UNITED NATIONS--Annan Warns on Iraqi Oil Industry

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Annan Warns on Iraqi Oil Industry

Story Filed: Monday, March 13, 2000 10:23 PM EST

UNITED NATIONS (AP) -- Iraq's oil industry will continue to deteriorate, jeopardizing U.N. relief operations, unless more spare parts are allowed into the country immediately, Secretary-General Kofi Annan warned in a report Monday.

Annan called for the Security Council's sanctions committee to double the amount of spare parts Iraq can buy and to streamline its review of contracts for the equipment ``to offset permanent damage to oil-bearing structures in Iraq.''

The 63-page report details how low oil prices, bureaucratic delays and blocked contracts have undermined efforts to improve life for 22 million Iraqis living under U.N. trade sanctions.

The U.N. oil-for-food program, launched in 1996 to ease the effects of sanctions on ordinary Iraqis, allows Baghdad to sell its oil through U.N.-monitored sales. The proceeds go mainly to buy food and medicine but $300 million every six months is earmarked to buy spare parts for Iraq's oil sector.

While $6.7 billion in goods have arrived in Iraq since the program began, another $1.5 billion in contracts have been placed on ``hold'' -- most for oil spare parts and equipment to upgrade Iraq's electricity sector and water sanitation system.

The United States has placed the bulk of those contracts in limbo, saying it wants to make sure the goods aren't diverted for military use.

``The effectiveness of the program has suffered considerably not only due to shortfalls in the funding level, but also due to the very large number of applications placed on hold,'' Annan said in the report.

Oil exports have fallen from 1999 levels by about 300,000 barrels per day, and Iraqi Oil Ministry officials say further reductions are likely unless oil sector spare parts are delivered quickly.

The report said production could decline another 5 percent to 15 percent unless the delivery of spare parts is accelerated.

``The ability of the Iraqi oil industry to sustain the current reduced production levels will be seriously compromised, unless effective action is taken immediately to reverse the situation,'' it said.

U.N. oil industry experts visited Iraq in January to assess the state of the industry and explore options for increasing production and exports.

A State Department official, speaking on condition of anonymity, said the United States would continue to take a hard look at equipment bound for Iraq until U.N. weapons inspectors return, but would look positively on a recommendation to increase Iraq's spare parts quota.

Annan said the $300 million every six months should be increased to $600 million.

Annan also took the government of Iraq to task for failing to present a clear plan for the purchase and distribution of humanitarian supplies, and called on Baghdad to submit contracts to the United Nations faster.

Iraq was placed under trade sanctions after it invaded neighboring Kuwait in 1990. Sanctions cannot be lifted until weapons inspectors report Iraq is free of its weapons of mass destruction.

Copyright ) 2000 Associated Press Information Services, all rights reserved.


-- (Dee360Degree@aol.com), March 13, 2000

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