IRAQ: NEW RESOLVE MAY 20, 1996 TRANSCRIPT

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The U.N. is allowing Iraq to sell nearly $2 billion worth of oil to buy humanitarian supplies. Money will also go to victims of Iraq's occupation of Kuwait. The move comes as relief agencies warn that 1.5 million children -- all those born since U.N. sanctions began five years ago -- are in desperate need of food and medicine.

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ELIZABETH FARNSWORTH: Next tonight, the deal between Iraq and the United Nations.We start with a report from Lindsay Hilsum of Independent Television News.

LINDSAY HILSUM, ITN: The first chink in the armor of sanctions, an agreement Iraq may now sell nearly $2 billion worth of oil to buy humanitarian supplies and start compensating the victims of the Iraqi occupation of Kuwait. At the U.N., everyone wanted to claim victory.

MADELEINE ALBRIGHT, U.S. Ambassador to the U.N.: It's a great day for the United States because we were the authors of Resolution 986, and we have made sure that the people of Iraq are assured of the proper provisions. But at the same time a very tight sanctions regime that has been imposed upon Iraq remains in place.

ABDUL AMIR AL-ANBARI, Iraqi Negotiator: Everything's perfect, and I'm very happy to announce that from now on we are going to start the implementation of the agreement and hopefully this will be the foundation of understanding between Iraq and the United States.

LINDSAY HILSUM: Sanctions have hit hard in Iraq. Children, who had once received health care of European standards, now suffer third-world diseases, and although medical supplies are exempted from sanctions, the Iraqis haven't had the money to buy them. Today's agreement was delicately phrased so Saddam Hussein can claim to retain his country's sovereignty, although the U.N. will send monitors to ensure the distribution of food and medicine bought with the proceeds of oil is fair.

BOUTROS BOUTROS-GHALI, U.N. Secretary-General: I hope that the adoption of this resolution will encourage the government of Iraq to implement all the other resolutions which have still not been implemented.

LINDSAY HILSUM: Saddam Hussein told his senior ministers his decision on oil sales yesterday but there's no sign that he is going to make any other moves, such as destroying what remains of his arsenal.

ELIZABETH FARNSWORTH: We get three views now: Christine Helms is the director of country analysis at the Petroleum Finance Company, a Washington-based consulting firm; Phebe Marr is a senior fellow at the Institute for National Strategic Studies at the National Defense University; Raghida Dergham is senior diplomatic correspondent for Al-Hayat Newspaper. And beginning with you, Ms. Dergham, why is this happening now? This has been in the works for months. Did somebody give in?

RAGHIDA DERGHAM, Al-Hayat Newspaper: (New York) I think everybody sort of understood, or took the decision, that this should be allowed to be implemented, and I think finally the pragmatic realistic logic prevailed in Baghdad, and I think the strategic logic prevailed in Washington, rather than the elections logic, so I think--and the negotiations, themselves, played a big role in arriving at a compromise that would take care of problematic sides to the agreement and Boutros-Ghali, the Secretary-General of the United Nations, also interfered personally, trying to guarantee the success of the agreement, and I think all sides allowed it to happen finally, if that political decision was not to allow this agreement to take place, I think we wouldn't have had it.

ELIZABETH FARNSWORTH: Do you agree with that, or do you think things have changed in Iraq and around Iraq that made this happen now?

PHEBE MARR, National Defense University: Oh, I think there were a number of long-term as well as short-term reasons for this. The negotiations have been going on for some months now, and they've raised expectations quite high in Baghdad. There's been an improvement in the situation for the people of Baghdad because there's been a rise in the dinar, food prices--

ELIZABETH FARNSWORTH: The dinar is the--

MS. MARR: The Iraqi currency -- food prices have been more affordable, and had Saddam Hussein at this point negated that, it would have been very difficult for him. And I think over the long-term, in fact, perhaps as we look back on it, the defection of Hussein Camel may have been something of a watershed--

ELIZABETH FARNSWORTH: This is Saddam Hussein's son-in-law who--

MS. MARR: Saddam Hussein's son-in-law--

ELIZABETH FARNSWORTH: --talked about weapons of mass destruction that were being made in Iraq.

MS. MARR: That's quite right, and it, it generated this release of all these documents, and as soon as that came out, it became apparent that we had a long way to go in unmasking biological program and so on, so if Saddam Hussein had been waiting for the real sanctions to come off, that is to say the oil embargo to come off under Resolution 687, it would have been a much longer time, and so I think at that point he probably came to the conclusion that maybe he'd better see what kind of a deal he could get with this temporary resolution.

ELIZABETH FARNSWORTH: Do you have anything to add to that, Ms. Helms?

CHRISTINE HELMS, Petroleum Finance Company: Well, two other things. I think the humanitarian situation in Iraq was really dramatically worse in 1995 and relief agencies warned that this would exponentially increase during 1996 with 1.5 million children at risk under the age of five, in other words, all those born since these sanctions began, and another very important factor is that the Iraqis have seen the acceptance of the one- time oil deal as a key to ultimately lifting sanctions by showing that they are complying with U.N. resolutions.

ELIZABETH FARNSWORTH: How will the profits from the oils sales, the income from the oil sales, be distributed? Just briefly outline that for us.

MS. HELMS: Well, in essence, there will be letters of credit that will go into an Iraqi account at an international bank, contracts between oil companies will be negotiated with the State Oil Marketing Association of Iraq, known as SOMAI. There will be U.N. monitors from the oil industry who regulate the quality and amount of crude that's shipped, and it will be overseen by a group of three or four individuals. That part of it I think is quite straight and clear. The biggest issue yet to be resolved, which hopefully will be resolved in the first week of June, is actually the mechanism or the modalities of distributing food in Iraq.

ELIZABETH FARNSWORTH: And Raghida Dergham, have you heard anything about how the U.N. is going to handle that, how they will monitor the distribution of food, how they will distribute it? Will they do it themselves?

MS. DERGHAM: In the Northern part of Iraq, where the Kurds are, yes, the United Nations has a program that is operating there, and the United Nations inter-agency program, I think it's called, the humanitarian agencies, they are going to take care of the distribution of the food and medicine and all other equipment in Northern Iraq. As to the rest of the country, the United Nations will observe the distribution -- that's the word they used actually used "observe" -- so that they will guarantee that it's a fair and equitable distribution.

I think the United Nations' role throughout different processes of implementing this resolution and this agreement is quite solid. That is why the negotiations took so long, and I believe that the sanctions committee which has its membership constituted from the Security Council will have a big role to play, and therefore, there will be an ongoing monitoring, an ongoing observation, very direct role of the United Nations to escrow account and other ways in order to guarantee this resolution can be implemented exactly as it was written.

ELIZABETH FARNSWORTH: Ms. Dergham, is this a humiliation for Saddam Hussein? He had avoided or not wanted this deal because he felt that it impinged on Iraqis' sovereignty. Is this a humiliation?

MS. DERGHAM: I believe that everybody will put a different spin on this. I think there was a different, different points of views within the Iraqi officials in Baghdad and outside. Some argued that 986 would amount to humiliation of Iraq and others said, well, look there is no other choice, and it actually, this agreement will constitute an opening, a new page in the relationship with the Security Council, with the world, it will put the oil back on the market, it is the only window available, and therefore it is not a humiliation. After all, there was a recognition, maybe some part of a recognition that Iraq has been defeated in the war, and that it cannot come to the international community and dictate its terms.

And, in fact, that's why I said earlier, logic prevailed, the logic of, of reality and pragmatism, rather than that of, of threatening and saying, we will take it till the end of it. I don't--there were attempts for humiliating Saddam Hussein, but I think finally Washington did not go all the way in the process of humiliating Saddam.

ELIZABETH FARNSWORTH: What do you think about that? The U.N. does have, will have even a larger role than it already has in the commission to oversee the destruction of the weapons.

MS. MARR: Oh, I think there is going to be a larger role and as Rhagida said, there will be observers inside Iraq. I understand that they'll have the ability to be at checkpoints and other places inside to make certain that the distribution is proceeding as it's supposed to.

ELIZABETH FARNSWORTH: What is the status right now of the destruction of the weapons? What is happening in the, the complex maneuvering between the Iraqi government and the U.N.?

MS. MARR: Well, as I alluded to before, when, when this massive amount of paper work, paper became available--

ELIZABETH FARNSWORTH: With the defection of the son-in-law.

MS. MARR: With the defection of Hussein Camel, UNSCAM, which is the U.N. Commission that's charged with looking into those, has to go through all those papers--what became apparent is that there was a massive weapons--there was a massive biological weapons program which the Iraqis claimed that they have destroyed. I'm not so sure that everybody believes that, but it has to be investigated.

We have to find the bottom line of what was there before, before we can actually verify that it's not there any longer, and there were some aspects of the nuclear program -- chemicals and others -- that needed to be re-checked. That process is under way, and most people believe that it's going to be some time before UNSCAM, the commission, can work its way through that material and actually come up with a report which certifies that these weapons have been completely destroyed and that their comfortable with what they've got. This, I think, most people think is going to take some considerable time which, again, may have been a motive for Saddam accepting this food for--this oil for food resolution.

ELIZABETH FARNSWORTH: And I noticed in the report that we had before this discussion, the reporter said that this was the first chink in the sanctions. Is that true? Is this going to--do you think this removes some pressure on Saddam Hussein or no, or is there just no relationship between the whole effort to find out about the weapons and this, this deal?

MS. HELMS: No. I think quite definitely this does remove some pressure, and this will give him a little bit of a lease on life in the short-term, and initially certainly, and the Iraqi people have really been expecting that the internal pressure inside Iraq had very much been building, and this will also open a life line into Turkey. Iraq has already improved its relations with the Turkish government, Amarashi, the oil ministers--

ELIZABETH FARNSWORTH: That's because the oil is going out--

MS. HELMS: Exactly.

ELIZABETH FARNSWORTH: --via a pipeline through Turkey.

MS. HELMS: And, in fact, in a way, it actually opened the door to nation state building in Iraq. The Iraqi government has also opened negotiations with Masoud Barzani, one of the guerrilla leaders in the North. I mean, these are actually very important and potentially long-term, extremely-significant moves.

ELIZABETH FARNSWORTH: And tell me what is the effect on oil prices, what's happening so far?

MS. HELMS: Well, the oil market didn't behave itself today. The oil market actually increased $2 a barrel, but there are many reasons for that. Many believe that perhaps it had dropped already slightly because of the uncertainty of the ongoing four rounds of Iraqi oil sale talks, but because so much oil is now potentially going to enter the market, non-OPEC production is increasing, it's not clear at all whether OPEC will adhere to its quota and allow Iraq to come in, although they're over-producing now by a million and a half barrels per day, but in the next several weeks I would expect that it will begin to drop.

ELIZABETH FARNSWORTH: Raghida Dergham, anything to add on oil prices?

MS. DERGHAM: Yes, I think the Iraqis are going to seek to increase the amount. Later on, you see the resolution of course says that they are allowed to sell a billion dollars' worth of oil every 90 days for six months, and I think they're trying to seek two things: one, the increase of the amount based on the needs of the population, which have increased, and two, so that this will not stop at the six months, and that once the oil starts coming out of Iraq that it should from their point of view stay on-flowing until and--until the time comes when there will be a total lifting of the oil embargo if and when Iraq complies fully with, with the commission for the destruction of Iraqi weapons.

ELIZABETH FARNSWORTH: And Phebe Marr, we have just a little bit of time left. Anything to say on oil, anything to add?

MS. MARR: No. I feel fairly sure that the Iraqis will try to continue to get a better deal. I'm not sure this is quite the opening wedge that the Iraqis may see because as Raghida said, there are these other resolutions that have to be satisfied, and I think the pressure is also off the United States a little in that humanitarian needs will be satisfied, this card can no longer be played, and so you may find that the United States, Britain, and others who really want to hold Iraq's feet to the fire on these other issues -- not only the weapons of mass destruction but the Kuwaitis that have not been returned, perhaps even Resolution 688 on humanitarian issues -- that the United States might find itself in the position to be tough on these down the road.

ELIZABETH FARNSWORTH: You said humanitarian needs will be satisfied. Will they? Is this going to bring in enough money to really fill all those needs?

MS. MARR: It's going to be, first of all, the Iraqi government, so to speak, is not going to get as much as they might like. Something like 15 percent goes to the Kurdish area, the reparations that are due to victims of Kuwait, that's another 30 percent to be taken out. I don't know what the amount might be, another 5, perhaps even 5 percent more will go to pay for UNSCAM and this commission and, and so on, so if you subtract all that, they may only be getting 50 percent of this amount, so it isn't going to be an enormous amount. It's going to take off a little pressure, but perhaps not an awful lot.

ELIZABETH FARNSWORTH: Well, thank you all for being with us.

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