UN official voices 'grave concern' over declining Iraqi oil revenues for relief aid

A senior United Nations official has voiced “grave concern” over the decline in Iraq’s oil revenues, which are used to purchase humanitarian relief for the country, calling for measures to resolve differences over pricing the country’s crude.

In a just-released letter to the Security Council's Iraq sanctions committee, the Executive Director of the Iraq Programme, Benon V. Sevan, points out that during the first two months of the latest phase of the oil-for-food programme, Baghdad exported only 63.2 million barrels of oil - an amount "lower than previous recorded levels of monthly exports under the programme."

"Even by the most conservative estimates, some $1.5 billion in revenue had been lost owing to a reduction in the level of Iraqi oil exports," the letter states.

If the reduced levels of exports persist, the current phase would net only $3.22 billion in revenues for a humanitarian operation budgeted at over $5 billion by the Government of Iraq.

This situation is further exacerbated by the cumulative revenue shortfall from earlier phases, which has left the programme without resources to fund 1,040 approved contracts, worth over $2.2 billion, as of the end of July.

Warning of "very serious consequences on the humanitarian situation in Iraq" as a result of the increasing shortfall in funds, Mr. Sevan concluded the letter by appealing to the members of the sanctions committee and the Baghdad Government to "take all necessary measures to resolve the difficulties encountered in improving the critical funding situation, including, in particular, the long outstanding question of the pricing mechanism for Iraqi crude oil exports."

The pricing mechanism is proposed by the Iraqi oil authorities in consultation with UN oil overseers, who offer input based on the international market, and is then forwarded to the sanctions committee for approval.