OVERVIEW
The EU's Relations with Iraq

Prepared by the European Union's Office of External Relations

Brussels, Belgium

June 2000

1. Political context

The European Community (EC) has not and never had any contractual relations with Iraq, which is neither part of the EU-Mediterranean framework of association, nor is it included in the EU co-operation set-up for South and the South-East Asia. There is no official dialogue between the EC and the Iraqi Government, and the Commission does not have a delegation in Baghdad. However, an Iraqi Chargé d’affaires is in principle accredited to the EC.

Given the lack of contractual relations with Iraq, the Commission has since 1991 limited its role to implementing the UN Security Council’s sanctions and emphasising that full Iraqi compliance with relevant resolutions is a prerequisite to any re-consideration of the present state of affairs. In the humanitarian field, the Commission (through ECHO and, from 1994 to 1996, External Affairs Directorate-General) has gained some prominence. The EU Middle East-Gulf Working Group is regularly reviewing the situation.

2. Economic situation

The eight-year war with Iran left Iraq with great economic losses, shortages of labour and supplies, severe damages to the infrastructure and a large foreign debt. The economic embargo subsequent to the invasion of Kuwait has further reduced production, exports and imports and has contributed to the sharp rise in prises.

As the humanitarian situation in Iraq aggravated during the nineties, a UN oil-for-food programme was established to soften the impact of the economic sanctions by allowing Iraq to sell limited amounts of oil in order to buy food, medicine and other necessities approved by the UN.

In May-November 1999, Iraq exceeded the $5,26 billion revenue ceiling for the sixth phase of the oil-for-food agreement. According to the UN, Iraq generated oil sales of $7,46 billion during the sixth phase. The UN adjusted the revenue ceiling upwards to $8,26 billion (4^th quarter 1999), citing earlier revenue shortfalls as justification. In December 1999, the UN Security Council extended the humanitarian programme to another six months. It allows Baghdad to sell oil worth $5,2 billion during this period.

In 1999 the Iraqi economy has been further impeded by a drought which has caused a drastic decrease in agricultural production and has reduced the generating capacity of hydroelectric dams, leading to cut-downs in power supplies to private consumers and to the rationing of electricity to essential services. A considerable part of the humanitarian relief work carried out in 1999 has concentrated on alleviating the worst impacts of the drought.

3. Trade relations

The EC-Iraq trade was virtually non-existent from 1991 to 1996, but the amount of trade rose considerably in 1997 after the start of implementation of the oil-for-food programme. In 1999 the EU imports (99 pct. oil products) from Iraq amounted to 3,68 billion Euro, reaching the same level as before the Iraqi invasion of Kuwait, the EU thus making-up more than a third of the Iraqi export destination markets.

The volume of exports from the EU to Iraq has not increased as fast. Thus, the value of 589,5 million Euro for 1999 corresponds to one fifth of the amount exported in 1989. The EU exports to Iraq are diversified, with large machinery and electrical and mechanical appliances making-up one third of the total exports. Medicaments and medical equipment make up another large part, as do food supplies.

4. Humanitarian aid

Since 1991, the EC has been the major donor of humanitarian aid to Iraq, with a total of 242 million Euro. Furthermore, several EU Member States have provided large aid contributions within bilateral frameworks.

Although the oil-for-food programme has helped prevent deterioration to absolutely unacceptable levels, it meets only a small part of the needs of the Iraqi people. Also, the intended effect of Resolution 986 has been undermined by the slowness of the implementing procedures. Therefore, for the last few years, and in order to avoid duplication of effort, ECHO has been supporting projects which complement those implemented under Resolution 986. However, humanitarian assistance can at best only offset for a short term some of the worst effects of the humanitarian crisis. The end of the embargo is a prerequisite to a solution of the problem that it has created.

Problems of access for NGOs remain paramount. The Turkish government continues to prevent access to the north of Iraq via Turkey, and the Iraqi Government only allows seven NGOs to operate in Iraq.

In May 1999, ECHO allocated additional 2 million Euro to cover a 6-8 months period starting from July 1999, focusing on the supply of essential medicines to major hospitals, sanitation in Baghdad, assistance to institutions dealing with children in Baghdad, Mosul and Basra, and aid to the internally displaced living in the south.

For 2000, the EC is in the process of adopting an ECHO Global Plan for Iraq amounting to 8.6 million Euro. This amount will fund operations in the centre and south of Iraq, where humanitarian needs are more acutely felt, and support will be provided to sectors such as health, water and sanitation, food, basic education and small scale rehabilitation of the humanitarian sector.