ARABS-UN - June 2 - Proposals For Humanitarian Program Circulated.

Britain and France circulate duelling proposals to improve the humanitarian situation in Iraq, which the UN reported was still dire despite some recent improvements. The draft resolutions are designed to extend the UN oil-for-food program, which lets Baghdad sell its oil to buy food and medicine for its 22m people living under UN sanctions. But they also contain controversial suggestions for other changes to the program - such as the French call to use oil-for-food proceeds to pay Iraq's OPEC dues - that merely served to reinforce the divisions in the council. Secretary-General Annan, meanwhile, issues a report, on June 2, on the overall humanitarian situation in Iraq, saying the nutritional and health status of Iraq's people continues to be a "major concern". He urges Iraq to use excess proceeds from the oil-for-food program to reduce malnutrition levels and calls for the council to speed up its approval of contracts for vital equipment to repair Iraq's oil sector. Annan also issues a separate report from the new arms inspection agency, saying it had made a "good start" in recruiting new arms experts but noting that Iraq would have to start co-operating in order for them to resume weapons searches. The British draft proposes a one-year extension for the program, compared to the regular 6-month phases that have defined oil-for-food since its inception in 1996. (Britain and the US have argued that the yearlong extension would enable UN agencies and companies doing business with Iraq through the program to better plan and co-ordinate aid deliveries.)

But, council diplomats say there is little indication Iraq would agree to a modified extension since it would imply at least symbolically that sanctions would remain in place for another year. France, one of Iraq's allies on the council, circulates a rival draft resolution that calls for a regular 6-month extension and proposes other amendments that draw immediate opposition from the US. The French draft, for example, suggests that the council agree to a long-time Iraqi demand to let the government use money from its oil sales to pay the dlrs 34m Baghdad owes the UN and OPEC in back dues. The US rules out such a proposal, saying aid money shouldn't be used to finance Iraq's diplomatic budget. Washington also criticises a key proposal in the rival British draft resolution that was intended to speed up delivery to Iraq of badly needed water and sanitation equipment. (The US has placed about US$1.6 bn worth of contracts for such equipment on "hold", out of concern that they might be used for military purposes.) US diplomats say that while Washington has objected to the British call for speedier deliveries, the US has released US$720m worth of contracts since Mar. 1 that have been on hold.