U.S. has its eye on Iraq funds 'Borrowing' assets would underwrite U.N. operations

March 20, 1992|By Mark Matthews and Richard H. P. Sia | Mark Matthews and Richard H. P. Sia,Washington Bureau

WASHINGTON -- While holding out military action as a last resort, President Bush has decided to press forward with a plan take up to $1.7 billion worth of frozen Iraqi assets in a show of resolve and an effort to fill badly depleted United Nations coffers.

U.S. officials said yesterday that the president authorized the State Department on Wednesday to begin consultations with allies and with Congress on the move, which would require a U.N. Security Council resolution, officials said.

It marks a step officials believe could be taken quickly to bring added pressure on Iraq while the United States works to overcome Arab resistance to the use of force if Saddam Hussein continues to defy U.N. mandates to destroy his weapons of mass destruction.

The $1.7 billion, which would be turned over to the United Nations, is the most easily obtainable of the $5 billion worth Iraqi assets frozen worldwide after Iraq's invasion of Kuwait in August 1990. It includes $1.3 billion in proceeds from sales of Iraqi oil delivered but not paid for after a U.N. embargo was imposed, and $400 million worth of Iraqi oil held in Turkey and Saudi Arabia.

Because of billions of dollars worth of outstanding claims against Iraq stemming from both the gulf crisis and before, the money will only be borrowed, with the understanding that it will be repaid once Iraqi oil sales resume under agreement with the United Nations.

Iraq would thus effectively be replacing seized assets with its own money.

The claimants include victims of the war and commercial creditors.

Iraq previously rejected a U.N. resolution authorizing it to sell $1.6 billion worth of oil, with the proceeds to go toward U.N. inspections, humanitarian needs and compensation, calling it an infringement on Iraqi sovereignty. But it recently agreed to resume negotiations over the oil sales issue. Those negotiations would be conducted with the United Nations in Vienna.

U.S. officials say that no resolution concerning the frozen assets will be put forward if Iraq and the United Nations reach agreement in Vienna.

The action is the only one to win high-level approval so far out of a series of measures under consideration to force Iraq to comply with Security Council resolutions. Other options disclosed in recent days are said to pose problems. These include expanding the area of northern Iraq controlled by the United States and allied air forces, a move seen likely to draw Turkish opposition.

Bombing of Iraq's missile and nuclear arms development facilities is deemed a last resort if Iraq fails to agree to a plan to destroy the facilities, U.S. officials said.

A knowledgeable senior military officer said military planners have been reviewing the same range of options they readied in September, the last time Baghdad's refusal to cooperate with U.N. inspection teams prompted talk about renewed air attacks on Iraq.

That set of options, which includes air strikes against missile-production facilities and armed escorts for U.N. helicopter inspection missions, "has not been altered," the military source said.

Asked if any new military options were presented recently to the White House, the officer said flatly, "No."

But the officer, who insisted on anonymity, noted that Iraq must decide soon whether to cooperate with the U.N. inspectors, who are expected to give Iraq a deadline for destroying missile manufacturing equipment and a nuclear weapons research facility at Al Atheer. "It's close at hand," he said.

In moving against Iraq's frozen assets, the Bush administration hopes to fulfill two goals.

The money would fund continued U.N. inspections for several years to ensure that Iraq's weapons of mass destruction are tracked down and destroyed. It would enable humanitarian supplies to enter Iraq under U.N. supervision.

It would also provide a clear signal to Iraq that it will be saddled with a well-funded U.N. inspection and long-term monitoring regime for the foreseeable future regardless of its own stalling tactics.

Legal objections have been raised by Treasury officials both here and overseas because of the number of existing claims against Iraq, but administration sources say these have largely been overcome by the plan merely to "borrow" the funds.

Within the U.S. government, there is increasing determination to ensure the destruction of Iraqi weapons of mass destruction facilities regardless of what it takes.

"There is a recognition that we will have to adopt the measures necessary," a U.S. official said. A similar resolve has been voiced by French, British and Russian officials. In Britain, where Prime Minister John Major faces a stiff re-election challenge April 9, the opposition Labor Party has consistently supported enforcement of U.N. resolutions and would support military action if necessary to achieve that, officials said.

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