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[casi] Sevan: "Grave concern (over) humanitarian situation"

Oil-for-Food, the humanitarian exception to the embargo on Iraq, has not had a
good week.

On Sunday a Washington Post commentary recommended that Oil-for-Food be
"scrapped", claiming it cost $6B annually (false: it's self-funded and costs the
UN nothing) and that it's ineffective (as a viable national economy, true, but
as a temporary lifeline for 24-million people, it's indispensable).

Tuesday on the 12th anniversary of sanctions, Executive Director Benon Sevan
expressed "grave concern" to the UN's 661 Committee over falling oil sales due
to "retroactive pricing".  The U.S./British sponsored policy (basically, "Buy
now and discover later what it cost") has caused “some $1.5 billion in (lost)
revenue” with “very serious consequences on the humanitarian situation in Iraq”.

Mesmerized by the prospect of war, the mainstream press - and, frankly, the
anti-sanctions movement - has attended this crisis hardly at all.

Drew Hamre
Golden Valley, MN USA

Time remains to respond to the Post commentary.  See


August 7, 2002
Oil - for - Food Chief Worries for Iraq

Filed at 2:39 a.m. ET

UNITED NATIONS (AP) -- The head of the U.N. humanitarian program for Iraq warned
Tuesday that a drop in Iraqi oil exports that fund the program could have
serious consequences for the delivery of food, medicine and other aid.

Benon Sevan, head of the oil-for-food program, urged the Security Council
committee monitoring sanctions against Iraq to resolve a dispute over the
pricing of Iraqi oil, which he blamed for the drop in exports.

In a letter to the committee, Sevan noted that in the last two months Iraq
exported only 63.2 million barrels of oil. Normally, Iraq exports at least 2
million barrels a day.

``Even by the most conservative estimates, some $1.5 billion in revenue has been
lost, owing to a reduction in the level of Iraqi exports,'' he said.

Proceeds from Iraqi oil sales are the main source of revenue for the 5-year-old
oil-for-food program, which was started to alleviate the suffering of Iraqi
civilians living under sanctions imposed on Iraq after its 1990 invasion of
Kuwait. It allows Iraq to sell unlimited quantities of crude oil to purchase
food, medicine and other humanitarian goods.

``The increasing shortfall in funds will have very serious consequences on the
humanitarian situation in Iraq,'' Sevan warned.

The current problem began in late 2000 when the Iraqi government introduced
illegal surcharges as high as 50 cents on every barrel of oil as a way of
partially circumventing U.N. control over its only source of hard currency.

At the insistence of the United States and Britain, the sanctions committee has
since October set oil prices at the end of every month -- rather than the
beginning -- to prevent Iraq from taking advantage of fluctuations in the oil
market to impose an illegal surcharge.

Washington and London maintain the so-called retroactive pricing policy has
worked in cutting illegal payoffs to Saddam Hussein's government.

But U.N. officials, Iraq and Russia blame the delayed pricing policy for a 25
percent drop in Iraqi oil exports this year, which has created a revenue crisis
for the oil-for-food humanitarian program.

The United States and Britain have expressed readiness to consider alternatives
that would have the same effect and address the concern of critics who contend
that the policy has created undue uncertainty in the oil market and discouraged
traders and oil companies from purchasing Iraqi oil.

The sanctions committee has considered various proposals to try to generate more
oil exports, while controlling kickbacks -- but to date has not been able to
agree on a solution.

6 August 2002

Oil-for-Food Background Information
Weekly Update
(27 July - 2 August 2002)

In a letter addressed to the Acting Chairman of the Security Council’s 661
sanctions committee on 1 August 2002, the Executive Director of the Iraq
Programme, Benon V. Sevan, expressed “grave concern” at the reduced levels of
Iraqi oil exports and the corresponding level of low revenues under the United
Nations oil-for-food programme. Noting that “two months into phase XII of the
programme and as at 31 July, Iraq had exported only 63.2 million barrels of
oil”, he drew attention to the fact that this amount was “lower than previous
recorded levels of monthly exports under the programme, particularly during
phase VIII”, which had averaged more than 2 million barrels of oil per day.

The letter went on to add that, “even by the most conservative estimates, some
$1.5 billion in revenue had been lost, owing to a reduction in the level of
Iraqi oil exports”. In May, the average rate of export was 1,012,000 barrels of
oil per day, which had dropped to 835,000 barrels per day in June and risen
somewhat to 962,000 barrels per day in July.

Mr. Sevan pointed out that “should the current reduced levels of exports
persist”, phase XII total revenue would be in the vicinity of $4.5 billion,
which after the necessary deductions would leave the humanitarian programme with
only $3.22 billion. The Government of Iraq had budgeted this phase of the
programme at $5.08 billion. The situation was further exacerbated by the
cumulative revenue shortfall from earlier phases, which had left the programme
without resources to fund 1,040 approved contracts, worth over $2.2 billion, as
at 31 July 2002. Recalling that some $5 billion worth of contracts had earlier
been placed on hold by the 661 Committee, he noted the “regrettable fact” that
while some $25 million worth of these contracts had recently been approved under
the new set of procedures of Security Council resolution 1409 (2002), no funds
were available for the issuance of letters of approval for such contracts.

Warning of “very serious consequences on the humanitarian situation in Iraq”, as
a result of the increasing shortfall in funds, Mr. Sevan concluded the letter by
appealing to the members of the 661 Committee and the Government of Iraq to
“take all necessary measures to resolve the difficulties encountered in
improving the critical funding situation, including, in particular, the long
outstanding question of the pricing mechanism for Iraqi crude oil exports”. “The
cooperation of all concerned is essential”, he added.

In the week ending 2 August, Iraq exported 8.4 million barrels of oil through
eight loadings, six of which were from Mina al-Bakr terminal, with 6.8 million
barrels, and two loadings from Ceyhan terminal, with 1.6 million barrels. At an
average price of approximately €24 (euros) or $23.50 per barrel, the exports
netted an estimated €202 million or $201 million in revenue, at current prices
and rate of exchange, bringing the total estimated revenue in phase XII to
€1.594 billion or $1.59 billion.

There are now 142 approved oil purchase contracts for 316 million barrels of
oil, including five new contracts approved by the United Nations oil overseers
during this week. As at 2 August in phase XII, Iraqi oil exports had totalled
67.3 million barrels. The phase runs from 30 May to 25 November 2002.

Since the start of the programme on 10 December 1996, Iraqi oil exports of some
3.1 billion barrels have generated an estimated revenue of $38.6 billion and
€19.1 billion ($17.2 billion). The humanitarian programme receives 72 per cent
of the oil proceeds, with 59 per cent allocated to the 15 central and southern
governorates and 13 per cent to the three northern governorates.  So far, more
than $36 billion worth of contracts for the purchase of humanitarian supplies
and equipment have been approved by the 661 Committee and OIP, including about
$3.3 billion worth of oil industry equipment. Supplies and equipment worth $23.7
billion have been delivered to Iraq, including $1.4 billion worth of oil
industry equipment. Another $10 billion worth of supplies and equipment are in
the production and delivery pipeline, including $1.8 billion worth of oil
industry equipment.

As at 2 August, the revenue shortfall had left 1,051 approved humanitarian
supply contracts, worth over $2.25 billion, without available funds. The sectors
affected by the lack of funds were: food with $356 million; electricity with
$353 million; food handling with $325 million; agriculture with $297 million;
housing with $286 million; water and sanitation with $216 million; health with
$159 million; telecommunication and transportation with $152 million and;
education with $111 million.

There are now 2,058 contracts, worth about $5.2 billion, previously placed on
hold by the 661 Committee, of which 1,430 contracts, valued at about $4.5
billion, are for humanitarian supplies and 628 contracts, worth $745 million,
are for oil industry equipment.

Paragraph 18 of the new set of procedures under resolution 1409 (2002) divides
contracts on hold into two categories. The first category comprises contracts
that contain “dual use” item(s), as determined by the United Nations Secretariat
experts, which are returned to the submitting Mission or United Nations agency
for possible re-submission under the new procedures. The second category
includes all other contracts on hold which are re-circulated by OIP under the
new procedures.  The re-circulation of contracts on hold in the second category
will be completed by 15 September.  It is foreseen that with the end of this
process, there will no longer be contracts on hold.

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