Iraq has reached an agreement with the United Nations on the distribution of humanitarian aid under its oil-for-food plan, according to the Iraqi Trade Minister, Mohammed Mehdi Saleh.

Details are to be forwarded to the UN Secretary-General, Kofi Annan, within a few days, Mr Saleh said.

Once the Secretary-General's approval has been secured, Iraq will immediately start pumping oil, he added.

Kofi Annan may approve the new scheme next week

The announcement comes two weeks after Iraq suspended exports of the limited amount of oil it is allowed to sell, protesting that the UN-approved arrangements for aid distribution were not working.

The UN's humanitarian co-ordinator in Iraq, Dennis Halliday, said the new agreement was a significant step forward for the people of Iraq.

Neither Mr Halliday nor Mr Saleh gave details of the contents of the agreements.

Iraq has been under UN sanctions since its 1990 invasion of Kuwait, which sparked the 1991 Gulf War. The oil-for-food programme launched in December 1996 is an exception from the sanctions, which bar Iraq from selling oil and other economic dealings.

UN offers to increase export allowance

In a further development, senior UN officials said they hoped the oil-for-food deal can be expanded to allow $4bn worth of Iraqi exports every six months instead of the current $2bn.

Mehdi Saleh interviewed on BBC World about the oil-for-food deal (7'25")

However, Mr Saleh has said even this amount would not be enough to satisfy the daily needs of the Iraqi people.

He told BBC World television that Baghdad had to restart trade with all countries to make up for the deprivation it had suffered in seven years of UN sanctions. "We have lost almost $120 bn in seven years," he said.

He had harsh words for the West's hold on the Iraqi economy. "If you are a rich person in England and you have children and your children are in hosptial ... and you go to the bank and the bank does not allow you to take your money for your children ... what would you say about that bank that is preventing you from using your money to save your children?"

When it was suggested that allowing UN weapons inspectors to visit presidential palaces might solve the sanctions problem, Mr Saleh said that weapons of mass destruction - if there were any - would not be stored in places where officials are based.

He said that such UN resolutions showed a lack of respect for Iraqi sovereignty and "dignity".

"There is only the bedroom of all Iraq they didn't go to search," he added.
 

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