4 June 1997


Press Release
SC/6380



SECURITY COUNCIL EXTENDS IRAQ 'OIL-FOR-FOOD' ARRANGEMENT FOR ADDITIONAL 180 DAYS, BEGINNING 8 JUNE

19970604
Resolution 1111 (1997), Adopted Unanimously, Directs Expeditious Processing of Contract Applications

Acting under Chapter VII of the United Nations Charter, the Security Council this afternoon decided that the provisions of its resolution 986 (1995), which permits the sale of Iraqi oil to pay for humanitarian goods and their distribution in the country, shall remain in force for another 180 days, beginning at 00.01 hours (EDT) on 8 June.

Through its unanimous adoption of resolution 1111 (1997), the Council also directed the Sanctions Committee established under its resolution 661 (1990) to process expeditiously contract applications submitted under the present resolution as soon as the Secretary-General has approved a new plan submitted by Iraq, guaranteeing equitable distribution and including a description of the goods to be purchased.

The Council asked the Secretary-General to report to it 90 days after the start of the renewal period and again prior to the end of the 180-day period on whether Iraq has ensured the equitable distribution of medicine, health supplies, foodstuffs, and material and supplies for essential civilian needs, financed from the revenues accruing from the sale of Iraqi oil.

The Secretary-General was also asked to report to the Council on the adequacy of those revenues to meet Iraq's humanitarian needs, as well as on its capacity to export enough petroleum and petroleum products to produce the sum not exceeding a total of $1 billion every 90 days, as specified in resolution 986 (1995). The Sanctions Committee was also asked to report to it at the same intervals.

The Security Council further decided to conduct a thorough review of all aspects of the implementation of the present resolution, after 90 days and before the end of the 180-day period, based on the reports of the Secretary- General and of its Sanctions Committee.


Under resolution 986 (1995), oil from Iraq is supplied through the Kirkuk-Yumurtalik pipeline in Turkey and from Iraq's Mina al-Bakr oil terminal, with the larger share being shipped via the pipeline. The sale of the petroleum products is monitored by the Sanctions Committee with the assistance of independent inspection agents. Money derived from the sale of the oil is deposited in an escrow account, to be used to meet the humanitarian needs of the Iraqi population.

On 20 May 1996, the United Nations Secretariat and the Government of Iraq signed a Memorandum of Understanding covering such questions as the distribution of humanitarian goods, establishment of the escrow account, and the sale of petroleum and petroleum products originating in Iraq. Four independent overseers were appointed by the Secretary-General on 9 August 1996 to assist United Nations Headquarters with expertise in the international oil trade.

The meeting, which was called to order at 12:39 pm., was adjourned at 12:42 pm.

Resolution Adopted

The resolution adopted by the Council reads as follows:

"The Security Council,

"Recalling its previous resolutions and in particular its resolution 986 (1995) of 14 April 1995,

"Convinced of the need as a temporary measure to continue to provide for the humanitarian needs of the Iraqi people until the fulfilment by Iraq of the relevant Security Council resolutions, including notably resolution 687 (1991) of 3 April 1991, allows the Council to take further action with regard to the prohibitions referred to in resolution 661 (1990) of 6 August 1990, in accordance with the provisions of those resolutions,

"Determined to avoid any further deterioration of the current humanitarian situation,

"Convinced also of the need for equitable distribution of humanitarian relief to all segments of the Iraqi population throughout the country,

"Welcoming the report submitted by the Secretary-General in accordance with paragraph 11 of resolution 986 (1995) (S/1997/419), as well as the report submitted in accordance with paragraph 12 of resolution 986 (1995) (S/1997/417) by the Committee established by resolution 661 (1990) of 6 August 1990,


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"Reaffirming the commitment of all Member States to the sovereignty and territorial integrity of Iraq,

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

"1. Decides that the provisions of resolution 986 (1995), except those contained in paragraphs 4, 11 and 12, shall remain in force for another period of 180 days beginning at 00.01 hours, Eastern Daylight Time, on 8 June 1997;

"2. Further decides to conduct a thorough review of all aspects of the implementation of this resolution 90 days after the entry into force of paragraph 1 above and again prior to the end of the 180-day period, on receipt of the reports referred to in paragraphs 3 and 4 below, and expresses its intention, prior to the end of the 180-day period, to consider favourably renewal of the provisions of this resolution, provided that the reports referred to in paragraphs 3 and 4 below indicate that those provisions are being satisfactorily implemented;

"3. Requests the Secretary-General to report to the Council 90 days after the date of entry into force of paragraph 1 above, and again prior to the end of the 180-day period, on the basis of observation by United Nations personnel in Iraq, and on the basis of consultations with the Government of Ira, on whether Iraq has ensured the equitable distribution of medicine, health supplies, foodstuffs, and materials and supplies for essential civilian needs, financed in accordance with paragraph 8 (a) of resolution 986 (1995), including in his reports any observations he may have on the adequacy of the revenues to meet Iraq's humanitarian needs, and on Iraq's capacity to export sufficient quantities of petroleum and petroleum products to produce the sum referred to in paragraph 1 of resolution 986 (1995);

"4. Requests the Committee established by resolution 661 (1990), in close coordination with the Secretary-General, to report to the Council 90 days after the date of entry into force of paragraph 1 above and again prior to the end of the 180-day period on the implementation of the arrangements in paragraphs 1, 2, 6, 8, 9 and 10 of resolution 986 (1995);

"5. Directs the Committee established by resolution 661 (1990) of 6 August 1990 to process expeditiously contract applications submitted under the present resolution as soon as the Secretary-General has approved the new Plan submitted by the Government of Iraq, guaranteeing equitable distribution and including a description of the goods to be purchased with the revenues of the sale of petroleum and petroleum products authorized by the present resolution;

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


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Report of Secretary-General

In a report to the Security Council (document S/1997/419), the Secretary-General recommends a six-month renewal of the programme by which Iraqi oil is sold to meet humanitarian needs in the country. He says that most, if not all, of the problems associated with the programme's initial implementation which resulted in a number of difficulties and delays have now been overcome.

The Secretary-General adds, however, that he is "troubled by the persistent lags and other difficulties encountered in the processing of applications, which have resulted in major delays in the provision of several items, in particular medicine and pharmaceutical supplies, of which there is demonstrably a critical and sometimes desperate shortage".

As at 30 May, according to the report, total oil sales had reached 119.5 million barrels and the receipts in the United Nations Iraq Account at Banque national de Paris had reached $1.7 billion. Also by that date, 630 applications for exports of humanitarian supplies to Iraq had been received by the Security Council Committee charged with monitoring the sanctions against Iraq. Of the 574 applications circulated to the Committee, 331 were approved, 191 placed on hold and 14 blocked. Thirty-eight others are pending under the "no-objection" procedure or awaiting clarification. Food commodities began arriving in Iraq on 20 March and by the end of May 691,648 tons of food had reached the country. Pharmaceuticals began arriving there on 9 May.

The 32 independent inspection agents provided by Lloyd's Register have been authenticating the arrival in Iraq of the humanitarian supplies at the agreed entry points, the report adds.

The Secretary-General's report states that the Under-Secretary-General for Humanitarian Affairs, Yasushi Akashi, visited Iraq between 3 and 9 May to assess the progress in the implementation of the programme and briefed the Security Council on his findings on 22 May. In response to concerns raised by both the Government of Iraq and United Nations agencies about delays in the arrival of humanitarian goods in Iraq and the potential disruptions in food distribution, Mr. Akashi explained the Secretariat's persistent efforts to improve the handling of applications. A number of proposals had also been made by the Government of Iraq. According to the report, other senior Secretariat officials have recently visited Iraq to review implementation of the programme and discuss concerns arising from it.

On the sale of Iraqi petroleum and petroleum products, the Secretary- General's report states that the approval of oil contracts by the oil overseers has proceeded as planned. The overseers have continued to advise the Iraq Sanctions Committee on the pricing mechanisms, contract


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modifications, management of the combined 180-day revenue objective of $2.14 billion (including the pipeline fee) and other pertinent questions related to imports of petroleum originating in Iraq. A total of 51 contracts involving 35 different purchasers have been reviewed and approved by the overseers. Approximately 121 million barrels for the 180 days have been lifted. About 57 per cent of the 114 liftings were made at Ceyhan in Turkey.

According to the report, in the first 90 days, 51.6 million barrels were lifted, 0.7 million less than the total of all approved term and spot contracts for that period. The total revenue generated from the liftings was $1.034 billion. A shortfall of $37 million was carried forward to the second 90 days. During that period, 65 liftings were made, totalling 67.9 million barrels, at an estimated value of $1.116 billion. Based on the assessment of the overseers and the independent inspection agents (Saybolt), Iraq has the capacity to export sufficient quantities of petroleum and petroleum products to meet the revenue target of $1 billion every 90 days.

The Secretary-General states that a total of $1,747,405,752.62 proceeds deposited into the United Nations Iraq Account at the Banque nationale de Paris and letters of credit amounting to $465.9 million issued by the bank on behalf of the United Nations for the payment of humanitarian supplies destined for the whole of Iraq have been distributed, together with related expenditures, as follows:

-- $878.4 million has been allotted for the purchase of humanitarian supplies by the Government of Iraq; expenditures recorded for contracts for humanitarian supplies approved by the Security Council Committee amounted to $572.0 million;

-- $215.4 million has been allotted for the purchase of humanitarian goods to be distributed in the three northern governorates by the United Nations Inter-Agency Humanitarian Programme; expenditures recorded for humanitarian goods contracts approved by the Committee amounted to $49.4 million. In addition, funds under the account will be utilized to reimburse the account for purchase of humanitarian supplies for central and southern Iraq; and for food and medicine delivered to the three northern governorates under the bulk purchase arrangement with the Government of Iraq;

-- $497.2 million has been transferred directly to the United Nations Compensation Fund, with $151.3 million allocated to payment of claims and operating expenses of the Compensation Commission;

-- $36.5 million has been allotted for United Nations expenses associated with the implementation of the programme as specified in resolution 986. Expenditures for administrative costs for all United Nations bodies involved in the programme's implementation amounted to $20.3 million;


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-- $13.3 million has been transferred to the United Nations Special Commission for its operating requirements;

-- $90.0 million has been set aside to cover transportation costs for petroleum and petroleum products originating in Iraq and exported via the Kirkuk-Yumurtalik pipeline through Turkey; and

-- $16.6 million has been transferred directly to the escrow account established by previous resolutions.

The report states that prior to April, the food ration provided by the Government of Iraq satisfied about 50 per cent of daily calories needed and did not meet the full requirement for energy, protein and most essential vitamins and minerals. Furthermore, economic difficulties prevented many Iraqi families from fully complementing their food requirements through market purchases. Consequently, their nutritional status had deteriorated significantly. A survey of 15,000 children under five years of age in 87 primary health care centres in the 15 central and southern governorates showed that 25 per cent of them were malnourished.

As at 28 May, a total of 691,648 tons of food, soap and detergent was expected to have arrived in Iraq, which was 29 per cent of the total allocation for food and related items in the distribution plan, according to the report. The first delivery of medical supplies which arrived on 9 May was distributed to hospitals in all governorates. While there have been no major disruptions in deliveries following the entry of Turkish troops in northern Iraq since 14 May, the report says the United Nations was concerned that were hostilities in the region continue to escalate, it might become necessary for United Nations agencies and local authorities to modify distribution procedures.

The report states that of serious concern also was the presence of mines, mostly in Sulaymaniyah, and a budget of $2.5 million had been allocated for mine-related activities. The number of internally displaced persons has continued to grow as a result of continued factional clashes and the displacement of Kurds from Kirkuk by the Government of Iraq. An inter-agency task force has been established to ensure that much-needed assistance was provided in an integrated manner.

The Secretary-General says that as at 30 May, 132 out of 151 international observers were deployed in central and southern Iraq: 61 geographical observers, 14 multidisciplinary observers and 57 sectoral observers -- 37 from the World Food Programme (WFP), 9 from the World Health Organization (WHO), 8 from the United Nations Children's Fund (UNICEF), 2 from the Food and Agriculture Organization (FAO) and one from the United Nations Educational, Scientific, and Cultural Organization (UNESCO). United Nations


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observers have, in general, been granted satisfactory access to relevant information and to Iraqi officials. Contact with officials in warehouses, silos and mills and with food/flour agents has been generally smooth.

With regard to relations with the government facilitators, the report says there have been government complaints about the pertinence of some questions asked by observers and their attitude regarding local traditions. The United Nations Humanitarian Coordinator has also expressed concern about interference, on five occasions, by government facilitators with the observation process, including interviews with food/flour agents and beneficiaries. The report says those issues have been resolved to the satisfaction of the United Nations and the Government of Iraq and efforts would be made to ensure that the work of the observers remains unimpeded.

The report states that since 20 March United Nations observers have not detected any significant or unacceptable losses during the handling and processing of the commodities. Throughout the country, all indications suggest that during the two months of the actual distribution -- April and May -- all citizens registered under the ration system were receiving a quantitatively and qualitatively identical food basket. United Nations nutritionists have concluded that the current food ration provides food and nutrient supply at basic survival level.

The WFP continues to assist vulnerable groups throughout the country in need of targeted nutritional assistance in addition to the food ration, the report goes on. In the agricultural sector, the FAO considers that resolution 986 is not covering emergency needs such as campaigns to control screw worm outbreaks, vegetable seed requirements or animal vaccination campaigns in central and southern Iraq. The inputs are valued at approximately $4.3 million.

The report notes that any assessment of the adequacy of medical supplies in meeting the health needs of the population is hampered by the slow and partial arrival of medicines and medical supplies. "Indeed, the continuous degradation of the health sector has been exacerbated by this situation", it states further. An inter-agency working group has been set up to monitor the situation. In the educational field, UNESCO believes that approximately $1.8 million is required for projects to support street children and handicapped children and for the rehabilitation of day care centres in disadvantaged regions of the country. The UNICEF is of the opinion that $13.5 million is required to meet urgent humanitarian needs, including for immunization, nutrition or access to water and sanitation.

Also before the Council is a letter from the Chairman of the Security Council Iraq Sanctions Committee, which was established by resolution 661


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(1990), Antonio Monteiro (Portugal), transmitting the Committee's report adopted on 30 May (document S/1997/417).

The report notes that while the export of Iraqi oil has proceeded well, there have been delays in the supply of humanitarian goods. Progress has been made, however, with the processing of applications for humanitarian supplies to Iraq. It says that 630 such applications have been received as at 30 May. Twenty-four of the applications have been cancelled, and 574 circulated to Committee members for action. Of those, 331 have been approved, totalling approximately $816 million, and 191 have been placed on hold. Of the remaining 52, 14 have been blocked and 38 are awaiting the Committee's decisions.

The report says the Committee will continue to address remaining issues with the goal to resolve them expeditiously. Towards that end, it would welcome amendments by Iraq to the categorized list of goods to reflect the updated humanitarian needs of its population.

According to the report, 217 national oil purchasers from 39 countries authorized to communicate with the overseers have been nominated, and as at 30 May, 51 contracts have been approved. Thirty-four of them were term contracts and 17 spot contracts. A total of 121 million barrels of oil for the 180 days were approved for export at an estimated value of $2.16 billion. In view of the volatility of the market, the oil overseers have monitored the price fluctuations together with the contract volumes remaining for the second 90- day period, as well as the schedule and volume of individual liftings, with the purpose of maximizing the revenue for oil delivered through 7 June without exceeding the 180-day revenue objective of $2.14 billion, including pipeline fee.

According to the report, some 114 loadings, totalling 119.5 million barrels, with an estimated value of $2.16 billion, have been completed. In the first 90 days, 51.6 million barrels were lifted, 0.7 million barrels less than the total of all approved term and spot contracts for that period. The total revenue generated from the liftings was $1.034 billion. The shortfall of $37 million was carried forward to the second 90 days in accordance with the proposals of the overseers. For the second 90 days, 65 loadings, totalling 67.9 million barrels at an estimated value of $1.116 billion, have been completed. Three of those liftings were delayed loadings from the first 90 days.

The report observes that the process for approval of applications for supplying humanitarian goods to Iraq has been one of the most complex tasks facing the Committee and its secretariat. The Committee is concerned at the slow pace of contract approval, which has been caused by a number of factors, including the initial insufficiency of funds in the United Nations Iraq


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Account and deficiencies in submitted applications. Committee members who placed holds on contracts indicated that a major reason was that the applications were incomplete or technically inconsistent with its approved distribution plan. The report notes that the Committee is working with its secretariat to eliminate such technical deficiencies to avoid delay in the approval of contracts.

The Committee on 1 April adopted additional points of understanding, allowing it to process applications based upon anticipated revenue as determined by the issuing of an irrevocable letter of credit for oil shipments and confirmation of lifting of oil cargoes, the report goes on. That was on the understanding that the issuing of letters of credit for contracts for humanitarian goods would continue to be based on the availability of funds in the Iraq Account. On 14 May, the Committee adopted further points of understanding.

On matters relating to the Kirkuk-Yumurtalik pipeline, which runs through Turkey, the report says the Committee has on 16 April approved $46,286,616.44 transfer fees requested by Turkey on the understanding that the actual transfer would take place only after proceeds from the sales of oil to cover the fees had been deposited in the Iraq Account and the deductions for the Compensation Fund made.

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