Auditors at the UN say the total income generated by the escrow account for Iraq made up of funds related to the expired and mainly letter of credit (L/C) based oil-for-food programme (OFP) dropped by over one third between 2005-06.

The drop in income was attributed to more than US$370 million being transferred to the Development Fund for Iraq (DFI), according to a recent report by the UN Board of Auditors.

Sanctions scheme

Under the OFP, which operated when sanctions were imposed on Iraq during the last years of the Saddam era, Iraq was allowed to use monitored oil sales revenue for humanitarian purchases.

It was phased out in 2003 when a UN resolution lifted sanctions on the country.

Development fund

The DFI was set up that same year to administer proceeds from export sales of petroleum, petroleum products and natural gas.

The UN auditors now say, "the slow issuance of authentication documents by the government of Iraq and the protracted cancellation of L/Cs with no claims of delivery continued to hamper the complete liquidation and closure of the OFP".

Awaiting processing

Earlier this year UN Secretary General Ban Ki-moon came up with several options for resolving outstanding issues in the OFP.

In April there were 132 L/Cs in the OFP with a value of US$273 million still to be processed.

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