11 May 2001
In the run-up to the expected showdown at the UN in three weeks, when the current ninth phase of the Iraqi oil-for-food program ends, US State Department officials have embarked on intensive consultations with their four fellow permanent Security Council members on the ideas for “smart sanctions” the Americans intend to propose in the UN resolution covering the program’s 10th phase. The proposals, expounded to the French, British, and Russians by US assistant secretary of State David Welch in late April, would result in far fewer humanitarian contracts being put on hold, lessening the criticism directed at the Americans and British for their tough stance. But far more appealing to Russia, China, and France, it could allow large-scale investment in the Iraqi upstream.
Diplomats tell Energy Compass that the US wants to slash the huge number of humanitarian contracts put on hold because the goods and equipment are deemed “dual use” — they could have military capabilities. The Americans propose restricting the interpretation of “dual use” to that used by the UN Monitoring, Verification and Inspection Commission (UNMOVIC), rather than their own broader interpretation. As of Apr. 30, 1,715 contracts were on hold, worth $3.6 billion, UN figures show. On average, UNMOVIC puts about 4% of the contracts submitted on hold on dual use grounds. The US has been responsible for 20%.
Right now, new contracts are submitted to the Office of the Iraq Program. Some are approved by the UN Secretariat, while the remainder go to the UN sanctions committee for further scrutiny. Under the new procedures, more than 90% of contracts would be approved by the secretariat, without submitting them to the sanctions committee.
By limiting sanctions to the import of arms and a stricter definition of dual-use items, the embargo on foreign investment in oil exploration and production in Iraq could essentially be scrapped — particularly appealing to the Russian, Chinese, and French, whose oil companies have all negotiated multibillion-dollar deals with Baghdad, but have been unable to go ahead under the current sanctions regime.
Washington is also offering “carrots” to Iraq’s neighbors, whose cooperation is vital if the sanctions rework is to succeed. Mideast sources say the US is rethinking its objection to civilian flights in and out of Baghdad provided they are limited to three regional gateways, and UN monitors ensure cargoes don’t include banned items. Jordanian Trade Minister Wasef Azar announced this week that his country will resume regular flights to Baghdad next month. Amman began charter flights last November, but has to get UN sanctions committee approval of passenger lists 48 hours before departure.
As part of the overall review, US military officials are debating a major change in patrols over the no-fly zones in northern and southern Iraq. With fears growing that pilots could be killed, they are reportedly recommending that the US and UK patrols be halted or reduced, though Iraqi aircraft will still be prevented from overflying the zones. The change would certainly appeal to US ally Saudi Arabia, which, along with Kuwait, is often accused by Iraqi officials of allowing US and British aircraft to use its territory to fire at Iraqi civilians.
In return for loosening sanctions, the Americans want to enforce tighter controls on Iraqi oil revenues, and on imports — a harder sell. Iraq sounded the death knell for the UN oil export regime when it persuaded lifters to pay an illegal surcharge, and increased smuggling in collaboration with Syria, all beyond UN financial control.
According to one diplomat, the US is seeking a “magic formula where it can insure cooperation by Jordan, Syria, and Turkey, while at the same time respecting the sovereignty of those countries.” One possibility would be to allow the three to import as much Iraqi crude oil and products as they wanted, putting payments into special escrow accounts that Iraq could use to buy goods from them. Monitors would be installed in the three countries to ensure that Iraq didn’t try to import weapons or dual-use items. Other Security Council members have suggested a less tough regime, with Syria and Turkey allowed to arrange the same kind of barter deals with Iraq that Jordan has. They would be entrusted with surveillance of their own borders while trading freely with Iraq outside UN control.
So far, though, the US has offered little to tempt them to cut down on oil smuggling. It now has less than three weeks to do so. Although the current phase expires on Jun. 3, diplomats say a vote on the resolution governing the next phase should be taken on May 31 to ensure a smooth transition.
Baghdad is meanwhile brandishing its own carrots and sticks. Following talks with Turkish trade officials in Baghdad this week, Iraqi Trade Minister Mohammad Mahdi Saleh said Baghdad will boost trade with Ankara to compensate for the $35 billion Turkey says it has lost because of the 11-year UN sanctions regime. The same day, Iraqi deputy prime minister Tareq Aziz warned Iraq’s neighbors that they risk losing their economic and trade advantages if they implement Washington’s “smart sanctions.” The ruling Baath Party newspaper, Al-Thawra, went further, saying Baghdad will deem such cooperation an “act of hostility,” and will “respond adequately.”
By Ruba Husari, London
(Published in Energy Compass, 11 May 2001)