Funds from sales of Iraqi crude have been paid into the escrow account, held at the New York branch of BNP Paribas, since 1997. The money in the account is used to pay for humanitarian supplies and to fund the purchase of oil industry parts and equipment under the UN oil-for-food programme. In addition, a percentage goes to the UN compensation commission in Geneva, which handles claims resulting from Iraq’s invasion of Kuwait, and funds from oil sales also cover the UN’s administration costs for the oil-for-food programme.

‘We have been pushing ahead with the diversification of the escrow fund for a number of years,’ says the UN treasurer, Suzanne Bishopric. ‘Investments have already been diversified, and we have recently issued letters of intent to negotiate with banks over the diversification of letters of credit.’

Until now, BNP Paribas has been responsible both for confirming letters of credit (LCs) issued by other banks for companies wishing to purchase Iraqi oil, and for issuing LCs to companies wishing to supply humanitarian goods to Iraq. These two responsibilities will now be separated, and awarded to banks on the basis of the recent tender. The shortlisted banks are now in negotiations with the UN. Bishopric declined to provide further details