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[casi] Sevan: Financial crisis. Pricing scheme to blame.


February 26, 2002
U.N.'s Iraq Aid Effort Faces Crisis
Filed at 9:55 p.m. ET

UNITED NATIONS (AP) -- The U.N. program that provides food, medicine and other assistance to Iraqi 
civilians is facing a ``financial crisis'' because of a sharp drop in Iraqi oil exports which fund 
it, the head of the program said Tuesday.

Benon Sevan blamed an oil pricing policy adopted last fall by the U.N. committee monitoring 
sanctions against Iraq, and warned that if the committee and the Iraqi government don't find a 
solution the humanitarian program could be in ``deep trouble.''

The new policy was pushed by the United States and Britain to keep Baghdad from subverting the 
humanitarian program and reaping illegal financing and kickbacks. Western diplomats say the policy 
has helped reduce kickbacks to Saddam Hussein's regime by $35 million. The diplomats say there is 
no intention of altering the policy, which they see as a success.

The so-called oil-for-food program began in 1996 to help ordinary Iraqis cope with sanctions 
imposed after Iraq's 1990 invasion of Kuwait. It initially provided food and basic humanitarian 
goods but has expanded to cover public services such as education and water supply. Funded by oil 
sales, the program has become the mainstay of the Iraqi civilian economy.

Sevan, who returned earlier this month from a four-week trip to Iraq to assess the oil-for-food 
program, said the new pricing scheme demanded by the United States and Britain may have reduced 
illegal payments made by oil traders to Iraq.

``At the same time, I think, the main result has been the reduction in the oil exports,'' he said.

Iraqi oil exports have fallen by nearly one-third, to 1.4 to 1.5 million barrels of oil a day 
compared with 2.1 to 2.2 million previously. The immediate result is that the sanctions committee 
has approved $1.6 billion worth of Iraqi purchases for humanitarian goods under the program for 
which the country does not have oil revenue, he said.

If the committee approved all contracts which have been held up -- primarily by the United States 
because of questions over items that could have dual military use -- there would be an additional 
shortfall of $5.3 billion, Sevan said.

``I think we are in deep trouble as far as funding of the program is concerned ... We have no money 
now -- additional money -- for new contracts,'' Sevan said after briefing the U.N. Security 
Council. ``We have a financial crisis as far as I'm concerned.''

He said he plans to raise with the committee the possibility of temporarily halting the processing 
of contracts from Iraq for the purchase of humanitarian goods until the program's cash flow 

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