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[casi] Sevan: Price Dispute Bankrupts Oil-for-Food

Yesterday's statement by Benon Sevan to the Security Council was noteworthy, not
only for the particulars of Oil-for-Food's worsening funding crisis, but also
for concerns expressed over a) OFF problems in the North, b) disruptive
side-effects of the new Goods Review List, and c) OFF's continuing impact on
domestic agriculture.

Following is a Reuters summary (see the full statement at:

Drew Hamre
Golden Valley, Minnesota USA


Iraq-U.N. Oil Price Dispute Bankrupts UN Goods Plan
Wed May 29, 2:59 PM ET
By Evelyn Leopold

UNITED NATIONS (Reuters) - With a new overhaul of U.N. sanctions about to begin,
a senior U.N. official said on Wednesday the Iraq-U.N. humanitarian program was
nearly bankrupt because of an oil-pricing dispute with the United States and

"Without funds, the whole exercise will be meaningless," said Benon Sevan, the
U.N. undersecretary-general in charge of the program after briefing the U.N.
Security Council. He said at least $2 billion more in revenue was needed.

Under the oil-for-food program, which includes the new sanctions regulations,
Iraq can sell oil in order to buy food, medicine and a host of supplies to ease
the impact of the embargoes, imposed when Baghdad invaded Kuwait in August 1990.

Iraq stopped shipping oil for a month earlier this year to protest
Israeli-Palestinian violence, costing the program $1.2 billion in oil revenues.
Iraq's oil revenues are put in a U.N. escrow account out of which suppliers of
goods are paid.

But still ongoing is Iraq's dispute with Britain and the United States on
setting the price of crude oil, resulting in an average reduction in exports of
some 500,000 barrels a day or another $1.2 billion over the past six months,
Sevan said.

The United States and Britain want to reduce the number of small trading firms
buying Iraqi oil, contending they are making illegal payments of 20-30 cents a
barrel directly to the Iraqi government, outside the U.N. program.

Consequently, both nations insist Iraq set prices retroactively to ensure they
conform to world rates. Iraq, which denies it imposes a surcharge, says this
system is scaring away customers.

"Unless the question of the pricing mechanism ... is resolved urgently, all
other efforts and decisions taken to expedite the approval of humanitarian
supplies for Iraq may unfortunately remain academic," Sevan told the council.


The new sanctions regulations, approved by the Security Council earlier this
month, take effect on Thursday but will not be totally in place until July 15.
They aim to expedite civilian goods to Baghdad but at the same time require
reviews by U.N. officials and Security Council members of supplies on a 300-page
list that could have military uses.

But Sevan raised apprehensions that some of the goods on the list could endanger
the program if the council did not approve them, such as laboratory equipment
used in hospitals.

"It is not enough to say medicines will flow in freely if certain items for
hospitals are kept out," he told reporters. "We will not be able to achieve our
objectives unless all parties approach it with the proper spirit."

Baghdad objects to the new sanctions procedures or any change in the complicated
program it said has inflicted untold harm on its population. But it implicitly
accepted the new regulations by renewing on Tuesday the 1996 oil-for-food
program for another six months, until Nov. 25, Sevan said.

Sevan briefed the council on the new procedures, which require all contracts to
go to two U.N. disarmament commissions to see if they are banned outright or are
on the new list. If they are on the list, the council's sanctions committee
reviews them. If they are not, Sevan's department expedites the goods.

Previously, the United States was virtually the sole guardian of blocking
supplies it suspected of having military uses, with a council committee having
control over a large variety of contracts. The new system gives more power to
U.N. officials and disarmament agencies.

Ideally, these procedures are to be completed within 30 days, providing
suppliers have submitted required information. Currently, the United States has
blocked $1.3 billion worth of contracts, some of them for years. A number of
them will have to be released under the new system.

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