SECURITY COUNCIL AUTHORIZES SALE OF IRAQ OIL TO OFFSET SHORTFALL IN REVENUES RESULTING FROM DELAY IN OIL SALES, DROP IN OIL PRICES

25 March 1998

Press Release
SC/6492

SECURITY COUNCIL AUTHORIZES SALE OF IRAQ OIL TO OFFSET SHORTFALL IN REVENUES RESULTING FROM DELAY IN OIL SALES, DROP IN OIL PRICES

19980325 Resolution 1158 (1998) Adopted Unanimously

Concerned about the humanitarian consequences for the Iraqi people resulting from a shortfall in oil revenues, the Security Council this afternoon decided to authorize the sale of up to $1.4 billion of Iraqi oil and oil products within a 90-day period from 0001 hours (EST) of 5 March.

In its unanimous adoption of resolution 1158 (1998), the Council also decided that the provisions of its resolution 1143 (1997) should remain in force, subject to the provisions of resolution 1153 (1998).

Acting under Chapter VII of the United Nations Charter, the Council sought to offset the shortfall in Iraqi oil revenues during the first 90-day period of the implementation of resolution 1143 (1997) resulting from a delay in the resumption of oil sales and a serious drop in oil prices.

That text extended for an additional six months, beginning on 5 December 1997, the provisions of resolution 986 (1995), which allows the sale of Iraq oil to pay for humanitarian goods and their distribution in the country. By its adoption, the Council authorized the sale of $2.1 billion worth of Iraqi oil over an additional 180-day period. To avoid further deterioration of the humanitarian situation in Iraq, the Council adopted resolution 1153 on 20 February, thereby permitting the import of up to $5.256 billion -- up from the previous $2.1 billion -- for a new 180-day period.

The meeting was convened at 4:12 p.m. and adjourned at 4:15 p.m.

Text of Resolution

The text of resolution 1158 (1998) reads as follows:

"The Security Council,

"Recalling its previous resolutions and, in particular, its resolutions 986 (1995) of 14 April 1995, 1111 (1997) of 4 June 1997, 1129 (1997) of 12

September 1997, 1143 (1997) of 4 December 1997 and 1153 (1998) of 20 February 1998,

"Welcoming the report submitted on 4 March 1998 (S/1998/194 and Corr.1) by the Secretary-General in accordance with paragraph 4 of resolution 1143 (1997) and noting with appreciation, as mentioned in this report, the commitment expressed by the Iraqi Government to cooperate with the Secretary- General in the implementation of resolution 1153 (1998),

"Concerned about the resulting humanitarian consequences for the Iraqi people of the shortfall in the revenue from the sale of petroleum and petroleum products during the first 90-day period of implementation of resolution 1143 (1997), due to the delayed resumption in the sale of petroleum by Iraq and a serious price drop since the adoption of resolution 1143 (1997),

"Determined to avoid any further deterioration of the current humanitarian situation,

"Reaffirming the commitment of all Member States to the sovereignty and territorial integrity of Iraq,

"Acting under Chapter VII of the Charter of the United Nations,

"1. Decides that the provisions of resolution 1143 (1997) shall remain in force, subject to the provisions of resolution 1153 (1998), except that States are authorized to permit the import of petroleum and petroleum products originating in Iraq, including financial and other essential transactions directly relating thereto, sufficient to produce a sum not exceeding a total of 1.4 billion United States dollars within the period of 90 days from 00.01, Eastern Standard Time, on 5 March 1998;

"2. Decides to remain seized of the matter."

Secretary-General's Report

When the Council met this afternoon, it had before it a report of the Secretary-General (document S/1998/194 and Corr.1), submitted pursuant to paragraph 4 of resolution 1143 (1997). By the terms of paragraph 4, the Secretary-General was asked to report to the Council within 90 days after the entry into force of paragraph 1 of the resolution, on whether the Iraqi Government had ensured the equitable distribution of medicine, health supplies, food and materials and supplies for essential civilian needs, financed in accordance with resolution 986 (1995).

The report provides information up to 15 February on the distribution of humanitarian supplies throughout Iraq, including the implementation of the

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United Nations Inter-Agency Humanitarian Programme in the three northern governorates of Dahuk, Erbil and Sulaymaniyah.

Since the beginning of phase III of the implementation of resolution 986 (1995), the oil overseers have reviewed and approved a total of 34 contracts involving purchases from 14 countries, the report states. The total quantity of oil approved for export under those contracts corresponds to approximately 152 barrels for 180 days -- the highest amount since the beginning of the implementation of resolution 986, which provided for the sale of Iraqi oil to pay for humanitarian goods and their distribution in the country. At current prices, total projected revenue for the 180-day period is about $1.87 billion (including the pipeline fee).

Under phase I, the Iraqi Government was authorized to export oil at a time when the price averaged $17.99 per barrel, the report continues. A total of 119,515,720 barrels were exported, raising $2,149,806,398. Under phase II, when the oil price averaged $16.74 per barrel, Iraq exported 126,942,341 barrels, raising $2,124,569,788. In the first 63 days of phase III, with a price of $12.18 per barrel, Iraq sold 50,663,476 barrels, which raised $617,130,190. Compared to the first half of phase I, when Iraq exported 51,611,001 barrels, the 32 per cent decline in the price of oil in phase III means Iraq would have to export a total of 84,916,622 barrels to raise comparable revenue.

Owing to the delayed resumption in the sale of petroleum from Iraq under resolution 1143 (1997) and a serious price drop since its adoption, a $380 million revenue shortfall in the 90-day revenue objective of $1.07 billion (including the pipeline fee) is anticipated if current prices remain unchanged, the report states. During phase III of the implementation of resolution 986 (1995), the export of oil from Iraq proceeded smoothly and based on the assessment of the oil overseers and oil monitors, Iraq is capable of exporting sufficient quantities of petroleum to meet the revenue target of $2 billion for phase III.

As at 15 February, 2.727 million tons of the 2.979 million tons of food supplies contracted under phase I had arrived in Iraq, the report states. For phase II, 1.522 million tons have arrived in the country and the World Food Programme (WFP) reports that a total of 3.799 million tons purchased under phases I and II have been distributed. In the medical sector, out of a total phase I allocation of $210 million, contracts worth $200 million had been approved by the Security Council Committee monitoring the implementation of sanctions against Iraq. The value of medicines and related supplies represented 70.2 per cent of the phase I allocation.

Referring to resolution 1153 (1998), which permitted the importing of $5,256 billion for a new 180-day period, the report says the Government of

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Iraq has indicated that its operational capacity may limit petroleum exports to $4 billion during a 180-day period. The Government has expressed its readiness to receive a group of experts, pursuant to paragraph 12 of resolution 1153 (1998), to help it determine its precise petroleum export capacity. Arrangements are being made for a group of experts to arrive in Iraq around 10 March to help the Government determine its precise export capacity.

The Secretary-General says he is confident that the process of approval of applications and delivery of humanitarian supplies to the people of Iraq will be handled more expeditiously. On 23 February in Baghdad, he held detailed discussions on the humanitarian programme, as well as the implementation of resolution 1153 (1998) with Iraq's Vice-President, Foreign Minister and Minister for Oil and the Permanent Representative of Iraq to the United Nations. In a 25 February letter, the Foreign Minister reiterated his Government's "commitment to cooperate effectively and in good faith" with the Secretary-General with a view to the "expeditious implementation" of the humanitarian programme. It is hoped that Council resolution 1153 (1998) will strengthen cooperation between the Iraqi Government and the United Nations for the benefit of the Iraqi people.

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