Iraq/Oil for Food

Expected Council Action
The Iraq oil-for-food programme will finally be terminated on 31 December, according to resolution 1483. No further Council action is required. However, the Council will receive recommendations from the Secretary-General on mechanisms to deal with residual issues. The Council is likely to respond to the proposals in a letter.

Key Recent Developments
In August the Secretary-General sent his latest note on arrangements for terminating operations relating to the letters of credit issued in the oil-for-food programme against the UN Iraq escrow account. He highlighted the slow pace or non-provision of authentication documents by the Iraqi government verifying delivery of goods. There are 188 letters of credit (valued at around $208 million) which have expired and for which there are claims of delivery from suppliers. Without authentication documents, vendors cannot be paid. In June the UN Controller had again requested the Central Bank of Iraq to expeditiously issue and transmit those documents to the UN.

The Secretary-General suggested that the Council request the Secretariat to develop proposals for mechanisms to address all issues unresolved after 31 December. This could include arbitration or mediation of commercial disputes between the Iraqi government and companies.

On 8 November, the Council endorsed these suggestions and in a letter requested the Secretary-General to make proposals within three weeks. The Council affirmed that the programme would be terminated on 31 December. It also sent a letter to the Iraqi government asking it to expedite processing of remaining letters of credit, and urged it to provide answers to problems of authentication.

Options
The Council has the following options:

• extend the programme and the letters of credit expiring in December (this seems unlikely);
• endorse the Secretary-General’s expected recommendations to establish a Secretariat mechanism for residual issues; or
• take no action, in effect leaving the residual problems to the parties.

Key Issues
The main issue in December will be whether to authorise the Secretary-General to establish a mechanism to deal with residual issues including the risk of litigation between the Iraqi government and companies after 31 December.

A related issue is whether the funds in the Iraq escrow account should continue to be held pending full resolution of the claims of delivery. Those funds are destined to be transferred to the Development Fund for Iraq under resolution 1483.

Council Dynamics
Council letters regarding the remaining arrangements of the oil-for-food programme are usually drafted by the UK and discussed among the P5 before being circulated to the elected members.

There is consensus within the Council that the letters of credit should not be extended further; all of them expire in December. What position members with commercial interests in the oil-for-food programme (mainly China, France and Russia) will take on possible residual arbitration mechanisms remains to be seen.

Useful Additional Sources

• Oil-for-food programme: http://www.un.org/Depts/oip/index.html

Full forecast