INTERNATIONAL OIL & GAS
10/30 17:35 UN Worried Iraq Delaying Oil Spare Parts Contracts
UNITED NATIONS, Oct 30 - Iraq, which has complained the United States is holding up its contracts for badly needed spare parts for its oil industry, has apparently built in its own delays in ordering the equipment.
A document obtained by Reuters shows 105 contracts worth $86 million approved by the council's sanctions committee since July but many of them have not been activated.
Iraq has only sent out letters of credit for 27 of these contracts, worth $46 million. Of this amount contracts amounting up to $20 million were issued to firms in France, followed by China with $9.8 million and Germany with $8.4 million, according to the documents.
Under a complicated scheme, the letters of credit to the Bank de Paris, which manages the Iraq-United Nations account, are necessary before any of the firms will begin to ship equipment to Iraq once the order is placed.
"We are looking at the flow of things," said John Mills, U.N. spokesman for Iraqi humanitarian program. "We have this concern that there are delays and we have done our best saying 75 percent of the contracts that have come in have been processed within two days."
But Mills said he did not know what caused the delays concerning the letters of credit. Iraqi officials were not immediately available for comment.
Under the so-called oil-for-food program, Iraq is allowed to sell $5.25 billion in oil over six months in order to buy food, medicine and other humanitarian supplies. The program is an exception to stringent sanctions imposed in 1990 after Iraqi troops invaded Kuwait.
But without $300 million worth of spare parts the Security Council approved for Baghdad's oil industry, Iraq cannot come close to meeting this target this year or next.
Assistant Secretary-General Benon Sevan, executive director of the program, has frequently urged the council to approve the contracts quickly, saying the entire plan would collapse without them.
Initially, the United States, sometimes backed by Britain, delayed approval in the sanctions committee and some 50 contracts are still on hold. But another 109 contracts worth $86 million have been approved by the Security Council's sanctions committee.
Diplomats on the committee said there appeared to be no technical reason why some of the 109 contracts received letters of credit and others did not. Many were not in the order in which they were received or related to one particular project.
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