,         
The magazine of the War Resisters League.  It is with the magazine's
permission that I send 
you this advance copy:



WHERE DOES IRAQ'S MONEY GO?


by Suzy T. Kane



The ink was barely dry on the 1991 cease-fire before the United Nations
Security Council set up a commission to process claims against Iraq totaling
more than $300 billion for damages suffered during the Persian Gulf War. The
claims totaled almost five times the cost of the war.

With no money budgeted for its administration, the United Nations
Compensation Commission, a subsidiary organ of the Security Council, was
launched on the "voluntary contributions" of U.N. member nations to the U.N.
Working Capital Fund. Why the "voluntary contributions" are not more
straightforwardly called "loans," however, is a mystery because Iraq will be
paying the yet-to-be determined interest they are earning. According to a
U.N. Treasury spokesperson, the total amount loaned to the Working Capital
Fund for the work of the commission is not public information.

Since its inception, the Compensation Commission has become a small
industry. Nearly 100 nations have beaten their path to the commission's
doors with their claims against Iraq-over half the membership of the United
Nations, literally more than half the world. Headquartered in Geneva in a
villa called La Pelouse, once a residence for three secretaries-general of
the League of Nations, the commission handles the documentation of the 2.6
million claims, which takes up approximately 3,500 square yards of storage
space. The commission's secretariat-its administrative operations-employs a 
fulltime staff of 240, whose salaries are paid for by Iraq (along with the
commission's office supplies, building maintenance costs, etc.) out of the
30 per cent of its oil sales earmarked for reparations.

Blood from a Stone

Suffering under comprehensive economic sanctions dictated in August 1990 by
U.N. Security Council Resolution 661, which exempted only food and medicine,
Iraq continually refused the terms of the Security Council's offers
(Resolutions 706 and 712) to sell limited amounts of oil to meet its
humanitarian needs. Finally, in December 1996, Iraq agreed to the plan to do
so spelled out in Resolution 986. With 30 cents of every dollar Iraq earned
in oil sales for the next four years going to the Compensation Commission,
however, the oil-for-food program could have been more honestly called the
oil-for-food-and-reparations program.

Effective in early December 2000, the percentage of Iraq's oil sales
earmarked for reparations was reduced to 25 per cent, with the newly freed 5
per cent going to humanitarian relief. Additionally, 1 per cent of Iraq 's
oil sales that had been earmarked for other administrative purposes was
temporarily suspended last year so that that 1 percent also could be applied
to Iraq's humanitarian needs.


But Iraq's extensive oil industry repair needs must also come out of its
"humanitarian" allowance. The group of U.N. experts who traveled to Iraq in
January 2000 to assess the state of the oil industry there described it as
"lamentable" and declining. They concluded that if it is left unchanged,
lack of materials, spare parts and long delivery times "will lead inexorably
to the demise of the oil industry." The recent 6 per cent increase in Iraq'
s "humanitarian" funding, we can be sure, will be aimed at keeping alive the
golden goose.

Subhead

The Compensation Commission is composed of (1) a governing council that
determines policy and has the last word on the recommendations of the panels
of commissioners, (2) panels of commissioners that evaluate the 
claims recommend compensations, and (3) a secretariat to provide services to
the governing council and the panels of commissioners. According to the
commission's website (www.unog.ch/uncc) the composition of the Governing
Council "is the same as that of the fifteen-member Security Council at any
given time." The salaries of the council members do not come out of the
compensation fund, but are paid by their countries of origin.

But the expense reimbursements of the experts who come to Geneva to comprise
the panels of commissioners-their transportation, lodging, meals and fees
for their expertise-do come out of Iraq's oil sales allocated for
compensation. According to a commission spokesperson, the annual total of
the money needed to run the commission is "confidential." Reparation
payments must get in line behind these "confidential" expenses, but their
postponement is palatable: Iraq's indebtedness is rolling up all the time at
compound interest. Claimants for Iraqi reparations earn interest on the
unpaid balance of their claims from the date of loss. Interest will be paid
after the principal amount of awards, but the rate of interest has not yet
been determined.

Seeking $80 billion in reparations from Iraq are 5,280 companies. One
hundred fifty-two of them are U.S. companies claiming a total of $2.4
billion. But because the names of the claimants are (also) "confidential"
until their applications are approved, we cannot know how many U.S.
companies, for instance, might be making claims from subsidiaries
incorporated in foreign countries, which are counted as claims from the
country of incorporation. An Italian-based subsidiary of a major U.S.
corporation, for example, would be counted as an Italian company.

One U.S. corporation whose claim has been approved is the Halliburton
Company. Halliburton's claim of $36 million is a relative drop in the bucket
for the $15 billion oil services company, but to an Iraqi whose monthly
earnings are the equivalent of several U.S. dollars, the figure would seem
astronomical. The stock options and restricted stock Halliburton gave its
CEO Dick Cheney before he became Vice President of the United States
totalled $35.7 million--about the amount of Halliburton's claim against
Iraq.

To date, the commission has approved claims against Iraq for $36 billion and
actually paid out almost $14 billion to claimants. But with unknown U.N.
expenses and indeterminate interest expense accruing, we cannot know what
total Iraq will really be asked to pay. Also indeterminate on the other end
is how much Iraq needs to restore its infrastructure. If the repair bill for
the electrical system is an estimated $1 to $1.5 billion in Iraq's three
Kurdish northern governorates, for example, how much will it cost to repair
the electrical system in the remaining 15 governorates in the center and
south?

Experts delegated by the International Telecommunication Union concluded on
a mission to Iraq in August 1998 that Iraq's "entire telecommunications
infrastructure is deteriorating to such an extent that the quality of
service is beyond comprehension." The mission cited poor communications
between hospitals and the warehouses storing medicines and other medical
goods, the problem of transmitting faxes and the impossibility of
transferring computer files; it concluded that it would take $1 billion and
seven to 10 years to implement the necessary repairs and changes. "No one
knows what the state of decay [in Iraq] is," said a U.N. source. "Forty per
cent of the water that is pumped leaks, and most of the plants need complete
overhaul. It is an emergency situation. When something breaks, it is fixed
piecemeal or patchwork. [The Iraqis] are understaffed--most of the technical
people have left."

Since December 1996, Iraq has sold more than $50 billion worth of oil, or
about $10 billion per year. (In October 2000, Iraq requested that all its
oil sales be converted to Euros, since it considers dollars the "currency of
the enemy.") By comparison, its annual oil revenues were $14.5 billion the
year before the Gulf War (although at the time, because of the Iran/Iraq
War, the country was also $70 billion in debt). With the Gulf War 10 years
in the past and no ceiling on the amount of oil Iraq may now sell, one might
imagine that Iraq is rolling in dough.

But is $10 billion per year really $10 billion per year? When the proceeds
from Iraq's oil sales go into the Iraq Account administered, according to
U.N. Security Council Resolutions, by the U.N. Treasury, every dollar is
divided as follows:

                - 25.0 cents for the United Nations Compensation Commission
for 
                reparations;

                -       13.0 cents for the humanitarian needs of the Kurds,
who 
                     comprise 13 per cent of Iraq's population;

                -       2.2 cents to run the U.N. Office of the Iraq
Programme, 
                     which administers the oil-for-food program;

       - 0.8 cents to run the U.N. Monitoring, Verification and 
                Inspection Commission known as UNMOVIC; and

                - 59.0 cents for humanitarian and oil industry needs for the

                     central and south, where 87 per cent of Iraq's
population lives.

Iraq's annual $10 billion in oil sales, then, really boils down to $5.9
billion a year for Iraqis; and every purchase Iraq wishes to make must still
be approved by the "661 Committee," the committee established by Security
Council Resolution 661 in August 1990 to monitor the sanctions. In a letter
to the Chairman of the 661 Committee dated January 7, 2002, the Executive
Director of the Office of the Iraq Programme (www.un.org/Depts/oip) that
administers the humanitarian contracts "expressed grave concern at the
unprecedented surge in the volume of holds placed on contracts by the
Committee"-holds on contracts for humanitarian supplies worth $4.28 billion
and oil industry equipment worth $767 million.

Iraq appropriately paid over $610 million in reparations to Kuwait for the
cost of putting out its oil fires (the "Well Blowout Claim"). As extensive
as the damage to Kuwait was, however, it put out its oil fires in a matter
of nine months and repaired many of its damaged buildings within three to
four years. During the Gulf War, Iraq was "bombed back to a pre-industrial
age" and for the last 10 years has been kept there: a nation on the dole
with its own money, its citizenry, deprived of wages, unable to exercise
their right to work.

If only we would learn from history. After World War I, when still a young
economist, John Maynard Keynes quit the Paris Peace talks in protest against
the harsh reparations exacted from Germany. From the vantage of our
knowledge of World War II, we can appreciate how prescient Keynes' words
were when he said in 1920 what repercussions we might expect when a nation
is treated as cruelly as he believed Germany was being treated. As Keynes,
ever the literary voice, put it, "Vengeance, I dare predict, will not limp."

suzytkane@starband.net

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