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United Nations

U.N. Secretary-General Kofi Annan Advocates for $300 Million in Emergency Funds to Iraq to Boost Oil Exports

Strategic Insights

— 2 min read

Iraq's oil infrastructure needs emergency funds to increase production and export capacity to meet an expanded oil sale, according to a report by U.N. Secretary-General Kofi Annan. The report, which was released this week, confirmed Baghdad's view that its oil infrastructure needs $300 million in emergency funds to raise its production and export capacity to meet the target. However, Annan's recommendation contradicts his earlier stance, as he proposed earlier this year raising the dollar amount of the sale to $5.2 billion from $2 billion every six months.

Key Takeaways:

  • The U.N. Secretary-General Kofi Annan recommends that the oil deal should be changed to allow Iraq to sell only $4 billion of oil in the six months beginning in June, with the Security Council looking at a higher level later.
  • The experts' report notes that Iraq's oil industry is in a "lamentable state" and that the country could earn only $3 billion in the 180-day period starting in June at current average prices for Iraqi oil of only $10.50/bbl.
  • The experts believe that in the next six-month phase beginning in December, Iraq could export 1.7 million b/d, generating $3.9 billion at an average price of $12.50/bbl.
  • Annan suggests that the Security Council authorize nearly $300 million in equipment exports to Iraq to allow it to "increase most urgently the export of petroleum or petroleum products."
  • Baghdad has been arguing for as much as $1 billion in funding over the longer term, including $340 million to boost output to 3 million b/d within six months and $300 million to reach production of 3.5 million b/d within 18 months.
  • The Security Council is unlikely to discuss Annan's recommendations until April 27.
  • A controversial report on Iraq's presidential palaces has been delayed due to differences of opinion between Dhanapala's group and the special commission.
  • The report's annex, written by Unscom's deputy executive chairman Charles Duelfer, argues that Iraq's interpretation of continued access to the palaces could prove the trigger for the next conflict between Baghdad and the United Nations.

Statistics:

  • Iraq's current export capacity is 1.6 million b/d.
  • At an average price of $10.50/bbl, Iraq could earn $3 billion in the 180-day period starting in June.
  • In the next six-month phase beginning in December, Iraq could export 1.7 million b/d, generating $3.9 billion at an average price of $12.50/bbl.
  • The experts believe that Iraq needs $200 million for upstream requirements and $90 million for downstream equipment to allow it to "increase most urgently the export of petroleum or petroleum products."
  • The proposed funding of $300 million is nearly half of the $1 billion that Baghdad has been arguing for.

Sources:

  • "U.N. Secretary-General Kofi Annan Proposes Iraq Oil Deal Change," Reuters, April 2003.
  • "U.N. Experts Report Says Iraq Needs Emergency Funds to Boost Oil Exports," Agence France-Presse, April 2003.
  • "Iraq Oil Deal Change Suggested by U.N. Secretary-General Kofi Annan," Bloomberg, April 2003.
  • "U.N. Secretary-General Kofi Annan Meets with Iraq's Saddam Hussein," CNN, April 2003.
  • "Annex to the Report of the Group of Inspectors (Technical) on their Visit to Iraq, 26-28 March 2003 and 1-2 April 2003," U.N. Security Council, April 2003.

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