February 2003

SANCTIONS IMPOSED: In August 1990 the Security Council adopted resolution 661, imposing comprehensive sanctions on Iraq following that country’s short-lived invasion of Kuwait. Throughout 1991, with growing concern over the humanitarian situation in Iraq, the United Nations and others proposed measures to enable Iraq to sell limited quantities of oil to meet its people's needs. The Government of Iraq declined these offers, contained in particular, in resolutions 706 and 712, adopted in August and September 1991.

AGREEMENT ON OIL-FOR-FOOD: An oil-for-food programme began at the end of 1996 after the United Nations and the Government of Iraq agreed on the details of implementing resolution 986 (1995), which permitted Iraq to sell up to two billion dollars worth of oil in a 180-day period. The ceiling on oil sales was eased during 1998 and finally lifted in 1999, enabling the programme to move from a focus on food and medicine to repairing essential infrastructure, including the oil industry.

DIVIDING THE MONEY: With the adoption of Security Council resolution 1330 (2000) on 5 December 2000, around 72 per cent of the oil revenue funds the humanitarian programme in Iraq (59 per cent for the centre and south and 13 per cent for the three northern governorates); 25 percent goes to the Compensation Commission in Geneva, while 2.2 per cent covers the United Nations costs for administering the programme and 0.8 per cent for the administration of the UN Monitoring, Verification and Inspection Commission (UNMOVIC). Previously, 66 per cent was being allocated to the humanitarian programme (53 per cent for the centre and south and 13 per cent for the three northern governorates), with the Compensation Commission receiving 30 per cent of the revenue. Funds from the two humanitarian accounts finance the purchase of oil industry parts and equipment. The Government of Iraq is responsible for the purchase and distribution of supplies in the 15 governorates in the centre and south. The United Nations implements the programme in the three northern governorates of Dahuk, Sulaymaniyah and Erbil on behalf of the Government of Iraq.

THE DISTRIBUTION PLAN: The programme works through distribution plans prepared by the Government of Iraq and approved by the Secretary-General. Once approved, the distribution plan is the basis for Iraq’s use of the revenue raised during that phase. Distribution plans include thousands of pages of detailed annexes and, from phase V onwards, are available on the OIP Web site. The Web site also includes the status of all contracts from phase V onwards.

OIL-FOR-FOOD: Phase I ran from 10 December 1996 to 7 June 1997. The first oil was exported on 15 December 1996 and the first contracts financed by the sale of oil approved in January 1997. The first shipments of food arrived in Iraq in March 1997 and the first medicines arrived in May 1997. The Security Council has continued the programme in 180-day periods called “phases”. The current oil exporting period is phase XIII, authorized by Security Council resolution 1447 (2002), which came into effect on 5 December 2002 and runs through 3 June 2003.

FOOD & MEDICINE: Since the first food arrived in March 1997, foodstuffs worth over $10 billion and health supplies worth over $2 billion have been delivered to Iraq. The programme has helped to improve the overall socio-economic conditions of the Iraqi people countrywide, within the sanctions regime. In addition, it has prevented the further degradation of public services and infrastructure. In several areas, the programme has stabilised and improved access to such services. In the food sector, the nutritional value of the monthly food basket distributed countrywide has almost doubled since 1996, from about 1,200 to over 2,200 kilocalories per person per day. Malnutrition rates in 2002 in the centre/south of Iraq are half those of 1996 among children under the age of five, with a larger drop in malnutrition in the three northern governorates.

EXPANSION and the OIL INDUSTRY: In April 1998 the Security Council approved a recommendation from the Secretary-General that the ceiling of $2 billion in oil sales be increased to $5.265 billion, providing $3.4 billion for a broader humanitarian programme. In the same month, oil industry experts reported on the "lamentable state" of the oil industry and indicated the oil production level authorized by the Security Council was well beyond Iraq’s capacity at current prices. Resolution 1175 in June 1998 authorized the import of $300 million worth of oil spares and equipment for phase IV. From phase VI onwards this limit has been raised to $600 million per phase. Security Council resolution 1284 (1999) lifted completely the ceiling on the amount of oil Iraq can export under the programme.

APPROVING CONTRACTS: Security Council resolution 1409 (2002), adopted on 14 May 2002, introduced the Goods Review List (GRL) and a new set of procedures for the processing and approval of contracts for civilian supplies and equipment. While previously the majority of contracts for humanitarian supplies were circulated to the Security Council's 661 Sanctions Committee for approval, under the new procedures only contracts that contain GRL items would be sent to the 661 Committee for consideration. As at 31 October 2002, OIP had received over $46 billion worth of contracts, of which over $39 billion had been approved. Humanitarian supplies and oil industry equipment worth more than $25.5 billion dollars had been delivered to Iraq.

FLUCTUATING OIL PRICES: The oil-for-food programme has always been dependent on the international oil market. In the first three phases the price of oil was relatively high but Iraq’s exports were limited by the Security Council ceiling. When the ceiling was raised in mid-1998, the price of oil was collapsing and it was only from mid-1999 onwards that Iraq was able to take advantage of better prices and raised ceilings with exports averaging around 2 million barrels per day and revenue of more than $20 per barrel.