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Despite the fact that it has been operating for many months, there has been very little talk about what the Iraqi oil-for-food program actually means in practical terms. Beyond quoting the bald figures representing the value of oil that can be sold, $2 billion - now increased to $5.256 billion - media reports have offered little else. As a result there are many unanswered questions:
None of these questions has been dealt with in the media. Nor is the information readily available from the UN. Bearing in mind the fact that the very reason the UN adopted the program was that there was a feeling among the general public that sanctions lacked something in the way of humanitarian content, one might have thought that the UN would have been anxious to provide answers to questions such as those posed above and to publish some information as to the meaning of the oil-for-food program in practical terms. Not only has there been no explanatory material published, the UN has been strangely reluctant to divulge information about the oil-for-food program.
Recent developments have made it even more important for the public to have some appreciation of whether the program is generous or only token. Iraq has begun a vigorous campaign to persuade the Security Council to lift the sanctions altogether. Among other arguments, Iraq is making much of the suffering of the Iraqi people (without mentioning the oil-for-food program). Its objective seems to be to divide the Security Council and isolate the US. As a start, Iraq is hoping to win the support of Russia, China and France. Support for ending the sanctions is gaining momentum in the non-governmental community, not least in the US. The Iraqi American Committee in Los Angeles has launched a "Free Iraq Campaign" in an effort to have Saddam Hussein indicted for war crimes and to get the sanctions lifted (1). Other groups with objectives that include the lifting of sanctions have formed in New York (Iraq Sanctions Challenge) and Chicago (Voices in the Wilderness). (2)
Another development that is causing more attention to be given to sanctions is the fact that the US appears to be de-emphasising the military option for dealing with Iraqi problems. It would appear that there are anxious debates taking place within the US Administration on this matter (3). President Clinton recently remarked at a press conference, when speaking of the US military presence in the Gulf, "...at some point in the future, I would anticipate some reallocation of our [military] resources." (4) It would appear that the US is coming to the conclusion that its critics were correct when they said that the contemplated bombing operations would be useless towards achieving the objective of removing Iraqi obstructions to the inspections (5). In addition, the US may be reassessing the question of whether it would be justified under existing UN Security Council resolutions to launch a military strike against Iraq (6).
These developments indicate that there are two opposing forces coming to the fore in relation to the sanctions. There is a campaign to lift the sanctions altogether and, at the same time, there is a toning down of the emphasis on military measures which may point to sanctions becoming more important. As sanctions come in for more attention in the coming weeks, it is essential that the public have a more accurate understanding of the strengths and weaknesses of the existing sanctions regime. Vital to this understanding is some reliable information on the practical effect of the oil-for-food program. It is this information that this paper seeks to provide.
The Current Program
The oil-for-food program consists of an arrangement whereby Iraq is allowed to sell a quantity of oil on condition that the proceeds are paid to the UN which will use them partly to pay for food and medicine for the benefit of the Iraqi people and partly for other purposes. In its current form, the program provides that 30% of the proceeds are used to pay compensation for the victims of Iraq's invasion of Kuwait; about 5% for the inspection expenses of the UN Special Commission on Iraq (UNSCOM) and for certain other UN expenses; and the balance, about 65%, to pay for food, medicine and other humanitarian commodities.
The history of the program goes back to a point shortly after the Gulf War. On 15 August 1991, the Security Council adopted Resolution 706 which provided for the sale of oil to the value of $1.6 billion during a period of 180 days. The program was dependent on Iraqi cooperation, since Iraq would have to produce the oil and would have to be involved in the distribution of the food and medicine. Iraq refused to accept Resolution 706 and three-and-a-half years went by during which Iraq was pressed to accept some alternative scheme.
Eventually, on 14 April 1995, the Security Council adopted Resolution 986 which Iraq, after more months of hesitation, accepted in the latter part of 1996. Under Resolution 986, which is currently in effect, Iraq is permitted to sell oil to the value of $2 billion over a period of 180 days. The first proceeds of the sale of oil were deposited in the UN's Iraq escrow account on 15 January 1997 (7). The first shipment of humanitarian commodities entered Iraq on 20 March 1997 (8).
Resolution 986 was intended to provide an exception to the original sanctions resolution, which was adopted by the Security Council immediately after Iraq's invasion of Kuwait (Resolution 661, 6 August 1990). Even before Iraq's acceptance of Resolution 986, it was permitted under the original sanctions resolution (661) to import food and medicine without restriction, but since it was prohibited from selling oil, it lacked the foreign exchange necessary to buy these items. Prior to the sanctions, Iraq depended on the sale of oil for 85% of its foreign exchange (9).
Under Resolution 986, Iraq is permitted to earn substantial quantities of foreign exchange but with the proviso that the UN collects all the proceeds. The UN deducts 35% for the purposes noted above and uses the balance to buy food and medicine. The decision as to what portion of the funds should be allocated to which particular category of food and medicine is made jointly by the UN and Iraq. The Resolution contemplates "arrangements or agreements" whereby the Secretary-General and Iraq settle on a plan setting out the manner in which the funds are to be spent (10); this plan later became known as the Distribution Plan.
Resolution 986 stipulated that the program would expire 180 days after its entry into effect unless renewed by further resolution of the Security Council. The program has been renewed twice (resolutions 1111 and 1143); Phase III of the program is now in effect and is due to expire on 3 June 1998 (11).
The Revised Program
On 20 February 1998, the Security Council adopted Resolution 1153 which extended Resolution 986 for 180 days but altered the maximum value of Iraqi oil permitted to be sold during that period from $2 billion to $5.256 billion. Resolution 1153 provides that it is to enter into effect when a new Distribution Plan has been approved (12), which is expected to occur around the beginning of June so as to coincide with the expiry of Phase III. In the meantime, Phase III of the current program under Resolution 986 remains in effect.
Resolution 1153 recognized that additional information was needed as to the question of whether Iraq had the physical capability to produce and export the quantity of oil authorized in the Resolution. The Security Council was therefore requested to dispatch a team of experts to Iraq to survey the condition of its machinery and equipment for producing and transporting oil (13). On 15 April 1998, the teams' report was submitted to the Security Council with a letter from the Secretary-General (14).
The report concluded that Iraq's machinery and equipment for producing and transporting oil was so dilapidated that it was in no position to export more oil than its current level of exports. The document goes on to advise that, with an expenditure of $300 million dollars for repairs and refurbishment, it might be possible for Iraq to export at a level sufficient to yield $4 billion over a period of 180 days. This particular point is not stated explicitly in the Secretary-General's letter or in the accompanying executive summary of the team's report, but the Secretary-General seems to have adopted this conclusion in his recommendations to the Council. His letter recommends that Council authorize the expenditure of $300 million for repairs and improvement and that Council adopt the figure of $4 billion as the maximum "authorization" for the 180-day period following the expiry of Phase III (15), which occurs on 3 June 1998 (16).
A detailed analysis showing the practical effect of the revised program is presented in the Appendix to this paper.
At the time of writing (6 May), the Security Council has not yet considered the Secretary-General's recommendation referred to above for an "authorization" of $4 billion. When it does, the Council will decide on two matters. Since it will have received additional information as to Iraq's needs for producing and transporting oil, the Council will use that information to decide whether the Secretary-General's $4 billion figure should be adjusted. More significantly, the Council will decide what status this figure should have; it would appear that Council has two options on the matter. It could simply alter the $5.256 billion figure representing the maximum value of oil to be sold to read $4 billion. Alternatively, it could leave untouched the $5.256 billion figure, but approve a distribution plan that would show $4 billion as the total amount to be spent during the phase covered by Resolution 1153. (The Distribution Plan for Phase III, for instance, is essentially a budget showing the amount to be spent for each of the various categories of foodstuffs, medical supplies and other humanitarian commodities; it is available on the Internet as http://www.un.org/Depts/oip/dplan/dp-main.htm If the Security Council were to select this second option, it would thereby be affirming the maximum value of oil sales at a level that takes no account of the information received by Council in the report it had requested - a rather anomalous approach, but one that seems to be under serious consideration. By the time this paper appears in print, no doubt the Security Council will have chosen its course.
Is There Anything Left Of The Sanctions?
Two salient facts emerge from the figures presented in the Appendix:
Obviously, the revised program, when it comes into full operation, will represent a significant dilution of the sanctions regime. Even with the program at the $4 billion level, the regime would appear to have significantly less potency than when first imposed in 1990. The reason is that the key element in the regime is the blocking of oil exports. Some might say that that element will be virtually eliminated once the $4 billion scheme becomes operational. Indeed, some might question whether there will be any real potency whatever left in the sanctions regime. Conceivably, there may be some who argue that the sanctions have been weakened to a point where they are no longer worth maintaining. There could be calls to abandon the whole regime purely on the basis that its benefits do not measure up to the trouble it entails.
Upon closer examination, however, it is apparent that the sanctions regime in its new format has retained much of its former potency. Evidence of its continuing strength is to be seen primarily in the fact that Iraq is currently demanding a permanent lifting of the sanctions. Iraq's Deputy Prime Minister, Tariq Aziz, in a letter to the Security Council on 22 April 1998, demanded that the sanctions be lifted "immediately and without any new restrictions or conditions" (18). On 25 April 1998, one of Iraq's leading journalists, Salah al-Mukhtar, in a front page editorial quoted by Reuters, wrote "we are adamant on breaking the embargo this year if it is not lifted by the Security Council. America and others have to choose between lifting the embargo or storms that are impossible to control, like past events have proven, which will get rid of all the putrid symbols." (19)
One of the reasons that Iraq finds the sanctions regime so objectionable, even in its diluted form, stems from the fact that, under the oil-for-food program, the UN controls the manner in which most of Iraq's foreign exchange earnings are spent. The UN insists on approving every contract for the purchase of humanitarian commodities. Iraq finds this extremely annoying and is making every effort to persuade the UN to relax this requirement. The UN has been engaged in countless meetings with Iraq on this issue. Iraq is obviously annoyed, frustrated and humiliated by the fact that the UN exercises so much control over its daily life.
It must be remembered too that Iraq is losing 35% of the proceeds of its oil sales - the portion siphoned off by the UN mostly to pay compensation to the victims of the invasion of Kuwait.
The conclusion is clear: the sanctions, even with the allowance under the oil-for-food program, are still a potent instrument.
The Nature of Iraqi Sanctions
The sanctions against Iraq possibly differ from other sanction regimes in that the primary focus is on blocking exports rather than imports. The only direct measure to block imports consists of Security Council rulings that require member States to enact regulations to prevent their citizens from selling or supplying items to persons in Iraq or representing Iraq. But there are few border controls to prevent items from crossing into Iraq.
Instead of measures operating directly, imports are targeted indirectly - through blocking exports of oil which has the effect of substantially reducing Iraq's sources of foreign exchange. Without foreign exchange, a country is unable to pay for its imports, which makes them impossible to obtain unless the country can find friends abroad who are willing to sell on credit or provide loans, both of which are prohibited under the sanctions.
Iraq is still able to earn relatively small amounts of foreign exchange by smuggling goods across its borders. Some of these smuggled exports consist of oil, but always in small quantities (except for shipments of diesel oil to Turkey - a problem that should be investigated). Bulk shipments of oil have been blocked altogether. The UN has found it relatively easy to accomplish this, partly by commissioning a naval blockade in the Gulf (20) which blocks shipments by tanker from Iraq's ports on the Gulf, and partly by arranging with Turkey to close the pipelines between Iraq and the Mediterranean. Under the oil-for-food scheme, bulk shipments of oil have started again but under UN control.
Conclusion: A New Breed of Sanctions
With the oil-for-food program in place, the sanctions regime has been transformed. It no longer involves an outright prohibition of oil exports. Instead, the regime now depends on a system of controlled exports, under which 85% of the country's export earnings are administered by the UN and must be spent in accordance with the requirements of the UN. Under this new version of sanctions, the UN is able to achieve a measure of targeting so that the suffering caused to the general populace is substantially reduced while the political leadership is still saddled with annoying and humiliating controls.
The next turning point in the saga of the oil-for-food program will come in November. The date of expiry for Resolution 1153 is likely to be about the first day of December (21). At some point before December, the Security Council will have to decide what to do about renewing Resolution 1153. A decision will have to be made on the ceiling - the maximum value of oil that can be exported during Phase V. In the period leading up to that decision, it does not appear likely that Iraq will have the physical capacity to pump more than $4 billion worth of oil, so that that figure will likely be the effective limit until November. But if the Security Council decides in May in accordance with the second option noted above, the approved ceiling will be $5.256 billion. A judgement will then have to be made whether to reduce the ceiling below $5.256 billion or to allow Iraq to escalate to that figure as and when its pumping capacity allows it to do so.
Much will depend on Iraq's behaviour over the next six months.
Notes and references
APPENDIX: ANTICIPATED RESULTS OF THE OIL-FOR-FOOD
Notes: all figures show total for periods of 180 days; all dollar figures are in US dollars; information valid as of 29 April 1998. It is important to note that of the two versions of the "revised program" presented below, the version that will be put into effect at the end of Phase III on 3 June, will be Version B, i.e. the version proposed by the Secretary-General, amending Version A as set out in Resolution 1153. Sometime before 3 June, the Security Council will deal with the Secretary-General's proposal and adopt his figure of $4 billion or a figure fairly close to it.
1. DOLLAR VALUE OF OIL TO BE PERMITTED TO BE SOLD BY IRAQ
Current Program (Resolution 986 - in place until 3 June
1998): $2 billion (1)
Revised Program (Resolution 986 as amended, due to commence 4 June 1998)
Version A (Approved under Resolution 1153): $5.256 billion (2);
Version B (Proposed by Secretary-General (3)): $4 billion (4)
2. PORTION OF PROCEEDS AVAILABLE TO BUY FOOD, MEDICINE & OTHER HUMANITARIAN COMMODITIES
Current Program: $1.32 billion (5)
Revised Program, Version A: $3.43 billion (6)
Version B: $2.61 billion (7)
3. PORTION OF THE ABOVE ITEM ALLOCATED FOR THE PURCHASE OF FOOD
Current Program: $805 million (8)
Revised Program, Version A: $1.33 billion (9)
Version B: $1.01 billion (10)
4. PORTION OF PROCEEDS RESERVED FOR PAYMENT OF COMPENSATION TO THOSE WHO SUFFERED DAMAGE AS A RESULT OF IRAQ'S INVASION OF
Current Program: $600 million (11)
Revised Program, Version A: $1.57 billion (12)
Version B: $1.2 billion (13)
5. PORTION OF PROCEEDS RESERVED FOR PAYMENT OF UNSCOM'S INSPECTION EXPENSES AND FOR VARIOUS OTHER EXPENSES(14)
Current Program: $80 million (15)
Revised Program, Version A: $256 million (16)
Version B: $190 million (17)
6. VOLUME OF OIL PERMITTED TO BE EXPORTED BY IRAQ BASED ON THE CURENT PRICE OF IRAQ CRUDE OIL ($10.50 PER BARREL) (18)
Current Program: 190 million barrels (19)
Revised Program, Version A: 501 million barrels (20)
Version B: 381 million barrels (21)
Figures for Comparison:
7. Average dollar value of food imported by Iraq over a
period of 180 days prior to the imposition of sanctions: $1
8. Volume of oil exported by Iraq prior to the imposition of sanctions (180 days in 1989): 407 million barrels (23).
9. Volume of oil capable of being exported over a period of 180 days at the current level of exports: 275 million barrels, having a value of $2.9 billion (24).
Notes and references to Appendix
Douglas Scott is President of the Markland Group for the Integrity of Disarmament Treaties, based in Ancaster, Ontario, Canada. Information on the Markland Group can be seen on its web-site at http://www.hwcn.org/link/mkg
© 1998 The Acronym Institute.
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