Oil may not flow out of Iraq quickly: UN

Despite optimism by traders, the United Nations expects little oil to flow out of Iraq in the foreseeable future and says many goods ordered previously by Baghdad do not cover emergency war needs.

Benon Sevan, the undersecretary-general in charge of the UN oil-for-food program for Iraq, said on Tuesday some $720 million worth of undelivered goods for emergency needs could go to Iraq among the more than $10 billion in the pipeline.

But he said many of them might not get there within the 45 days the Security Council has extended the humanitarian program and that nations should contribute to the $2.2 billion separate appeal the United Nations made last week.

"There is no way for us to deliver during the 45-day period everything which may be available in the pipeline to meet the emergency need of the people of Iraq," Sevan told reporters after briefing the 15-member council.

Sevan said Iraqi oil already under contract and not yet lifted or oil stored in the Turkish Mediterranean port of Ceyhan would stay there until a competent authority was available.

"There is no SOMO," Sevan told reporters, referring to Iraq's State Oil Marketing Organization, which not only signs the contracts but must certify them before any lifting can resume, either in Ceyhan or elsewhere.

Whether a Security Council sharply divided on the war would agree to any U.S.-backed oil officials taking charge of the contracts is debatable.

Under the oil-for-food program, Iraq had to place its oil revenues in a UN escrow account out of which it purchased food, medicine and other civilians supplies. The program was meant to ease the impact of sanctions imposed after Baghdad's troops invaded Kuwait in August 1990.

Many of the contracts, outside of food and medicine, of goods Iraq purchases have to be approved by the Security Council members, which can also interfere

The Pentagon, fearing a UN stalemate could delay the use of postwar Iraq oil exports to pay for reconstruction, is organizing a board of former Iraqi oil officials and U.S. industry executives to oversee management of the country's oil fields. Industry sources say Washington hopes the oil would be for sale soon after the war ends.

But at this point, there is little chance the UN procedure can be circumvented. Mark Malloch Brown, administrator of the UN Development Program, told reporters last week the dispute "drives you once more back to that little stuffy table in the Security Council and a resolution."

"We will have to make some careful decisions within the council," British Ambassador Jeremy Greenstock told reporters on Tuesday.

"The United Kingdom's intention is to act under the resolution, including when sanctions are lifted," he said.

The council, after bitter disputes, decided to authorize Secretary-General Kofi Annan to deliver more food and medical goods to Iraq, under the oil-for-food program. That stopgap measure expires on May 12.

Sevan said it took council members until Monday to agree on compensating suppliers who had to make a detour and deliver goods instead to the Mediterranean ports of Latakia in Syria, Iskenderun in Turkey, the Jordanian Red Sea port of Aqaba and the Gulf port at Kuwait City.

Diplomats said Russia had wanted all suppliers compensated for the detours but finally agreed to compensate only those whose goods were already in transit.

On the other hand, many of the contracts in the pipeline, both for oil as well as for goods, stemmed from Russian and French firms, while food supplies were from Egypt and other regional nations, UN officials said.

Consequently, diplomats said there would have to be some compromise in future oil dealings as well as for the goods already contracted for but not yet financed if any firms expected to be paid.