Iraq's unilateral oil embargo costly to UN aid program

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.

May 23, 2002

2 min read

By OGJ editors

HOUSTON, May 22 -- 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.

Iraq halted its oil exports for a month in protest of Israeli policies in occupied Palestinian territories. Baghdad had called on other Arab or Muslim oil exporting countries to join its embargo but resumed crude shipments after no other nation acknowledged the call.

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.

The UN oil-for-aid program was established in 1995 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 in August 1990.

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.

Since the start of oil shipments under that 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 current 6-month phase, which expires May 29.

Iraq said this week that it planned to continue oil exports through the next 6-month phase. Sanctions recently were revised by the UN Security Council to provide even more goods to Iraqi citizens.

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.