Trade With Iraq


By Abeya Al Bakry

Gulf News
February 23, 2002

Merchants trading with Iraq have urged world bodies to make the sanctions regime more efficient and smooth so as to allow faster access to humanitarian supplies by the people of Iraq.

Traders pointed out that no one is talking about flouting United Nations sanctions. However, the sanctions regime itself is not working with efficiency and speed, and this needs to be tackled. Laws and regulations should be enforced to streamline and improve the flow of goods to Iraq. These are recognised as "humanitarian", but there are many obstacles to doing trade with Iraq, including heavy bureaucracy.

Moreover, delays, especially in perishable items, leads to wastage and serve no purpose, delegates were told at a recent seminar on doing trade with Iraq. Trade procedures should simplified to send humanitarian relief to Iraq under the United Nations (UN) oil-for-food programme, said a UN expert at the Global Resources Conference organised event. They said UN Security Council decisions taken are in the right direction to ease exports to Iraq, but the approval system is arbitrary.

Iraq needs $5.5 billion worth of humanitarian supplies in phase 10 of the oil-for-food programme, according to the Iraqi distribution plan under the UN Report by the Secretary General dated October 31, 2001. Oil is Iraq's chief export. It is one of the world's major oil producers. It cannot afford to stall on selling oil to receive supplies. When oil prices are down as they are at the moment, Iraq will not profit from the programme.

Revenues will not be enough to buy sufficient food or medicine and will not rebuild roads to receive whatever supplies are coming through, delegates said. This leads to Iraqi buyers committing to sell more oil than they are lifting. In phase 10 covering the second half of 2001, for example, only 290 million barrels were expected to be lifted whereas 387.2 million barrels were approved for trade.

While oil revenues not only pay for the humanitarian supplies, 13 per cent of the amount gets cut and goes to the UN compensation fund, and some further percentages towards UN administrative costs. From the remainder is adjusted the petroleum production costs, and actual Iraqi buying power. The deducted costs reduce the amount of supplies Iraqis can buy.

The lengthy procedures by the UN Security Council (UNSC) Approval Committee also discourage merchants from doing trade with Iraq. On average, an application for trade with Iraq may take up to six weeks for approval beside payment processing at the bank. "Traders who attended the conference voiced their criticism of the many procedures taken to trade with Iraq under the UN oil-for-food programme," said Dr. Sebiha Mehdi, executive director of the conference.

The oil-for-food programme started in 1996 so that the Iraqi people receive food and medicine after five years of famine and disease following the UN sanctions imposed on Iraq after the Gulf War in 1991. 'Fast track' procedures have been taken by the UN Security Council to approve lists of foodstuffs, as well as of basic or standard health, agricultural and educational supplies, which would no longer require submission to the UNSCR Approval Comm-ittee, but the items still have to be notified to the Secretary General through the Office of the Iraq Programme (OIP).

Laurent Marion, United Nations Development Project officer in Baghdad, said at the conference that "it is unfortunate that the procedures take such a long time and that is why we started the 'fast track' procedures. These procedures have done away with parts of the approval system, but they do not guarantee the success of the application." According to the UN, suppliers should be aware that the time invested in signing contracts, the preparation and submission of applications for goods which may qualify for expedited processing, does not necessarily mean immediate acceptance of contracts.

If the items are not on the approved reviewed lists, the applications will be sent to the approval committee and are prone to rejection, wasting exporters' time and lessening their faith in trade with Iraq. The UN Security Council Resolutions (UNSCR) prohibit the sale of arms and military equipment to Iraq. Food and medicines were the only items allowed for trade from 1996 until November 2001. The UNSC recently reviewed items needed for trade to include materials needed to rebuild the Iraqi infrastructure.

There were also constraints limiting the quantity of oil exchanged for food and medicine until December 1999. By this time, however, the UNSCR allowed Iraq to export as much oil as required to meet its humanitarian needs. Following the Gulf War, the roads, electricity and power supplies, water and sanitation services deteriorated. The bad condition of the roads prevents smooth flow of supplies, typhoid and dysentery among other diseases spread because of lack of sanitation and a total power failure is threatening the country.

The distribution plan allocates funds from oil supplies to the different sectors to buy and distribute urgent humanitarian supplies. The Security Council resolved that a number of supplies can be approved for the rehabilitation of Iraq. However, rather than releasing supplies, the reasons for holding back supplies are being changed.

In the report of the Secretary General dated November 19, 2001, 185 applications were found to contain items acceptable on the review list, these applications were sent to the approval committee. Only 50 of these applications were approved and the reason to withhold the remaining applications was changed. This in effect contradicts the approved reviewed items and wastes exporters' efforts, discouraging them from trade with Iraq, traders said. Most importantly, it is destroying the Iraqi people's opportunity to reclaim their health and future.

Traders have to spend time, effort and money on registration for trade with Iraq. There are no tender advertisements, so exporters have to register with UN bodies (which are dispersed in different parts of Europe) if they want to be notified of upcoming trade opportunities.

It is easy to forget that the oil-for-food programme is primarily a humanitarian programme funded by Iraq itself. If more money is received from oil, and if more oil is sold at a good price and the proceeds kept to pay for humanitarian supplies, the Iraqi people may become healthier and live in a better environment, the conference concluded.

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