BBC News Online: Special Report

A people suffering under sanctions

Huge increases in the costs of basic foodstuffs and the collapse of the Iraqi dinar have resulted in unrest, particularly after the decision in September 1994 to halve the basic ration issued to all Iraqis. Begging and criminal activity are now widespread.

By 1995 an average monthly salary of 5000 dinars would buy only two chickens. The infant mortality rate has risen from 25 per 1000 births before the war to 92 per 1000 births by 1994, according to Unicef.

Despite such problems, analysts say the economy could recover fairly quickly if sanctions were lifted.

Before its invasions of Kuwait, the Iraqi government was beginning to liberalise the economy, and discussions were beginning on privatisation.

Reserves of oil remain substantial, there is considerable agricultural potential, and the middle classes are well educated.

Oil for food

Iraq delayed approval of the oil-for-food programme for four years. It was not until December 1996 that the programme was launched.

Under UN resolution 986, known as the oil-for-food programme, Iraq was allowed to sell $2bn of oil every six months to buy food and medicine. It took effect in December 1996.

Two-thirds of the revenue raised from the sale of this oil can go to buy food and medicine.

The rest pays for the Unscom weapons inspection programme, with some money going to Kuwait to pay for the damage caused by the Gulf War.

However, aid agencies argued Iraq should be allowed to sell more oil, and therefore buy more humanitarian supplies, because of the desperate plight of ordinary Iraqis.

Kofi Annan, the UN Secretary-General, supported the call and earlier this year Iraq was given permission to sell $5.2bn of oil every six months meaning $3.6bn could be used to buy food and medicine.

In June, the UN Security Council approved a resolution allowing Iraq to spend $300m on importing spare parts to repair its oil facilities.

Iraqi officials are opposed to the oil-for-food programme, and have threatened to stop co-operating.

Oil sales and market