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The Unicef report said children are bearing the brunt of economic hardship in Iraq. The number of malnourished children represents an increase of 72% since international sanctions were imposed on Baghdad.
The Unicef representative in Baghdad, Philippe Heffinck, said: "What we are seeing is a dramatic deterioration in the nutritional well-being of Iraqi children since 1991."
"It is clear that children are bearing the brunt of the current economic hardship. They must be protected from the impact of the sanctions. Otherwise, they will continue to suffer, and that we cannot accept."
The Unicef survey came out shortly before the Security Council considers improvements to the programme, which allows Iraq to sell limited amounts of oil to buy food and medicine. The aid-for-trade agreement is aimed at alleviating the impact of UN trade sanctions.
TV crews asked to film suffering
The Iraqi cabinet are holding an emergency meeting to discuss the impact of sanctions on children.
Iraqi authorities invited foreign television crews into a hospital to film women grieving over children who they say died as a result of the sanctions.
Unicef reports that 32% of children under the age of five -- a total of 960,000 -- are undernourished. The problem is far greater than in neighbouring Jordan or Turkey.
The study is based on an Iraqi government survey last year of 6,375 households in the country and two follow-up surveys this year.
"What concerns us now is that there is no sign of any improvement since Security Council Resolution 986 came into force," said Mr Heffinck, referring to the document that set up the oil-for-food plan which came into effect a year ago.
UN to increase oil sold for food
Even before the current crisis with Iraq, UN officials were advocating an increase in the amount of oil Iraq could sell to buy humanitarian goods, with some wanting to double the figures to $4 billion every six months.
The UN Secretary-General, Kofi Annan, is to present a report by the end of November reflecting this view. But he may not suggest a specific figure, leaving it up to the Security Council, which has to make a decision early in December.
The United States has been the chief advocate of the oil-for-food programme, which gives the UN control over goods arriving in Iraq.
Iraqi children suffering under UN sanctions
Iraq says sanctions must end
Iraq to allow inspectors into palaces
Unicef
Iraq Foundation
Iraq Net
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