Iraq: UNOIP Weekly Update 21 Jan 2003

Oil-for-Food Programme Channels $61 million in Overhead Savings to Humanitarian Purchases for Iraq
The Oil-for-Food Programme announced this week that $61 million in savings from its administrative and operational costs and expenditures for phase Xll (30 May - 4 December 2002) would be redirected to the purchase of humanitarian supplies for Iraq. This brings the programme"s total savings on administrative and operational overheads to $272 million since September 2000.

Administrative and operational costs for the programme are funded from the ESD (2.2 per cent) account created pursuant to Security Council resolution 986 (1995). In July 2001, the Security Council (resolution 1360) requested the Secretary-General to have excess funds transferred from the account and applied to humanitarian purchases.

In letters to the Chairman of the Security Council"s 661 Sanctions Committee and to the Permanent Representative of Iraq, the Executive Director of the Iraq Programme said that $61 million saved by cost-minimizing efforts would be transferred to the 59 per cent account for humanitarian purchases in the 15 centre and southern governorates. The Executive Director noted previous overhead savings of $52 million (phase Vll), $75 million (phase Vlll) and $84 million (phase X). There were no excess funds available after phases lX and Xl due to shortfalls in oil revenues used to fund the oil-for-food programme.

Oil-for-Food Exports

Iraqi exports under the oil-for-food programme totaled 15.1 million barrels for the week (11-17January) - an average of about 2.1 million barrels per day.

There were 10 loadings from the authorized terminals: five from the Iraqi port of Mina al-Bakr (8.9 million barrels) and five from the Turkish Mediterranean port of Ceyhan (6.2 million barrels). These are the only outlets for Iraqi oil exports allowed under the oil-for-food programme.

Total exports for the week (15.1 million barrels) generated estimated revenue of €398 million (euros) or $424 million, at current prices and rates of exchange. The average price of Iraqi crude for the reporting period was approximately €26.00 or $27.70 per barrel.

Eight new contracts were approved by the oil overseers for the week, bringing the current total to 101, covering 255 million barrels of oil. Estimated revenue generated from the beginning of phase Xlll (5 December - 3 June 2003) at the current rate of exchange, stands at $1.9 billion.

Contract Approvals

Of a total 4,992 contracts for humanitarian supplies worth $9.3 billion processed by the United Nations Secretariat under the Goods Review List (GRL) and new procedures under Security Council resolution 1409 (2002), the Office of the Iraq Programme has approved 3,600 contracts worth about $5.1 billion (55 per cent in terms of value) after assessment by the United Nations Monitoring, Verification and Inspection Commission (UNMOVIC) and the International Atomic Energy Agency (IAEA) that they do not contain items on the Goods Review List.

Approvals include 1,010 contracts worth more than $1.7 billion that had previously been on hold by the Security Council"s 661 Sanctions Committee. These have now been reviewed by UNMOVIC/IAEA under para 18 of the procedures of resolution 1409 (2002).

Goods Review List

Of the total contracts, 1,201 worth about $3.6 billion (38.7 per cent in terms of value) are on GRL Non Compliant status. UNMOVIC and IAEA will require additional technical information from suppliers to enable final assessments.

So far, 217 contracts worth $731.6 million have been found by UNMOVIC/IAEA to contain one or more GRL items. Of these, 103 contracts worth $232.3 million have been reviewed by the Security Council"s 661 Sanctions Committee, of which, 24 contracts worth $9.6 million have been approved. Eleven, worth $13.3 million, have lapsed because the suppliers have not submitted a petition within 30 working days of the denial. Thirteen of the 103 contracts, worth $36.8 million, have been rejected because of a"high risk of diversion to military use."An additional 46 contracts worth $161.5 million have been denied approval by the 661 Committee, pending appeal.

Contracts containing GRL items represent 7.8 per cent, in terms of value, of all applications processed by the UN experts so far.

Humanitarian revenue shortfall

Due to a cumulative oil revenue shortfall dating from phase VIII (9 June - 5 December 2000) through phase Xll of the programme, 2,371 UN-approved humanitarian supply contracts worth some $4.3 billion, currently lack funds. The sectors affected by the revenue shortfall are: agriculture ($676 million); food handling ($596 million); electricity ($467 million); health ($515 million); water and sanitation ($469 million); housing ($454 million); food ($421 million); telecommunications and transportation ($351 million); education ($329 million).

Oil-for-food programme

The oil-for-food programme was established by the Security Council on 14 April 1995. Some 3.3 billion barrels of Iraqi oil valued at about $61.7 billion have been exported under the programme since December 1996. Of this amount, 72 per cent of the total has been allocated towards humanitarian needs nationwide since December 2000. The balance goes to: Gulf War reparations through a Compensation Fund (25 per cent since December 2000); UN administrative and operational costs for the programme (2.2 per cent) and costs for the weapons inspection programme (0.8 per cent).

Since December 1996 about $41 billion worth of humanitarian supplies, including $3.6 billion worth of oil spare parts, have been approved by the 661 Sanctions Committee and the Office of the Iraq Programme. Of this amount, some $26 billion worth of humanitarian supplies and equipment have been delivered to Iraq under the oil-for-food programme, including $1.6 billion worth of oil industry spare parts and equipment. An additional $10.5 billion worth of supplies are currently in the production and delivery pipeline.

Additional information is available from the website of the Office of the Iraq Programme. For further information please contact Ian Steele email: