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29 October 2002
Oil-for-Food Background Information


Weekly Update

(19 - 25 October 2002)

The Office of the Iraq Programme (OIP) approved an important contract for two gas turbines for Dibis power plant in Iraq, valued at $80 million. Reviewed in compliance with the new contract processing procedures of Security Council resolution 1409 (2002) for the supply of humanitarian goods to Iraq under the oil-for-food programme, the contract was approved by the United Nations Secretariat after the supplier provided the additional technical information requested and no Goods Review List (GRL) items were found. The contract had been placed on hold by the Security Council’s 661 sanctions committee in December 2000.

Once installed and commissioned, the gas turbines will produce power for the northern governorates of Erbil and Sulaymaniyah, which will be reconnected to the national electricity grid as part of an effort to increase the supply of electricity to all three northern governorates. A third governorate, Dahuk, is already connected to the national electricity grid.

Iraqi oil exports under the programme plunged from the previous week’s record high of 3.03 million barrels per day to 729,000 barrels in the week ending 25 October. The exports, with an estimated value of €126 million (euros) or $123 million, at current prices and rate of exchange, were completed in four shipments - one from Mina-al-Bakr with 2 million barrels of oil and three from Ceyhan with 3.1 million barrels. The average price of Iraqi crude oil during the week was approximately €24.65 or $24.05 per barrel.

In current phase XII of the programme, which ends on 25 November 2002, buyers of Iraqi crude oil have lifted almost 160 million barrels out of 472 million barrels approved by the United Nations oil overseers under 191 contracts, including three new contracts approved in the past week. So far in this phase, Iraqi oil exports have generated an estimated €3.96 billion or $3.87 billion in revenue. Iraq would need to export about $7 billion worth of oil during the current phase in order to meet its humanitarian programme budget of over $5 billion.

Since the beginning of the programme on 10 December 1996, Iraq has exported some 3.2 billion barrels of oil at an estimated $38.6 billion and €21.5 ($19.4 billion) in revenue. With 72 per cent of the oil proceeds allocated to the humanitarian programme, some $38.9 billion worth of contracts have been approved by the 661 Committee and OIP for the purchase of various humanitarian supplies and equipment, including about $3.5 billion worth of oil industry spare parts and equipment. So far, about $24.9 billion worth of supplies and equipment have been delivered to Iraq, including $1.5 billion worth oil spare parts and equipment. An additional $10 billion worth of supplies and equipment, for which funds have been set aside, are in the production and delivery pipeline, including $1.8 billion worth of oil industry equipment.

As a result of a revenue shortfall from earlier phases of the programme, currently 1,552 approved humanitarian supply contracts, worth about $3.08 billion, are without funds and therefore cannot be delivered to Iraq. The sectors affected by the revenue shortfall are: electricity with $640 million; agriculture with $541 million; food handling with $510 million; health with $315 million; housing with $309 million; water and sanitation with $284 million; telecommunications and transportation with $241 million; education with $236 million.

Out of $6.16 billion worth of humanitarian supply contracts processed by the United Nations Secretariat under the new set of procedures of Security Council resolution 1409 (2002), contracts worth around $2.37 billion (38.4 per cent) have been approved by OIP after having been assessed by the United Nations Monitoring, Verification and Inspection Commission (UNMOVIC) and the International Atomic Energy Agency (IAEA) as not containing any Goods Review List (GRL) items, including a number of contracts previously placed on hold by the 661 Committee. UNMOVIC/IAEA have categorized $3.56 billion worth of contracts (57.8 per cent) as “GRL non-compliant”, requiring additional technical information from suppliers to enable final assessment. So far, $232 million worth of contracts (3.8 per cent) have been found to contain GRL items, of which $2.2 million worth have been approved by the 661 Committee.

The process of re-circulating and review of contracts previously placed on hold by the 661 Committee has now been completed by UNMOVIC/IAEA, as required under paragraph 18 of the new set of procedures. Some $1.08 billion worth of contracts previously on hold have been assessed as GRL-free and, therefore, approved by OIP, while UNMOVIC/IAEA have put another $3.39 billion worth of contracts in the category of “GRL non-compliant”, requiring additional technical information from the suppliers. GRL items have been found in 75 contracts previously on hold worth $222 million.

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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