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U.N., U.S. could clash over Iraq's oil

By MARY JACOBY, Times Staff Writer
Published April 3, 2003

WASHINGTON - Most of Iraq's oil fields may now be lying idle, but international maneuvering for their control is going strong.

The question of who will administer Iraq's oil industry after the expected fall of President Saddam Hussein is of paramount importance to both the United States and the United Nations. At stake are enormous political, diplomatic and economic issues.

Bush administration officials, for example, are counting on Iraqi oil revenue to defray much of the cost of the country's reconstruction. Most analysts believe the White House would prefer to use those revenues unencumbered by the United Nations.

But for the U.N. Security Council, having authority over Iraq's oil industry during a postwar transition period would help it regain influence over world events after the United States and Britain led the invasion of Iraq without U.N. approval.

"This is an important early manifestation in getting the United States to recognize there is no post-Saddam future without the council," said George Lopez, director of the Kroc Institute for International Peace Studies at the University of Notre Dame in South Bend, Ind.

The United Nations has experience administering Iraqi oil revenues under the Oil-for-Food Program, which has allowed Iraq to export 3.4-billion barrels of oil worth about $64-billion since 1996.

Seventy-two percent of those revenues were dedicated to humanitarian assistance for the Iraqi people, who had suffered shortages of food, goods and medicine since the United Nations imposed economic sanctions after the 1991 Persian Gulf War.

A quarter of the revenues went to pay reparations to countries harmed by Iraq's 1990 invasion of Kuwait, with the rest reimbursing the United Nations for costs and its weapons inspection program.

But with war looming March 17, U.N. Secretary-General Kofi Annan suspended the oil-for-food program, withdrawing all U.N. personnel from Iraq. Eleven days later, the Security Council provisionally restarted the program, unanimously approving a resolution giving Annan authority for 45 days to facilitate delivery of goods that had already been purchased but not yet delivered.

Speaking to reporters about the resolution, Annan on Friday said most Security Council members "do not want to see any situation where the U.N. is subjugated to the authority of a country or several countries," an apparent reference to the United States and Britain.

The council also does not want to appear to legitimize the invasion, Annan said.

The United States, Britain, China, France and Russia are the five permanent veto-wielding members of the council, which has 10 additional rotating members.

Now, there is skirmishing over $2.8-billion in Iraqi oil revenue held in escrow for humanitarian relief by the United Nations. Some analysts believe the United States wants to use that money after the war to improve Iraq's oil industry infrastructure so production - and revenues - could increase.

"Maybe the most central issue at the moment is, what is the legal status of the escrow account?" Lopez said. "If the regime falls, whose money is that?"

Another wrinkle is domestic American politics. The Bush administration does not want reconstruction efforts to become a burden to taxpayers.

The administration has requested $2.4-billion from Congress for Iraq relief and reconstruction. The amount is part of an overall $74.7-billion request for the war-related costs, a bill Congress hopes to have approved by April 11.

"The U.S. is clearly pushing the notion that Iraqis have to bear the financial burden of reconstructing their own country, and France and others are opposing that," said United Nations observer Lopez.

France's position is that the United States is responsible for repairing infrastructure it destroyed in the war, Lopez said.

But the U.S. ambassador to the United Nations, John Negroponte, told the Security Council last week that the blame for the destruction lies with Hussein, whose regime "launched two bloody wars and which has refused for 12 years to give up weapons of mass destruction."

Another contentious issue is the awarding of oil and reconstruction contracts in postwar Iraq. European countries want to see the United Nations in charge because they fear the United States would award contracts only to U.S. companies.

But the Bush administration could face a political uproar at home if it is seen as sacrificing American soldiers' lives while allowing countries that opposed the war - including Russia, France and Germany - to reap the economic benefits.

There is also disagreement over whether Iraq's oil revenues are enough to pay for reconstruction.

Deputy Secretary of Defense Paul Wolfowitz told a House appropriations subcommittee March 27 that "there's a lot of money to pay for" reconstruction.

"It doesn't have to be U.S. taxpayer money. And it starts with the assets of the Iraqi people. They will now own those assets instead of a dictator that owns them, and they should spend them for their own welfare," Wolfowitz said.

But Eric Schwartz, director of the Council on Foreign Relations independent task force on postconflict Iraq, disagreed.

It is "probably unrealistic to assume that Iraqi oil revenues will provide the resources necessary for rebuilding Iraq, especially in the short term," he said March 10 before the Senate Foreign Relations Committee.

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