May 2011 Monthly Forecast

Posted 29 April 2011
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Expected Council Action
A report from Iraq is expected in early May on its plans for a new mechanism that will enable the scheduled termination of the DFI to take place. At time of writing, no briefing or Council action was scheduled.

Resolution 1483 in 2003 established the Development Fund for Iraq (DFI) to meet Iraq’s humanitarian and economic reconstruction needs following the fall of the Saddam regime in 2003. The DFI was provided with immunities to prevent creditors from seizing Iraqi oil revenue and financial assets. It holds the proceeds of petroleum export sales from Iraq as well as balances from other frozen Iraqi funds.

Resolution 1905 in 2009 extended the DFI and related immunities for another year and called on Iraq to establish an action plan and timeline to ensure the transition to a post-DFI mechanism by the end of 2010. This deadline was then further extended by the Council in resolution 1956 at a high-level meeting on Iraq held on 15 December 2010.

Resolution 1956:

  • terminated, as of 30 June 2011, the DFI and the International Advisory and Monitoring Board (IAMB) that monitors the DFI;
  • welcomed Iraq’s decision not to request any further extensions of DFI financial immunities and decided on a final extension of immunities until 30 June;
  • affirmed that 5 percent of the proceeds from all export sales of petroleum would continue to be deposited into the compensation fund established by resolution 687 (1991);
  • called on Iraq to work closely with the Secretary-General to finalise the transition to a post-DFI mechanism by 30 June, including putting in place external auditing arrangements;
  • requested Iraq to provide the Council with a written report by 1 May on progress made on transitioning to a post-DFI mechanism, as well as written confirmation once the transfer of funds from the DFI to the successor mechanism is complete; and
  • requested the Secretary-General to provide ongoing written reports to the Council every six months on compliance with making required deposits to the compensation fund, beginning by 1 January 2012.

Key Issues
The key issue for the Council is whether progress made by Iraq in transitioning to a post-DFI mechanism appears to be satisfactory.

Options for the Council include:

  • taking no action at present while continuing to monitor Iraq’s transition to a post-DFI mechanism throughout June;
  • using the May benchmark as an occasion to issue a press statement (perhaps congratulating Iraq on its progress if appropriate or encouraging continued progress); or
  • an informal meeting to assess progress with the other outstanding issues such as the outstanding matters between Iraq and Kuwait.

Council and Wider Dynamics
It seems most Council members continue to feel that progress made by Iraq in meeting its international obligations should be assessed regularly throughout the year. In particular, the resolutions and statement adopted by the Council in December call on Iraq to ratify the IAEA Additional Protocol and make progress on issues with Kuwait. While resolution 1956 is viewed as an important step that provides final direction on establishing a DFI-successor mechanism, most Council members do not seem to foresee any significant problems with Iraq’s completing the transition by 30 June.

The US is the lead country on Iraq issues in general, and the UK is the lead on Iraq/Kuwait issues.

UN Documents

Selected Security Council Resolutions

  • S/RES/1958 (15 December 2010) terminated the Oil-for-Food programme and established an escrow account to provide indemnification to the UN.
  • S/RES/1957 (15 December 2010) terminated the WMD-related Chapter VII measures and urged Iraq to ratify the Additional Protocol as soon as possible.
  • S/RES/1956 (15 December 2010) extended the DFI and related immunities a final time until 30 June 2011.
  • S/RES/1905 (21 December 2009) extended the arrangements for the DFI and the IAMB until 31 December 2010 and called on Iraq to develop an action plan and timeline for a post-DFI mechanism in 2010.
  • S/RES/1483 (22 May 2003) established sanctions against the previous Iraqi government, created the DFI, provided immunity to Iraqi petroleum products and envisaged the termination of the Oil-for-Food programme.
  • S/RES/692 (20 May 1991) established the UN Compensation Commission and the UN Compensation Fund.

Meeting Record

  • S/PV.6418 (10 November 2010) was the latest briefing on the DFI and the IAMB.

Latest Secretary-General’s Report

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