Mr. MURKOWSKI. Mr. President, first of all, I want to raise with my colleagues two issues that revolve around energy security. The first issue is the state of the domestic oil industry and the second issue is the Oil-for-Food Program for Iraq. I think that this marks the first departure from the debate on the impeachment, and I hope the Presiding Officer will find it refreshing.

Last week, the Energy and Natural Resources Committee, which I chair, held a hearing to review the state of the domestic petroleum industry, and to assess the threat to our economic security from our growing dependence on foreign oil. The domestic oil industry in the United States is in serious trouble. Companies are laying off workers in droves. In my State of Alaska, British Petroleum, just announced the layoff of some 600 workers, and another one of our major oil companies lost somewhere in the area of just under $800 million in the last quarter of 1998.

Exploration and drilling budgets are way down. Drilling contractors have been cut to the bone. Marginal and stripper wells are being shut in. These are production capabilities, Mr. President, that, once lost, will unlikely be regained. These, to a large degree, represent an ongoing operating petroleum reserve--one might conclude a strategic petroleum reserve--because while they are small, they are substantial in their numbers and contribute to domestic production.

Now, to quote a recent report by the John S. Herold Company, 1998 was a `catastrophe' for the U.S. oil industry, `nothing short of murderous for investors' in that industry. We are seeing mergers and consolidations, significant implications for the Nation's energy security, and certainly U.S. jobs--30 merged companies alone last year.

This situation in the oil industry is interesting, as we look at the commodities in this country. As the Presiding Officer is well aware, the agricultural industry--production, livestock, hogs, beef--the farmers can hardly raise them anymore. Many aspects of the agricultural industry are under water. This is true of the timber industry. It is true of the steel industry. It is true of the mining industry, and certainly true of the oil and gas industry.

So as we reflect on the prosperity of this country, it is interesting to note the job losses in the commodities industries of this country--and one has to wonder when it is going to catch up with itself. Of course, we enjoy low gasoline prices when we fill our car or boat, low heating oil prices when we warm our home, and low inflation due in large measure to low oil prices. Let's recognize where it is.

But a decimated U.S. oil industry creates a risk to consumers, to the economy, to our national energy security. And we only have to look back at history. Some say we learn from history, and some say not much. Well, we recall the 1973 Arab oil embargo when we were only 36 percent dependent on foreign imported oil. That had a devastating impact on consumers and the economy. We saw oil shortages, and long lines at the gas stations. Many people have forgotten that timeframe--soaring prices, double-digit inflation, and an economy put into recession. What was the prime rate at that time? Well, the prime rate was 20.5 percent in 1980. Inflation was in the area of 11 percent--double-digit.

If it happened today, we could be hit even harder. And we are getting set up for it because we are in worse shape today than we were in 1973. Since 1973, our foreign dependence has grown by leaps and bounds. U.S. crude oil production dropped by one-third. U.S. oil imports--oil imports--soared by two-thirds.

Today, U.S. foreign oil dependence is 56 percent, compared to 36 percent back in 1973. Our excessive foreign oil dependence puts our national energy security interests at stake and hence our national security at stake. We can't forget that the United States went to war in 1991 when Iraq invaded Kuwait and threatened the world oil supplies. Part of that was our supply.

In 1995, President Clinton issued a Presidential finding that imports of oil threatened our national security, and a short time ago the U.S. bombed Iraq because Saddam continues to threaten the stability in the Persian Gulf. Well, it is fair to say, Mr. President, if we do nothing, what will happen: We know things are going to get worse.

The Department of Energy projects in the year 2010 U.S. foreign dependence will hit about 68 percent. That means we will be depending on foreign sources for 68 percent of our oil supply.

I don't think we should put our trust in foreign oil-producing nations that have their interests in mind, not ours. I plan to work closely with the small and independent producers to develop a solution to this crisis. Already I have cosponsored Senate bill 325, a bill introduced by my colleague from Texas, Senator Kay Bailey Hutchison, that would amend the Tax Code to add marginal producers. I will work as a member of the Finance Committee to consider this and see it is adopted.

I also intend, with Senators from producing States, to consider a non-tax means to assist domestic production through regulatory and land access issues.

Second, I want to talk about oil-for-food and our relations with Iraq. This deals with our energy security; that is, our U.S. policy towards Iraq, specifically, the U.N. Oil-for-Food Program. Six weeks have passed since President Clinton ordered America's Armed Forces to strike military and security targets in Iraq. What has Saddam's regime done since then? They have shot at U.S. fighter planes on almost a daily basis. They have challenged Kuwait's right to exist. They have demanded compensation for U.N. crimes against Iraq--isn't that ironic. They have demanded an end to sanctions and no-fly zones. They have reiterated that no weapons inspectors will be allowed to return. That is a pretty bold statement.

Now, what policy initiative has the Clinton administration launched to deal with Saddam's defiance? U.S. officials offered to eliminate the ceiling on the Oil-for-Food Program, a de facto ending of the sanctions on oil exports. My views on the absurdity to this proposal were included in a recent Washington Post op-ed, and I ask unanimous consent that be printed in the Record.

There being no objection, the article was ordered to be printed in the Record, as follows:

From the Washington Post, Jan. 25, 1999

Our Toothless Policy on Iraq

On the eve of Operation Desert Fox, President Clinton announced to the nation that `we are delivering a powerful message to Saddam.' That message now appears to be that as long as Saddam Hussein refuses to cooperate with inspections, refuses to comply with U.N. resolutions and refuses to stop illegally smuggling out oil, he will be rewarded by the de facto ending of economic sanctions.

At least, that was the message sent by the U.S. Ambassador to the United Nations Peter Burleigh on Jan. 14 when he offered a plan to eliminate the ceiling on how much oil Iraq can sell abroad. This proposal was in reaction to a proposal (made by France and supported by Russia and China) to end the Iraq oil embargo.

Do not be fooled. The distinctions between the U.S. plan and the French plan are meaningless. This is the end of the U.N. sanctions regime. Security Council Resolution 687, passed in 1991 at the end of the Gulf War, requires that international economic sanctions, including an embargo on the sale of oil from Iraq, remain in place until Iraq discloses and destroys its weapons of mass destruction programs and capabilities and undertakes unconditionally never to resume such activities. This, we know, has not happened.

But the teeth in Resolution 687 have effectively been pulled, one by one, with the introduction and then continued expansion of the so-called oil-for-food exception to the sanctions. Although the humanitarian goals of the oil-for-food program are worthy, Saddam Hussein already has subverted the program to his own benefit by using increased oil capacity to smuggle oil for hard cash and by freeing up resources he might have been forced to use for food and medicine for his own people.

The increase in illegal sales of petroleum products coincided with implementation of the oil-for-food program in 1995. Part of this illegally sold oil is moving by truck across the Turkish-Iraqi border. A more significant amount is moving by sea through the Persian Gulf. Exports of contraband Iraqi oil through the gulf have jumped some 50-fold in the past two years, to nearly half a billion dollars. Further, Iraq has been steadily increasing illegal exports of oil to Jordan and Turkey.

Oil is Saddam Hussein's lifeline; it fuels his ability to finance his factories of death and rebuild his weapons of mass destruction. Revenue from oil exports historically has represented nearly all of Iraq's foreign exchange earnings. In the year preceding Operation Desert Storm, Iraq's export earnings totaled $10.4 billion, with 95 percent attributed to petroleum. Iraq's imports during that same year, 1990, totaled only $6.6 billion.

The United States proposes to lift the ceiling on the only export that matters. In addition, it is prepared to relax the scrutiny applied to contracts for spare parts and other equipment needed to get Iraqi industry working better.

France, China and Russia, of course, did not support Desert Fox, and have wanted to lift the Iraq embargo for some time. They are willing to put economic gain before international security, because these appeasers of Iraq stand to earn billions in a post-sanctions world. In fact, earlier this month, the U.N. released more than $81 million under the expanded oil-for-food program to enable Iraq to buy electrical generating equipment, nearly all of which ($74.9 million) will come from China. Will these new turbines merely guarantee an uninterrupted power supply for Saddam Hussien's poison gas facilities?

Why is the Clinton administration prepared to take this course? Because our Iraq policy is bankrupt. We have relied on Koki Annan and the Iraq appeasers to sign meaningless deals with Saddam Hussein regarding inspections that were useless from the moment they were signed. When we called back our aircraft at the last moment in October, despite the unanimous support of the Security Council for the attack, our Iraq policy suffered a near-fatal collapse. It finally did collapse when we decided to strike at a time when the president's credibility was at its lowest and the approach of Ramadan guaranteed Saddam Hussien easily could outlast our attack. Indeed the absurdity of our policy is reflected in the fact that in December our bombers targeted an oil refinery in Basra and at the end of the attack we pledged support to rebuild Iraq's oil-export capacity.

The inept policies that have brought us to this point must be reversed. As a first step, the administration ought to turn back from its path toward lifting, rather than tightening, the sanctions on Saddam Hussein. Second, when the U.N. reconsiders reauthorizing the oil-for-food program in May, the United States should use its veto to end this program, which has allowed Saddam Hussein to rebuild his political and military support.

We can bring Saddam Hussein to his knees by eliminating his ability to market any of his oil, thereby cutting off his cash flow. Not only should the United States strengthen oil interdiction and inspection operations, the administration should consider adopting a policy similar to the air blockade we enforce in the `no-fly' zone. A strictly enforced `no-oil-export' policy is what is called for.

Only then will Saddam Hussein realize that cooperation with U.N. inspectors is the only way to rebuild his economy. The policy predicated on so-called humanitarian grounds--oil for food--not only has failed but has ensured the survival of Saddam Hussein.

Mr. MURKOWSKI. Mr. President, I don't have time to go into that in depth, but let me remind my colleagues of a few things. One, the United Nations Security Council Resolution 687 passed in 1991 at the end of the Persian Gulf War requires that international economic sanctions, including an embargo on the sale of oil from Iraq, remain in place until Iraq discloses and destroys its weapons of mass destruction programs and capabilities and undertakes unconditionally never to resume such activities.

But the teeth in Resolution 687 have effectively been pulled out one-by-one with the introduction and then continued expansion of the so-called oil-for-food exception to the sanctions: In 1995, UNSCR 986 allowed Iraq to sell $2 billion worth of oil every 6 months. Iraq produced 1.2 million barrels per day in 1997. In 1997, UNSCR 1153 doubled the offer to $5.2 billion in oil every 6 months. Iraq is now producing 2.5 million barrels of oil. In 1999, United States, France, and Saudi Arabia will offer varying plans on removing the limit on how much oil Iraq can sell and for what purpose.

This means that Iraq's oil production of 2.5 million barrels per day equals--their production now equals--the prewar production levels in the year preceding Desert Storm. Iraq's export earnings total $10.4 billion, with 95 percent attributed to oil, which is Iraq's only significant identifiable cash flow. Iraq's imports that same year were only $6.6 billion.

The President's National Security Advisor, Sandy Berger, takes issue with my characterization of the U.S. proposal. In a Washington Post editorial, he said that under the Oil-for-Food Program:

We prevent Saddam from spending his nation's most valuable treasure on what he cares about most--rebuilding his military arsenal--and force him to spend it on what he cares about least--the people of Iraq. From Saddam's point of view, that makes the program part of the sanctions regime.

I ask unanimous consent that editorial in the Washington Post be printed in the Record.

There being no objection, the article was ordered to be printed in the Record, as follows:

From the Washington Post

Oil for Food: The Opposite of Sanctions

The Post's Jan. 17 editorial `Rewarding Saddam Hussein' endorsed the administration's policy of containing Iraq and our continued readiness to back that policy with force. Unfortunately, it also misconstrued important elements of our approach to sanctions to Iraq. The confusion was compounded by a Jan. 25 op-ed by Sen. Frank Murkowski (R-Alaska). Both took issue with what the editorial referred to--incompletely--as an administration statement offering `to eliminate the ceiling on how much oil Iraq is permitted to sell.' The second half of that statement--which the editorial omitted--read: `to finance the purchase of food and medicine for the Iraqi people.'

Under the U.S. proposal, Iraq could pump as much oil as is needed to meet humanitarian needs. All the revenue would go directly to a U.N. escrow account, as it does now. From that account, checks could be written--directly to the contractor--to buy food, medicine and other humanitarian supplies, as well as parts for equipment that we know is being used to pump oil for this program. These supplies then would be distributed under U.N. supervision. Saddam would never see a dime.

The Post and Sen. Murkowski also asserted that our proposal to increase the flow of humanitarian aid to Iraq is no different from proposals to lift sanctions. In fact, it is in direct opposition to them.

If sanctions were lifted, the international community no longer could determine how Iraq's oil revenues are spent. The oil-for-food program would have to be disbanded, not expanded. Billions of dollars now reserved for the basic needs of the Iraqi people would become available to Saddam to use as he pleased. The amount of food and medicine flowing into Iraq most likely would decline.

In contrast, under the current program, we prevent Saddam from spending his nation's most valuable treasure on what he cares about most--rebuilding his military arsenal--and force him to spend it on what he cares about least--the people of Iraq. From Saddam's point of view, that makes the program part of the sanctions regime.

Indeed, Saddam already has rejected our initiative to expand it. He knows that every drop of oil sold to feed the Iraqi people is a drop of oil that will never be sold to feed his war machine. Oil for food means no oil for tanks.

Saddam's intent is clear: He is cynically trying to exploit the suffering of his people--for which he is responsible--to gain sympathy for his cause and to create a rift in the international coalition arrayed against him. In this way, he hopes to build support for ending sanctions so that he can resume his effort to acquire weapons of mass destruction.

But he is failing. In recent weeks, opinion has hardened against Saddam in Arab countries. On Sunday, the Arab League called on Iraq to stop provoking its neighbors and to comply with U.N. resolutions. Newspapers in Egypt and Saudi Arabia have called for Saddam's ouster. But there remains strong public sympathy for the Iraqi people.

The effect of our policy is to make clear that the source of hunger and sickness in Iraq is not sanctions but Saddam. After the Gulf War ended, the United States made certain that food and medicine would never be subject to sanctions. Saddam always has been free to import them. When he refused to do so, the United States took the lead in proposing that Iraq be allowed to sell controlled quantities of its oil in order to purchase humanitarian supplies. Remarkably, until 1996, Saddam refused to do even that.

Currently, the United Nations allows Iraq to spend up to $5.2 billion in oil revenue every six months for humanitarian purposes. Saddam is so indifferent to the suffering of his people that he still refuses to make full use of this allowance. But the food supply in Iraq has grown, and soon will provide the average Iraqi with about 2,200 calories per day, which is at the top of the United Nations' recommended range.

To leave no doubt about who is responsible for the suffering of Iraq's people, we are willing to lift the $5.2 billion ceiling to allow Iraq--under strict supervision--to use as much oil revenue as is necessary to meet humanitarian needs. In the meantime, we will continue to enforce sanctions against Iraq and remain prepared to take action against any oil facilities being used to circumvent them.

Critics of this effort imply we should starve Iraq into submission. They forget that starving Iraq is Saddam's strategy. The oil-for-food program helps us to thwart it.

The program does not reward Saddam; it further restrains him, while relieving the suffering of ordinary Iraqis. It has helped to deepen Saddam's isolation, and it will remain a logical part of our strategy against him and the threat he poses.

Mr. MURKOWSKI. In conclusion, I don't care much about Saddam's point of view, but from the point of view of this Senator from Alaska, what this program does is allow Saddam to use his increased oil capacity to smuggle oil for hard cash and free up resources he can use to finance his weapons of mass destruction. Saddam's cash flow is oil. The smuggling is documented. The displacement issue is harder to track, but Saddam's war machine is still working and his troops are still fit.

Let me take issue with the definition of `humanitarian supplies.' The most recent U.N.-approved plan would allow Saddam to spend this oil-for-food money, and I think it is interesting to reflect where is he spending his money. Let's look at it, because I think it counters Sandy Berger's remarks that this is going for `humanitarian' purposes: $300 million for petroleum equipment; $409 million for electricity networks; $126 million for telecommunication systems; $120 million to buy trucks, repair the railway system, and build food warehouses; $180 million for agriculture equipment, including pesticides.