The United Nations' updated Iraq sanctions regime has no provisions to deter oil smuggling and illicit trade or to reintroduce weapons inspectors, according to an analysis by the General Accounting Office.
"Until these issues are resolved, the sanctions cannot provide assurance that Iraq has stopped developing weapons of mass destruction," said the report, which was prepared for Senate Agriculture Committee Chairman Tom Harkin (D-Iowa).
Iraq has been under international economic sanctions since its invasion of Kuwait in August 1990. Since their inception, the sanctions have been controversial.
In the early years of the sanctions, there was strong evidence to suggest the civilian population was suffering from the trade ban, even though the rules were primarily intended to stop Iraqi President Saddam Hussein from rebuilding his war machine.
Aid program successful
GAO said that despite concerns that sanctions have worsened the humanitarian situation, the oil-for-aid program established in 1995 has been successful.
The UN oil-for-aid program was established to help provide food and other basic necessities to average Iraqi citizens who otherwise would be deprived under the international economic sanctions imposed on Iraq 4 days after its invasion of Kuwait.
Proceeds from oil sold under that program are deposited in an UN-administered escrow account, with 70% of those funds being funneled into mostly humanitarian aid to Iraqis. Some of the funds are earmarked for rehabilitation of Iraq's war-ravaged oil infrastructure. The rest of that money goes into a fund used to pay compensation claims resulting from Iraq's attack on Kuwait.
The UN has determined the program "has had considerable success in several sectors such as agriculture, food, health, and nutrition by arresting the decline in living conditions and improving the nutritional status of the average Iraqi citizen," GAO said.
The aid plan is not foolproof. Problems develop when Iraq decides to forgo oil exports, as it did in April to protest Israeli troops in Palestinian areas. That action meant that $1.3 billion was lost from the oil-for-aid escrow account, leaving nearly 700 contracts for humanitarian supplies unpaid.
Illegal revenue
Under the oil-for-aid program, the United Nations has controlled $51 billion of Iraq's oil revenues from 1997 to 2001 and channeled it to civilian use. But based on US government and oil industry data, GAO estimates Iraq earned more than $6 billion in illegal revenue from oil smuggling and surcharges during the same time.
GAO said that UN and US officials believe Iraq took those petrodollars to buy items prohibited by the UN Security Council.
The revised UN resolution, dubbed "smart sanctions," seeks to streamline distribution of civilian goods through the country by reducing the import permitting process. US and UN officials said the new system is designed to help Iraq rebuild its civilian economy faster than it has been able to do under the old sanctions regime.
US Department of State officials who reviewed GAO's findings defended the new "smart sanctions" system, saying the new agreement signifies a renewed consensus that will be useful in seeking the return of weapons inspectors or other options for dealing with Iraq.
Other Security Council resolutions address weapons inspections exclusively, State department officials said, adding that Iraq still fails to comply with them.
Import ban costs
Iraq's self-imposed ban on oil exports from Apr. 9 through May 8 cost the United Nations-administered oil-for-aid program 1.2 billion euros ($1.1 billion), UN officials estimated.
Since then, 6.9 million bbl of Iraqi oil has been sold at an average price of 24.45 euros/bbl, generating 169 million euros in total revenue, UN officials reported.
Since the start of oil shipments under the oil-for-aid program in December 1996, some 3 billion bbl of Iraqi oil has been exported, generating revenue estimated at 53.7 billion euros. That includes 4.15 billion euros for 214 million bbl under the program's most recent 6-month phase, which expired May 29.
Meanwhile, UN officials said, the oil-for-aid program faces a continued funding shortfall, with 763 supply contracts for humanitarian goods and services already approved and awaiting funding at close to $2 billion.
