With vote on sanctions, renewed unity at the UN

The 14-to-0 vote to lift restrictions against Iraq means revenues will flow again.

The historic vote at the UN Security Council Thursday lifting 13 years of economic sanctions on Iraq paves the way for the long-troublesome country's return as a peaceful member of the international community.

The 14-to-0 vote, which fell just shy of the 15-to-0 "vote of consensus" the US had sought, signals a new era of international cooperation on Iraq. And, perhaps of greatest short-term importance for Iraqis, it means that billions of dollars in oil revenues will be disbursed as part of the nation's daunting reconstruction.

Praising the Council that just weeks ago was bitterly divided over war in Iraq, John Negroponte, the US ambassador to the UN, said the action allows for a "robust" international participation in Iraq's rebuilding.

With President Bush heading to Europe next week to meet with several of the world leaders who most adamantly opposed the war, the US keenly sought a show of renewed cooperation on Iraq. (Only Syria didn't vote for the resolution. Its representative was not present for the vote.) Setting the tone, Mr. Negroponte emphasized "the constructive spirit with which the Council has considered and strengthened the resolution."

Representatives of what are called in UN shorthand the "losing ambassadors" in the Iraq war debate sounded a more subdued enthusiasm for the measure. They stressed the benefit that lifting sanctions would have for the Iraqi people and the opening it creates for the international community to join in reconstruction.

French UN Ambassador Jean-Marc de la Sablière called the resolution "not perfect" but said it is a "credible framework" that will allow the international community to "lend support" to the postwar effort in Iraq. In what some saw as a dig at America's postwar results so far, he made a particular point of noting that disorder continues in Iraq while services are lacking.

Broad power for US and Britain

The resolution grants unprecedented power to the US and Britain to manage Iraq for at least a year. It also allows the two countries to determine the process of establishing a future Iraqi government.

While the long-term global impact of the move will be debated for months, the resolution has the immediate effect of opening escrow accounts holding more than $3 billion dollars in oil revenues for spending. It also puts the US in charge of revitalizing the oil sector.

"This allows some breathing room for Iraq in general and some clarity both for spending existing funds and for how the crucial oil sector will be administered," says David Phillips, an analyst at the Council on Foreign Relations in New York.

Most immediately, "a pile of money in escrow accounts [held by the UN] will be spent honoring existing contracts and addressing humanitarian needs," he says. Beyond that, "this opens the way for putting the oil sector back on its feet and back generating the revenues the country needs."

The biggest beneficiary of the provision for honoring existing contracts is Russia, which has about $1.7 billion in outstanding contracts for mostly industrial supplies to Iraq. The original resolution called for honoring only contracts for humanitarian needs like food and medicine. The final version allows the UN to determine which contracts to honor and only targets frivolous purchases for elimination.

Currently, little Iraqi oil is flowing and available to sell. The industry's infrastructure has been damaged by looters. And the international oil partnerships that could help make the industry a financial gusher are awaiting the formation of a Iraqi government, which could take a year or so.

Richard Barton, an analyst at the Center for Strategic and International Studies in Washington, calculates that expanded oil exports could bring Iraq about $22 billion a year, of which $13 billion would be needed for running the government and investment in the oil industry.

That would leave $9 billion, which should be shared directly with the Iraqi population, $350 a head, Mr. Barton suggests. It would help remedy the 80 percent decline in the Iraqi economy in the past 20 years. It would provide needed cash for people and it would "break the grip of the center" government.

The Council's framework for lifting sanctions would set up a new system for handling Iraq's oil industry. The occupying trio of the US, Britain, and Spain will manage the industry through an interim authority. (Under sanctions, the UN managed the oil-for-food program that used Iraqi oil revenues to feed 60 percent of its population.)

Proceeds from sale of the oil will flow to a new Development Fund for Iraq held by the Iraqi Central Bank. The resolution will immediately transfer $1 billion to that fund left over in an escrow fund of the UN's oil-for-food program. Another $2.1 billion in that escrow fund will be managed by the UN to deal with outstanding contract issues, especially those held by Russia.

Where the money goes

Development Fund money will be used to help pay for the humanitarian and reconstruction needs. A portion, presumably, would go toward paying down Iraq's massive foreign debt and for restitution for the Kuwait invasion. An advisory board, with representatives from the UN, the World Bank, the International Monetary Fund, and others, will review the authority's decisions and appoint independent accountants to audit the Assistance Fund.

"It's a logical way to handle things," says Daniel Yergin, president of Cambridge Energy Research Associates in Cambridge, Mass. "It is going to be critical that the oil funds are handled in a transparent way."

The Council faced a deadline. The UN's oil for food program, which has bought $26 billion in food and other goods from France, Russia, China, and neighboring Arab states, was to expire June 3. It has now been extended six more months.

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