Iraq to Continue to Pay 5% of Oil Proceeds to Compensation Fund

UNITED NATIONS, 03 April 2010 – Kuwait News Agency 

UN Secretary-General Ban Ki-moon on Friday said Iraq must continue to pay five percent of its oil proceeds into the Compensation Fund even if arrangements for the successor Development Fund for Iraq (DFI) are in place and Iraq stated its commitment to settle all debts inherited from the Saddam regime.

“Unless the Iraqi Government and the Governing Council of the UN Compensation Commission mutually agree to change the percentage or terminate such payments, it is imperative that the Government of Iraq continue to be obliged to deposit 5 percent of the (oil) proceeds into the Compensation Fund, ” Ban said in his first quarterly report to the Security Council on arrangements for the DFI.

It is also necessary, he added, to ensure that the “present mechanism is maintained or an alternative equally effective mechanism is established” to ensure the payment into the Compensation Fund which was established by the council to compensate the victims of the Iraqi invasion of Kuwait in 1990.

In the post-Development Fund arrangements and as an alternative mechanism to ensure such payment, he suggested, the banking services agreement to be established by Iraq for any accounts that would hold oil proceeds “could include an article specifying the percentage that would be taken from the total and deposited in the Compensation Fund.” He noted that as it will be difficult to ensure that all proceeds would be recorded, an audit mechanism, he suggested, would be established or the Security Council “may request that a fixed yearly amount is paid by the Government of Iraq into the Compensation Fund, irrespective of the amount of oil proceeds.” Ban’s report to the council is the first in conformity with the council’s request in resolution 1905 of last December to provide quarterly written reports on progress made in strengthening financial and administrative oversight of the DFI as well as the legal issues and options to be considered to implement successor arrangements and an assessment of Iraq’s progress in preparing for such arrangements.

The DFI, established in 2003, holds the proceeds of Iraq oil revenues and the transferred balances from the UN oil-for-food programme. It is being audited by independent accountants reporting to the International Advisory and Monitoring Board (IAMB) in order to ensure transparency.

The mandates of both the DFI and the IAMB, as well as the immunity of oil proceeds deposited in the DFI, were extended by the council last December for one year ending December 31st, 2010. The council said it was ready to review their mandates by June, 2010, at the request of Iraq. Ban suggested in his report that the council end the privileges and immunities of the DFI once it becomes a fully nationally owned and controlled Fund and that the Iraqi Government be prepared to assume responsibility for any claims and liabilities to which the successor arrangement may be exposed after December, 2010.

In the meantime, Iraqi Foreign Minister Hoshyar Zebari sent a letter to the Security Council released this week regarding the action plan and timeline for the transition to successor arrangements for the DFI and the IAMB beginning January, 2011, in a manner that will enable it to comply with paragraph 21 of resolution 1483 which said Iraq shall pay the five percent of its oil proceeds to the Compensation Fund.

Zebari also reaffirmed Iraq’s commitment to settle all debts inherited from the Saddam regime, and to continue to examine them until final settlement.

His letter mentioned debts owed to governments as well as to private and international companies. Zebari also stated the steps the government is taking to prepare for the successor arrangements and timeline for the DFI. Ban “welcomed” Iraq’s report to the council and “commended” the Government for “acknowledging their obligations” under resolution 1483.

“I recognize that the action plan and timeline as presented by the Government of Iraq are realistic and I’m pleased that the Government of Iraq plans to select an independent international auditor to confirm that all (oil) proceeds from Iraq are accounted for,” Ban said.

Ban also “welcomed” Iraqi Committee of Financial Experts (COFE) which finalized a time-bound action plan to implement a comprehensive oil metering system and “encouraged” the Government to provide an update on this matter in its next quarterly report to the council.

Ban finally said that “work remains to be done to fully implement” the Iraqi action plan for the transition to successor arrangements for the DFI and “I look forward to keeping the Security Council informed on the Government’s progress in preparing for such arrangements.” An official from the Iraq National Bank is scheduled to brief the council in an open meeting on these arrangements next Tuesday.

Comments are closed.