Russia opposes US on Iraq oil

Pricing schedule debated in UN

By Bernie Woodall and Evelyn Leopold, Reuters, 9/14/2001

NITED NATIONS - The UN Security Council was at an impasse yesterday over preventing kickbacks to Iraq through its oil sales, with Russia objecting to a US-British plan to cut down on the back-door payments.

Norwegian ambassador Ole Peter Kolby, chairman of the council's sanctions committee on Iraq, escalated the dispute to ambassadorial level in the 15-member body after his panel was unable to reach a unanimous decision. The council came to no conclusions either.

For weeks, Britain and the United States have been attempting to get oil prices set for 15 days instead of 30 days. They argue that the 30-day period allows for a larger premium to some middlemen, who then pay Iraq a kickback outside of the UN system, which is to supervise the oil sales.

The paybacks, presumably to President Saddam Hussein and his inner circle, come when Iraq sets prices lower than the anticipated market rate.

Matters came to a head last week when Russia sided with Iraq, insisting that oil pricing run for 30 days, not 15.

The only agreement among Russia and its colleagues was to have oil marketing experts hired by the United Nations, called overseers, brief council members Sept. 20 about the complex dispute. But council members make the final decision.

At issue is the UN oil-for-food program, instituted in December 1996, to allow Iraq to sell oil and purchase basic goods under UN supervision.

Its purpose was to alleviate the impact on ordinary Iraqis of UN trade sanctions, imposed when Baghdad invaded Kuwait in August 1990.

The monies from the oil revenue are to be put in a UN escrow account which pays suppliers of goods to Iraq. But since last November, oil companies have reported that some funds are siphoned off and Iraq has demanded a surcharge, which Baghdad denies.

For example, earlier this year Iraq proposed lowering prices 19 times when the market moved downward but only adjusted them three times when prices rose, UN reports show, thereby allowing room for the kickbacks.

France supports the substance of the US-British position, but its envoys said it objected to procedures Kolby had instituted in the council's committee.

China, diplomats said, expressed willingness to consider the shorter time span but had not given a definitive answer.

Britain's UN ambassador, Sir Jeremy Greenstock, said that there were too many rancorous statements made during yesterday's council consultations and that explanations were needed from the oil overseers.

No prices have been set since Sept. 1 for Iraqi crude destined for the United States, which consumes more Iraqi oil than any other country.

But shipments to the United States can continue until Oct. 1 with prices set retroactively.

This story ran on page A20 of the Boston Globe on 9/14/2001.
© Copyright 2001 Globe Newspaper Company.