In February, the Security Council approved an increase in Iraqi oil exports from $2 billion to $5.25 billion, to begin after Annan approves Iraq's distribution plan. But the plan calls only for a maximum $4.5 billion in oil sales over the next six months providing Iraq can upgrade its oil industry. Of this amount $3 billion is for humanitarian supplies while the remainder is deducted for compensation to victims of the 1991 Gulf War and other U.N. costs.

Iraq has been barred from freely selling oil since its 1990 invasion of Kuwait. Since 1996, the UN has allowed limited exports of oil for humanitarian aid and to compensate Gulf war victims. The distribution plan calls for dramatic increases in funding for food and nutrition, health, water and sanitation, agriculture, electricity and education. Alltold, the plan will allocate $3.1 billion in humanitarian aid for Iraq's 22 million people.

However, because of Iraq's oil export capacity and low oil prices, there is guarantee that projects proposed in the enhanced distribution plan will be fully funded, UN officials said. The plan also allocates $300 million in spare parts for Iraq's run-down oil industry, and $150.5 million for upgrades to Iraq's telecommunications network. The spare parts are needed to boost Iraq's oil production and exports, but have been delayed in a contentious debate in the council. UN officials, who administer the oil-for-food program, are calling for swift action on the spare parts.

Because about one third of every oil-for-food dollar goes to administration and war compensation, Iraq must export $4.5 billion of oil over six months to generate $3.1 billion for humanitarian aid. Even with the spare parts, Iraq says it is likely to generate only $4 billion in oil sales over six months.

However, other procedural issues that couldtake several days to resolve, as well as scheduling issues for oil lifters in the region, are expected to create a brief gap in exports, sources said.

Annan's approval of the distribution plan was the last major hurdle to be cleared at the UN before the fourth phase can begin. However, the council has yet to authorise delivery of the $300 million in spare parts. Iraqi leaders have said they won't hold up exports if the spare parts are not approved by June 3. However, some in the industry are not so sure.

Assuming Baghdad does not delay exports over the spare parts issue, establishing prices for oil lifted in June and scheduling liftings will dictate how much Iraqi crude is exported in June and when, sources said. Iraq's State Oil Marketing Organisation has yet to submit a pricing formula for crude oil lifted after June 2.

New oil-for-food plan not enough: Trade minister

Samia Nakhoul

Iraq said on Saturday that UN approval of Iraq's plan for distributing food and medicine would not endthe misery of its people and only a lifting of sanctions would do the job.

"The plan has failed to achieve its objective. It proved to be an unsuccessful method of alleviating human suffering," trade minister Mohammed Mehdi Saleh told a news conference after UN secretary-general Kofi Annan approved Iraq's new aid plan last Friday.

"If the international community is really keen on solving the issue of human suffering, then it is required to lift sanctions. This is the only way," he said.

Annan had to approve the plan before the next six-month phase of the oil-for-food programme could begin next week. Saleh said that before the embargo, Iraq used to spend $20 billion a year on imports of civilian commodities and social development projects. He said Iraq required not only food and medicine but a huge amount of cash to rebuild and repair its damaged infrastructure and develop essential services such as electricity, water, sanitation, transportation, communications and education.