Under the oil-for-food programme, Iraq is allowed to sell its petroleum and petroleum products and use the funds for humanitarian goods, compensation to victims claiming damages as a result of Baghdad's 1990 invasion of Kuwait, and certain other expenses. By today's resolution, the Council decided to reduce the proportion of funds allocated to the Compensation Fund from 30 per cent to 25 per cent, and to use the 5 per cent difference for "strictly humanitarian projects to address the needs of the most vulnerable groups in Iraq."

This move was anticipated after agreement was reached in late September among the five permanent members of the Security Council to award some $15.9 billion to the Kuwait Petroleum Corporation from the Compensation Fund. At the time, a UN spokesman reported that the permanent five settled that claim while agreeing to reduce the percentage of funds received by the Commission from the sale of Iraqi oil and to use the difference for the humanitarian programme.

The resolution adopted today also requested the Secretary-General to make the necessary arrangements, subject to Council approval, to allow funds of up to 600 million euros deposited in the escrow account to be used "for the costs of installation and maintenance, including training services, of the equipment and spare parts for the oil industry." It also called upon the Iraqi Government to cooperate in the implementation of such arrangements.

In a first since the oil-for-food's programme's establishment in 1995, the Council expressed its "readiness to consider, in the light of the cooperation of Iraq in implementing all the resolutions of the Council, allowing a sum of 15 million United States dollars to be drawn from the escrow account to be used as payment of the arrears in Iraq's contribution to the budget of the United Nations."

The Secretary-General was requested to prepare a report by the end of March "containing proposals for the use of additional export routes for petroleum and petroleum products" consistent with the Council's resolutions, "and particularly addressing the possible pipelines that might be utilized as additional export routes."

Meanwhile, the Office of the Iraq Programme, which oversees the oil-for-food scheme, announced today that there is still no agreement has between the UN and Baghdad on the pricing mechanism for the sale of Iraqi oil for the month of December. At Iraq's decision, there have been no oil loadings under the programme since the end of November.