East West Debt, solving defaulted trade and bank debt

East-West Debt oct. 2002 news, update : IRAQ

Iraq  The United Nations Security Council passed a resolution which introduces improvements in its humanitarian oil-for-food program with Iraq which started in 1996. The $10 billion program allows Baghdad to sell its oil to buy food, medicine and other humanitarian goods for the civilian population. However, the US has delayed more than $5 billion of imports for Iraq in recent years as it suspected parts of it were used for military purpose. This in turn resulted in a growing number of blocked contracts and the criticism from the UN Secretariat, relief agencies and other governments that the US was sabotaging the program grew stronger.

Last year, Washington in its attempt to stop Iraq's $2-3 billion of illicit trade, agreed to rewrite the rules of the humanitarian program. The UN is granted much more power now to decide which contracts are to be approved and which ones have to be denied.

As a result of extensive negotiations with Russia, one of the most significant Iraqi trading partners and thus its most important ally in the Security Council, it was possible to adopt a new plan which will allow Iraq to import with little control all humanitarian goods except those listed by the Security Council as having military uses.

The UN has already fully implemented the new procedures and, as a result, states can more quickly process contracts on all goods that are not directly subject to the sanctions in place and are not referenced on a Goods Review List.

Billions of dollars of stalled contracts will now be reassessed by the UN. However, Iraq has no longer the money to pay for the goods as Baghdad's recent decision to halt exports, and a drop in global oil prices, have left the humanitarian program more than $4 billion short of funds.

The United Nations panel, based in Geneva, paid out over $700 million in July for the damages arising from Iraq's 1990 invasion and later occupation of Kuwait. The UN Compensation Commission, which draws its funds from a portion of Iraqi oil revenue, distributed a total of $708 million for 961 successful claimants. The money was granted to 33 countries and two international organizations - the UN Development Programme (UNDP) and the UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). The countries and the two organizations are responsible for distributing payments to the successful claimants within one year, or the money must be returned to the Commission.

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