Security Council doubles amount Iraq may spend for oil spare parts, equipment

Press Release - SC/6838 - 20000331
The Security Council this morning, resuming its consideration of the humanitarian situation in Iraq, increased the amount of money that Iraq may use to purchase oil spare parts and equipment to $600 million under the programme of humanitarian assistance known as "oil-for-food".

Adopting resolution 1293(2000) unanimously, the Council welcomed the 10 March report of the Secretary-General, which had recommended the increase. Previously, Iraq was permitted to use $300 million during each six-month phase of the programme, which began in December 1996. The progamme's seventh phase began on 11 December 1999.

The Secretary-General recommended the increase because of the deteriorating condition of Iraq's oil industry, as confirmed by a panel of oil experts who visited Iraq from 16 to 31 January. A summary of their findings is included in the Secretary-General's report.

The Council also expressed it willingness to consider expeditiously other recommendations contained in the Secretary-General's report and the provisions of section C of resolution 1284 (1999). That resolution established the United Nations Monitoring, Verification and Inspection Commission (UNMOVIC) for Iraq and section C concerns various aspects of the humanitarian programme.

The meeting convened at 10:45 a.m. and adjourned at 10:50 a.m.

Council Work Programme

The Security Council met this morning to resume it discussion of the situation between Iraq and Kuwait, in particular the programme of humanitarian assistance for Iraq, also known as the "oil-for-food" programme. The programme allows the Government of Iraq to sell a certain quantity of oil and use the proceeds for humanitarian goods for the Iraqi people. The Council held a day-long debate on the issue on 24 March (see Press Release SC/6833).

The programme was established by the Council in 1995 as a temporary measure to provide for the humanitarian needs of the Iraqi people, in the context of the sanctions regime applied to Iraq in 1990 and in force until it complies with resolution 687 (1991) of 3 April 1991. That resolution, among other things, set the terms for the ceasefire between Iraq and Kuwait and decided that Iraq's weapons of mass destruction should be destroyed.

The Council had before it a report of the Secretary-General (document S/2000/208), submitted pursuant to Council requests in resolutions 1284 (1999) and 1281 (1999) to report on: progress made in meeting the humanitarian needs of the Iraqi people and on the revenues necessary to meet those needs; Iraq's existing petroleum production and export capacity, as well as recommendations for increasing that capacity; and whether Iraq has ensured the equitable distribution of medicine, health supplies, foodstuffs, and materials and supplies for essential civilian needs.

For the preparation of the report, the Office of the Iraq Programme undertook an inter-agency review of the humanitarian programme, which was established by resolution 986 of 14 April 1995 and is currently in its seventh phase, effective 11 December 1999. It also undertook a review of the whole process of contracting, application processing, obtaining approval by the Security Council Committee established by resolution 661 (1990) concerning sanctions, procurement and shipment, as well as the timely distribution of humanitarian supplies within Iraq.

The report also examines the extent to which the recommendations contained in the Secretary-General's supplementary report dated 1 February 1998 (document S/1998/90), as endorsed by the Council, have been implemented and identifies additional measures aimed at increasing the effectiveness of the programme, with a view to achieving substantial improvement in both the health and nutritional status of the population and also to address the deterioration of social services infrastructure.

In his introduction, the Secretary-General states that, in any assessment of the programme and its implementation, it is essential to bear in mind the exceptional and unprecedented complexity of the programme and that it should not, therefore, be confused with a development programme and the requirements of such a programme. Further, he states, despite the great increase in the range of resource available to meet humanitarian needs throughout Iraq, the programme was never intended to meet all humanitarian needs and must be assessed in that context.

Section II, on revenue generation and status of the oil industry, contains sections on oil production and sale of petroleum and petroleum products, status of the oil industry, and United Nations accounts pertaining to the oil industry. It states that, for phases I to VI, total crude oil export from Iraq under the programme amounted to 1.5 billion barrels, with a value of $20.7 billion.

Concerning the status of the oil industry, the report summarizes a more detailed report of the group of experts established by the Secretary-General to report on Iraq's existing petroleum production and export capacity, as well as to make recommendations for increasing that capacity. The full report is being supplied to the Council. The experts, who visited Iraq from 16 to 31 January 2000, analyse production, investment levels, refining, transportation and storage, spare parts and equipment.

The report states that since sanctions were imposed in 1990, the oil industry of Iraq has suffered seriously as a result of the absence of the required spare parts and equipment. There has been a massive decline in the condition, effectiveness and efficiency of the oil infrastructure. In general, the group of experts reports that the "previously noted generally lamentable state" of the Iraqi oil industry had not improved. The decline in the condition of all sectors of the industry continued and was accelerating. "Without prompt action", it states, "a continued decline in production is strongly indicated."

Section III of the Secretary-General's report, Observation and Monitoring Activities, describes the inspection and authentication of humanitarian supplies, the monitoring of oil spare parts and equipment, and the United Nations observation mechanism. Section IV covers the processing and approval of applications, while Section V describes the effectiveness, equitability and adequacy of the programme implementation. There are two annexes, one on the status of the United Nations accounts pertaining to the Iraq programme and a second on the number and value of letters of credit pertaining to oil proceeds and humanitarian supplies.

In the report's conclusions, the Secretary-General states that the adequacy of the programme to address the humanitarian needs of the Iraqi population had been a continuing concern throughout the period of implementation of Council resolution 986 (1995). Despite the difficulties and shortcomings identified in his report, the programme has provided substantial assistance in all sectors to address pressing humanitarian needs affecting the lives of the Iraqi people. The total amount of funds made available for the implementation of the programme from December 1996 to 31 January 2000 was $13.2 billion. As at 31 January, the total value of the supplies delivered to Iraq was $6.7 billion -- including over 13 million tons of food basket items valued at $4.4 billion and health supplies worth just under $840 million. Additional approved supplies with a total value of $2.7 billion were awaiting delivery, and additional supplies were being contracted during phase VII.

The Secretary-General states that, by adopting resolution 1284 on 17 December 1999, the Security Council responded to concerns that the underlying weaknesses in the implementation of resolutions 986 (1995) and 1153 (1998) had not been adequately addressed and that, consequently, improvements in the humanitarian situation have been below expectations. The Secretary-General is hopeful that effective implementation of the provisions of section C of resolution 1284, which addresses those weaknesses, will enhance the impact of the programme.

By the same resolution, the Council lifted the ceiling on revenues earned by oil exports which, coupled with the present increase in the price of oil, will make more funds available for the implementation of the programme, he continues. However, lifting the ceiling and authorizing improvements in programme implementation alone will not suffice. The effectiveness of the programme has suffered considerably, not only because of shortfalls in the funding level, but also because of the very large number of applications placed on hold (at 31 January, the total value of those applications was over $1.5 billion). In that regard, the Secretary-General reiterates his appeal for a further review and reconsideration of positions taken with regard to applications placed on hold.

The Secretary-General states that he has directed the Office of the Iraq Programme to review further the information requirements of the Security Council Sanctions Committee in respect of applications placed on hold. Further, he has directed the Office to identify ways in which the observation mechanism can more effectively track and report on a programme that is rapidly increasing in size and complexity and to enhance observation procedures for items of special interest to the Committee.

The Secretary-General also calls upon the Government of Iraq:

  • To move away from an inventory-based approach to the distribution plan in favour of a project-oriented one;
  • To share with the programme all existing baseline data relevant to the programme and, where such data do not exist, to collaborate with the programme in collecting such data through joint surveys and reviews;
  • To share all technical data related to the electricity grid in the three northern governorates so that the rehabilitation there is compatible with established Iraqi engineering standards and specifications;
  • To consider employing internationally recognized pre-shipment inspection agents at the port of shipment using funds in the United Nations Iraq account to improve food quality control;
  • To strengthen cooperation with United Nations observers to ensure unhindered and timely access to all facilities and end-users, notably in the health and education sectors;
  • To ensure that the food basket is distributed regularly and in full each month in order to meet the current nutritional target of 2,300 kilocalories and 54.2 grams of protein per person per day. However, until his recommendations on supplementary feeding programmes are fully implemented, the Government's distribution plan should retain the target provision for the food basket of 2,463 kilocalories and 63.6 grams of protein per person per day to meet the immediate nutritional needs of the Iraqi population;
  • To establish efficient distribution networks for targeted nutrition and supplementary feeding programmes;
  • To ensure adequate funding in the health sector for phases IV to VI to cover recurrent costs and to provide the framework for the restoration of the basic public health care system; and
  • To improve the delivery and administration of drugs for chronic illnesses and ensure that sufficient quantities of anti-infectious and anti-tuberculosis drugs are ordered and distributed.

The Secretary-General also recommends that the Security Council Committee:

  • Improve further its working procedures and understandings with a view to expediting the approval of applications;
  • Identify with greater clarity the reasons for which applications have been placed on hold so that the Office of the Iraq Programme, in consultation with all concerned, may provide all available information to facilitate the lifting of such holds;
  • Streamline the processes by which such holds can be lifted;
  • Renew its efforts to reach consensus on the proposal submitted by the Office of the Iraq Programme on 11 February 1999 for a new system to expedite the rate at which funds are reimbursed from the ESC (13 per cent) to the ESB (53 per cent) accounts;
  • Review further the options contained in the paper submitted on 7 July 1999 by the Office of the Iraq Programme concerning payment clauses for the ESB (53 per cent) account in order to meet the legitimate need to provide commercial protection for purchases made by the Government of Iraq within the provisions of the rules and regulations governing the implementation of the programme; and
  • Address the difficulties encountered in the appointment of additional oil overseers in order to correct the present untenable situation.

Concerned with the deteriorating condition of the oil industry of Iraq, the Secretary-General reiterates his earlier recommendation that the Council approve the request to increase by $300 million the allocation for oil spare parts and equipment for phase VI. He also recommends that the Council approve the allocation of an additional $300 million for spare parts and equipment for phase VII in order to offset permanent damage to oil-bearing structures in Iraq.

Raising the level of allocations alone is not sufficient, the report continues. A special effort must be made to approve most expeditiously the applications for oil spare parts and equipment. The total value of applications placed on hold as at 31 January was $291 million, more than half of the total of $506 million approved.

The Secretary-General states that, despite the measures adopted to improve the funding level and widen the scope of the programme, its full potential has not been attained because of the numerous difficulties described in the report. Accordingly, he appeals once more to all concerned "to intensify their efforts in order to enable the programme to address more effectively the difficult conditions under which the Iraqi people continue to live".

Draft Resolution

The Council also had before it a draft resolution (document S/2000/266) which reads as follows:

"The Security Council,

"Recalling its previous relevant resolutions and in particular its resolutions 986 (1995) of 14 April 1995, 1111 (1997) of 4 June 1997, 1129 (1997) of 12 September 1997, 1143 (1997) of 4 December 1997, 1153 (1998) of 20 February 1998, 1175 (1998) of 19 June 1998, 1210 (1998) of 24 November 1998, 1242 (1999) of 21 May 1999, 1266 (1999) of 4 October 1999, 1275 (1999) of 19 November 1999, 1280 (1999) of 3 December 1999, 1281 (1999) of 10 December 1999, and 1284 (1999) of 17 December 1999,

"Welcoming the report of the Secretary-General of 10 March 2000 (S/2000/208), in particular his recommendation on additions to the current allocation for oil spare parts and equipment pursuant to paragraph 28 of resolution 1284 (1999),

"Acting under Chapter VII of the Charter of the United Nations,

"1. Decides, pursuant to paragraphs 28 and 29 of resolution 1284 (1999), that from the funds in the escrow account produced pursuant to resolutions 1242 (1999) and 1281 (1999) up to a total of $600 million may be used to meet any reasonable expenses, other than expenses payable in Iraq, which follow directly from the contracts approved in accordance with paragraph 2 of resolution 1175 (1998), and expresses its intention to consider favourably the renewal of this provision;

"2. Expresses its willingness to consider expeditiously other recommendations contained in the Secretary-General's report of 10 March 2000, and the provisions of section C of resolution 1284 (1999);

"3. Decides to remain seized of the matter."

Action on Draft Resolution

The Security Council unanimously adopted resolution 1293 (2000).