U.S. Proposes Broader Control Of Iraqi Oil, Funds

By Colum Lynch

Washington Post Staff Writer

Friday, May 9, 2003; 11:50 AM



UNITED NATIONS, May 9 -- The Bush administration today offered the Security Council a resolution calling for the elimination of more than a decade of international sanctions on Iraq and granting the United States broad control over the country's oil industry and revenue until a permanent, representative Iraqi government is in place.

The resolution, which was presented to the 15-nation body this morning, would shift control of Iraq's oil from the United Nations to the United States and its military allies, with an international advisory board having oversight responsibilities but little effective power. A transitional Iraqi government, which U.S. authorities have said they hope to establish within weeks, would be granted a consultative role.

The proposal would give the United States far greater authority over Iraq's lucrative oil industry than administration officials have previously acknowledged. Buffeted by charges that the United States was launching a war to gain control over Iraq's oil fields, administration officials have for months sought to assure governments that Iraq's oil revenue would remain in the hands of the Iraqi people after the ouster of president Saddam Hussein.

The U.S. text, which was sponsored by Britain and Spain, could potentially face tough resistance from France and Russia, who favor continued U.N. control over Iraq's oil wealth and are on record opposing any Security Council action that would grant legitimacy to a war that they charge was conducted without explicit U.N. authority.

But U.S. officials have voiced confidence in recent days that the bitterness that divided the Security Council before the war has eased since Hussein's downfall and that the council would support a new resolution that the administration says is crucial to jumpstarting the Iraqi economy and its transition to democratic rule.

The resolution would eliminate all non-military trade sanctions on Iraq, endorse the administration of Iraq by the United States, Britain and other countries that took part in the war, and give its blessing to U.S. efforts to form a transitional government known as an interim Iraqi authority. It would also order U.N. members to deny a haven to Hussein and his top officials and to freeze the assets of members of the former government and their families. The proceeds would be placed in a trust fund controlled by the United States and its military allies.

In an effort to address calls by France, Russia and others for a U.N. role in Iraq's future, the resolution would direct U.N. Secretary General Kofi Annan to appoint a special representative to work with the United States on relief and reconstruction activities, and on the establishment of a representative government. "The U.N. should play a vital role in providing humanitarian relief, in supporting the reconstruction of Iraq, and in helping in the formation of an Iraqi interim authority," the resolution says.

But the United States and its allies would control the political and economic life of Iraq until an internationally recognized Iraqi government emerges. Under the system proposed by the administration, the proceeds of Iraq's oil revenue would be placed in an Iraqi Assistance Fund held by the Central Bank of Iraq, which is being managed by Peter McPherson, a former deputy Treasury secretary and Bank of America executive.

The United States and its allies would have the sole power to spend the money on relief, reconstruction and disarmament and to pay "for other purposes benefiting the people of Iraq." The "funds in the Iraqi Assistance Fund shall be disbursed at the direction of the [U.S.-led coalition], in consultation with the Iraqi Interim Authority," the resolution states. It adds that Iraq's oil profits shall remain in the assistance fund "until such time as a new Iraqi government is properly constituted and capable of discharging its responsibilities." According to some estimates, it may take years for such a government to be established.

The fund's expenditures would be subject to oversight by an international advisory board comprising representatives of the World Bank, the International Monetary Fund and the United Nations. The board would choose a team of accountants to audit the funds.

Although the resolution underscores the right of the United States to administer Iraq and its resources for an initial 12 months, it notes that its authority would be automatically renewed each year until the Security Council decided to end it.

The resolution would leave open the prospect of the United States tapping into Iraq's oil revenue to finance its own costly efforts to disarm Iraq. But U.S. officials indicated that they have no intention of using Iraqi oil money to finance the broader U.S. military campaign that led to the fall of the Iraqi government.

The scope and duration of U.S. control over Iraq's oil outlined in the resolution goes well beyond previous administration statements, which largely have been confined to affirmations that the oil was the property of the Iraqi people. Testifying on Capitol Hill in March, Secretary of State Colin L. Powell said, "The oil of Iraq belongs to the people of Iraq. It's the source of revenue to run the country."

The resolution attempts to satisfy Russian concerns that contracts it signed with Iraq through the U.N. oil-for-food program, under which Iraq was able to sell oil to pay for food, medicine and other humanitarian goods, be honored. It would allow the U.N. humanitarian operation to be phased out over four months, ensuring that about $10 billion in goods and equipment could be shipped to Iraq before the program closes its doors.

The U.S. effort in the Security Council is aimed at encouraging foreign countries to help finance the reconstruction of Iraq. John D. Negroponte, the U.S. ambassador to the United Nations, urged the international body yesterday to adopt it by June 3, when a U.N. mandate authorizing the export of Iraqi oil expires.

"We're certainly hopeful that everybody is going to enter into this discussion in a constructive and forward-looking spirit so that we can get on with the question of freeing the Iraqi economy, helping them take steps towards the establishment of a democratic political system, and so that the process of reconstruction of that country can get launched," Negroponte said.

The resolution makes no reference to a U.N. role in certifying Iraq's weapons inspections, a proposal that France and Russia have pressed. "The coalition has taken over the process of inspecting in Iraq for weapons of mass destruction," the text says, adding that it does not envision any role for the U.N. weapons inspection agency "for the foreseeable future."



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