9 August 1996

Press Release


The following information relating to arrangements for the implementation of resolution 986 (1995) -- the "oil-for-food" formula -- was issued today by the Security Council Committee established pursuant to resolution 661 (1990) which is monitoring the sanctions against Iraq: At its 142nd meeting, on 8 August, the Security Council Committee established by resolution 661 (1990) concerning the situation between Iraq and Kuwait adopted the expedited procedures to be employed by the Committee in the discharge of its responsibilities under Security Council resolution 986 (1995). The procedures consist of 46 paragraphs and two annexes. Section I (paragraphs 1 to 24), entitled "Sale of petroleum and petroleum products originated in Iraq", deals with the procedure to be followed for the approval of oil sales, the question of the overseers, the pricing mechanism and the opening of a letter of credit. Four independent oil experts or "overseers", to be selected by the Committee upon the recommendation of its secretariat, will consider oil contracts endorsed by the Government of Iraq or the Iraqi State Oil Marketing Organization (SOMO). If a contract employs a pricing mechanism submitted by Iraq and approved by the Committee, it will be reviewed by two overseers to determine whether it meets the set criteria, including details of a confirmed irrevocable letter of credit to be opened, with the irrevocable undertaking that the proceeds of the letter of credit will be paid directly to the escrow or Iraq account established by the Secretary-General under paragraph 7 of resolution 986 (1995). The export of petroleum and petroleum products will be monitored by United Nations independent inspection agents, appointed by the Secretary- General, who will be stationed at the loading facilities at Ceyhan and Mina-al-Bakr and at the metering station at the Iraq-Turkey border, and who shall report regularly to the Committee. Section II (paragraph 25), entitled "Import by Turkey of petroleum and petroleum products originating in Iraq pursuant to paragraph 2 of resolution 986 (1995)", stipulates that such import will be undertaken in accordance with the relevant provisions of Section I of the present procedures and the requirements of paragraphs 2 and 6 of resolution 986 (1995). Section III (paragraphs 26 to 38), "Export to Iraq of humanitarian supplies", outlines the procedures which have to be followed in cases of payment for humanitarian supplies requested from the Iraq account. It should be added that the current practice of the Committee will continue to be

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observed for applications submitted by the United Nations Inter-Agency Programme. This section also contains provisions covering the opening of letters of credit. Payment from the Iraq account can, in principle, take place only for items included in the categorized list of goods and after confirmation of their arrival in Iraq by independent inspection agents appointed by the Secretary-General. Section IV (paragraphs 39 and 40), entitled "Export to Iraq of parts and equipment, and financial transactions related thereto, pursuant to paragraphs 9 and 10 of resolution 986 (1995)", stipulates that the export of the parts and equipment will be undertaken in accordance with the procedures set out in Section III of the present procedures. Section V (paragraphs 41 and 42), entitled "Approval of reasonable expenses other than expenses payable in Iraq", provides that the Committee can approve the financing from the Iraq account of reasonable expenses, other than expenses payable in Iraq, which are determined by it to be directly related to the export by Iraq of petroleum and petroleum products permitted under resolution 986 (1995). Section VI (paragraphs 43 to 46), entitled "General provisions", addresses general questions such as the establishment of communication links, reports of the Secretary-General on the details of disbursements made out of the Iraq account, the form of the letters of credit and the possibility of a revision of the procedures. The last part of the procedures are the two annexes. Annex I contains the "Standard application form to request approval of contracts for the sale of Iraqi petroleum and/or petroleum products". Annex II lists up the "Information to be included in the letter of credit". Following the adoption of the procedures, the Committee agreed to introduce a new application form for sending humanitarian supplies to Iraq and requested the Chairman to make it available to all States and relevant international organizations. Pursuant to paragraph 1 of the Procedures, the Secretariat made a recommendation to the Committee on the selection of the overseers. Pending approval of the recommendation by the Committee under its no-objection procedure by noon, 9 August 1996, the names of the selected candidates will be forwarded to the Secretary-General for appointment. The Committee also considered a request from Turkey to resume the import of petroleum and petroleum products from Iraq for domestic purposes given the serious economic difficulties it has suffered as a result of the sanctions against Iraq. In view of the complexity of the matter and its implications for the sanctions regime, several members requested that the matter be deferred to allow them additional time to study the request. It was so decided.

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