January, 2001

Iraq: the sanctions and the oil crisis

Rimoun Maher Kamel

According to Security Council Resolution 661, international sanctions were imposed on Iraq as a penalty for its invasion of Kuwait in 1990. In April 1991, the Security Council issued Resolution 687 stipulating the conditions for lifting the sanctions, one of the most important of which was the elimination of weapons of mass destruction. As a result of these sanctions, the Iraqi people have suffered on all levels - socially, economically, politically and militarily.



The Oil-for-food Program:

Security Council Resolution 986 ratified the oil-for-food program, which allows Baghdad to export limited amounts of crude oil on the condition that revenues are collected in a special fund for allocation as follows:

53 - per cent for the buying of foodstuffs, medication and necessities for the residents of the central and southern governorates under the Iraqi regime

30 - per cent for the buying of foodstuffs, medication and necessities for the residents of the three northern governorates in Kurdistan, which do not lie under the control of the regime.

13 - per cent for the war compensation fund.

4 - per cent for administration costs, including the expenses of the committee for the inspection and elimination of weapons of mass destruction.
While the international sanctions have without doubt led to the suffering of the Iraqi people, the Iraqi regime's handling of the international agreements has aggravated this suffering.



The Oil Crisis:

As an important member of OPEC, Iraq was able to make use of the oil crisis - which came at the same time as growing international calls to lift the sanctions - to apply pressure to end the oil-for-food programme and compel the United States to review its intransigent stance over the lifting of the sanctions. Iraq's endeavors in this regard relied on two main bases.

Firstly, favoring Arab countries with Iraqi oil in a political attempt to achieve rapprochement, attract more Arab support and, at the same time, pressure Western countries, particularly the United States. And secondly, changing the currency used in oil transactions from the US dollar to the euro in order to express rejection of the US stance and to obtain more European support.

In mid-November 2000, the oil crisis became more serious when the price per barrel passed $35. This led to a breakdown of trust between the oil-consuming nations and the members of OPEC, with the former unconvinced of OPEC's ability to maintain prices by increasing production.

Iraq then threatened to suspend its export of oil as it was unable to access its revenues accumulating in the Banque Nationale de Paris -BNP-. Moreover, the Iraqi agency for marketing oil requested foreign companies to pay an extra 50 cents per barrel over the official price from December 2000 and to deposit this in an account not controlled by the United Nations. These companies would otherwise not be provided with their quotas of Iraqi oil.



Conclusion:

The international calls for the lifting of the economic boycott against Iraq coincided with the oil crisis, the US presidential elections and the latest Russian political revival; factors that brought about changes in the handling of the Iraqi issue on the regional as well as international levels.

The United States' double containment policy failed with Iraq as it did with Iran. Iraq's refusal to receive weapons inspectors, its rejection of certain flights to and from Baghdad and its cancellation of UN supervision of its oil revenues show that matters are moving out of the hands of the United States. This was enhanced by Soviet support for lifting the international boycott, with the aim of regaining its former superpower status.

The international community is becoming convinced that the sanctions against Iraq no longer serve their purpose and the United Nations is expected to present a new mechanism to deal with the issue. The UN secretary general met the vice president of the Iraqi Revolutionary Council on the fringe of the Doha Islamic Summit in November 2000, where both agreed that the Iraqi issue had to be comprehensively reviewed within a new framework of understanding and with the aim of lifting the sanctions.

The oil crisis had a number of positive consequences for Iraq: it provided the country with an ideal opportunity to break its political isolation; it showed that it was still capable of applying pressure, threatening not only its neighbors, but even the United States; and it encouraged Arab rapprochement, with Iraq starting to consolidate its cooperation with Jordan and to rebuild ties with Syria and the United Arab Emirates.