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GAO: Report to the Honorable Tom Harkin, U.S. Senate:



May 2002: Weapons of Mass Destruction: U.N. Confronts Significant 

Challenges in Importing Sactions against Iraq:



GAO-02-625:



GAO Highlights:



May 2002:



U.N. Confronts Significant Challenges in Implementing Sanctions against 

Iraq:



This is a test for developing highlights for a GAO report. The full 

report, including GAO’s objectives, scope, methodology, and analysis is 

available at www.gao.gov/cgi-bin/getrpt? GAO-02-625 . For additional 

information about the report, contact Susan S. Westin (202) 512-4128. 

To provide comments on this test highlights, contact Keith Fultz (202-

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Highlights of GAO-02-625, a report to the Honorable Tom Harkin, United 

States Senate:



Why GAO Did This Study:



After 12 years of debate, U.N. sanctions against Iraq remain 

controversial. The sanctions are intended to ensure that Iraq does not 

acquire or develop biological, chemical, or nuclear weapons, while also 

providing for the humanitarian needs of the Iraqi people. In response 

to continuing humanitarian concerns, the U.N. Security Council set up a 

program in 1995 that allows Iraq to sell oil only for the purchase of 

civilian and humanitarian goods. A new U.N. resolution (due to take 

effect on May 31, 2002), aims to further address humanitarian concerns. 

GAO was requested to examine (1) the challenges facing the United 

Nations in stopping Iraq from developing and acquiring weapons of mass 

destruction and (2) the elements of the new resolution that could make 

the sanctions more effective.



What GAO Found:



While the United Nations controlled $51 billion of Iraq’s oil revenues 

from 1997 to 2001 and channeled it to civilian use, Iraq still earned 

more than $6 billion in illegal revenue from oil smuggling. Iraq uses 

the illegal revenue to buy items prohibited by the Security Council and 

brings them into the country through numerous points (see figure 

below). Sanctions further required weapons inspections to verify Iraq 

was not using prohibited and other goods to develop weapons of mass 

destruction, but Iraqi action forced U.N. weapons inspectors to 

withdraw in 1998. Thus, the United Nations cannot ensure that Iraq has 

stopped developing weapons of mass destruction, and there are 

indications that it continues to do so.



Unlike the current sanctions, which allow Security Council members to 

hold any shipment to Iraq except preapproved humanitarian goods, the 

new resolution allows members to hold only military and related items 

specified on a control list. This should expedite and increase imports 

of humanitarian and civilian goods to Iraq. But the new resolution does 

not address oil smuggling, illicit trade, or weapons inspectors--the 

latter of which are covered in other resolutions Iraq is flouting. 

Until these issues are resolved, the new sanctions cannot provide 

assurance that Iraq has stopped developing weapons of mass destruction.



Agency Comments:



In comments on GAO’s report, State said other U.N. resolutions 

adequately address weapons inspections. As noted in GAO’s report, 

inspections are an integral part of a complete sanctions regime; GAO 

explicitly notes the absence of provisions for them in the new 

resolution.



Contents:



Letter:



Results in Brief:



Background:



The United Nations Faces Challenges Implementing Sanctions against 

Iraq:



Little Divergence between U.N. and U.S. Decisions on Exports to Iraq:



New Sanctions Agreement Addresses Humanitarian Concerns but Not 

Monitoring and Enforcement Problems:



Agency Comments and Our Evaluation:



Appendixes:



Appendix I: Scope and Methodology:



Appendix II: The U.N. Oil for Food Program:



Appendix III: Timeline of Major Events Related to Sanctions against 

Iraq:



Appendix IV: Comments from the Department of State:



Tables: 



Table 1: Estimates of Smuggled Oil, March 2002:		



Table 2: Oil for Food Revenues and Allocation, 1997 through 2001:		



Figures:



Figure 1: Iraq and the Middle East:



Figure 2: Iraq Oil-Related Revenues:



Figure 3: Iraq Smuggling Routes:



Figure 4: Iraq Military Expenditures 1980-2000:



Figure 5: U.N. and U.S. Export Approval and Licensing Processes:



Figure 6: Inspection for Prohibited Missile Components:



Figure 7: Inspection for Chemical Nerve Agents:



Figure 8: Destruction of Chemical Weapons:





May 23, 2002:



The Honorable Tom Harkin United States Senate:



Dear Senator Harkin:



After nearly 12 years of debate, U.N. sanctions against Iraq remain 

controversial. U.N. sanctions were first imposed in August 1990 

following Iraq’s invasion of Kuwait. In 1991, the Security Council 

declared Iraq a threat to international security and focused the 

sanctions on stopping Iraq from acquiring or developing biological, 

chemical, and nuclear weapons. To achieve this, the Security Council 

prohibited all nations from buying Iraqi oil or selling the country any 

commodities, except for food and medicine. It further established a 

weapons inspection regime to ensure that Iraq destroyed its weapons of 

mass destruction and stopped its weapons programs. In 1995, concerned 

about the humanitarian need of the Iraqi people, the Security Council 

established a U.N. program that controls Iraq’s oil sales and allows 

the purchase of food, medicine, and essential civilian goods (the oil 

for food program). In 2001, with international support for the 

sanctions eroding, the Security Council passed a new sanctions 

resolution intended to address humanitarian concerns while continuing 

to stop Iraq from rebuilding its weapons systems.



Because of your interest in the sanctions’ effectiveness and your role 

as Chairman of the Senate Agriculture Committee, you asked us to 

examine (1) the challenges confronting the United Nations in 

implementing sanctions against Iraq, (2) whether U.S. standards for 

approving exports to Iraq are more stringent than U.N. requirements, 

and (3) the elements of the new sanctions agreement that could make it 

more effective than the current sanctions agreement.



To examine the challenges confronting the United Nations and the 

potential effectiveness of the new sanctions agreement, we met with 

U.N. officials responsible for implementing the sanctions and some 

members of the Security Council. We analyzed U.N. resolutions and 

reports and obtained information from U.S. databases detailing the 

screening process for commodities imported into Iraq. We met with 

officials from the Departments of State and Defense and U.S. 

intelligence agencies responsible for managing and monitoring the Iraq 

sanctions. We obtained data on Iraq’s oil production from U.S. 

government and oil industry reportsand developed a model to estimate 

the revenue Iraq earns from oil smuggling. To determine whether the 

United States employs a more stringent standard than the United Nations 

for approving exports to Iraq, we examined all license applications for 

Iraq processed by the U.S. government in 2000 and 2001. We did not 

visit Iraq or neighboring countries due to security concerns. (For 

a more complete description of our scope and methodology, see app. I.):



Results in Brief:



The United Nations faces three major challenges in implementing 

sanctions against Iraq. First, although the United Nations has 

controlled $51 billion of Iraq’s oil revenues from 1997 to 2001, we 

conservatively estimate that Iraq earned an additional $6.6 billion in 

illegal revenue from oil smuggling and surcharges during the same time. 

Second, although the sanctions prohibit Iraq from obtaining goods that 

are not approved by the Security Council, Iraq is able to buy 

unapproved goods with its illegal revenue. Iraq brings the illicit 

goods in through numerous routes, in part because some neighboring 

states are not fully enforcing the sanctions. Third, the U.N. Security 

Council requires weapons inspections to verify that Iraq is not 

rebuilding weapons of mass destruction, but Iraqi actions forced the 

United Nations to withdraw weapons inspectors in 1998. As a result, the 

United Nations concludes that it cannot ensure that Iraq has stopped 

programs to develop chemical, biological, and other weapons. Moreover, 

there are indications from multiple sources that it continues to 

develop such weapons.



In design, U.S. licensing standards for exports to Iraq are more 

restrictive than U.N. requirements. In practice, however, U.S. and U.N. 

requirements are almost identical because the United States plays a 

substantial role in the U.N. process for approving exports to Iraq. 

Consequently, almost all U.S. exporters who get U.N. approval are also 

granted a U.S. export license. As part of the U.N. screening and 

approval process, the United States conducts the most thorough review 

of any Security Council member, firmly applying U.N. resolutions as it 

scrutinizes all contracts to limit imports that could be diverted for 

military use. As a result, the United States is the Security Council 

member that most frequently places holds on proposed sales to Iraq.



A new sanctions agreement, due to take effect at the end of May 2002, 

changes the contract screening process and could make the sanctions 

more effective in allowing imports of humanitarian and civilian goods 

to Iraq. Unlike the current system, which allows Security Council 

members to hold any shipment to Iraq except for preapproved 

humanitarian goods, the new sanctions allow Security Council members to 

hold only items on a controlled list, which includes dual-use items. 

Further, the new sanctions have provisions that allow members to single 

out an objectionable item from a shipment of goods. Currently, Security 

Council members must hold an entire shipment of goods even if it 

contains only one offending item. According to State Department and 

U.N. officials, these expected changes should make it easier for Iraq 

to import goods to rebuild its civilian economy. However, the new 

agreement has no provisions to deter oil smuggling and illicit trade or 

to reintroduce weapons inspectors. Prior Security Council resolutions 

address weapons inspections but Iraq is not complying with them. Until 

these problems are addressed, the sanctions cannot provide assurance 

that Iraq has stopped its efforts to acquire and build weapons of mass 

destruction.



We received comments on a draft of this report from the United Nations 

and the Departments of Treasury, Defense, and State. The United Nations 

provided oral comments, which we incorporated in the report as 

appropriate. Treasury provided technical notes, which we incorporated 

into the report. The Department of Defense accepted the report without 

comment. State provided written comments that are reprinted in appendix 

IV. State officials commented that the new sanctions agreement 

signifies a renewed consensus that will be useful in seeking the return 

of weapons inspectors or other options for dealing with Iraq. However, 

they said our statement that the new sanctions resolution does not 

address weapons inspections leaves the false impression that other 

Security Council resolutions do not adequately address the issue and 

that the new resolution should. We have revised the report to clearly 

state that prior Security Council resolutions address weapons 

inspections and Iraq is failing to comply with them.



Background:



Since 1990, the United Nations has passed more than 56 resolutions 

related to Iraq sanctions and the country’s invasion of Kuwait. In 

August 1990, the U.N. Security Council determined that Iraq’s invasion 

of Kuwait threatened international peace and the region and imposed 

sanctions on Iraq. (Fig. 1 shows Iraq and the Middle East region.) The 

sanctions continued after Iraq was expelled from Kuwait to ensure that 

Iraq would destroy its nuclear, chemical, and biological weapons and 

ballistic missiles and that it would not use, develop, or acquire new 

weapons. [Footnote 1] The Security Council prohibited all nations from 

buying Iraqi oil or selling the country any commodities except for food 

and medicine, and also established a weapons inspection regime. 

However, confrontations began almost as soon as U.N. weapons inspectors 

started operations in April 1991. At that time there was also growing 

international concern over the humanitarian situation in Iraq. The 

Security Council responded by offering Iraq an opportunity to sell oil 

to meet its people’s basic needs. The Iraq government rejected the 

offer and over the following 5 years, food shortages and a general 

deterioration of social services were reported. By 1996, the United 

Nations reported that the average Iraqi’s food intake was about 1,275 

calories per day compared with the standard requirement of 2,100 

calories.



Figure 1. Iraq and the Middle East:



[See PDF for image]



Source: National Geographic.



[End of Figure]



During the mid- through late 1990s, Iraq continued to hinder weapons 

inspectors from entering suspected weapons sites and the Security 

Council passed several resolutions demanding Iraqi cooperation. The 

humanitarian situation continued to deteriorate and, in December 1996, 

the United Nations and Iraq agreed on the oil for food program, which 

permitted Iraq to sell a set amount of oil to pay for food, medicine, 

and infrastructure repairs. In 1999, the Security Council removed all 

restrictions on the amount of oil Iraq could sell to purchase civilian 

goods. Under the program, Iraq agreed to put all of its oil revenues 

into a U.N.-controlled escrow account. The United Nations supervises 

and monitors all of Iraq’s oil sales and the Security Council screens 

and approves purchases from the account. To ensure that the approved 

goods are the actual goods brought into Iraq, the United Nations checks 

the goods at the border and monitors the use of the purchased goods in 

Iraq. (App. II describes how the escrow account works and how the 
United 

Nations conducts screening and monitoring.):



According to U.N. reports, from 1996 to 1998, Iraq’s actions--including 

endangering weapons inspectors’ helicopters, manhandling an inspector, 

expelling Americans from the inspection teams, and preventing 

inspectors’ access to suspected weapons sites--led to numerous 

condemnations in Security Council resolutions and the withdrawal of 

weapons inspectors in December 1998. Sanctions against Iraq are now in 

their 12th year, though continued international support for them has 

eroded. In addition to humanitarian concerns, some member states are 

politically opposed to the sanctions for various reasons, including 

Arab solidarity and their assessment of Iraq’s threat to regional 

stability. U.N. weapons inspectors have not returned to Iraq since 

their departure in 1998. (App. III provides a timeline of significant 

events related to sanctions against Iraq.):



The United Nations Faces Challenges Implementing Sanctions against 

Iraq:



U.N. efforts to control Iraq’s oil revenues, screen and monitor its 

purchases, and inspect for weapons of mass destruction face several 

challenges. Iraq smuggles oil through neighboring states, and the 

illicit revenue is outside of U.N. control. Iraq also brings in illicit 

and unchecked commodities through numerous entry points on its borders. 

Finally, Iraqi actions led to the withdrawal of weapons inspectors in 

December 1998 and the United Nations concludes it cannot ensure that 

Iraq has stopped programs to acquire and build weapons of mass 

destruction. Several sources have found indications that Iraq has 

continued such programs. Nevertheless, U.N. sanctions may have deterred 

Iraq from obtaining most conventional weapons.



Sanctions Do Not Stop Iraq’s Illegal Revenue Stream:



Although the oil for food program controls most of Iraq’s oil revenues 

in an escrow account (more than $51 billion since the program was 

established), we conservatively estimate that Iraq has illegally earned 

at least $6.6 billion since 1997--$4.3 billion from smuggling and $2.3 

billion in illegal surcharges on oil and commissions from its commodity 

contracts. [Footnote 2] For example, in 2001, we estimate that Iraq 

earned $1.5 billion by smuggling oil through Jordan, Syria, Turkey, and 

the Persian Gulf. U.S. government and oil industry sources indicate 

that the quantity of oil being smuggled varies by destination over 

time. Oil industry experts estimate that Iraq smuggled out as much as 

480,000 barrels of oil per day in March 2002. (See table 1.):



Table 1. Estimates of Smuggled Oil, March 2002:



Exit route: Jordan; Barrels per day: 75,000 to 110,000.



Exit route: Syria; Barrels per day: 180,000 to 250,000.



Exit route: Turkey; Barrels per day: 40,000 to 80,000.



Exit route: Persian Gulf; Barrels per day: 30,000 to 40,000.



Exit route: Total; Barrels per day: 325,000 to 480,000.



Source: Middle East Economic Survey.



[End of table]



In addition to revenues from oil smuggling, U.N. Security Council and 

U.S. officials say the Iraqi government has been levying a surcharge 

against oil purchasers and commissions against commodity suppliers 

participating in the oil for food program. We estimate Iraq earned more 

than $700 million in 2001 using these illegal practices. According to 

some Security Council members, the surcharge is up to 50 cents per 

barrel of oil and the commission is 5 to 10 percent of the commodity 

contract, with the funds paid directly to officials connected with the 

Iraqi government. A State Department official said the United Nations 

has had some success in stopping these payments from the larger, more 

established companies but has been less successful with smaller and 

regionally based companies engaged in purchasing oil or supplying 

commodities to Iraq. Figure 2 shows our estimate of Iraq’s oil revenues 

that are controlled by the U.N. oil for food program and the illegal 

revenues earned through smuggling, surcharges, and commissions since 

1997.



Figure 2. Iraq Oil-Related Revenues:



[See PDF for image]



Source: GAO analysis based on information from the United Nations and 

oil industry experts.



[End of Figure]



Despite concerns that sanctions have worsened the humanitarian 

situation, the oil for food program appears to have helped the Iraqi 

people. According to the United Nations, the average daily food intake 

has gradually increased from around 1,275 calories per person per day 

in 1996 to about 2,229 calories at the end of 2001. [Footnote 3] In a 

briefing to the Security Council on his February 2002 trip to Iraq, the 

director of the Office of the Iraq Program stated that the oil for food 

program has had considerable success in several sectors such as 

agriculture, food, health, and nutrition by arresting the decline in 

living conditions and improving the nutritional status of the average 

Iraqi citizen. However, Iraq’s decision in April 2002 to suspend oil 

exports for several weeks until Israeli troops withdrew from 

Palestinian areas caused the oil for food program to forgo an estimated 

$1.3 billion. At that time, contracts approved for shipment to Iraq 

already exceeded funds in the escrow account by $1.6 billion, including 

nearly 700 contracts for humanitarian supplies.



Iraq Smuggles Illicit Goods and Oil through Numerous Routes:



Iraq is able to obtain commodities that are not approved by the 

Security Council and smuggle them in, as well as smuggle oil out 

through neighboring states and the Persian Gulf. Figure 3 shows 

potential routes for bringing illicit goods into Iraq and smuggling oil 

out of Iraq.



Figure 3. Iraq Smuggling Routes:



[See PDF for image]



Source: GAO analysis based on information from the United Nations and 

U.S. government agencies.



[End of Figure]



As figure 3 illustrates, Iraq has long, open borders with neighboring 

states. Moreover, shipments not approved by the Security Council are 

brought into Iraq at designated U.N. entry points on Iraq’s borders, 

according to U.N. officials. At these entry points, a U.N. contractor 

uses 78 monitors to check the goods and validate shipments for payment 

under the oil for food program. The monitors visually inspect 

approximately 7 to 10 percent of the approved deliveries and review the 

shipping documents for the rest, the officials said. However, U.N. 

monitors only have authority to check goods approved under the oil for 

food program and thus do not stop or check any other shipments.



Under Security Council resolutions, all member states have 

responsibility for enforcing the sanctions and the United Nations 

especially depends on neighboring countries to deter the importation of 

illicit commodities. However, despite Security Council resolutions 

controlling air travel to Iraq, several countries within and outside 

the region allow regular air flights to Baghdad. For example, according 

to U.S. government officials, Syria allows daily flights between 

Damascus and Baghdad that the United Nations has neither approved nor 

been notified of. According to Security Council members, flights 

originating from eastern Europe are of particular concern to weapons 

inspectors because of the region’s history as a source of illicit 

weapons sales and the governments’ close military relationship with 

Iraq. In addition to these air flights, a rail line from Syria, daily 

ferry traffic, and cargo ships bring unapproved commodities into Iraq 

in violation of U.N. sanctions, according to Security Council members.



Oil is smuggled out through several routes, according to U.S. 

government officials and oil industry experts. The major routes are 

through an oil pipeline to Syria and by truck through entry on the 

borders with Jordan and Turkey. Iraq has a trade protocol with Jordan 

under which Iraq purchases up to $300 million in goods from Jordan in 

exchange for oil at a heavily discounted price. [Footnote 4] Also, 

according to U.S. government officials, oil is smuggled out through the 

Persian Gulf. In the Gulf, a Multilateral Maritime Inspection Force of 

six to eight ships tries to limit oil smuggling. According to a 

Department of Defense official, the inspection force interdicts only 

about 25 percent of the oil smuggled out through the Gulf.



Sanctions Do Not Assure Iraq Has Stopped Developing Weapons of Mass 

Destruction:



The Security Council established a weapons inspection regime to provide 

final assurance that Iraq was not reconstituting its nuclear, 

biological, and chemical weapons programs, but Iraq’s actions forced 

the withdrawal of weapons inspectors in 1998. Prior to their 

withdrawal, the inspectors were able to confirm the destruction of much 

of Iraq’s weapons of mass destruction program, including buildings used 

to produce and test prohibited solid propellant rocket motors, 180 tons 

of sodium cyanide, and more than 6,000 122mm rockets designed to carry 

sarin gas. However, the U.N. Special Commission issued several reports 

concluding that, due to Iraqi obstruction and lack of access to 

suspected sites, it cannot ensure that Iraq has stopped its prohibited 

weapons programs. [Footnote 5] In addition, there are indications from 

the United Nations, the Central Intelligence Agency, and other sources 

that Iraq continues to develop weapons of mass destruction, 

particularly since weapons inspections ceased.



In January 1999, the U.N. Special Commission reported to the Security 

Council that Iraq substantially misled the United Nations on the extent 

of its proscribed weapons program and the continuation of prohibited 

activities. The report cited numerous examples where Iraq failed to 

account for known weapons and related items, including:



* biological weapon warheads,



* liquid missile propellant,



* artillery shells filled with mustard gas, and:



* R-400 bombs filled with biological agents.



According to some U.N. Security Council members, other factors raising 

concern that Iraq continues its weapons programs are (1) Iraq’s history 

of developing and using weapons of mass destruction, (2) its access to 

illegal revenues, (3) the ease with which it can import illicit goods, 

and (4) its willingness to accept more than a decade of economic and 

political isolation to maintain a weapons capability.



In a January 2002 unclassified report to Congress, [Footnote 6] the 

Central Intelligence Agency stated that without an inspection-

monitoring program, it is difficult to determine the current status of 

Iraq’s weapons of mass destruction program but it is likely the 

government has used the period since inspectors were forced out to 

reconstitute prohibited programs. The report indicates that Iraq has 

rebuilt key portions of its chemical production infrastructure as well 

as its missile production facilities. The report further states that 

Iraq has probably continued low-level theoretical research and 

development associated with its nuclear program and expresses concern 

that the government may be attempting to acquire materials that could 

help reconstitute its nuclear weapons program.



There are other indications that Iraq continues programs to develop 

weapons of mass destruction since the sanctions were imposed. For 

example:



* In February 2001, Germany’s Federal Intelligence Service reported 
that 

Iraq has created a military intelligence bureau in Russia to carry out 

arms negotiations. The service reported that an Indian-based company is 

acting for Iraq to buy materials and equipment related to developing 

chemical and biological weapons.



* In January 1999, the United Nations reported that 50 specialty 
missile 

warheads for biological or chemical agents declared to be in Iraq’s 

arsenal could not be accounted for. Further, tests indicated that Iraq, 

contrary to its official claims, had loaded similar warheads with 

deadly nerve gas agents.



* In September 1996, the Monterey Institute reported that a shipment of 

300 Swiss-made valves for uranium enrichment centrifuges, as well as a 

shipment of cascade components, bound for Iraq was seized in Jordan. 

The valves and components could be used to develop fissile material for 

weapons.



* In January 1995, the Department of Commerce reported that a New York 

resident pleaded guilty to arranging to transport ammonium perchlorate, 

a highly explosive chemical used to manufacture rocket fuel, from China 

to Iraq via Jordan.



* In November 1995, Jane’s Defence Weekly reported that Jordanian 

officials intercepted a shipment of 115 Russian-made gyroscopes bound 

for Iraq designed for use in long-range intercontinental missiles.



Sanctions May Limit Iraq in Obtaining Conventional Weapons:



Sanctions may have constrained Iraq’s purchases of conventional 

weapons. According to U.S. and U.N. officials, U.N. screening and 

monitoring of Iraq’s imports provide some deterrent to bringing in 

weapons and also provide limited on-the-ground checking that 

commodities are not being diverted to military use. Furthermore, these 

officials say there is no indication that Iraq has purchased large-

scale weapons systems, such as aircraft, ships, or armor. Iraq’s 

conventional rearmament efforts are limited to purchases of small arms 

and spare parts to keep weapons and vehicles not destroyed during the 

Gulf War operational.



Most importantly, according to State Department arms experts, 

conventional weapons systems, such as aircraft and ships, are expensive 

and U.N. controls have limited the amount that Iraq can spend on arms. 

As previously discussed, since 1997, the United Nations has controlled 

about 90 percent of Iraq’s oil revenues--$51 billion in the oil for 

food account versus $6.6 billion in illegal revenues. Partly because of 

this control, according to State officials, Iraq’s military 

expenditures have dropped dramatically. Iraq’s annual military 

expenditures averaged more than $18.8 billion between 1980 and 1990 (in 

constant 2001 dollars) but dropped in the years after sanctions were 

imposed and, beginning in 1995 remained flat, averaging an estimated 

$1.4 billion annually. Figure 4 shows Iraq’s military expenditures from 

1980 to 2000.



Figure 4. Iraq Military Expenditures 1980-2000:



[See PDF for image]



Source: Department of State, World Military Expenditures and Arms 

Transfers and the International Institute for Strategic Studies, 

Military Balance.



[End of Figure]



Little Divergence between U.N. and U.S. Decisions on Exports to Iraq:



The United Nations requires that exports to Iraq be reviewed and 

receive a U.N. letter of approval; U.S. exporters must also obtain a 

U.S. export license. In design, the standards for granting a U.S. 

export license are more restrictive than requirements for a U.N. letter 

of approval. However, because the United States, as a permanent member 

of the Security Council, may block any contract processed through the 

U.N. oil for food program, U.S. and U.N. decisions on approving exports 

to Iraq are nearly identical. As part of the U.N. process, the United 

States conducts the most thorough review of any Security Council 

member, firmly applying U.N. resolutions as it scrutinizes all 

contracts to prevent any imports with a potential military application. 

In 2001, the United States was responsible for more than 90 percent of 

the contracts withheld for shipment to Iraq. As of April 2002, the 

Sanctions Committee was withholding $5.1 billion worth of contracts 

that had been submitted for approval. [Footnote 7]



U.S. and U.N. Decisions Nearly Identical in Practice:



U.N. Security Council Resolution 687 and other resolutions on Iraq 

provide the requirements for Iraq sanction committee members’ actions 

and call for strict control of imports to Iraq of arms and munitions 

and materials or technology that could be used to produce weapons of 

mass destruction, ballistic missiles with a range over 150 kilometers, 

and conventional military equipment and spare parts. The U.N. 

resolutions apply to all nations, but members of the Iraq Sanctions 

Committee apply the resolutions when screening applications for export 

to Iraq. U.S. standards for getting a U.S. export license to Iraq 

require that licenses comply with all applicable U.N. resolutions. 

[Footnote 8] In addition, however, Treasury Department regulations 

allow the United States to prohibit exports that comply with U.N. 

Security Council resolutions. [Footnote 9] For example, according to 

U.S. officials, denials can be related to U.S. national security 

concerns, such as terrorism.



In actual practice, though, there is little difference between U.S. and 

U.N. requirements, as U.S. and U.N. decisions on proposed shipments to 

Iraq are nearly identical. Our examination of all U.S. export license 

actions taken in 2000 and 2001 revealed that very few applications were 

denied, if they met U.N. requirements. Out of the 503 applications for 

a U.S. export license that met U.N. standards, only 4 were denied a 

license. In those four instances, the commodities in question were 

controlled for anti-terrorism reasons.



United Nations and United States Conduct Thorough Screening of 

Contracts for Exports to Iraq:



Figure 5 outlines the screening process a member nation must initiate 

on behalf of a company to obtain a U.N. letter of approval for exports 

to Iraq and procedures that U.S.-based firms, their foreign-based 

subsidiaries, and foreign companies selling U.S.-origin products must 

also follow to get a U.S. export license. [Footnote 10]



Figure 5. U.N. and U.S. Export Approval and Licensing Processes:



[See PDF for image]



Source: GAO.



[End of Figure]



For the U.N. process, Iraq negotiates a contract with an international 

supplier and the contract is submitted by the exporting state to the 

U.N. Office of the Iraq Program in New York. The Office of the Iraq 

Program manages the oil for food program and refers the contract to the 

U.N.’s Monitoring, Verification, and Inspection Commission and the 

International Atomic Energy Agency, as necessary, for an assessment of 

whether weapons and related items are present. The Office of the Iraq 

Program has authority to immediately approve contracts that contain 

only items on a “fast track” list [Footnote 11] of goods--generally 

food, medicine, and other humanitarian goods. Otherwise the contracts 

are forwarded to the U.N. Security Council’s Iraq Sanctions Committee 

for final review and determination.



The Iraq Sanctions Committee comprises representatives of the U.N. 

Security Council’s 15 member states. Each member has authority to 

approve or hold any contract. The United States is an active member of 

the Iraq Sanctions Committee and, according to Security Council members 

and State officials, conducts the most thorough and complete review 

compared with other Security Council members. U.S. technical experts 

assess each item in a contract to determine its potential military 

application and if the item is appropriate for the end user. They also 

examine each end user’s track record with such commodities. An 

estimated 60 U.S. government personnel within the Departments of State, 

Defense, Energy, and other agencies examine all proposed sales of items 

that could be used to assist the Iraqi military or develop weapons of 

mass destruction.



According to U.N. Secretariat data, of the more than 2,100 contracts 

currently being held by the Iraq Sanctions Committee, the United States 

is responsible for approximately 90 percent of the holds. As of April 

2002, about $5.1 billion worth of goods were being withheld for 

shipment to Iraq. Our review of held contracts indicated they cover 

numerous sectors-- including telecommunications, agriculture, health--

and involve goods with both civilian and military application, such as 

chemicals and electronics. Examples of contracts currently being held 

at the U.N. include:



* water supply trucks worth $34 million, pending submission of 
additional 

technical specifications on composition and weight bearing capacity;



* oil well equipment, including detonators and charges, worth $9.2 

million; and:



* agricultural tire production equipment and insecticides, which 
include 

proscribed dual-use chemicals, worth $1.5 million.



The Department of the Treasury is responsible for issuing the U.S. 

export licenses to Iraq. It compiles the results of the review by U.S. 

agencies under the U.N. approval process and obtains input from the 

Department of Commerce on whether the contract includes any items found 

on a list of goods prohibited for export to Iraq for reasons of 

national security or nuclear, chemical, and biological weapons 

proliferation. [Footnote 12] Since several U.S. agencies have already 

reviewed the contract during the U.N. export approval process, 99 

percent of the suppliers with U.N. approval are granted a U.S. export 

license.



New Sanctions Agreement Addresses Humanitarian Concerns but Not 

Monitoring and Enforcement Problems:



Security Council Resolution 1409 commits the Security Council to 

implement a new sanctions agreement by May 30, 2002, that should 

expedite shipments of civilian goods to Iraq. As outlined in the 

resolution, only weapons and specified items with potential military 

application will be subject to review by the Iraq Sanctions Committee. 

All other items will be approved by the United Nations. U.N. Security 

Council members and U.S. officials believe these steps will eliminate 

contract holds, increase the flow of goods into Iraq, and effectively 

address humanitarian concerns while continuing to ensure that 

militarily useful items are not exported to Iraq under the oil for food 

program. However, the new sanctions agreement does not address problems 

of oil smuggling and illicit imports of goods into Iraq or the return 

of weapons inspectors.



Adoption of Goods Review List Should Accelerate Screening Process:



As outlined in Resolution 1409, the new sanctions contain a goods 

review list of specific items subject to review by the Security 

Council. The list should expedite the screening process and result in 

increased imports of goods designed to repair Iraq’s civilian 

infrastructure, according to U.N. Security Council members. Under the 

existing sanctions, all exports to Iraq are forbidden unless 

specifically permitted by Security Council resolution or specific 

decision. Under the new system, all goods are permitted except products 

that could be used to develop weapons of mass destruction, conventional 

weapons, and military-related or dual-use goods. These controlled items 

will be specifically listed, and only these items will be referred to 

the Iraq Sanctions Committee for review. According to U.N. and U.S. 

officials, Security Council members reached agreement on lists of (1) 

nuclear, chemical, biological, and missile-related items contained in 

Security Council Resolution 1051 [Footnote 13] and (2) dual-use 

materials used in conventional weapons contained in the Wassenaar 

Arrangement. [Footnote 14] In April 2002, Security Council members--

primarily the United States and Russia-- reached agreement on a more 

contentious and expanded third list that included dual-use items in 

nine categories, such as telecommunications, fiber optic technologies, 

sensors and lasers, and computers.



U.N. Security Council members and U.S. officials involved in the 

screening process expect a marked increase in the number of export 

applications granted because suppliers will have a specific list of 

items that must be referred for review and control. By following this 

list, suppliers should be able to submit contracts that can be quickly 

processed. The adoption of a goods review list will also focus the 

trade restrictions against Iraq on designated categories of goods, 

resulting in closer scrutiny of only the more difficult, borderline 

cases. Under the revised controls, the Sanctions Committee would 

evaluate specific items, not entire contracts. For example, if a 

contract contained items on a goods review list as well as items that 

are not, the United Nations would approve the latter. Under current 

practice, committee members must hold an entire contract if there is a 

single offending item on it.



New Sanctions Do Not Address Oil Smuggling and Illicit Trade or Return 

of Weapons Inspectors:



The new sanctions agreement does not address the oil smuggling and 

illicit trade occurring outside U.N. control, nor does it contain 

provisions to improve monitoring or enforcement of existing sanctions. 

According to Security Council members, the British government in fall 

2001 submitted a proposal to compensate states that were being harmed 

economically by the trade embargo in return for tougher enforcement. 

However, this proposal was dropped, as states bordering Iraq were more 

concerned with maintaining access to smuggled oil at a heavily 

discounted price than in enforcing sanctions against Iraq, according to 

some Security Council members. According to oil industry experts, the 

value of the discount has fluctuated over time, with Jordan receiving 

the largest discount of up to two-thirds the market price and the other 

countries receiving about a one- third discount.



In addition, the new sanctions do not provide for resumption of weapons 

inspections. In December 1999, the Security Council established a U.N. 

Monitoring, Verification, and Inspection Commission to fulfill the 

weapons inspection tasks mandated by Security Council resolutions. The 

commission has produced an organizational plan and is prepared to 

resume weapons inspections upon acceptance of the Security Council 

resolution by Iraq. The U.N. inspection commission is mandated to 

inspect any designated site at any time and plans to carry out 

inspections to provide assurance that Iraq has stopped developing 

nuclear, chemical, and biological weapons. Figures 6, 7, and 8 help 

illustrate the continuing concerns in these areas and what prior 

weapons inspections teams did to address these concerns.



Figure 6. Inspection for Prohibited Missile Components:



[See PDF for image]



Iraq is prohibited from having ballistic missiles with a range greater 

than 150 kilometers. Components and production equipment for shorter-

range missiles could be used to produce longer-range missiles and must 

be monitored.



Source: United Nations.



[End of Figure]



Figure 7. Inspection for Chemical Nerve Agents:



[See PDF for image]



Iraq is prohibited from developing chemical and biological weapons. 

Weapons inspectors from the earlier weapons inspection teams check for 

deadly nerve agents in a storage tank.



Source: United Nations.



[End of Figure]



Figure 8. Destruction of Chemical Weapons:



[See PDF for image]



U.N. resolutions call for the elimination of all weapons of mass 

destruction. Weapons inspectors destroy 500 kg bombs designed for use 

as chemical weapons.



Source: United Nations.



[End of Figure]



Agency Comments and Our Evaluation:



The U.N. Office of the Iraq Program and the U.N. Monitoring, 

Verification, and Inspection Commission provided oral comments, which 

we incorporated in the report as appropriate. Treasury provided 

technical clarifications, which we also incorporated. The Department of 

Defense accepted the report without comment. State provided written 

comments that are reprinted in appendix IV.



State noted that the new sanctions agreement is a sign of renewed 

consensus on Iraq among the five permanent members of the Security 

Council. That consensus will be useful not only to improve the efficacy 

of sanctions against Iraq but also if the United States should choose a 

different path to end Iraq’s threat to international peace and 

security. State also provided additional information on how the new 

sanctions agreement will be implemented.



State expressed concern that a statement in our draft report that the 

new sanctions agreement has no provisions to reintroduce weapons 

inspectors leaves the false impression that Security Council 

resolutions do not adequately provide for weapons inspections and that 

the new resolution should do so. State further stated that it has 

rejected all efforts to modify previous resolutions that require Iraq 

to admit and cooperate fully with weapons inspectors without 

conditions. We have revised our report to clearly state that prior 

Security Council resolutions address weapons inspections, but that Iraq 

is failing to comply with them. Our report does not imply that State 

has failed to take a firm stand on weapons inspections. As noted in our 

report, the sanctions are an integrated system of three elements: (1) 

control of Iraqi oil revenue; (2) rigorous screening and monitoring of 

Iraqi imports for proscribed items; and (3) weapons inspectors to 

ensure that Iraq is not acquiring or developing nuclear, chemical, and 

biological weapons.



State also commented that we leave the impression that U.N. personnel 

have the authority to stop and inspect all shipments into Iraq, even 

those outside the oil for food program. We believe our report clearly 

presents the facts concerning U.N. authority to stop and inspect 

shipments to Iraq. Our report states that “U.N. monitors only have 

authority to check goods approved under the oil for food program and 

thus do not stop or check any other shipments.” Our report further 

states that “under Security Council resolutions, all member states have 

responsibility for enforcing the sanctions and the United Nations 

especially depends on neighboring countries to deter the importation of 

illicit commodities.”:



We are sending copies of this report to interested congressional 

committees, the secretary of state, the secretary of the treasury, the 

secretary general of the United Nations, the director of the Office of 

Management and Budget, and the director of the Office of the Iraq 

Program. We will also make copies available to other parties upon 

request.



If you or your staff have any questions concerning this report, please 

call me at (202) 512-4128 or my director, Joseph Christoff at (202) 

512-8979. Key contributors to this report were Tet Miyabara, Janey 

Cohen, Patrick Dickriede, Stacy Edwards, Philip Farah, Peter Ruedel, 

and Richard Seldin.



Sincerely yours,



Susan S. Westin, Managing Director International Affairs and Trade:



Signed by Susan s. Westin.



(320085):





FOOTNOTES



[1] U.N. Security Council Resolution 687 (April 3, 1991) - the Gulf War 

cease-fire resolution -stipulates that Iraq shall unconditionally 

accept the destruction of its weapons of mass destruction and provides 

for U.N. weapons inspection to monitor Iraqi compliance. Since 1991 the 

U.N. Security Council has passed seven resolutions condemning 

noncompliance with Security Council resolutions and demanding Iraqi 

government cooperation with weapons inspectors.



[2] Our estimate is based on U.S. government reports, U.N. reports, 

estimates from oil industry publications, and interviews with U.N. 

Security Council members. Appendix I details how we derived our 

estimate.



[3] According to the World Health Organization, the standard food aid 

requirement for a typical population is 2,100 calories per person per 

day.



[4] The U.N. Iraq Sanctions Committee noted the existence of the 

protocol and took no further action.



[5] The U.N. Special Commission was superceded by the United Nations 

Monitoring, Verification, and Inspection Commission in December 1999.



[6] Central Intelligence Agency, Unclassified Report to Congress on the 

Acquisition of Technology Relating to Weapons of Mass Destruction and 

Advanced Conventional Munitions (Washington, D.C.: Jan. 2002).



[7] Since the inception of the oil for food program, the Security 

Council has approved more than $23 billion in food, medicine, and other 

contracts for Iraq. The holds represent a snapshot at a specific date; 

some holds are released at a later date, while others become inactive 

and are no longer counted. See appendix II for information on how 

Iraq’s oil revenues are distributed.



[8] As stipulated by 31 C.F.R. section 575.525.



[9] Id. 575.205



[10] The vast majority of U.S. export applications to Iraq are 

submitted by U.S. foreign-based subsidiaries and foreign companies 

selling U.S. origin products. In cases where a U.S. company is seeking 

authorization to ship commodities to Iraq, the licensing process starts 

with the firm submitting the export license request to the Department 

of Treasury for review.



[11] The fast track list is compiled and agreed to by the Iraq 

Sanctions Committee.



[12] In some cases, where the Department of Commerce classified 

commodities as controlled for export to Iraq, the State Department’s 

Sanctions Office or Bureau for Non-Proliferation Affairs is consulted a 

second time before a decision to approve or deny is made.



[13] Adopted in March 1996, Security Council Resolution 1051 and its 

amendments contain lists of items used in ballistic missiles and 

missile delivery systems; chemicals capable of being used for the 

development, production, or acquisition of chemical weapons; and 

microorganisms, viruses, and toxins.



[14] The Wassenaar Arrangement is a global multilateral arrangement on 

export controls for conventional weapons and sensitive dual-use goods 

and technologies that began operations in September 1996.



[End of section]



Appendix 1. Scope and Methodology:



At your request, we examined (1) the challenges confronting the United 

Nations in implementing sanctions, (2) whether U.S. standards for 

approving exports to Iraq are more stringent than U.N. requirements, 

and (3) the elements of a new sanctions agreement that could make it 

more effective than the current sanctions agreement.



As an agency of the U.S. government, we have no authority to review 

operations of multilateral organizations such as the United Nations. 

However, throughout this review we obtained broad access to officials 

and information from the U.N. Secretariat and Security Council member 

states.



To examine the challenges in implementing the sanctions, we compared 

the results of U.N. actions taken against Iraq with the criteria set 

forth in Security Council resolutions on Iraq. We reviewed related 

Security Council resolutions, a memorandum of agreement between Iraq 

and the United Nations, and quarterly and semi-annual reports submitted 

by the U.N. Secretariat describing developments in implementing the 

sanctions program. We interviewed officials from the Office of the Iraq 

Program and the United Nations Monitoring, Verification, and Inspection 

Commission responsible for the weapons inspections. We also met with 

Security Council members Norway and Britain to obtain their perspective 

on implementing sanctions and interviewed U.S. government officials 

responsible for managing and monitoring sanctions against Iraq, 

including officials from the Department of State, the U.S. Mission to 

the United Nations, the Department of Defense, the Defense Intelligence 

Agency, and the Central Intelligence Agency. We also met with Iraqi 

experts at the Brookings Institution and the Fourth Freedom Forum and 

obtained and analyzed reports on Iraq and U.N. sanctions from various 

knowledgeable think tanks, including the Center for Strategic and 

International Studies, the Wisconsin Project, and the Bonn-Berlin 

Process.



As part of our analysis of the challenges in implementing the 

sanctions, we estimated Iraq’s illicit earnings from oil smuggling, 

surcharges on oil, and commissions on commodity contracts. We obtained 

data and reports related to Iraqi oil production, capacity, and 

smuggling from the Department of Energy’s Energy Information 

Administration, the Middle East Economic Survey, and the International 

Monetary Fund. We then divided our analysis into two periods: January 

1991 to January 1997 (the beginning of the sanctions to the beginning 

of the oil for food program) and January 1997 to the end of 2001. 

(Estimates of oil production, consumption, and exports are measured in 

thousands of barrels per day (kbd).) We used the following steps to 

estimate the revenues from oil smuggling, surcharges, and commissions.



Period 1 (1991 to 1997):



* To estimate the amount of oil smuggled through Turkey and the Persian 

Gulf, we started with Energy Information Administration estimates of 

Iraqi oil production and subtracted estimates of Iraqi domestic 

consumption and exports to Jordan. The remaining amount was the volume 

of smuggled oil. We assumed that Iraqi domestic consumption was 300 kbd 

in 1992 and grew slowly during the first few years, then more quickly 

during subsequent years, until it reached nearly 400 kbd in 2001. 

Exports to Jordan started at 75 kbd in 1992 and grew by 2 kbd each 

year. Our estimates of the amount of smuggled oil were lower than some 

U.S. government estimates, but higher than some oil industry estimates.



* To estimate the revenues from smuggled oil during the first period, 

we multiplied the volume of smuggled oil by a discounted proxy Iraq oil 

price. Since data on Iraq oil prices were not available for this 

period, we used the Iran Light crude price and discounted it by 9 

percent for the quality differential. (This is consistent with the 

implicit price of Iraqi oil exports under the oil for food program 

between 1997 and 2001.) We assumed that the price of exports to Jordan 

was a third of the resulting figure, and the price of exports to Turkey 

and the Persian Gulf was two- thirds of this resulting figure. 

According to oil industry experts, this is representative of the prices 

paid for smuggled oil.



Period 2 (1997 to 2001):



* To estimate the volume of smuggled oil for the second period, we 

started with Energy Information Administration estimates of Iraq 

production and subtracted oil sold under the oil for food program and 

domestic consumption. We assumed that the remaining oil was the oil 

smuggled through Turkey, the Persian Gulf, Jordan, and Syria. We 

adjusted the amounts of smuggled oil in 1998 and 1999 to reflect some 

Iraqi storage of oil in 1998 to sell at a higher price in 1999. The 

price of oil in the second period (1997 to 2001) was based on the same 

assumptions regarding the pricing of smuggled oil as in the first 

period (1991 to 1997). (Note that oil smuggling through Syria began in 

late 2000; we priced this oil at two-thirds of Iran Light crude 

discounted by 9 percent.):



* To estimate the amount Iraq earned from surcharges on oil from 1997 

to 2000, we multiplied the barrels of oil sold by Iraq under the oil 
for 

food program by 25 cents per barrel--the most conservative estimate of 

the surcharge by Security Council members and oil industry experts we 

interviewed. In 2001, we priced the surcharge at 35 cents per barrel as 

both oil industry experts and Security Council members estimate that 

Iraq was trying to get 50 cents per barrel.



* To estimate the commission from commodities, we multiplied Iraq’s 

letters of credit for commodity purchases by 5 percent--the most 

conservative estimate of the commission by Security Council members.



The final element of our examination of the challenges facing U.N. 

sanctions was to analyze the effect of sanctions on Iraq’s ability to 

fund its conventional military. To do this, we interviewed U.S. 

officials, Security Council members, and U.N. weapons inspectors about 

military armaments Iraq was obtaining. We also analyzed Iraq’s military 

expenditures from 1980 to 2001, based on data from the State Department 

and the International Institute of Strategic Studies in London. We 

compared these military expenditures with Iraq’s oil revenues during 

the same period and focused particularly on the period since the 

sanctions were imposed beginning in 1991.



To assess whether U.S. standards for approving exports to Iraq are more 

stringent than the United Nations’, we interviewed officials from the 

Office of the Iraq Program and the U.N. Monitoring, Verification, and 

Inspection Commission involved in screening contracts to gain an 

understanding of the U.N. screening process. We analyzed databases 

detailing the screening process and obtained statistics on the number 

of contracts submitted, approved, and blocked, as well as the criteria 

and time frames employed. We met with Security Council members Britain 

and Norway, which along with the United States are the only Iraq 

Sanctions Committee members to review all contracts, to determine the 

process and criteria they used when screening contracts. We then met 

with officials from the Treasury Department’s Office of Foreign Assets 

Control, the Department of Commerce’s Bureau of Export Administration, 

and the Department of State who are responsible for reviewing export 

application requests from U.S.- based firms, their foreign-based 

subsidiaries, and foreign companies selling U.S.-origin products. We 

reviewed applicable U.S. laws and regulations to determine U.S. 

standards for exports to Iraq. To test whether export applications 

received a different outcome when going through the U.N. and U.S. 

screening processes, we conducted a comprehensive review of all U.S. 

export application actions to Iraq during 2000 and 2001.



To assess the elements of the new sanctions agreement that could make 

it more effective than the present sanctions, we analyzed U.N. Security 

Council Resolution 1382 of 2001, which outlined the new sanctions and 

set May 30, 2002, as the date they were intended to go into effect. We 

compared resolution 1382 with the previous resolutions about the 

sanctions and the memorandum of understanding with Iraq on the oil for 

food program. Since most of the previous resolutions are still 

applicable, we focused on the new material in resolution 1382, 

including appendixes that dealt with the goods review list of 

prohibited items. We compared the goods review list with documents from 

the Wassenaar Arrangement, which also identified items that should be 

controlled for export because they could have military uses. We 

interviewed U.N. weapons inspectors, officials of the Office of the 

Iraq Program, members of the U.N. Security Council, and U.S. officials 

about what changes they expected in the implementation of the new 

sanctions.



Due to travel restrictions and security concerns, we were unable to 

travel to Iraq or the frontline states of Turkey, Jordan, or Syria to 

examine firsthand the U.N. monitoring of commodities imported into Iraq 

under the oil for food program.



We performed our review from October 2001 through April 2002 in 

accordance with generally accepted government auditing standards.



[End of Section]



Appendix 2. The U.N. Oil for Food Program:



The U.N. Security Council established the oil for food program, which 

authorized Iraq to sell oil and put the funds into a U.N.-controlled 

escrow account to pay for humanitarian and other goods. Since the 

program was established, more than $51 billion in Iraq oil revenues 

have been channeled into the escrow account. A distribution plan 

prepared by the government of Iraq and approved by the U.N. secretary 

general authorizes Iraq to purchase and import goods for 11 sectors of 

the economy, including food, health, sanitation, electricity, 

agriculture, and telecommunications. For example, the most recent 

distribution plan included the purchase of 400 ambulances for the 

health sector; the purchase of 15,000 irrigation pumping sets and 

pesticides for the agriculture sector; and the expansion of a mobile 

cellular system for the telecommunication sector.



Under a current Security Council resolution, 72 percent of the oil 

revenue in the escrow account must fund the purchase of food, medicine, 

and other commodities for Iraq; 25 percent must go to a compensation 

commission to pay for war reparations; 2.2 percent covers the U.N. cost 

for administering the program; and 0.8 percent funds the operations of 

the U.N. Monitoring, Verification, and Inspection Commission. Table 2 

shows the amount of funds allocated to procure commodities by sector 

and to fund war reparations and U.N. administrative costs.



Table 2. Oil for Food Revenues and Allocation, 1997 through 2001:



Dollars in millions.



Sector



Sector or other expenses: Food; Security Council approved: $ 5,782; 

Security Council review not required: $ 5,213; Total: $10,995; 

Percentage of total: 21.5.



Sector or other expenses: Food handling; Security Council approved: 

2,286; Security Council review not required: 137; Total: 2,423; 

Percentage of total: 4.7.



Sector or other expenses: Health; Security Council approved: 1,749; 

Security Council review not required: 604; Total: 2,353; Percentage of 

total: 4.6.



Sector or other expenses: Oil production equipment; Security Council 

approved: 1,860; Security Council review not required: 872; Total: 

2,732; Percentage of total: 5.3.



Sector or other expenses: Electricity; Security Council approved: 

2,622; Security Council review not required: 12; Total: 2,634; 

Percentage of total: 5.1.



Sector or other expenses: Water/Sanitation; Security Council approved: 

1,233; Security Council review not required: 116; Total: 1,349; 

Percentage of total: 2.6.



Sector or other expenses: Agricultural; Security Council approved: 
2,312; 

Security Council review not required: 302; Total: 2,614; Percentage of 

total: 5.1.



Sector or other expenses: Education; Security Council approved: 580; 

Security Council review not required: 185; Total: 765; Percentage of 

total: 1.5.



Sector or other expenses: Telecommunications; Transportation; Security 

Council approved: 1,432; Security Council review not required: 0; 
Total: 

1,432; Percentage of total: 2.8.



Sector or other expenses: Housing; Security Council approved: 1,930; 

Security Council review not required: 324; Total: 2,254; Percentage 

of total: 4.4.



Sector or other expenses: Northern governorates; Security Council 

approved: 1,154; Security Council review not required: 95; Total: 

1,249; Percentage of total: 2.4.



Other expenses:



Sector or other expenses: Special allocation; Security Council 
approved: 

13; Security Council review not required: [Empty]; Total: 13; 
Percentage 

of total: 0.1.



Sector or other expenses: War reparations; Security Council approved: 

[Empty]; Security Council review not required: 13,960; Total: 13,960; 

Percentage of total: 27.3.



Sector or other expenses: Administrative fees; Security Council 
approved: 

[Empty]; Security Council review not required: 1,485; Total: 1,485; 

Percentage of total: 2.9.



Sector or other expenses: Approved but not yet funded; Security Council 

approved: [Empty]; Security Council review not required: 4,948; Total: 

4,948; Percentage of total: 9.7.



Total; Security Council approved: $22,953; Security Council review not 

required: $28,253; Total: $51,206; Percentage of total: 100.



Source: United Nations. :



[End of table]



Screening and Monitoring:



U.N. and member state screening and monitoring help verify that Iraq’s 

purchases are not for military uses and that it is not illegally 

selling oil. First, U.N. Security Council resolutions require that Iraq 

clear its proposed purchases from the escrow account through a U.N. 

screening and approval process. U.N. customs and weapons inspectors 

screen proposed Iraq contract purchases for weapons and related dual-

use items and ensure that prices being charged are reasonable. The 

proposed contracts are then submitted to the Iraq Sanctions Committee 

for further review. [Footnote 1] As a member of the sanctions 

committee, the United States subjects all potential Iraqi imports to a 

thorough examination to ensure that they have no military application 

before approving them.



To verify that the goods actually delivered to Iraq are the approved 

ones, the United Nations deploys 78 contract workers at 4 designated 

entry points on Iraq’s borders with Turkey, Jordan, and Syria, and at 

the Persian Gulf. At these border crossings, vehicle drivers who have 

U.N.-approved purchases and want to be paid by the escrow account must 

stop to have their shipments authenticated by the U.N. contractors. The 

authentication form must be signed to receive payment from the U.N. 

escrow account. The United Nations also monitors the use of sensitive 

goods within Iraq, such as vehicle spare parts and helicopters, through 

158 observers from 9 U.N. agencies working in Iraq. According to their 

mandate, however, the observers are not weapons inspectors and do not 

track all items in a shipment to their final use. [Footnote 2]



To check that Iraq is selling the approved quantity of oil under the 

oil for food program, the United Nations deploys 14 contract workers 

inside Iraq at three designated exit points, one on the Gulf and on 

both ends of an oil pipeline to Turkey. These contractors check that 

the quantity of oil pumped through the pipeline matches the quantity 

allowed under an approved oil contract. There are also 7 personnel who 

monitor spare parts procured for the oil industry. In addition, a 16-

nation Multilateral Maritime Inspection Force is deployed in the 

Persian Gulf to limit smuggling of illicit goods into Iraq and oil from 

Iraq. The force varies in size but consists of between six and eight 

vessels.



FOOTNOTES



[1] The U.N.’s Office of the Iraq Program has authority at this point 

to immediately clear--or fast track--contracts that include items in 

such sectors as food, education, health, agriculture, sanitation, and 

oil and electricity spare parts.



[2] U.N. agencies and programmers working as end-use monitors of oil 

for food commodities include the Department for Economic and Social 

Affairs, the Food and Agricultural Organization (FAO), the 

International Telecommunication Union (ITU), the United Nations 

Children’s Fund (UNICEF), the United Nations Development Program 

(UNDP), the United Nations Educational, Scientific and Cultural 

Organization (UNESCO), the United Nations Office for Project Services 

(UNOPS), the World Food Program (WFP), and the World Health 

Organization (WHO).



[End of Section]



Appendix 3. Timeline of Major Events Related to Sanctions against Iraq:



Date: Aug. 2, 1990; Event / Action: U.N. Security Council Resolution 

660; Summary: Iraqi forces invade Kuwait. Resolution 660 condemns the 

invasion and demands immediate withdrawal from Kuwait..



Date: Aug. 6, 1990; Event / Action: U.N. Security Council Resolution 

661; Summary: Resolution 661 imposes economic sanctions against the 

Republic of Iraq. The resolution calls for member states to prevent all 

commodity imports from Iraq and exports to Iraq, with the exception of 

supplies intended strictly for medical purposes, and in humanitarian 

circumstances, foodstuffs..



Date: Aug. 6, 1990; Event / Action: Operation Desert Shield; Summary: 

President Bush orders the deployment of thousands of U.S. forces to 

Saudi Arabia..



Date: Nov. 5, 1990; Event / Action: U.S. legislation; Summary: Public 

Law 101-510 prohibits import of products from Iraq into the United 

States and export of U.S. products to Iraq..



Date: Jan. 12, 1991; Event / Action: U.S. legislation; Summary: Iraq 

War Powers Resolution authorizes the president to use “all necessary 

means” to compel Iraq to withdraw military forces from Kuwait..



Date: Jan.16, 1991; Event / Action: Operation Desert Storm; Summary: 

Operation Desert Storm is launched: Coalition operation is targeted to 

force Iraq to withdraw from Kuwait..



Date: Feb. 28, 1991; Event / Action: Gulf War cease-fire; Summary: Iraq 

announces acceptance of all relevant U.N. Security Council 

resolutions..



Date: Apr. 3, 1991; Event / Action: U.N. Security Council Resolution 

687; (Cease-Fire Resolution); Summary: Resolution 687 mandates that 

Iraq must respect the sovereignty of Kuwait and declare and destroy all 

ballistic missiles with a range of more than 150 kilometers as well as 

all weapons of mass destruction and production facilities..



Date: June 17, 1991; Event / Action: Creation of U.N. Special 

Commission; Summary: The U.N. Special Commission is charged with 

monitoring Iraqi disarmament as mandated by U.N. resolutions and to 

assist the International Atomic Energy Agency in nuclear monitoring 

efforts..



Date: Oct. 6, 1992; Event / Action: U.S. legislation; Summary: Public 

Law 102 -391 stipulates that funds to carry out the Foreign Assistance 

Act or the Arms Control Act may not be used to provide assistance to 

any country not complying with U.N. Security Council sanctions against 

Iraq..



Date: Apr. 14, 1995; Event / Action: U.N. Security Council Resolution 

986; (oil for food resolution); Summary: Resolution 986 allows Iraq to 

sell $1 billion worth of oil every 90 days. Proceeds must be used to 

procure foodstuffs, medicine, and material and supplies for essential 

civilian needs. Resolution 986 is supplemented by several U.N. 

resolutions over the next 6 years that extend the oil for food program 

for different periods of time and increase the amount of oil that may 

be exported and humanitarian goods that may be imported..



Date: Dec. 10, 1996; Event / Action: Start of oil for food program; 

Summary: With the completion of measures for implementing Resolution 

986, Phase I of the oil for food program begins..



Date: Aug. 14, 1998; Event / Action: U.S. legislation; Summary: Public 

Law 105 -235 finds Iraq in unacceptable and material breach of its 

international obligations..



Date: Oct. 31, 1998; Event / Action: U.S. legislation:; Iraq Liberation 

Act; Summary: Public Law 105 - 338 authorizes the president to provide 

assistance to Iraqi democratic opposition organizations..



Date: Oct. 31, 1998; Event / Action: Iraqi termination of U.N. Special 

Commission activity.; Summary: Iraq announces it will terminate all 

forms of interaction with UNSCOM and that it will halt all UNSCOM 

activity inside Iraq..



Date: Dec.16, 1998.; Event / Action: Operation Desert Fox; Summary: 

Following Iraq’s recurrent blocking of U.N. weapons inspectors, 

President Clinton orders 4 days of air strikes against military and 

security targets in Iraq that contribute to Iraq’s ability to produce, 

store, and maintain weapons of mass destruction and potential delivery 

systems..



Date: Nov. 29, 2001; Event / Action: Security Council Resolution 1382; 

Summary: Resolution 1382 extends the oil for food program an additional 

180 days.Phase 11 of the program will be in effect until May 29, 2002. 

The resolution stipulates that a new Goods Review List will be adopted 

and relevant procedures will be subject to refinement..



[End of table]



[End of Section]



Appendix 3. Comments from the Department of State:



United State, Department of State

Washington, DC 20520



MAY 9, 2002:



Dear Ms. Westin:



We appreciate the opportunity to review your draft report, “WEAPONS OF 

MASS DESTRUCTION: U.N. Confronts Significant Challenges in Implementing 

Sanctions Against Iraq,” GAO-00-000, GAO Job Code 320085.



The enclosed Department of State comments are provided for 

incorporation with this letter as an appendix to the final report.



If you have any questions concerning this response, please contact 

William Grant, Sanctions Officer, Office of Peacekeeping and 

Humanitarian Operations, Bureau of International Organization Affairs, 

at (202) 736-7606.



Sincerely,



Christopher B. Burnham Assistant Secretary and Chief Financial 

Officer:



Signed by Christopher B. Burnham.



Enclosure:



As stated.



cc: GAO/IAT - Mr. Tetsuo Miyabara State/OIG - Mr. Berman State/I0- Mr. 

William Grant:



Ms. Susan S. Westin, Managing Director, International Affairs and 

Trade, U.S. General Accounting Office.



State Department Comments on GAO Draft Report:



WEAPONS of MASS DESTRUCTION: UN confronts Significant Challenges in 

Implementing Sanctions Against Iraq (GAO-PUB No., GAO Job 320085):



The Department provided numerous comments and clarifications to GAO on 

earlier drafts of this report, most of which are reflected in this 

draft. Our additional comments concern three subjects:



1. the revised export control system for Iraq (GAO completed its draft 

before all details were final);



2. the impression the report conveys that Security Council resolutions 

do not adequately provide for the return of weapons inspectors to Iraq 

when in fact they do; and:



3. more precision regarding the mandate of UN personnel who man the 

border crossing stations into Iraq.



New Export Control System for Iraq.	We expect the United Nations 

Security Council to approve by mid-May a resolution adopting a new 

export control system for Iraq based on the Goods Review List (GRL), 

for implementation beginning May 30, 2002. AS GAO notes, the Council 

agreed in principle to adopt the GRL in its last resolution on Iraq, 

UNSCR 1382 of November 29, 2001. The new resolution will reflect 

refinements of the List and associated procedures contained in 1382. 

Examples include modifications to the entries on biological growth 

media, lasers, telecommunications, and chemical sprayers and 

clarifications of the responsibilities of the ON Office of the Iraq 

Program, UNMOVIC (United Nations Monitoring, Verification and 

Inspection Commission) and the IAEA (International Atomic Energy 

Agency).



Under the new system, items covered by the GRL will be subject to 

scrutiny by the Iraq Sanctions Committee. The UN will have authority to 

approve other items with minimal delay; under the current system, many 

of those also must be referred to the Committee. The total ban on 

export to Iraq of military goods and services under paragraph 24 of 

UNSCR 687 is maintained. Because the new system focuses controls on 

items that Iraq could use to re-arm, it effectively lifts sanctions on 

purely civilian trade, while making clear to all nations and suppliers 

the items that warrant heightened scrutiny before export to Iraq.



This agreement is a sign of renewed consensus on Iraq among the five 

permanent members of the Security Council. That consensus will be 

useful as we continue efforts to improve sanctions to deny Iraq’s 

access to dangerous goods and seek the return of UN weapons inspectors. 

Such a consensus will also be useful should we choose a different path 

to ending the threat to international peace and security that the

Iraqi regime poses. The Security Council is expressing its view that 

the Iraqi regime continues to threaten international peace and security 

and controls are necessary to ensure that it does not re-arm. The 
Council 

also demonstrates its intention to meet the needs of the Iraqi people. 

Success on that point will depend on the actions of the Iraqi 
government, 

which has shown a consistent pattern of diverting goods intended for 

civilian use to its military and to supporters of the Iraqi regime.



Under the new system, there will be no contract holds, which the GAO 

discusses--the focus of review will be items, not contracts. UN experts 

from UNMOVIC and IAEA will conduct technical reviews of all items in 

all contracts. They will approve non-GRL items for shipment to Iraq 

without Iraq Sanctions Committee review. Items which either of the two 

agencies determines are covered by the GRL will require Committee 

review. Committee members (including the U.S.) will have the following 

options available for items that are referred: (a) approval; (b) 

approval subject to conditions as stipulated by the Committee; (c) 

denial; and (d) request for additional information. If the additional 

information is not provided in a specified time-period, the item(s) 

will be considered inactive and the review process will not proceed 

further. If supplier does not provide the requested information within 

a further specified time-period, the application will be considered 

lapsed.



Requirement for weapons inspections unchanged. GAO states that the “new 

sanctions do not provide for resumption of weapons inspections”, 

referring to the new export control system to be adopted by the 

Security Council. This leaves the false impression that Security 

Council resolutions do not adequately provide for weapons inspections 

and that the new resolution should do so. In fact, numerous Security:



Council resolutions require that Iraq admit and cooperate fully with UN 

weapons inspectors without conditions. The United States has rejected 

efforts to modify the requirements of these resolutions in order to 

entice greater Iraqi cooperation. The UN’s chief weapons inspectors 

took the same position in meetings with Iraqi representatives May 1-3. 

As Secretary Powell has made clear, the Iraqi government knows what it 

must do to comply with resolutions. The Department will continue to 

oppose proposals that would weaken the provisions regarding weapons 

inspections.



Clarifying the authority of UN personnel at border crossings.	 GAO 

language in the Background section leaves the impression that UN 

personnel have the authority to stop and inspect all shipments into 

Iraq and turn away goods that have not been approved under the UN 

program. In fact, the mandate of the UN staff at the borders (who are 

contractors from an inspection firm) is limited to checking goods that 

have been approved under the Oil-for-Food program, to verify that the 

goods conform to the contract that was approved by the UN. Governments 

of UN member states have the responsibility for preventing exports to 

Iraq that have not been authorized under the UN program. As a practical 

matter, the states bordering Iraq have a particular responsibility. We 

consult frequently with them on this subject.



[End of Section]



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