UN WILL TERMINATE IRAQ OIL-FOR-FOOD PROGRAMME
21 NOVEMBER, FACILITATE SMOOTH HANDOVER TO
COALITION AUTHORITY, SECURITY COUNCIL TOLD
Benon Sevan, Programme’s Executive Director, Briefs Council
NEW YORK, 28 October (UN Headquarters) -- Despite serious challenges, the United Nations would terminate Iraq’s oil-for-food programme on 21 November 2003, Benon Sevan, Executive Director of the programme, told the Security Council this afternoon.
The Organization would also continue to facilitate a smooth handover to the Coalition Provisional Authority, he said, in coordination with the relevant Iraqi authorities. Calling attention to communications from the Authority reaffirming that there would be no further role for United Nations agencies in directing programmes related to oil-for-food after the termination, he said he saw no alternative to the full transfer of assets, ongoing operations and responsibility for the administration of, and remaining activity under, the programme to the Authority “as is”, together with the relevant documentation.
He added that, however, handing over such a complex, multi-billon dollar programme has been made even more difficult by the current insecurity and reduced on-site staffing, requiring a degree of realism, understanding and flexibility from all parties. Despite the constraints, the United Nations approach to the transfer reflected an unswerving determination to safeguard the interests of the Iraqi people.
Most of the phase-down activities, he said, had been undertaken in the three northern governorates of Dahuk, Erbil and Sulaymaniyah, where the United Nations was responsible for the implementation of the programme on behalf of the former Government of Iraq and some $8.1 billion were allocated there since the start of the programme in 1996. In the 15 governorates in the centre and south of Iraq, the United Nations role was limited primarily to monitoring the distribution and utilization of humanitarian supplies provided under the programme, and handover arrangements involve a tripartite review of all remaining contracts for humanitarian supplies submitted under the programme.
His office had been working very closely, he said, with the Authority and relevant Iraqi authorities to finalize the necessary arrangements for the termination of the programme. Going over the various kinds of contracts and categories of goods in detail, he said the Authority needed to ensure that appropriate arrangements were in place, effective 22 November, for the effective management of the billions of dollars worth of ongoing contracts for supplies and equipment that would become its responsibility.
He said since the start of the programme in December 1996, about $65 billion worth of oil had been exported and more than $46 billion of that amount had been allocated to the programme, after deductions for other accounts pursuant to relevant resolutions. He remained confident, subject to security conditions, of meeting the challenge of terminating the programme in a timely manner.
In the discussion that followed, many Council members urged that arrangements be made by the Authority and the programme to make clear their plans for the processing of outstanding contracts, especially those yet to be renegotiated, and for a method for certifying goods. The representative of Germany said that the programme should define a mechanism for early information to suppliers of non-prioritized contracts and those that had not been determined to be of “relative utility”. The Authority would have to come forward with clear information for suppliers in the very near future, on how they should proceed after 22 November. The representative of Syria said contractors who had been working with the programme since 1996 deserved consideration.
The representative of France said that the shared goal was that the programme’s end did not result in a break in necessary supplies for the Iraqi people. The stakes were high -- more than 60 per cent of the people depending directly on the programme. Concrete replies must be provided regarding the post-oil-for-food arrangements, particularly regarding the food security of the Iraqi people. The deadline was less than four weeks away.
Responding for the Authority, the representative of the United Kingdom said the Coalition had approached issues concerning the transfer of the oil-for-food programme with a sense of realism and flexibility and had focused on the needs of the Iraqi people. That approach would continue after 21 November. Three thousand one hundred contracts had been prioritized and there was a focus on ensuring timely delivery of the contracts in cooperation with Iraqi authorities, the United Nations and the Authority. Coalition and Iraqi ministry officials were developing a strategy to ensure delivery of goods and warehousing. The Authority would continue to support fulfilment of all prioritized contracts, relying on United Nations agencies to complete renegotiations of all prioritized contracts by 21 November.
He said the Authority understood concerns about lack of clarity on future arrangements and was engaged in establishing a goods authentication system and full details would soon be circulated to the Council. At a forthcoming meeting of the 661 Committee, a detailed account would be given of arrangements after 21 November. That account would also be accessible to suppliers.
The Council President, representative of the United States, speaking in his national capacity, reassured members that his country had devoted many resources and personnel to ensure the humanitarian needs of the Iraqi people would be met as the programme drew to a close.
Also speaking today were the representatives of Bulgaria, Russian Federation, Pakistan, Chile, Mexico, China, Cameroon and Angola.
The meeting, which began at 3:15 p.m., adjourned at 5:30 p.m.
Background
When the Security Council met this afternoon to consider the situation in Iraq, it was expected to receive a briefing from the Office of the Iraq Programme on progress in the termination of the “oil-for-food” programme.
The oil-for-food programme was established by resolution 986 (1995) to allow Iraq to sell oil in order to finance humanitarian goods and services, under certain conditions and under control of the United Nations. By paragraph 16(f) of resolution 1483 (2003) of 22 May 2003, the Security Council extended the programme for six months, until 22 November 2003. By that resolution, it also requested that the Secretary-General provide, 30 days before that date, a comprehensive strategy developed in close coordination with the occupying authority and the Iraqi interim administration that would lead to the delivery of all relevant documentation and the transfer of all operational responsibility of the programme to the authority.
[For further information, see Press Release SC/7765 of 22 May 2003.]
Briefing
BENON SEVAN, Executive Director of the Office of the Iraq Programme, said that the exit strategy of the oil-for-food programme had been constantly overtaken by events beyond its control. For that reason, in lieu of a written report on that strategy, he had kept all interested parties updated through weekly briefings to the Security Council Committee established pursuant to resolution 661 (1990), close cooperation with the Coalition Provisional Authority (CPA) and an Office of the Iraq Programme Web site.
The United Nations, he said, would terminate the programme on 21 November 2003, as called for in resolution 1483 (2003), and would continue to facilitate a smooth handover to the CPA in coordination with the relevant Iraqi authorities. He called attention to a letter from a CPA senior adviser reaffirming that there would be no further role of United Nations agencies in directing oil-for-food-related programmes after the termination. He saw no alternative, therefore, to the full transfer of assets, ongoing operations and responsibility for the administration of, and remaining activity under, the programme to the CPA “as is”, together with the relevant documentation.
He added that, however, handing over such a complex, multi-billon dollar programme has been made even more difficult by the current insecurity and reduced on-site staffing, requiring a degree of realism, understanding and flexibility from all parties. Despite the constraints, the United Nations approach to the transfer reflected an unswerving determination to safeguard the interests of the Iraqi people.
Most of the phase-down activities, he said, had been undertaken in the three northern governorates of Dahuk, Erbil and Sulaymaniyah, where the United Nations was responsible for the implementation of the programme on behalf of the former Government of Iraq and some $8.1 billion dollars were allocated there since 1996. In the 15 governorates in the centre and south of Iraq, the United Nations role was limited primarily to monitoring the distribution and utilization of humanitarian supplies provided under the programme, and handover arrangements involved a tripartite review of all remaining contracts for humanitarian supplies submitted under the programme. The review had covered approved and fully funded contracts, as well as those approved, but not funded. Adjustments had also been made for alternative delivery and authentification sites to enable the delivery of supplies and equipment to Iraq.
Because of insecurity, he said, the number of on-site United Nations international staff and consultants performing the phase-down had been reduced from 769 countrywide, to a small core group, with most of the rest relocated to Jordan and Cyprus. He recalled that, on 29 September, he had said that a minimum of 115 international staff would be required for an orderly transfer of over $3.5 billion worth of competed and ongoing projects, including $1.5 billion worth of assets, in the north.
Because of United Nations reductions in personnel and the late deployment of a handover team by the CPA, the intended joint physical review of all programme assets by the United Nations, the CPA and the local authorities had not been possible. Instead, projects and activities would be transferred to the CPA through dossiers prepared for each one individually.
He said that in the centre and south of the country, as of 27 October 2003, some 3,154 approved and funded contracts worth some $6.36 billion had been classified to have relative utility. An additional 322 contracts were initially determined to have relative utility, but were later assessed as either fully delivered or related to suppliers who were not interested in completing deliveries.
The number of approved and funded contracts that had not yet been reviewed, he said, was estimated to be 1,621, with a total value of $1.5 billion, including 775 contracts with negligible balances of less than $30 million in total. As of 27 October, 273 approved but unfunded contracts worth some $700 million had been funded, following determination of their relative utility and urgent need. There remained 3,319 such approved but unfunded contracts, with a total value of $6.5 billion.
A final list of contracts that had not been reviewed so far would be prepared by 21 November, but it was unlikely that action would be taken on those found to have relative utility after 28 October. Many of those would be transferred to the CPA for appropriate action. Consideration of contracts determined to be of questionable utility would be postponed “until an internationally recognized representative government of Iraq was in a position to make its own determination” of their status, as per the resolution.
A total of $398 million worth of goods in transit to Iraq had been prioritized and arrangements made for suppliers to be compensated, he said. He expressed concerns over the fact that the independent inspection agent (Cotecna) was not allowed to operate at the port of Umm Qasr, and the CPA had not yet provided the Office of the Iraq Programme with arrangements made to confirm the arrival of goods under various programme contracts. In addition, the number of outstanding contracts with services to be authenticated had increased to 25, with a combined value of $4.9 billion.
The entire oil-for-food database would be transferred to the CPA on 21 November, he said. The CPA needed to ensure that appropriate arrangements were in place, effective 22 November, for the effective management of the billions of dollars worth of supplies and equipment to Iraq from the programme’s delivery pipeline and for authenticating arrival of those goods in order to facilitate payment to the suppliers, perhaps through the retention of Cotecna for a limited period. He said the CPA had assured him that a final decision in that regard would soon be taken.
Regarding the transfer of activities in the three northern governorates, Mr. Sevan said the main objectives guiding the United Nations included: timely transfer of the programme’s activities, projects and assets to the CPA and an uninterrupted delivery of essential humanitarian supplies and services beyond 21 November; protection of some $3.5 billion investments made in the governorates over the life of the programme; and transfer of residual obligations, commitments or liabilities of the United Nations.
He said to date, 151 projects and activities, worth $1.85 billion, had been completed and would be transferred to the CPA through dossiers. A further 117 projects and activities, valued at $597.51 million were expected to be completed by 21 November. The United Nations would hand over 159 projects not completed by 21 November, valued at $1.1 billion. Agreement between the United Nations and the CPA had been reached on the minimum contents of dossiers, as well as for the funding of ongoing projects beyond 21 November.
Regarding assets held by the United Nations on the last day of the programme, he said agreement had been reached on categorizing inventory items, as follows: stocks inside Iraq; stocks outside Iraq; and goods in transit. An initial assessment by experts from the CPA had indicated that inventory records provided by the United Nations agencies were accurate. Agreement had also been reached on disbursement of locally generated funds.
In accordance with resolution 1483 (2003), the United Nations could transfer remaining responsibilities for the programme only to the Authority. The CPA, in turn, would identify and subsequently handover responsibilities to appropriate Iraqi entities, he said, but emphasized that it was of paramount importance that the United Nations not be held liable for any residual commitments or obligations arising active international contracts.
In cases where active international and local contractors demand terms and conditions not acceptable to the United Nations and/or the CPA, the CPA might advise the United Nations to terminate them. In such event, the CPA should provide adequate legal commitments to ensure that the Organization would not be held ultimately liable for such decisions. Otherwise, the United Nations would have no alternative but to retain adequate funds to cover such liabilities.
Regarding about $25 million worth of goods in transit or warehoused outside Iraq by United Nations agencies, the CPA and Iraqi authorities would need to commit themselves to provide all necessary support for delivery into Iraq. Also, agreement had to be reached with the CPA regarding transfer of databases.
In conclusion, he said, since the start of the programme in December 1996, about $65 billion worth of oil had been exported. More than $46 billion of that amount had been allocated to the programme, after deductions for other accounts pursuant to relevant resolutions. Under the programme, more than $30 billion worth of goods had been delivered to Iraq. Before the start of the war in March, the delivery pipeline contained goods to the value of some $10 billion, fully funded. As at 27 October, over $7.56 billion worth of goods in the pipeline had been prioritized. He remained confident, subject to security conditions, of meeting the challenge of terminating the programme by 21 November, pursuant to resolution 1483 (2003).
Statements
The President of the Council, JOHN D. NEGROPONTE (United States) said all Council members joined Mr. Sevan in offering condolences to the families of the victims of the attack on the International Committee of the Red Cross (ICRC) headquarters in Iraq and joined the Secretary-General in his condemnation of the attack.
GUNTER PLEUGER (Germany) said, taking into consideration the high importance of transparency and continuity in the transition of the oil-for-food programme, he encouraged the parties involved to include a number of steps in their exit strategy. The Office should define a mechanism for early information to suppliers of non-prioritized contracts and there should be clear-cut criteria why contracts had not been determined to be of “relative utility”. Suppliers also had to be informed on how to proceed as of 22 November. The CPA would have to come forward with clear information in the very near future.
As the Office had decided internally to stop the amendment of prioritized contracts generally on 3 November, he said that, given the relatively low rate of amended contracts so far, he had strong doubts that the decision was appropriate. Would it not be better to show more flexibility towards the internal deadline for renegotiations by United Nations agencies? he asked. Such flexibility would not require an extension of the deadline set by resolution 1483. He encouraged the CPA to continue using the services of Cotecna and the newly established alternative entry points.
Regarding payment arrangements as of 21 November, he said if not all prioritized contracts were amended by the end of the programme, there should be agreement on the principle that all funds allocated to prioritized contracts would remain in the consolidated United Nations escrow account after 21 November, irrespective of their status of renegotiation. Regarding transfer of funds, he said at the last formal 661 Committee meeting, the United Nations treasury had not been in the position to inform when, how much and which funds were to be transferred. The response to those questions was essential for a transparent termination of the oil-for-food programme.
INOCENCIO ARIAS (Spain) said he was concerned that some approved contracts had not been performed on time. He was also concerned about the pace of renegotiating already prioritized and funded contracts. It was necessary to have a machinery for renegotiation in place after the 21 November. In that regard, he asked what kind of machinery would be provided to continue renegotiations after conclusion of the programme. He also asked for clarification on machinery for authenticating merchandise and how payments could be made after 21 November.
STEFAN TAFROV (Bulgaria) joined in condolences to the families of the victims of the attack on the ICRC. He welcomed the efforts made by Mr. Sevan’s team to complete the programme, with only 213 contracts that had not been financed. It was a matter of urgency, however, to finish all contract renegotiations. Other speakers had already mentioned possible solutions. To cope with the needs of the suppliers, the Authority and the Office should speed up the process of authenticating deliveries at the border. He expected the Authority to resolve also the matter of contracts that had been interrupted by the military action. In the northern governorates, it was only the Authority that could be involved in the transfer.
SERGEY LAVROV (Russian Federation) also joined in condolences to victims of the attacks. It was extremely important that the review of the phase-out should continue. The phase-out task was indeed difficult, but not all methods had been attempted to complete the programme’s humanitarian effort. He expressed concern over the contracts that were in various states of process. By 21 November, through the current system for prioritizing, all of the funded projects should be reviewed, especially because it was not clear whether such prioritization would be continued by the CPA.
He requested detailed information on the reason certain projects were not given priority status. The execution of many priority contracts for needed goods could be in doubt. He expected the United Nations to do its utmost to make sure that those were completed by November. He welcomed the new mechanism for authenticating deliveries, but worried about the future of that mechanism after the termination of the programme. The CPA should, in a timely fashion, inform all exporters of the situation. There were too many problems left as the programme wound down, but the needs of the Iraqi people and the requirements of suppliers must be met.
ADAM THOMSON (United Kingdom) associated himself with the condemnation of the attack on the offices of the ICRC. Such terrorist attacks, he said, would not deflect the international community from its determination to assist Iraqi people in the reconstruction of their country. The Coalition had approached issues concerning the transfer of the oil-for-food programme with a sense of realism and flexibility and had focused on the needs of the Iraqi people. That attitude would continue after 21 November. Since adoption of resolution 1483, a significant amount of work had been done to ensure that successful arrangements were in place for that transfer, and he was confident that the transition would be completed on time and in an effective manner.
He said 3,100 contracts had been prioritized. There was now a focus on ensuring timely delivery of the contracts in cooperation with Iraqi authorities, the United Nations and the CPA. Coalition and Iraqi ministry officials were developing a strategy to ensure delivery of goods and warehousing. The CPA would continue to support fulfilment of all prioritized contracts, relying on United Nations agencies to complete renegotiations of all prioritized contracts by 21 November.
Regarding the three northern governorates he said approximately $800 million in projects, such as electricity plants, hospitals and schools, would continue to be overseen until their completion. An oversight board of Iraqis would take over management functions. Local authorities in the north were ready to take over responsibilities of the oil-for-food programme. Noting that dossiers from the United Nations Children's Fund (UNICEF), the United Nations Educational, Scientific and Cultural Organization (UNESCO) and the World Health Organization (WHO) were still outstanding, he said those agencies should transmit the dossiers to the Coalition as soon as possible.
He said the CPA understood concerns about lack of clarity on future arrangements. The CPA also recognized the need for continuity in authentication of supplies. The Coalition was engaged in establishing a goods authentication system and full details would soon be circulated to the Council. At a forthcoming meeting of the 661 Committee, a detailed account would be given of arrangements after 21 November. That account would also be accessible to suppliers.
While security in Iraq was a limiting factor on the role of the United Nations, he looked forward to a continuing and productive relationship with United Nations agencies following the end of the oil-for-food programme.
FAYSSAL MEKDAD (Syria), adding his voice to the condolences for victims of the ICRC attack, paid tribute to the hard work of the Office of the Iraq Programme. He agreed with the concerns that had been raised about the rights of the contractors and the humanitarian needs of the Iraqi people. Consequently, the need to lay down clear criteria for the acceptance and prioritization of contracts before the transition was very important. Flexible mechanisms to deal with those problems after the deadline were needed. The contractors who had been working with the programme since 1996 deserved consideration.
MUNIR AKRAM (Pakistan) joined the condemnation of the attacks on the ICRC. He asked when the Office would complete the review of the relative utility of contracts and urged that they be completed in time. He noted the slow cooperation by the CPA in such areas as information and the arrival of goods, and he asked for a clarification. Regarding Iraqi employees of the Office, he asked if their employment would be terminated with the programme.
HERALDO MUÑOZ (Chile) said a true challenge lay ahead, involving many details and projects under way and coordination among various actors. The current security situation added another dose of realism. But one must not lose sight of the objectives: a gradual transfer of the oil-for-food programme by 21 November. The future programme must still meet the needs of the Iraqi people. Some issues had not yet been agreed upon, and he hoped they could be fully resolved in the right time frame. Prioritizing of contracts must be accelerated. He was concerned about the security of goods under United Nations responsibility in Iraq.
As there was a large amount of merchandise outside Iraq that must be transported to the country, he asked how and when arrangements would be made regarding transportation. He also asked if there were arrangements for the administrative costs of the programme of the United Nations. In conclusion, he said the oil-for-food programme had made a tremendous contribution to the people of Iraq, particularly for women and the most vulnerable.
CARLOS PUJALTE (Mexico) condemned in the strongest possible terms the attack. Resolution 1502 had described that kind of conduct as a crime against humanity, and those responsible must be punished. He agreed with Germany’s proposal that the United Nations office must be given flexibility to complete the process of renegotiating and amending contracts.
As the escrow account, as provided for by relevant resolutions, had to be audited by an independent group, he asked when the escrow account had been audited last and if there would be another audit before the transfer to the CPA.
CHENG JINGYE (China) expressed his condolences to victims of bombings in Iraq. He said that the successful phase-out affected both the Iraqi people and the suppliers of the programme. The amendments of all remaining contracts must be completed and the authentification of goods should be accelerated. In addition, the authentication procedure should be continued after the termination of the programme.
MARTIN CHUNGONG-AYAFOR (Cameroon), conveying condolences to victims of Iraqi bombings, expressed confidence that the CPA and the Office of Iraq Programme would work together for a successful transition. He welcomed the work that had been done on amending the prioritized contracts and authenticating supplies. Regarding the renegotiation of contracts, he encouraged the Office of Iraq Programme and other agencies involved to improve the current margin.
Given the time frame, he said it would not be possible to renegotiate all contracts by the termination date, but the deadline should be complied with. He welcomed the decision by the treasury to continue payments after that date. After 21 November, he urged transparency in arrangements. Talks that had begun must be intensified. He was particularly concerned about the situation in the north, and he stressed that the needs of the Iraqi people must be met as they sought to regain control of their fate.
ISMAEL ABRAAO GASPAR MARTINS (Angola) joined other speakers in expressing the strongest condemnation of the terrorist act against the ICRC. Ending the oil-for-food programme within six months was extremely difficult. It was essential that during the transition no void was created. He called, therefore, for a smooth transition in the delivery of the humanitarian programme.
The security conditions in Iraq and reduction of United Nations staff to a core number would badly impact the process of prioritization of contracts, particularly those oriented to the centre and south of the country. He hoped the CPA and relevant authorities in Iraq would take over the Office’s responsibilities and provide the Council with information in compliance with relevant resolutions.
Iraq was in one of the lowest positions in the 2002 Development Report. The war and following security situation had exacerbated the situation even more. The determination shown by the Office -- and he hoped a similar determination would be shown by the authorities in charge -- would set a good benchmark.
JEAN-MARC DE LA SABLIERE (France) also condemned the attack against the ICRC, which was a crime against humanity. He said the conclusion of the Office of the Iraq Programme must be successful and its disappearance must not lead to a break in supply of humanitarian necessities. The stakes were high, he said, as more than 60 per cent of the Iraqi people continued to depend on the oil-for-food programme. Maximum success depended on continuity of delivery of goods. Concrete replies must be provided to outstanding questions relating to the post-21 November period.
The prioritization of contracts must continue up to 21 November, he said. The main concern was transparency. Non-prioritized contracts must be a residual category. It was essential that the contracts, which were not retained and considered not being of relative utility, should be publicized and a reason given for their status. Renegotiating and amending contracts before the date of transfer was essential. The current pace must be maintained and agencies must amend as many contracts as possible by 21 November, he said.
It was a matter of concern that the CPA apparently had not provided for any machinery for the post-21 November period, he continued. Decisions must be adopted as a matter of urgency in that regard and suppliers informed. A practical solution must be possible. The United Nations agencies authorized by the CPA and Iraqi authorities should continue the programme a while longer.
Financing of contracts must be as transparent as possible, he said. Priority contracts should continue to be funded by, and paid from, the United Nations account. Funds must, therefore, remain in the account. There must be no discrimination among suppliers. Transferring funds from the account to the Development Fund of Iraq must also be carried out with full transparency. That had not been the case earlier in the year. He hoped an audit could be carried out soon. Comprehensive information on the transfer of funds should be prepared in a report.
He asked what machinery the CPA would establish to continue the oil-for-food programme, particularly with regard to the food situation.
JOHN NEGROPONTE (United States), speaking in his national capacity, thanked Mr. Sevan for the outstanding work that he and his staff had done over the years, despite the obstacles. He referred to the statement of the United Kingdom for details regarding the CPA’s intentions in the transition from oil-for-food. He acknowledged, however, that a considerable range of activities remained to complete the process. He reassured members that his country had devoted many resources and personnel to ensure the humanitarian needs of the Iraqi people would be met as the programme drew to a close.
He said that a number of United Nations agencies had produced good results in the renegotiation of contracts and he urged all such agencies to work to ensure that all renegotiation was completed before the deadline. All parties concerned must be focused on the renegotiation effort; for its part, the CPA would honour its commitment to support the fulfilment of all prioritized contracts. He urged that delays in processing letters of credit be corrected, as well.
He said that funds in escrow accounts belonged to the people of Iraq and he urged the Secretary-General to transfer at least $1 billion of such funds to reconstruction efforts, along with funds from other accounts. He requested more frequent and detailed updates on such transfers, as well as the freeze and return of all Iraqi funds outside the country, urging all States to comply with their responsibilities in that regard. Finally, he requested weekly meetings of the 661 Committee to ensure the transition was closely monitored.
In concluding remarks, Mr. SEVAN, Executive Director, Office of the Iraq Programme, thanked speakers for the kind words addressed to him and his Office. He said prioritization of contracts must not be confused with the process of renegotiating and amending contracts. Prioritization would continue up to and beyond 21 November. Contracts would be reviewed to establish their relative utility and a list would be prepared specifying all reasons for prioritizing or not prioritizing.
Suggestions made by the representatives of Germany, France and others would be thoroughly reviewed in order to address most, if not all, concerns expressed, he said.
He said to conform to relevant resolutions, the escrow account had been audited every six months. An audit was being carried out now for the current six months.
Regarding assets under the escrow account, he assured the Council that those assets not required for current United Nations activities would be transferred for the benefit of the Iraqi people.
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