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Iraq: UN's Oil-For-Food Chief Warns That Money Is Running Out

United Nations, 27 February 2002 (RFE/RL) -- The director of the United Nations oil-for-food program in Iraq has warned that the program is running out of funds due to dropping oil prices and what he called the politicization of the process.

The program's director, Benon Sevan, told the UN Security Council on 26 February that the program is projected to have a budget shortfall of nearly $1 billion at the end of the current six-month phase in May. The program is the main provider of humanitarian goods to Iraqis.

The country will remain under sanctions until UN weapons inspectors declare it free of weapons of mass destruction. There have been no inspections since 1998.

Sevan said a decline in world oil prices has contributed to the program's funding problem. And Iraq's oil exports, he said, are currently about 1.4 million barrels a day, compared to the normal assumed rate of 2.1 million barrels per day.

"We have already seen a 35 percent drop in the oil exports of Iraq during this recent phase, and -- compounded with applications which are coming from the previous phase for funding purposes in this phase -- I think we are in deep trouble as far as funding for the program is concerned," Sevan said.

In his report to the Council, Sevan said a major problem has been caused by uncertainties over the price of Iraqi crude oil. These uncertainties stem from a dispute over a pricing mechanism in the Security Council's oversight committee.

The United States and Britain helped institute a policy for retroactive prices, which was to prevent Iraq from charging contractors a surcharge and keeping some of the money outside of the UN-administered account. But the retroactive pricing policy has made contractors reluctant to enter into new agreements. Sevan appealed to all sides to resolve the dispute soon.

Sevan repeatedly faulted the Council's sanctions committee, saying continued failure to act on a number of important issues could bring the program to a halt. He said the humanitarian program has become over-politicized and overshadowed by what he called the "current political atmosphere" surrounding Iraq.

He again criticized the holds on $5 billion in contracts, most of them by the United States. He said they include holds on computers that can be purchased openly in shops in Baghdad.

"There is nothing but paralysis in the [Resolution] 661 committee, I'm sorry to say," Sevan said. "It's like a dead-letter [office]. Whatever you send there, it dies. We have issues sitting there months and months and months."

Sevan's report followed a three-week visit to Iraq in late January and early February. He said that, despite criticism of the six-year-old program, it has made a substantial difference in the lives of Iraqis. He said considerable achievements have been made in the sectors for agriculture, health, food, and electricity.

He said the program has stopped the decline in living standards for Iraqis and improved the health of much of the population, particularly in the three northern governorships where the program is administered by the United Nations.

"There is an ocean of difference [between] what I [saw] the first time I was there in November 1997 and what I [see] now," Sevan said. "There's improvement in all aspects of life. In the north also."

He said the program is now involved in a major project of rehabilitation of infrastructure, including the oil industry. But he said political and procedural obstacles are hurting the program, and he hopes the work of the Security Council committee will be reviewed as soon as today.