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11 September 2001  

Oil-for-Food Background Information


Weekly update

(1-7 September 2001)

According to a briefing provided by the United Nations Children’s Fund (UNICEF) to the Security Council’s 661 Sanctions Committee on the impact of inputs under the United Nations oil-for-food programme on the water and sanitation sector, there has been a 17 per cent increase in water production at water treatment plants and a marginal improvement in the water distribution network in the central and southern governorates of Iraq.  However, there has been a two per cent decline in access to potable water in urban areas, while such access has increased by five per cent in rural areas.  In the sanitation sub-sector, the Agency noted a “significant improvement” in solid waste disposal in Baghdad City, with “insignificant improvement in the sewerage network” throughout the centre and south of the country.

 The Agency attributed the low impact of programme inputs on the water and sanitation sector to several factors including, extensive electricity rationing, water leakage and losses in the distribution network, the lack of a cash component to cover installation, labour and transportation costs, poor maintenance, brain-drain of skilled labour and the large number of contracts placed on hold by the 661 Committee.  The water and sanitation sector has the highest relative volume of contracts on hold of all the sectors in the programme.  As at 5 September, it stood at over $495 million, representing 31 per cent of all contracts circulated to the Committee for this sector.  Also, as noted in the last report of the Secretary-General on phase IX, at the end of that phase, the Office of the Iraq Programme (OIP) had not received a single contract for this sector signed by the Government of Iraq and suppliers.  

 In the oil sector, the Committee has not yet reached an agreement on a pricing mechanism for Iraqi crude oil deliveries to the United States market for September.  Iraqi oil exports under the programme were up slightly from the previous week’s total of 13 million barrels to 14.2 million barrels in the week 1 – 7 September.  Of the total nine crude oil liftings from the two authorized loading terminals of Mina al-Bakr and Ceyhan, four were from the former, with seven million barrels, and five from the latter, with 7.2 million barrels.

 The average price of Iraqi crude oil during the week was approximately €26 or $23.20 per barrel.  The estimated revenue generated from the week’s exports was €367 million (euros) or $329 million, at current prices and rates of exchange.  This raised the total revenue in current phase X to €2.92 billion or $2.61 billion.  So far in phase X, which runs from 4 July to 30 November 2001, Iraqi oil exports have totaled 123.5 million barrels.  The United Nations oil overseers have approved 110 oil purchase contracts for this phase, including three during the week in review.  These contracts are for 299 million barrels of oil, 175 million of which are for Basrah Light and 124 million for Kirkuk crude. 

 Since the beginning of the programme on 10 December 1996, Iraqi oil sales of over 2.6 billion barrels have raised an estimated $38.6 billion and €9.6 billion ($8.2 billion) in revenue.  With the adoption of Security Council resolution 1330 (2000) on 5 December 2000, 72 per cent of the oil proceeds fund the humanitarian programme in Iraq, 59 per cent of which is for the 15 central and southern governorates and 13 per cent for the three northern governorates.

 During the same period, $25.6 billion worth of contracts for humanitarian supplies and another $2.2 billion worth of contracts for oil industry spare parts and equipment have been approved by the 661 Committee and “fast-tracked” by OIP.  Of these, more than $14.6 billion worth of humanitarian supplies and $888 million worth of oil industry spare parts and equipment have been delivered to Iraq.  Another $11 billion worth of humanitarian supplies and $1.3 billion worth of oil spare parts and equipment are in the production and delivery pipeline.

The value of contracts placed on hold by the 661 Committee reached an all-time high at the end of the week, standing at $3.93 billion.  In all, 1,515 contracts were on hold, of which 1,048 contracts, worth over $3.4 billion, were for humanitarian supplies and 467 contracts, worth $506 million, were for oil industry spare parts and equipment.  During the week, the Committee released from hold 18 contracts, worth $11 million, while it placed on hold 32 new contracts, valued at $312 million.    

As at 6 September, over $1.3 billion and €626 million in unused funds were available in the United Nations escrow account for the issuance of additional letters of credit for the purchase of humanitarian supplies and oil spare parts and equipment by the Government of Iraq.

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Produced for media and public information – not an official United Nations Document
For further information please contact Hasmik Egian, OIP - NY, 1.212.963.4341