Tracking Number:  184189

Title:  "Commission to Oversee Iraq's Payment of War Claims." The UN Security Council formally established the compensation fund and commission that will determine how Iraq will pay compensation for the damage caused by its invasion and occupation of Kuwait. (910520)

Translated Title:  ; "Irak: l`ONU Cree un Fonds d`Indemnisation." (910520)
Date:  19910520


05/20/91 COMMISSION TO OVERSEE IRAQ'S PAYMENT OF WAR CLAIMS) Security Council sets up compensation fund) (1060) By Judy Aita USIA United Nations Correspondent

United Nations -- The Security Council May 20 formally established the compensation fund and commission that will determine how Iraq will pay compensation for the damage caused by its invasion and occupation of Kuwait.

Adopting the resolution by a vote of 14 to 0, with Cuba abstaining, the council also said Iraqi petroleum and petroleum products exported from Iraq after April 3, 1991, as well as those exported earlier but not delivered or not paid for, will be included in the calculations for Iraq's payment to the fund.

U.S. Ambassador Thomas Pickering said that the resolution puts the compensation on track with the other requirements of the council's cease-fire resolution (687). "Now we are going to wait and see about Iraqi cooperation with the fund and with the commission on destruction of weapons of mass destruction," he said.

According to Security Council Resolution 687, Iraq is liable under international law for any direct loss, damage, depletion of natural resources, or injury to foreign governments, nationals and corporations resulting from its invasion and occupation of Kuwait. The same resolution calls for the creation of a compensation fund to pay claims and determine the level of Iraq's contribution to the fund based on a percentage of the value of its oil exports.

In passing the latest resolution -- number 692 -- the council accepted Secretary General Perez de Cuellar's report on how the fund and commission should be created and asked the secretary general to set the ceiling on the level of Iraq's contribution.

The governing council of the commission will be located at the U.N. office in Geneva. After convening, it will use Perez de Cuellar's recommendations to finally decide how to operate the fund; review claims by Kuwait and other countries harmed by the invasion; collect Iraqi payments; and, most importantly, set the percentage of Iraqi oil profits to be contributed to the fund each year using the secretary general's ceiling as a guide.

Before the council vote, Kuwaiti Ambassador Mohammad Abulhasan told the secretary general that his government

GE 2 POL107 wants the ceiling for the percentage of Iraq's oil profits set at 50 percent.

Perez de Cuellar said in his report to the council that the fund's governing council should set the "appropriate level of Iraq's contribution," taking into consideration "the probable levels of future oil export revenues of Iraq, the amounts of military spending and arms imports in the past, the service of Iraq's foreign debt, and the needs for reconstruction and development in the country."

The secretary general has not yet indicated what he will recommend.

The governing council also will notify the Security Council if Iraq fails to abide by the governing council's decisions.

Pickering said that 50 percent is not unreasonable. "We've talked about levels high enough to make sure that if, in fact, oil production does actually take place and increases and prices rise, there will be plenty of opportunity to supply this fund with money early, rather than be hamstrung by a low figure."

"The ceiling has to be high enough to admit for all contingencies. One of those contingencies (is) that Iraq suddenly at some point in the future could be making a lot of money and can afford a figure like (50 percent)," the U.S. ambassador said.

Ambassador David Hannay of the United Kingdom also said that the percentage should be substantial because "not only the damage done to Kuwait, but to others is very, very large."

The Security Council's mandatory sanctions imposed after the invasion of Kuwait are still in force, prohibiting all nations from importing Iraqi oil or oil products.

Pickering said that the lifting of those sanctions is a "long way down the road."

Earlier in the month Iraq asked for a five-year moratorium on its obligation to pay reparations saying that it needs about $214,000 million to service its foreign debt and rebuild its economy. Iraqi Ambassador Abdul Amir Al-Anbari called the council's vote May 20 a violation of the U.N. Charter.

"Not a word or sentence in the Charter authorizes the council to impose fines or set up such a strange animal," Al-Anbari said, but he added that Iraq has "no other choice but to comply" with the requirement to pay compensation.

GE 3 POL107 In a May 3 report to the council, Perez de Cuellar recommended that the "United Nations Compensation Fund" be administered by a 15-member U.N. Compensation Commission. The 15 members of the Security Council will be the commission's governing council and U.N. secretariat personnel will serve as technical administrators.

In the report, a 10-page document outlining bureaucratic procedures, the secretary general also listed several options for ensuring that Iraq meets its payments. Those arrangements, he said, "are among the most technical and difficult of the tasks that have been entrusted to the commission."

Methods of payment suggested are: determining the market value of the exports on the day of export, with payment due in 30 days; estimating quarterly contributions and making lump-sum advance payments in an escrow account; taking a physical share of the exports and selling them on the market on behalf of the fund; or designating the fund as the beneficiary on the bill of lading with the fund then paying Iraq its share.

All of the methods require "strict supervision of the exports of petroleum and products from Iraq," Perez de Cuellar said. "To this end, the commission should arrange for appropriate monitoring. Whatever approach is adopted, should Iraq fail to meet its payment obligation, the governing council would report the matter to the Security Council."

The governing council will also have to set up a procedure for processing claims. The secretary general recommended that the governing council handle only consolidated claims filed by individual governments on their own behalf and the behalf of their nationals and corporations. Otherwise, he said, the task would involve tens of thousands of claims that could take a "decade or more" to settle.

The governing council will also have to verify the claims, evaluate the losses, and resolve any disputed claims. The guidelines for that will also have to be drawn up by the council. NNNN

File Identification:  05/20/91, PO-107; 05/20/91, AE-108; 05/20/91, EP-109; 05/20/91, EU-105; 05/20/91, NE-104; 05/20/91, NA-103; 05/21/91, AS-220; 05/21/91, AR-209; 05/21/91, AF-204; 05/21/91, AR-209; 05/21/91, AF-207
Product Name:  Wireless File
Product Code:  WF
Languages:  Arabic; Spanish
Thematic Codes:  1NE; 1UN
Target Areas:  AF; EA; EU; NE; AR
PDQ Text Link:  184189; 184985; 184274; 184322