Iraq wants to rebuild its oil-producing infrastructure which was damaged during the Persian Gulf War

November 1, 1999
Web posted at: 11:00 p.m. EST (0400 GMT)

Baghdad, IRAQ (CNN) - Iraq wants to spend 10 percent of the money it has earned in international oil sales to rebuild its oil producing infrastructure, much of which was damaged or destroyed during the Persian Gulf War.

Baghdad has forwarded its request to the United Nations, which controls Iraq's oil industry as part of the agreement that ended the war in 1991.

But U.S. and British officials oppose the move, saying the money should be put into badly needed food and medicine.

In what might be called a "chicken and egg" argument, Iraq and U.N. officials insist that Iraq must be able to produce enough oil first, before it can generate enough money for food and medicine.

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CNN's Rula Amin looks at Iraq's oil industry Windows Media 28K 80K

"If Iraq's oil industry is unable to simply produce enough oil out of the ground and sell it, then there won't be any humanitarian revenue," said George Sommerwill, a U.N. spokesman.

U.N. Secretary-General Koffi Annan has recommended to the U.N. Security Council that Iraq be allowed to buy an additional $300 million in equipment and parts to upgrade its oil industry.

"We have been pushing to the limit our equipment, most of our operating systems are running without standby," said Faleh Al-Khayyat, director of general planning for the Iraqi Oil Ministry.

Five experts dispatched by the U.N. to examine Iraq's oil facilities agreed. They concluded that Iraq's oil industry is in a lamentable situation with an urgent need for spare parts and equipment for Iraq to maintain or increase its crude oil production.

The U.N. experts also concluded that lack of spare parts for Iraq's oil industry is threatening safety and the environment. Special equipment is required to refine Iraqi oil, which often contains high levels of sulphur.

"We used to treat our industrial water before we put it in the river. We used to treat the gases before we put them in the atmosphere. We used to get water from our refineries and out of our production system that you can drink. All of this is done by equipment and complicated systems, that needs spare parts, needs replacement, needs additions, needs development," said Al-Khayyat.

Due to rising prices on the world oil market, the U.N has already allowed Baghdad to exceed its oil sales limit by $3 billion over a six-month period. Now, it's up to the U.N. Security Council to determine how Iraq can spend that money.

Correspondent Rula Amin contributed to this report.