Campaign Against Sanctions on Iraq
Newsletter - February 2001

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Oil issues

Rising oil prices, and resulting increases in the revenue generated under 'oil for food', have dramatically changed Iraq's position over the past year. The July version of Peter Hain's form letter on Iraq states that increases in Iraqi oil exports are "bringing its oil revenues to a new peak". In actual fact, Iraqi oil exports in 1980 were $26bn, or about $53bn when inflation is adjusted for. [OPEC statistical bulletin, 1998, table 5; then inflation adjusted using US Consumer Price Index, as contained in the Statistical Abstracts of the United States for 1999]. In comparison, Iraq has averaged $53m in exports per day over the latest phase of 'oil for food', an annualised sum of $19bn or about 40% of its 1980 peak [UN Office of the Iraq Programme]. Nevertheless, the increased oil revenues have resulted in what the Secretary-General calls a "vast growth in the scale and complexity of the humanitarian [oil for food] programme". We discuss elsewhere in this newsletter why this has not resulted in commensurate improvements of the humanitarian situation in Iraq.

A tighter oil market has given Iraqi an increasingly important international role. In June last year, the press started reporting that rising oil prices gave Iraq, a new position of bargaining power; Saddam was thought to be "winning control of the oil market" [Wall Street Journal, 23/06/00]. While held by many to be an exaggeration, such reports have continued to surface, and on 18 January this year the Washington Post was still reporting that "Saddam may hold the key to West's prosperity", as increased Iraqi exports had a potential to offset OPEC plans to cut quotas. Madeleine Albright, however, seemed to be entirely unaware of such dynamics. When asked on ABC News if the US imported any oil from Iraq, she replied "I do not believe so. I don't think so", in stark contrast to the Energy Department's information that Iraq was the sixth-biggest supplier of oil to the United States [Reuters, 'Albright slips on Iraqi oil', 15/10/00].

The increased demand for Iraqi oil has also added an extra dimension to sanctions. Benon Sevan, the Executive Director of the UN Office of the Iraq Programme, drew attention to the dilemma in a briefing to the Security Council on 21 September last year: "On the one hand, everyone is calling on OPEC to increase the export of oil. On the other hand, the spare parts and equipment that are the minimum requirements of Iraq's oil industry, have been facing serious obstacles in the Security Council [Sanctions] Committee". Iraq has been quick to concur. Oil Minister Amir Muhammad Rashid recently stated that while Iraq's total oil production, for both exports and domestic use, averaged around 3 million barrels a day last year, and the target this year is 3.5 million barrels, Iraq could pump up to 4 million barrels a day if holds on spare parts were released [CNN, 14/01/01].

Oil Conflicts

Iraq has attempted to make political us of its new 'oil weapon'. Already in September, Iraq had vowed to stop using what it considered "enemy currencies", and Jordan consequently decided in late October to stop using dollars in all dealings with Iraq [Reuters, 'Jordan to ditch dollar in trade dealings with Iraq', 25/10/00]. At the same time, Iraq threatened to suspend all oil exports if a similar move was not taken in 'oil for food' dealings. As oil prices shot up, the UN Treasury Department approved Iraq's plan, and as of 1 November the conversion to euros was effective. As the Middle East Economic Survey pointed out, what enabled Iraq to take these steps was its very large buffer in the UN escrow account. Despite repeated appeals, $11bn had not been spent, but remain to be allocated within the scope of the 'oil for food' programme.

In mid-November, Iraq raised the stakes further, and demanded that all contracting companies pay a surcharge of 50 cents (ironically, the subdivision of the dollar, not the euro) per barrel of purchased oil, stating that failure to do so would exclude companies from further oil deals. If applied to volumes similar to those exported in November, this would divert c. $420m (£300m) over the course of a year. Crucially, this surcharge would not be paid into the UN escrow account, but to a separate account under the direct control of the Iraqi government, and would therefore constitute a breach of sanctions. As such, it would be up to individual governments to ensure that it did not take place.

What escalated the conflict, however, was that Iraq also submitted a new pricing formula for December, proposing that the price be decreased by an amount broadly corresponding to the surcharge. After this was rejected by the UN oil overseers, Iraq suspended all oil exports on 1 December. Iraqi exports at the time accounted for 5% of the world oil supply, but Saudi Arabia and the US promised to make up for any shortfall, rendering the Iraqi threat much less effective [Financial Times, 'Oil eases on US and Saudi assurances', 1/12/00]. On 13 December Iraqi exports resumed under a compromise pricing formula, but the effects of the episode were more drawn out; by mid-January, the UN Office of the Iraq Programme estimated that Iraq had lost revenue corresponding to $1.4bn in direct losses. It is harder to calculate what gains it might have made from driving up oil prices.

Arms issues

Nearly two years ago, inspectors from the United Nations Special Commission (UNSCOM) were withdrawn from Iraq. A successor organisation, UNMOVIC, was set up in late 1999, but has not so far resumed inspections within Iraq. In the 'knowledge vacuum' created by this absence of inspection, debate has raged around two issues: how far was UNSCOM successful in ridding Iraq of its weapons of mass destruction, and how far has an inspector-less Iraq managed to rebuild its weapons since 1998.

These issues have been the setting for a surprising clash of the titans. Scott Ritter, former UNSCOM inspector and hawkish advocate of 'challenge inspections', stated in June of this year that "given the comprehensive nature of the monitoring was possible as early as 1997 to determine that, from a qualitative standpoint, Iraq had been disarmed". At the other pole of the debate, former UNSCOM executive chairman Richard Butler has dismissed Ritter's claims as the ravings of a "basically good man who has gone off the rails". He goes further, indeed, and argues that "the chemical warfare agent manufacturing facilities have been rebuilt. The same is true of their biological capacity. And I've seen evidence...that he [Saddam Hussein] has recalled their nuclear weapons design team".

Butler's position makes for better newspaper headlines. 'IS IRAQ PLANNING TO NUKE U.S.?', asks the Christian Broadcasting Network in August of this year. It quotes Shyam Bhatia, former Iraq correspondent for the Guardian newspaper, who argues that Saddam Hussein is "very close" to building a nuclear bomb. In the same month, a high-ranking Iraqi defector made similar claims. However, there is no shortage of learned voices dismissing such claims as alarmist. Hans Blix, executive chairman of UNMOVIC and former head of IAEA inspections, states that he has seen "nothing to substantiate" the claims that Iraq is trying to rearm. Blix also makes the critical point that qualitative disarmament is the only possible measure of "success" for the inspections team: "no inspection, however intrusive...can ever come up with a 100% answer or mapping of the capacity that Iraq has".

Publicly, US and UK positions have not engaged with the points raised by Blix and Ritter. At the moment, the situation is characterised by stalemate. Security Council Resolution 1284, which set up UNMOVIC, states that sanctions will be suspended only once Iraq has allowed weapons inspectors back into the country. While the UK minister Peter Hain recently claimed that there were "encouraging signs" that Iraq was ready to reopen a dialogue with the UN, and recently stated that Britain was prepared to show some "flexibility" in its demands, Iraq itself has given no such signs; indeed it recently reaffirmed its opposition to SCR 1284.

The next step in this process is talks between Secretary-General Kofi Annan and Iraqi officials, scheduled to take place in late February, after having been postponed twice since November. For this arbitration to be successful, a radical departure on either side would be required. The US and UK insistence that 'every comma' remain in resolution 1284 is still pitted against the total Iraqi rejection of UNMOVIC and as long as this stalemate continues, the Iraqi population will continue to suffer.

'Oil for food' -- uses and abuses


In addition to selling oil under the 'oil for food' programme, the Iraqi government smuggles oil to earn revenue. As the money raised is not supervised by the UN, it goes directly to the Iraqi government and the others involved in the oil smuggling.

While official figures for smuggled oil exports are not published, the usual estimate suggests that $2 billion is being exported annually [Robin Allen, Financial Times, 4/10/00]. US officials publicly estimate that $1 billion is being smuggled through Iranian waters [Robin Wright, Los Angeles Times, 6/6/00]. A former British diplomat in the Middle East suspects that the charges imposed by Iran for shipping through its waters mean that Iran earns more than the Iraqi government from these oil sales. In volume, an often quoted figure for smuggling is 100,000 barrels per day. This seems to derive from a July story which claimed that Iraq was refining 100,000 barrels per day in excess of it needs [Leon Barkho, 'Iraq says will expand smuggling of crude oil and refined products', Associated Press, 21/7/00].

Whatever the precise sums resulting from this smuggling, it does benefit Saddam Hussein. According to this year's Forbes list of the World's Working Rich, Saddam's personal wealth has grown from about $5 billion in 1997 to $7 billion in mid-2000 [Forbes, 'How Dictators Manage Their Billions', 22/06/00].

Some of the oil sold outside of 'oil for food' is sold at below-market rates, in the hope of purchasing political influence. The Security Council has looked away since the early 1990s when Iraq continued the concessionary sales to Jordan that had started before sanctions. Since November, a similar agreement seems to be in place with Syria, and negotiations on analogous terms are also under way with Lebanon.

UN replenishment of Iraqi stocks

CASI's May 2000 newsletter reported that, although the Iraqi government under-purchased proteins under 'oil for food', it made up for this by contributing proteins from its own stocks under an arrangement that had the UN repay it in kind.

This turns out to be only half the story. A UN consultant has since advised CASI "that this is a shell game devised by entrepreneurial Iraqi authorities to rob the UN". The Iraqi government stocks are of lower quality than the UN stocks with which they are replaced. The consultant mentioned this in the context of grains (and estimated that the UN grains were worth about 10 times the Iraqi grains that they were replacing) but implied that it also applied to the proteins.

Exporting of 'oil for food' imports

The British government has long accused the Iraqi government of either exporting imports purchased under 'oil for food', or exporting crops more generally (q.v. Baroness Symons' 4/2/99 statements in the Lords). There finally seems to be some evidence to support this: on 24 September the Sunday Telegraph reported on Glaxo-Wellcome's complaint to the Foreign Office that it had found 15,000 units of Ventolin sold under 'oil for food' in Beirut [ 'Saddam sells UN drugs on black market', Christina Lamb].

While complaining likely ensures that Glaxo-Wellcome will not again win contracts to sell to Iraq, it was concerned about the safety (and hence legal) implications of its prescription drugs appearing on the black market. It was also worried that re-exporting interfered with Glaxo-Wellcome's pricing policy, which may charge different rates in different countries.

The story claimed that the asthma drugs had reached Lebanon in Iraqi Ministry of Transport vehicles. From this it inferred firstly that this indicated approval from the highest levels of Iraqi government, and secondly that it undermined the belief that hardship in Iraq might be due to the sanctions. The second of these conclusions is clearly false: that Iraq's government fails to take all steps to offset the effects of the sanctions does not mean that the sanctions have no effect.

At a New York press briefing on 19 October, the head of the UN programme in Iraq, Tun Myat, explained that his office was investigating this claim. He did explain that the sprays sold for about $60-$70 outside of Iraq while, inside Iraq, were distributed for almost nothing. He therefore suspected that a "few enterprising people" had realised this.

As a note of background, the UN Food and Agriculture Organisation reported as early as 1993 that Iraqis were often selling components of their government ration in the markets. They were doing this, it felt, for the same reasons that people buy and sell anywhere: the contents of the rations did not necessarily match their needs. As stated above, Myat reported in his October 19 briefing that this practice still continues.

Eroding the sanctions

The past year has seen remarkable changes in Iraq's standing in the world, with a steady easing of Baghdad's diplomatic isolation. Two clear examples of this are the high attendance at the Baghdad Trade Fair last November and the recent flurry of flights to Iraq. The success of the Iraqi regime in restoring international ties has been aided by at least three factors. First, rising oil demand has made Iraq a more attractive trading partner. Second, the US prominent role in the Iraqi case has been largely neutralised due to a year of presidential campaigning, its controversial intervention in the Palestine-Israel conflict, and its fixation to SCR 1284 as the framework for any further discussion on the embargo. Third, neighbouring countries are realising that, like it or not, Saddam has not been toppled by the sanctions and the time has come to move on.

Outraged by the recent killings of Palestinians since confrontations with Israel restarted last September, many Arabs have come to appreciate Saddam as a power in the front against Israel and as a voice of discontent with US policy in the Middle East Countries which used to trade actively with Iraq have suffered for ten years the nasty side effects of the embargo and are therefore eager to see an end to the sanctions. Some of Iraq's neighbours are moreover preparing for the moment when Iraq's reconstruction is "auctioned" to the outside world. In addition, solidarity with ordinary Iraqis is growing among the Arab public, putting pressure on governments to help Iraq out of the crisis. It is then understandable that Arab leaders should overcome their fear of Saddam to engage in a 'rapprochement' towards the Iraqi regime.

The Baghdad Trade Fair (November 2000) hosted 1,554 companies from 45 countries, up from 960 companies from 36 countries in 1999. The biggest delegations were from France, Russia and China. Official delegations were sent by Italy, Spain, France, Germany, Belgium, Sweden, Finland, Russia, Greece, Turkey and China. Britain was represented only by Vapormatic, a company which makes agricultural spare parts.

People and countries speaking out

Sanctions were imposed on Iraq with the purpose of annihilating Saddam's aggressive capacity, so that countries in the region and the Kurds and Shiites of Iraq are no longer under threat. Until last year most Gulf countries had welcomed the UN's policy, and their acquiescence was central to its legitimacy. However, in the last few months there has been a shift in the regional perception of UN's methods.

There is a sense that the UN, under US influence, leads a policy of double standards in the Middle East: it applies rigour to Iraq, but refuses to protect the Palestinians from the Israeli onslaughts. An Iranian official said last November that while the "United States defends the Zionist regime and its atrocities against the Palestinians, which is a token of terrorism, it is not entitled to accuse other states of terrorism and set conditions for them". He added that the countries in the region "can bring security to the area under the auspices of convergence, participation and cooperation".

Last July, Jordanian Prime Minister, Abdul-Raouf al-Rawabdeh, demanded "the lifting of sanctions against Iraq and the preserving of the unity of its people and its land". This posture has gradually spread to other countries in the region, and even to countries which previously were more hostile. Notably, on November 14 Iranian foreign minister Dr. Kamal Kharrazi called for lifting the UN sanctions against Iraq. On January 22 an editorial letter in Kuwaiti newspaper al-Rai al-Aam called for the lifting of the sanctions and for the creation of an International Tribunal to condemn Saddam. Kuwaiti Foreign Minister congratulated the editor-in-chief, punctuating that Saddam should abide to UN demands.

Thus even Iran and Kuwait, both victims of Iraqi aggression and with all the reasons to dread their neighbour, are now contesting the embargo. This is a serious blow to the motives underlying sanctions, calling the role of US and Britain as guardians in the region into question.

There have also been joint Arab initiatives against sanctions. At the Arab League Summit held last October at Cairo -- the first attended by Iraq since 1991 -- the heads of State from Jordan, Yemen, Sudan and Palestine called for the end of the embargo. On 30-31 December, at a meeting of the Gulf Cooperation Council, Qatar and the UAE launched a proposal to cancel the support of the group to UN sanctions, but Saudi Arabia and Bahrain rejected it.

Recent Arab pronouncements mesh with a movement worldwide. In June the Italian lower house voted in favour of restoring diplomatic ties with Iraq and to work for the lifting of sanctions. A similar resolution was passed by the Dutch parliament in November. As permanent members of the UN Security Council, France and Russia have tried in vain to persuade the US of the need for a complete review of the resolutions on sanctions. They would like to modify the present regime so as to resolve the humanitarian crisis in Iraq and to work on the basis of well-defined objectives.

Today several governments are urging the UN to unconditionally lift the sanctions: India, Syria, Egypt, Venezuela, Indonesia, and Vietnam. The US and UK are largely isolated in their diehard resolution to maintain them.

Last August, President Hugo Chavez "ratified Venezuela's position to support any accord against any kind of boycott to Iraq or any country". During a trip to Indonesia, he shared with President Abdurrahman Wahid a deep repulse for the perpetrators of the embargo: "Who has the right to really have an innocent child die there? Let God have pity on the soul of those who act that way. I think the time has come for it to be over". Wahid expressed intentions to visit Baghdad shortly. The US administration got the message, and their reaction was quick. First Boucher, the Department of State spokesman, deemed Chavez's trip as something the US would "keep in mind in future dealings with Chavez and his government". Then Albright warned Wahid that visiting Baghdad would be inappropriate and ill-advised, and blatantly asked him to keep out of the way: "President Wahid has a great deal to do in Indonesia", she said. Nevertheless, such pressure is proving increasingly inadequate in influencing third parties' positions.

"Airoding" sanctions

On August 17 Baghdad airport re-opened, after years of closure to civilian traffic. Rehabilitation jobs had been long and costly, for the airport was badly damaged by Western air-raids in 1991. On August 19 a Russian airliner landed in Baghdad. Since then, more than 80 planes have landed, mainly from European and Arab countries. Politicians, businessmen, anti-sanction campaigners, doctors, aid-workers, even footballers, are now travelling to Baghdad by air. They often bring humanitarian goods, such as medicines, medical equipment, food and school supplies.

Because no UN resolution deals explicitly with passenger flights to Iraq, there is ongoing controversy about how much control to place on them. The most relevant is resolution 670, Paragraph 3 which "Decides that all States ... shall deny permission to any aircraft to take off from their territory if the aircraft would carry any cargo to or from Iraq or Kuwait other than food in humanitarian circumstances, subject to authorization by the Council or the Committee established by resolution 661". The US and Britain insist that the authorization be claimed on a case-by-case basis. Namely, that for each flight to Baghdad the Sanctions Committee examines the proposed cargo in advance, and grant or deny permission to depart accordingly. France and Russia argue for a laxer interpretation. They claim that by simply notifying the Committee prior to each flight, a government is complying with regulations, and that it is up to each government to control the cargo.

Further considerations complicate the debate. Why are violations of sanctions overlooked when it comes to vehicles crossing the Iraqi borders, notably in the case of Turkey? How do later UN resolutions, with a tendency to ease the embargo, affect the argument? Should lists of passengers be also handed to the Committee before every departure? The latter question has arisen from demands by the US and Britain; that passengers should be controlled is definitely not suggested in UN resolutions.

The Sanctions Committee has yet to clarify procedures. While the confusion continues, some French and Russian Baghdad-bound planes have taken off without even notifying the committee. Less powerful countries have taken fewer risks: almost all their flights await formal approval. In November, though, the OIC (Organisation of Islamic Conference) demanded, during a meeting in Qatar, the end of the no-fly zones and recommended its 56 member countries to ignore the air restrictions. Russia and Jordan are striving to resume scheduled flights to Baghdad, while Saddam wages to recover 37 Iraqi civilian planes from Tunisia, Jordan and Iran. He ordered that they be flown abroad on the eve of the Gulf War, to protect them from destruction.

It seems that the wrangling continues behind the scenes, through extra-official action. According to an Egyptian official, "The British delegate to the Sanctions Committee asked Lloyds not to insure humanitarian flights which fly to Baghdad without explicit Committee approval, which led to the suspension of several humanitarian flights to Baghdad".

New US government faces 'old' Saddam

In the run up to the Presidential elections, Washington remained relatively quiet on Iraq. Briefings emphasised the success of the embargo in containing Saddam and the benefits brought to the Iraqi people by the 'oil for food' programme. There was little reference to the devastating effects of the blockade, and if Saddam was pointed out as the sole person responsible for the suffering in Iraq.

During the election campaign, both the Democrat and the Republican candidates pronounced in favour of "tougher" sanctions. Both endorsed the ousting of Saddam's regime as a long term aim for US policy and promised immediate action in the event of any aggression by Iraq. Although no political bloc publicly opposed the embargo, a few individuals did. On November 26th the Undersecretary for Political Affairs, Thomas Pickering, made a case for "softer" sanctions. He argued that the fall of Saddam's regime, a necessary condition for peace in the region, could only be achieved by the Iraqi people.

Now Bush has won the election and formed government. The new Secretary of State, Colin Powell, has been shocked by the amount of sanctions the US Foreign Office has to handle: "they just keep coming, and I think I've seen about half a dozen new ones ... in the last couple of weeks" he said when he testified before the Senate Foreign Relations Committee. "I would encourage the Congress to stop for a while. I mean stop, look and listen before you impose a sanction", "let's talk about it before you slap another bureaucratic process on me". Although he plans to reduce the number of sanctions to a bare minimum, there are two countries which he is strongly believes should remain under sanctions: Cuba and Iraq. Concerning Iraq he explained:

"Saddam Hussein is still in power. But what a mess he has made of his nation over the past 10 years while the rest of the world has moved on. While we have seen our economy flourish ... he sits there trapped in the past. Instead of seeking peace and prosperity for his people, we see a weakened Iraq that utters threats and pursues horrible weapons to terrorize its neighbours". "We owe it to its neighbours ... that they are no longer threatened that Iraq is ready to live in the world and not apart from it. And until Iraq makes that decision and lives by it, we will remain resolute".

There is a clear defence-department orientation in the new government. Dick Cheney, the new Vice-president, and Colin Powell held top positions in the Pentagon under George Bush senior, and were involved in Operation Desert Storm against Iraq in 1991. This may bring more aggressiveness to US diplomacy: the new team promises a more strategic and firm approach to sanctions. At his nomination, Powell pledged: "We will work with our allies to re-energise the sanctions regime". Echoing this, Bush's National Security Adviser, Condoleezza Rice, also contends that the "sanctions regime (to Iraq) needs to be reinforced and strengthened .... I think it's very clear we have a big job to do in trying to re-energize". Such promises seem infeasible even to British officials. On January 16th Peter Hain dismissed the possibility of US diplomats effecting a "revival of sanctions", since they will have to "grapple with the realities of current circumstances".

Playing at Toppling

George Bush is concerned that US forces have been "over-deployed" and has repeatedly expressed intentions to cut down US participation in peacekeeping operations worldwide. What seems certain is that the new trend would not spare Saddam. Condoleezza Rice clarified this point already last October: "The United States is the only power that can handle a showdown in the Gulf, mount the kind of force that is needed to protect Saudi Arabia ... And extended peacekeeping detracts from our readiness for these kinds of global missions".

Some of Bush's top nominees see the use of force as a valid way to finish with Saddam. During the presidential campaign Cheney suggested that a Bush administration might "have to take military action to forcibly remove Saddam from power". In 1998 Donald Rumsfeld, the new head of Pentagon, said that "removing Saddam Hussein and his regime from power will require a full complement of diplomatic, politic and military actions". Condoleezza Rice, meanwhile, holds that, at the slightest misdeed by Saddam, Washington should "really try to hurt him, not just deliver a pinprick air-strike" as Clinton did.

The INC and the Iraq Liberation Act

More directly, the US has attempted to attain its aims by working with the Iraq National Congress, which is an umbrella group for parts of the Iraqi opposition. It originated as a guerrilla army in 1992, with heavy CIA backing, and had bases in northern and southern Iraq. In 1996 Saddam, at the invitation of the KDP (one of the two main Kurdish factions), sent tanks into the north and forced the hasty evacuation of 6,000 INC fighters and supporters. This put an end to the armed phase of the INC.

In 1998 Donald Rumsfeld headed the commission that designed and lobbied for the Iraq Liberation Act, which would entitle the US government to disburse $97 million towards arming and training INC militants. The project became law in 1999.

However, the Clinton administration considered it ill-advised to openly arm a group of rebels and doubted that the INC could ever become a serious opposition to Saddam. Hence, the plan remained stalled until last October, when Clinton disbursed $4m for non-lethal training of 100 INC members and agreed to found a centre for the INC in Tehran. Just before leaving office, Clinton donated another $12m, but to date no weapons have been delivered to the rebels. However, in the new government there are strong advocates of the INC who will press towards the "full implementation of the Iraq Liberation Act". Rumsfeld may finally manage to provide what he called "lethal aid".

One of the INC leaders, Ahmed Chalabi, has personal ties with Rumsfeld and Cheney and might exploit them to gain more intensive support from the US. He admits that preparing the present INC numbers would not suffice to win a full war against Saddam, but contends that it would allow for little victories, which in turn would encourage defections from Iraq's army: indecisive soldiers "would have a place to go to".