The sources confirmed that the process of political reconstruction will take longer than previously indicated and that the coalition is declining to make a commitment about the length of military occupation. Exiled political groups are reported to be assenting reluctantly to the fact that an early move to Iraqi self-government has been ruled out and that power in Iraq has now been placed in the hands of the coalition. The US has said it is to ask members of NATO to provide troops to replace and supplement US and UK troops on the ground. No attempt is being made to form a peacekeeping force under UN control.

The sources say, however, that the end of UN sanctions, called for in UN Security Council resolution 1483 and approved by 14 votes to zero on 22 May, will clear the way for a rapid recovery in the Iraqi economy. Crude oil production at the end of May was approaching 1 million barrels a day (b/d), more than twice the level needed to meet domestic demand. Exports are expected to begin in June. The coalition has begun disbursing funds to pay salaries to Iraqi civil servants. The value of the Iraqi dinar against the dollar has doubled from levels recorded immediately after the occupation of Baghdad.

Decisions are now awaited about how resolution 1483 will be implemented. UN Secretary-General Kofi Annan announced on 27 May that Sergio Vieira de Mello, the Brazilian who has been the UN High Commissioner for Human Rights since September 2002, had been appointed the UN special representative to Iraq to fulfil the functions defined in the resolution. US President Bush on 22 May issued an executive order to establish the Development Fund for Iraq (DFI) at Iraq's central bank. The DFI, which will be administered by the coalition, will receive proceeds from the sale of Iraqi oil. However, no announcement has been made about the implementation of paragraph 13 of the resolution, which calls for the funds 'to be disbursed at the direction of the authority (coalition), in consultation with the Iraqi interim administration'. The membership of the International Advisory & Monitoring Board (IAMB), a body that will supervise spending by the DFI, is also still to be announced. Under paragraph 14 of the resolution, the IAMB will include representatives of the UN, IMF, World Bank, the Arab Fund for Economic & Social Development (AFESD) and the coalition. The FCO sources say that the size of the board has not yet been decided, but that there is no intention to give undue weight to the coalition.

Business people are also focusing on the legal context for reconstruction. Lawyers say that resolution 1483 sets a new precedent for international public law and that some of its elements could infringe Iraqi sovereign rights and the Hague Convention of 1907, which defines the rights and obligations of military occupiers. Other lawyers say this is legal quibbling and that for practical purposes the coalition under civilian administrator Paul Bremer can pursue its own policies.