Volume 1 - Iraq Watch

• The first contract under the Protocol was signed inAugust 2001 and the last contract in June 2002.• The trade involved primarily crude oil, but the lasttwo contracts were for fuel oil.• The trade reached an estimated peak of 33,000bbl/d in May 2002. The cargo was shipped by truckfrom Iraq to Aqaba, Jordan, where it was loaded onships for transport to Egypt or Yemen.Iraq’s total earnings over the life of the Protocolwere $33 million according to SOMO records. Allbut $1 million was earned in 2002.• Iraq generally charged Egypt about $7 per metricton less than the authorized price for crude underthe UN OFF program. The first two contracts were$15 per metric ton off the UN price.• The Protocol was 60-percent credit and 40-percentcash. The credit account was under SOMO’sname at the National Bank of Egypt and the cashproceeds were deposited in the Ahli Bank (JordanNational Bank) in Jordan.United Nations OFF ProgramThe UN OFF program saved the Iraqi Regime fromfinancial collapse and humanitarian disaster. WhenIraq began exporting oil under UN OFF in December1996, the Regime averted economic conditionsthat threatened its survival. The program also providedIraq with unprecedented opportunities to earnsignificant amounts of hard currency outside thecontrol of the UN.Phases of the UN OFF ProgramThe UN OFF Program was run in phases. Each phasewas approved by a UNSCR and was designed tolast for 180 days, although the length was adjustedat times as deemed necessary. Phase 1 ran from 10December 1996 to 7 June 1997. The first oil wasexported on 15 December 1996, and the first contractsfinanced from the sale of oil were approved inJanuary 1997. The first shipments of food arrived inIraq in March 1997 and the first medicines arrived inMay 1997. The final oil exporting period (phase 13),authorized by UNSCR 1447 (2002), was in effectfrom 5 December 2002 through 3 June 2003 (seeFigure 13).Disposition of UN OFF FundsAs of 19 November 2003, Iraq’s oil exports under theprogram had earned over $64 billion. After deductingthe costs of the UN’s administering the OFF programand WMD monitoring mission, as well as, the CompensationFund, $46 billion was available for Iraqihumanitarian imports. Of this amount:• $31 billion worth of humanitarian supplies andequipment were delivered to Iraq including $1.6billion of oil industry spare parts and equipment.• $3.6 billion was approved for projects to be implementedby UN agencies.• $8.1 billion had been transferred to the DevelopmentFund for Iraq as of 19 April 2004.• The remainder of this revenue was uncommittedand in the UN-Iraq accounts awaiting further distribution.• In addition to the $46 billion, an additional $8.2billion in approved and funded humanitarian goodswere in the production and delivery pipeline andunder review by the UN and Iraqi authorities.Oil Vouchers and AllocationsThroughout the UN OFF Program, Iraq used aclandestine oil allocation voucher program thatinvolved the granting of oil certificates to certainindividuals or organizations to compensate them fortheir services or efforts in undermining the resolveof the international community to enforce UNSCresolutions. Saddam also used the voucher programas a means of influencing people and organizationsthat might help the Regime. By the end of thefinal phase (13) of the UN OFF Program, Iraqhad allocated 4.4 billion barrels of oil to approvedrec1pients. However, only 3.4 billion barrels wereactually lifted (loaded and exported)—the samefigure reported by the UN.• The oil allocation program was implementedthrough an opaque voucher program overseen andapproved by Saddam and managed at the mostsenior levels of the Iraqi Regime.• Starting in Phase 3 of the UN OFF program, untilOIF, the Iraqi Regime began to politicize the allocationsprocess by giving quantities of oil to individualsand political parties it favored.28