Hussein May Be Main Beneficiary of U.N. Aid Effort

Iraq is effectively diverting hundreds of millions of dollars annually to prop up President Saddam Hussein’s regime through a United Nations humanitarian aid program that soon will more than double, U.S. officials and oil analysts say.

Baghdad is gaining access to new revenue through the U.N. “oil-for-food” program that has let Iraq since 1996 sell $2 billion in oil every six months to buy food and medicine to alleviate the Iraqis’ suffering.

But these supplies, which were intended to be supplements, are often now used to replace basic goods that Iraq once provided--freeing revenue for other uses.

“The money he should have put toward feeding people he is now using to buy marble for his palaces or to keep his inner circle happy and loyal,” a senior Clinton administration official said.

U.S. and U.N. officials say they cannot give an exact sum, but conservative estimates are that the Iraqis have garnered hundreds of millions of dollars a year this way.

And the total is certain to increase because a U.N. resolution approved last month more than doubled the amount of oil that Iraq is allowed to sell, increasing the total to $5.25 billion every six months--and expanding the program in ways that might make Baghdad more difficult to control.

As a result, the U.N. has “effectively taken over the role the government once played” in providing the minimum nutritional intake of Iraq’s poorest citizens, said James Placke, a former U.S. envoy in Iraq now with Cambridge Energy Research Associates.

A greater danger, however, lies in what Baghdad is doing with the money. “Even if we can prove Iraq is diverting foodstuffs, it’s difficult to say that Iraq is using the program to strengthen its military,” a U.N. expert said.

U.S. analysts are concerned about misuse that could keep the regime alive--and armed. “The money is fungible. Hussein can take the money he now does not have to spend on his people and put it into dual-use equipment that can make weapons of mass destruction or use it to reward people in his regime,” said Anthony Cordesman of the Center for Strategic and International Studies in Washington.

Iraq has proved itself masterful at disguising dual-use equipment. When it was working on a “super gun” intended to be the world’s longest-range artillery piece, Iraq disguised its intent so effectively that manufacturers thought the barrel parts they were supplying were for an oil pipeline, said Patrick Clawson, a former World Bank economist now at the Washington Institute for Near East Policy.

The expansion of the oil-for-food program will be a major boon to Baghdad on other fronts: The increased sales could make Iraq the sixth- or seventh-largest oil exporter, boosting production to levels currently beyond Iraq’s capability.

Under U.N. Resolution 1153, Iraq will be allowed to sell an annual total of $10.5 billion in oil exports. The deal is so generous, it will basically allow Baghdad to export almost the same amount it did before the 1991 Persian Gulf War, experts say. Sales between 1981 and 1989 averaged $9.54 billion annually, the equivalent of $11.5 billion today.

And “Iraq’s income is becoming so large that you will no longer have effective control over what it is able to import,” Clawson said. “Oil-for-food is effectively no longer a humanitarian program.”

The resolution represents “a big victory” for Hussein, who has been pushing hard for relief from the world’s toughest economic embargo, Clawson said. “He is now authorized to export oil effectively without limit because he is permitted to export all the oil he is capable of pumping.”

Iraq is capable of producing about $8 billion in oil for export each year. As a result, Hussein’s regime will be allowed to develop its petroleum industry for the first time since the Gulf War.

The resolution “expresses its readiness [to] authorize the export of necessary equipment” to enable Iraq to export oil. This is a critical step on the road to restoring Iraq’s economic infrastructure and development--a step that otherwise would have to wait until sanctions are lifted, analysts say.

On a broader level, the tenor of the resolution shifts the U.N. effort from a humanitarian relief program to one that emphasizes aid and development, in effect laying the groundwork for lifting sanctions, U.S. officials and regional specialists say.

The resolution expands the types of imports that Iraq can buy with oil-for-food income.

They include not just essentials but a spectrum of goods that Baghdad would buy if it was not under sanctions, experts say. With the additional income allowed under the resolution, the regime will be able to import about half of what it bought before sanctions began in 1990.

Iraq also will be able to greatly expand the type of projects the oil-for-food project can fund. Several are development projects--involving electricity, agriculture and resettlement--addressing problems having little to do with war or economic hardship.

Large sums have been earmarked for Baghdad to help rebuild its shattered nation, Clawson states in a policy paper titled “Oil for Food or the End of Sanctions?” They include: $77 million for electric facilities, $143 million to develop agriculture, $305 million for water sanitation, $30 million for resettlement programs, $449 million for hospitals and clinics, and $92 million for education and schools.

Critics argue that the resolution’s expanded provisions undermine the purpose of sanctions and the outside world’s leverage against Hussein. “In vastly expanding the amount of oil Iraq can export and loosening the restrictions on what it can import, this U.S.-backed measure went a long way toward undermining the existing sanctions regime and removing much of the incentive for Iraq to fulfill its arms inspections obligations,” Clawson said.

Clinton administration officials counter that the resolution serves the interests of peace by putting Iraq’s oil revenue under U.N. control and making its spending patterns and development subject to U.N. approval.

Wright reported from Washington, Daniszewski from Cairo and Baghdad.