OIL-FOR-FOOD PROGRAMME
Phasing down and termination of the
Programme
pursuant to
Security Council resolution 1483 (2003)
Statement by
Benon V. Sevan
Executive Director of the Iraq
Programme
At Informal
Consultations of the Security Council
Wednesday, 19 November 2003
Mr. President,
In paragraph 16 of its
resolution 1483 (2003) adopted on 22 May 2003 the Security Council
requested the Secretary-General to continue to exercise his
responsibilities under resolutions 1472 (2003) and 1476 (2003) for a
period of six months following the adoption of resolution 1483 (2003),
and terminate within this time period, in the most cost effective
manner, the ongoing operations of the Oil-for-Food Programme, both at
headquarters level and in the field, transferring responsibility for
the administration of any remaining activity under the Programme to
the Authority – the Coalition Provisional Authority (CPA).
As we count down to our
termination of the Programme in two days (Friday, 21 November), I
should like to update the information I provided to the Security
Council at its 4851st meeting held on 28 October 2003, with
regard to the phasing down and termination of the Programme, including
the status of contract prioritisation, humanitarian deliveries,
letters of credit, authentication of goods, contract processing,
transfer of assets and projects, as well as the assignment of
contracts. My update will cover action taken as at 18 November 2003.
The transfer process is being
carried out through the use of model agreements and other documents
that were prepared by the Office of the Iraq Programme (OIP) in close
consultation with the United Nations Office of Legal Affairs, and
approved by the CPA. Assets, facilities and installations purchased
by UN agencies and programmes are being transferred to the CPA
pursuant to the relevant provisions of resolution 1483 (2003), and
from the CPA to the relevant Iraqi authorities, through the use of
transfer agreements and transfer certificates, which describe the
assets, facilities and installations being transferred. Active
contracts are being assigned by the UN agencies and programmes
concerned to the CPA pursuant to contract assignment/modification
agreements. In addition, claims and disputes, which are not covered
by one of the aforementioned agreements, will be transferred to the
CPA through the use of assignment agreements designed for that
purpose. Finally, the custody of goods which are in the possession of
the United Nations, but which are not owned by the United Nations, is
being transferred to the CPA through the use of possession and custody
transfer agreements and certificates. This galaxy of agreements will
transfer to the CPA virtually all of the rights, obligations and
liabilities of the United Nations relating to the Programme, as
envisioned by resolution 1483 (2003).
Transfer of
activities in the centre and south
Prioritisation of contracts
pursuant to paragraph 16 of resolution 1483 (2003)
Handover
arrangements for the centre and south involved a tripartite review of
all remaining contracts for humanitarian supplies and equipment
submitted under the Programme. This review procedure by the United
Nations, the CPA and the relevant Iraqi authorities has covered
approved and fully funded contracts (4,834 with a total value of $7.9
billion at the beginning of the exercise), as well as many of the
approved but unfunded contracts (3,586 with a total value of $7.07
billion). Adjustments were also made for alternative delivery and
authentication sites to enable the delivery of supplies and equipment
to Iraq.
Pursuant to Security Council
resolutions 1472 (2003) and 1476 (2003), a total of $1.4 billion worth
of items were prioritised from the Programme’s humanitarian delivery
pipeline of over $10 billion under the ESB (59 per cent) account. The
goods that could be shipped to Iraq for emergency needs under the
above resolutions, pertained to the following sectors: food ($748
million), electricity ($297 million), agriculture ($184 million),
health ($126 million), and water and sanitation ($40 million).
As at 17 November 2003, an
additional 2,937 approved and funded contracts worth some $6.51
billion had been classified to have relative utility in the following
sectors: food ($1.52 billion), electricity ($1 billion), food
handling ($517 million), water and sanitation ($406 million),
agriculture ($632 million), health ($294 million), housing ($442
million), telecommunications and transport ($301 million), education
($200 million) and oil spare parts ($989 million). An additional 694
contracts worth $715 million were initially determined to have
relative utility but were later removed from the list for a variety of
reasons. In some cases it was determined that the contracted goods
had either been fully delivered or, for whatever reasons, the
suppliers were not interested or able to complete deliveries at this
time. These contracts will not be amended by the United Nations prior
to 21 November 2003, and will be transferred to the CPA for further
processing, where applicable.
The number of approved and
funded contracts that have not been determined to have relative
utility stands at 868, with a total value of $1.35 billion. They
include some 500 approved and funded contracts, with previously issued
letters of credit, worth about $288 million, against which the
suppliers concerned had already delivered some of the goods to Iraq
before the war stopped further deliveries. It should be noted that
these 868 contracts do not include contracts with negligible balances
which suppliers are not interested to pursue. There are 721 contracts
worth a total of some $28 million in this category.
As at 17 November 2003, 386
approved but unfunded contracts worth some $706 million had been
funded following determination of their relative utility and urgent
need in the following sectors: food ($539 million), electricity ($20
million), food handling ($62 million), water and sanitation ($1.6
million), agriculture ($67 million), health ($2.8 million), housing
($0.6 million), education ($4.2 million), industry ($8.2 million).
There remain 3,226 approved but unfunded contracts, with a total value
of $6.4 billion.
While the United Nations and
the CPA have continued to review the relative utility of the approved
and funded contracts in the pipeline, the CPA has informed the Office
of the Iraq Programme that they “do not anticipate that this process
will result in a large number of additional contracts moving forward”
by 21 November 2003. Prioritised contracts that cannot be amended by
the UN agencies and programmes before the termination of the
Programme, will be transferred to the CPA for appropriate action.
Pursuant to paragraph 16 (b) of
resolution 1483 (2003), action on “contracts determined to be of
questionable utility and their respective letters of credit” will be
postponed “until an internationally recognized, representative
government of Iraq is in a position to make its own determination as
to whether such contracts shall be fulfilled.”
Of a total of 2,937 prioritised
contracts, the UN agencies and programmes have negotiated amendments
to 2,783 (94.8 per cent). I am happy to report that the UN agencies
and programmes have successfully delivered on their repeated
assurances to the Office of the Iraq Programme that the amendment of
remaining prioritised contracts will be completed, albeit with some
exceptional extension of the deadlines, and despite some additions to
the list of priority contracts that have been submitted very recently.
The Office of the Iraq Programme has made arrangements, on an
exceptional basis, to process amendments that were delayed for reasons
beyond the control of suppliers, up until 19 November 2003. I am
providing the Council with a table categorizing contracts for which
amendments were still pending as at 17 November (Table I).
New projects
On my recommendation, the
Security Council Committee established by resolution 661 (1990)
approved, on an exceptional basis, 13 projects for the procurement of
items, including $189 million for the local procurement of
wheat and barley, not covered by approved and funded or
unfunded contracts. Approval of these projects, with a total value of
$459 million, was based on the essential needs of the Iraqi people, as
identified by the United Nations, in coordination with the CPA and the
relevant Iraqi authorities. As at 17 November 2003, 183 contracts for
goods and services worth $134 million were submitted and approved
under these projects in the health ($18 million), agriculture ($94
million) and education ($22 million) sectors, respectively.
Delivery of supplies under resolutions 1472 (2003) and 1476 (2003)
As at 17 November 2003, under
resolutions 1472 (2003), 1476 (2003) and 1483 (2003), UN agencies and
programmes had arranged the delivery of goods worth over $1.14
billion, including $218 million worth of items authenticated under new
procedures introduced on 10 October 2003. For those goods that are
still at locations outside Iraq and cannot be delivered into Iraq by
21 November 2003, arrangements are being made for their transfer to
the CPA outside Iraq before that date.
Goods that are
consigned to UN agencies and programmes under resolutions 1472 (2003)
and 1476 (2003) but not received by them by 21 November, will be
consigned to the relevant Iraqi authority. The UN agencies and
programmes will provide a list of the goods falling under these two
categories to the CPA.
Goods in transit
Goods worth $403 million were
established to be in transit to Iraq when the United Nations
independent inspection agents were withdrawn from the country in
mid-March 2003 for security reasons. Among them are prioritised goods
under 256 contracts valued at $309 million. Arrangements are being
made for the holders of the remaining 35 contracts to be compensated
under paragraph 4 (g) of resolution 1472 (2003). UNOPS is currently
assessing the storage, transportation and insurance costs accrued
under these contracts to determine the amounts of compensations that
may be claimed, and will advise the suppliers shortly to dispose of
the goods in alternative markets.
Letters of credit
The “cash collateral” associated with all
contracts in the following categories will be maintained in the United
Nations Iraq Account until the contracted goods are delivered in full
and payments have been made to suppliers according to the terms and
conditions of the related letters of credit as follows:
a.
Contracts assigned relative utility and
priority which have letters of credit issued and outstanding and which
will be extended according to the amended agreements between the UN
agencies and programmes concerned and the supplier;
b.
Contracts assigned relative utility and
priority for which new letters of credit are being issued by BNP
Paribas at the request of the United Nations Treasury in accordance
with the amendment agreed to between the adopting UN agency and
programme and supplier;
c.
Contracts of questionable utility that have
letters of credit issued and outstanding. The United Nations will
allow such expiring letters of credit to lapse. These contracts will
be held in abeyance until an internationally recognized,
representative government of Iraq is in a position to make its own
determination as to whether such contracts shall be fulfilled;
d.
Contracts considered a priority which will
be amended by CPA after 21 November 2003.
Authentication
of goods
The UN independent
inspection agent (Cotecna) is currently stationed at inspection sites
outside Iraq and authenticates the arrival of goods consistent with
arrangements agreed upon between the UN, the CPA and the relevant
Iraqi authorities. However, for security reasons, Cotecna personnel
are not permitted to operate at the port of Umm Qasr. Bulk and
general cargo destined for Umm Qasr are therefore inspected at sea
near Dubai, and authenticated confirmation of their arrival is
issued once the vessels discharge their consignments at Umm Qasr.
Since the
establishment on 10 October 2003 of the revised authentication
procedures, Cotecna has authenticated delivery of goods to Iraq valued
at $214.9 million. This includes the first confirmations of receipt
in Umm Qasr received by OIP on 14 November 2003.
In July 2003, the CPA was provided
with details of 21 contracts against which suppliers have claimed to
have provided services prior to the war and could not be authenticated
due to Cotecna’s withdrawal. Despite repeated reminders, the CPA has
only been able to produce a negative response in connection with three
of these contracts. The number of outstanding cases with services to
be authenticated has recently increased to 29, with a combined value
of $5.2 million. The Office of the Iraq Programme will provide the
CPA with electronic copies of all correspondence associated with these
cases for further processing after 21 November 2003.
The CPA should ensure that
appropriate arrangements are in place from 22 November 2003, for the
effective management of the billions of dollars worth of supplies and
equipment destined for Iraq from the Programme’s delivery pipeline and
for authenticating arrival of these goods in order to facilitate
payment to the suppliers. The CPA has been in close discussions with
Cotecna with a view to the retention of its services for a limited
period after the termination of the Programme and has given assurances
to OIP as well as to the Security Council Committee that a final
decision in that regard will soon be taken, thus ensuring the
continuation of authentication arrangements beyond 21 November 2003.
Copies of contracts
The Office of the Iraq Programme has provided the
CPA and the relevant Iraqi ministries with two electronic copies of
all approved and executed contracts for the sale of Iraqi oil, as well
as all approved and funded contracts and their relevant applications
in the humanitarian and oil spare parts sectors. The number of
contracts currently stands at more than 5,000, with just a handful
remaining to be prepared for transfer by 21 November 2003. In
addition, the Office of the Iraq Programme will complete scanning of
all approved but unfunded contracts, as well as contracts registered
but not approved, for transfer to the CPA. The Office of the Iraq
Programme has also adjusted its databases to include information
concerning the delivery dates negotiated by the UN agencies and
programmes for contracts prioritised pursuant to resolution 1483
(2003). The databases include delivery locations and up-to-date
contact information for suppliers. The entire Oil-for-Food database
will be transferred to the CPA on 21 November 2003.
Transfer of activities in the three
northern governorates
The transfer process
The High Level Tripartite Working Group (HLTWG),
composed of the CPA Senior Advisor, who also chairs the meetings, a
representative of the United Nations Office of the Humanitarian
Coordinator in Iraq (UNOHCI), and senior representatives of the local
authorities in Erbil and Sulaymaniyah, has met regularly since its
establishment on 10 August 2003. All policy matters and final
decisions regarding the transfer of Programme activities in the three
northern governorates have been taken by the HLTWG. The Working Group
has taken the necessary measures to ensure that the delivery of
essential services will not be interrupted after the termination of
the Programme on 21 November 2003.
Transfer of projects and
activities through dossiers
The
Council was informed on 28 October 2003, that the United Nations
required a minimum of 115 international staff for an orderly transfer
of over $3.5 billion worth of completed and ongoing projects,
including $1.5 billion worth of assets, in the three northern
governorates. Given a substantial reduction in the number of UN
personnel for security reasons and the late deployment of a handover
team by the CPA, the intended joint physical review of all Programme
assets by the United Nations, the CPA and the local authorities, was
not possible. Accordingly, it was agreed that completed and ongoing
projects and activities would be transferred to the CPA through
dossiers prepared for each project and activity. The Council was also
provided with details of the information to be included in the
dossiers.
The representatives of the UN
agencies and programmes and the CPA Sectoral Advisors have been
initialling these dossiers. The dossiers will be annexed to the
transfer Agreement.
Transfer of
completed and ongoing projects
By 21 November, 268
completed projects and activities, with a total value of $2.1 billion,
would be transferred to the CPA. Details on the number and value of
these projects, by sector, were also provided to the Council. The CPA
accepted our recommendation, as also advocated by the local
authorities, to fund all viable ongoing projects. The United Nations
will also hand over 159 projects, with a total value of $1.5 billion,
which will not be completed by 21 November. It should be borne in
mind, however, that the initiation of the execution of some of the
approved projects was delayed for a variety of reasons, most of them
beyond the control of the UN agencies and programmes, which include
the interruption of the United Nations operations prior to the
conflict and due to security reasons during the post-conflict period.
Assignment of third party
contracts
Negotiations for
the assignment of third party international contracts to the CPA,
which were originally signed by the UN agencies and programmes, have
been underway in Amman, Jordan, for over a month. While most have
been finalized, some are still outstanding. An all out effort is being
made to finalize the assignment of all outstanding third party
international contracts to the CPA by 21 November.
As at 17 November, there were 380
international contracts and purchase orders to be assigned to the CPA
by 21 November. The CPA has decided to
assume legal responsibility for all active third party local contracts
signed by the UN agencies and programmes and renegotiate with the
local contractors, as necessary, after the termination of the
Programme. Accordingly, 261 local contracts have been
assigned to the CPA.
Warehouse inventories
On 10 November,
the CPA confirmed to the United Nations in writing, its acceptance of
the report of a CPA team of experts who applied statistical sampling
techniques to determine the accuracy of inventories of assets in the
warehouses of UN agencies and programmes. The experts concluded that
the warehouse inventory balances reported by the UN agencies and
programmes to the CPA were accurate.
The UN agencies and programmes and CPA Sectoral
Advisors have already been initialing the inventory of items in the
warehouses. These inventories will be attached to the hand-over
Agreements and transferred to the CPA. As at 18 November, the total
value of the items to be transferred was $384 million.
Office of Project Coordination (OPC)
In order to return
responsibility for the management of affairs to the Iraqi people as
soon as practicable, the CPA Administrator, in a letter dated 11
November 2003 addressed to the President of the Governing Council,
proposed that the Council accept authority for the administration of
the Programme’s projects and its assets in the three northern
governorates, upon the transfer of authority from the United Nations
to the CPA on 21 November. The Administrator also recommended that
the Council establish without delay an Office of Project Coordination
(OPC) in the three northern governorates for this purpose.
On 16 November, the Governing
Council authorized the OPC to accept all Programme assets on behalf of
the Council, and authorized the relevant officials of the local
authorities in the three northern governorates to designate the
individuals to sign the transfer documents. The organizational
structure of the OPC has been finalized and the local authorities have
identified a candidate for Director General of the OPC. The OPC will
manage $748 million
worth of ongoing projects whose implementation
would extend beyond 21 November 2003.
Joint Humanitarian Information
Centre (JHIC)
The Joint Humanitarian
Information Centre (JHIC) in Erbil has served as the central database
for the United Nations inter-agency humanitarian operations in the
three northern governorates of Iraq. The JHIC and its assets will
also be transferred to the CPA.
Assets purchased with funds
from the ESD (2.2 per cent) account
The ESD (2.2 per
cent) account was established pursuant to paragraph 8 (d) of Security
Council resolution 986 (1995) for United Nations administrative and
operational costs. In identical letters dated 23 October 2003
addressed to the Executive Heads of the United Nations agencies and
programmes concerned, the Secretary-General stated as follows:
“As the operations of the ‘Oil-for-Food’ Programme
wind down and we prepare ourselves to complete the transfer of
responsibility for the administration for any remaining activity to
the Coalition Provisional Authority (CPA), I have directed that assets
purchased with funds from the 2.2 per cent account that would not be
required by the United Nations for its activities relating to Iraq,
either at the headquarters or in the field, should be transferred to
the CPA for the benefit of the people of Iraq.”
Accordingly, the United
Nations, its agencies and programmes, have been reviewing their
respective inventories of all assets purchased with funds from the 2.2
per cent account, to determine which assets should be transferred to
the CPA, pursuant to the Secretary-General’s directive.
Concluding observations
It is gratifying to state without
hesitation that the United Nations has met the challenge for an
orderly termination of the Programme by 21 November 2003 pursuant to
resolution 1483 (2003). It has achieved this in spite of the
Programme’s magnitude in terms of scope, level of funding, operational
scale and complexity. This challenge has been met in the face of
prevailing security conditions, and the ensuing substantial reduction
in UN international personnel in Iraq after the terrorist bombing of
the United Nations headquarters in Baghdad on 19 August.
I should like to pay a special
tribute to the memory of all our international and national colleagues
who made the ultimate sacrifice in the line of duty. Over 100 hundred
colleagues suffered injuries, some still recovering from serious
injuries.
On behalf of the Office of the Iraq
Programme I should like to express my sincere appreciation and
gratitude to all our United Nations international and national
colleagues, both at headquarters and in the field, for their dedicated
service throughout the life of the Programme, and especially during
the extremely difficult period of its phasing down and termination.
In this
connection, it is satisfying to learn that the CPA is making
arrangements to transfer most of the 2,600 United Nations national
staff in the three northern governorates to posts in the local
government or to retain them on personal services contracts, thereby
recognizing their capacity and expertise, which will support the
future administration of the projects and activities transferred by
the United Nations to the CPA. I should like to appeal to the CPA and
the relevant Iraqi authorities to give similar consideration to the
future employment of over 1,000 United Nations national staff serving
in the centre and south of Iraq.
It is
also a source of satisfaction to note that the CPA has found the local
technical capacity in the three northern governorates to be adequate
for the handover of authority for the administration of the
Programme’s projects and assets, which will be administered by the
Office of Project Coordination.
On behalf of my colleagues I should
like to thank sincerely the members of the Security Council as well as
its Committee and the distinguished Chairman, H.E. Mr. Gunter Pleuger
(Germany), for their understanding and support. I should also like to
thank our counterparts in the CPA and the relevant Iraqi authorities
for their close cooperation and understanding throughout the
transition period.
Irrespective of the political and
other constraints, the Programme made a real difference in the daily
lives of the average Iraqi citizen. As long as sanctions remained in
place, there was no alternative to the Programme in alleviating the
humanitarian situation in Iraq and mitigating the unintended
consequences of the sanctions regime.
On behalf of all my colleagues, I
wish to express our gratitude for the privilege of serving the Iraqi
people during their most difficult period.
TABLE
I
Summary of outstanding contracts as per OIP files as at 17 November
2003
CATEGORY |
# OF CASES |
Amendments completed,
sent out, suppliers’ signature pending
|
5 |
Amendments for ‘late
priorities’ still negotiated by the UN agencies and programmes |
30 |
Contracts with responses
from CPA or suppliers pending
|
33 |
Cases pending for other
reasons
(subject to
reconciliation)*
|
85* |
TOTAL OUTSTANDING CONTRACTS
|
153 |
*includes
contracts from UNOPS, Habitat and WFP (food) for which no
categorization
was received at the time of this update
|