Iraqi oil revenues to be transferred to pay for consequences of Kuwait invasion.

• Position: United Nations

UN inspectors enter Baghdad Ministry after 22-day stand-off

The Security Council on 2 October decided to assume control of Iraq's assets frozen outside that country - estimated at between $500 million and $1 billion - to compensate victims of Iraq's invasion of Kuwait and to defray the costs of UN activities related to Iraq.

In unanimously adopting resolution 778(1992) by a vote of 14 to none, with 1 abstention (China), the Council condemned Iraq's continued failure to comply with its obligations under relevant Council resolution. The resolution was adopted under Chapter VII of the UN Charter.

Iraqi oil funds specified in the resolution would be transferred to a UN escrow account administered by UN Secretary-General Boutros Boutros-Ghali, who would use the fund to pay for UN activities related to Iraq and shift 30 per cent of that account to the UN Compensation Fund, created by the Council on 20 May 1991 to pay claims against Irag arising from its invasion and occupation of Kuwait.

The Council decided that the resolution would be suspended if Iraq agreed to export its oil, pursuant to the system provided in Council resolutions 706 (1991) of 15 August and 712 (1991) of 19 September or if it decided to lift sanctions against Iraq.

(By resolution 706, the Council had stipulated terms for the limited sale - not to exceed $1.6 billion initially - of Iraqi oil and oil products under strict conditions and close UN monitoring, with the revenues to be used for humanitarian purposes. Under resolution 712, the Council created a basic structure and set out measures for the sale of Iraqi oil.)

In resolution 778, the Council reaffirmed its concern about the nutritional and health situation of the Iraqi civilian population and the risk of a further deterioration of that situation. It also deplored Iraq's refusal to cooperate in the implementation of resolutions 706 and 712 which, it stated, "provide a mechanism for providing humanitarian relief to the Iraqi population". Iraq, the Council said, was putting its civilian population at risk by refusing to cooperate.

During the Council debate, the United States stressed that resolutions 706 and 712 had created a mechanism to fund UN operations - mandated by resolution 687 (1991), as well as UN humanitarian relief operations in Iraq - from Iraqi oil sales.

Resolution 687, adopted on 3 April 1991, set detailed conditions for a formal cease-fire, ending the hostilities resulting from Iraq's occupation of Kuwait and provided conditions essential to the restoration of peace and security in the region. Among the conditions was total Iraqi compliance with UN decisions.

A reasonable response

The United States said that resolution 778 was a "reasonable and proportionate" response to Iraq's intrasigence. Iraqi asset would thus be "borrowed" for the Secretary-General's use to pay for UN operations, such as the Special Commission on Iraqi disarmament, the Compensation Fund and humanitarian programmes.

China, in explaining its vote, said it hopped for an agreement between the UN Secretariat and Iraq on the export of Iraqi oil, so that relevant Council resolutions could be effectively implemented. In view of that, it was unnecessary to "take so extraordinary a measure as the seizure of frozen assets overseas". The seizure of a country's frozen assets abroad was a matter that concerned its sovereignty and involved complicated legal implications.

Funds to be transferred

The text of resolution 778 states that the Council has decided that all States in which there were Iraqi funds derived from the sale of Iraqi petroleum or petroleum products should transfer those funds to a UN escrow account administered by the Secretariat-General.

States in which there was petroleum or there were petroleum products owned by the Iraqi Government or its State bodies, corporations or agencies were to purchase them or arrange for their sale and transfer the proceeds to the escrow account, the Council decided.

The Council asked the Secretary-General to determine the location and amounts of Iraqi oil and the proceeds of its sale, as well as the costs of UN activities related to Iraq, including the elimination of weapons of mass destruction, the provision of humanitarian relief, facilitating the return of Kuwaiti property and the work of the Iraq-Kuwait Boundary Demarcation Commission.

Iraq position

On 30 September, Iraq told the General Assembly that attempts were being made to seize Iraq's frozen assets which had no justification or legality whatsoever, since Iraq had cooperated in good faith with the UN to agree on the export of Iraqi oil and the use of the revenues thereof.

While Iraq endeavored in earnest to implement its obligations under Council resolutions, the Council had...