IRAQ-U.N.: Iraq Clinches Deal for Restricted Oil Sales

By Farhan Haq Reprint | | Print |

UNITED NATIONS, May 20 1996 (IPS) - The government of Iraqi President Saddam Hussein Monday confirmed its acceptance of a U.N. deal which will allow Baghdad to sell its oil anew, under strict U.N. monitoring.

Iraqi Ambassador Abdul-Amir al-Anbari, who signed a memorandum of understanding to clinch the deal with U.N. Under-Secretary- General Hans Corell, called the agreement “a good deal for the Iraqi people.”

The deal allows Iraq to sell oil for the first time since August 1990, when the United Nations first placed the nation under a tight international embargo to punish its for invading Kuwait.

U.N. Secretary-General Boutros Boutros-Ghali praised the agreement — which allows Iraq to sell oil worth two billion dollars over a six-month period — as a success for the world body’s Security Council. Last year, the Council approved Resolution 986, which allows limited oil sales on humanitarian grounds.

“The poorest of the poor were suffering in Iraq,” Boutros- Ghali said.

He explained that the United Nations’ actions were intended to put a halt to that suffering by allowing Baghdad to pay for food and medicines that have been in critically short supply due to a lack of hard currency.

Al-Anbari said he expects Iraq will resume selling its oil within a month.

However, U.N. officials said Baghdad may have to wait a little longer than that — perhaps between one and two months — to resume oil exports.

Iraq still must submit a plan to Boutros-Ghali for his approval, detailing how proceeds from the sale of oil will be distributed to all Iraqis in need — including Kurds in three semi- autonomous Northern regions — U.N. spokewomen Sylvana Foa said.

The United Nations also must set up a bank escrow account to process the relevant transactions, she added.

Al-Anbari received Hussein’s acceptance of the deal over the weekend. Iraq had rejected a deal for a year after the Council approved Resolution 986, claiming the it violated Iraqi sovereignty.

A memorandum of understanding was quickly signed by Corell and al-Anbari Monday morning, and Security Council ambassadors expressed their confidence that it would be implemented soon.

“We see this as a great victory … for the Iraqi people, who have been suffering so unjustly from Saddam Hussein’s contorted priorities,” said U.S. Ambassador Madeleine Albright, whose nation was a key author of 986.

The deal provides an initial six-month period, in which Iraq can sell two billion dollars of oil and use the proceeds to pay for humanitarian supplies. The United Nations is to monitor the oil sale, as well as the distribution of relief goods purchased.

Crucial to acceptance of the deal by Britain and the United States, which undermined an agreement last month when they objected to more favourable terms for Iraq, is tight U.N. monitoring of the escrow account and distribution of proceeds, particularly to the Kurdish regions.

Last month, the two nations — which both have veto power on the Security Council — objected to negotiations between al-Anbari and Corell that would have allowed Iraq to set up its own escrow account to handle money obtained from the oil sales.

Under the new accord, Boutros-Ghali will select the bank “after consultations with the government of Iraq”, although Iraq may choose “a senior banking official” to coordinate all banking matters with the United Nations.

The sales agreement charges the U.N. Inter-Agency Humanitarian Programme with the responsibility for supervising the distribution of aid in the three Kurdish zones, which are guarded by U.S., French and British troops.

In turbulent Southern Iraq, where Hussein has put down several rebellions by Shi’ite Muslims, the Iraqi government will decide all relief distribution questions. Even there, however, they will be subject to U.N. observation.

A senior U.S. official, speaking on condition of anonymity, said the bottom line is that the United Nations will decide all crucial distribution considerations. “The United States will be holding Iraq’s feet to the fire” through its position on the Security Council Iraqi sanctions committee, he added.

“The whole set-up is one which will allow for there to be equitable distribution,” said Albright, who has repeatedly raised doubts over the Hussein government’s commitment to use the oil proceeds to help Iraq’s neediest populations.

Iraqi oil sales are an especially thorny issue for Washington. On one hand, President Bill Clinton, who faces re-election this November, should benefit from Iraq’s re-entry into the world oil market, which will likely drive the price of oil down steeply — thus boosting the oil-dependent U.S. economy.

Oil prices already fell by four cents per barrel Monday morning in response to rumours that Iraq would accept the deal. This followed a drop of some 25 cents a barrel over the weekend.

To appear tough on Iraq, however, Clinton cannot afford the perception that Hussein has gained anything on the deal. Such concern is underscored by Albright’s assertion that “this is clearly a humanitarian exception; this is not a lifting of the sanctions regime.”

Since oil is Iraq’s economic mainstay, that distinction is a minor one.

Iraq still has good reason to be wary of the deal, as two of its nemeses — Washington and London — will oversee many of the procedures involved in the oil sales. Additionally, al-Anbari was unable to include provisions that would allow Iraq to recover production and transport costs, an estimated two U.S. dollars per barrel.