UNITED NATIONS, July 1 (KUNA) -- As the UN supervision of the Development Fund for Iraq (DFI) ended Thursday at midnight, the UN Security Council (UNSC) welcomed Iraq's establishment of a successor arrangement for the transition, and its assumption of full autonomy over the Fund's proceeds as of July 1st.

In a statement to the press hours before the expiration period, the Council President, Gabon, late Thursday said the Council members "welcomed the Government of Iraq's establishment of a successor arrangement for the transition of the Development Fund for Iraq, consistent with resolution 1956" adopted last year.

The Council decided last December in that resolution to terminate, on June 30 2011, the UN supervision of depositing into the DFI proceeds from Iraqi oil and natural gas sales, and called on Baghdad to finalize the "full and effective" transition to a post DFI mechanism, including external auditing arrangements, and to continue to pay the five percent to the victims of the Iraqi invasion of Kuwait in 1990.

"The members of the Security Council noted that, in this regard, oversight of the full proceeds from the Development Fund for Iraq has been transferred from the International Advisory and Monitoring Board (IAMB) to the Government of Iraq's Committee of Financial Experts (COFE), which will exercise authority in accordance with its terms of reference approved by Iraq's Council of Ministers." the Council statement said. The Council set up the DFI in May 2003 so that oil and other revenues could be paid into it, to be disbursed at the discretion of the then US-led Provisional Authority for humanitarian and economic reconstruction of Iraq, replacing the previous oil-for-food programme that allowed the former Iraqi regime, which was under UN sanctions for invading neighbouring Kuwait in 1990, to use some oil revenues for humanitarian purposes.

"The members of the Security Council reiterated their welcome of the ongoing efforts and commitment by the Government of Iraq to ensure that oil revenue is used in the interests of the Iraqi people, and to ensure that transition arrangements remain consistent with the constitution and with international best practices in respect of transparency, accountability and integrity," the statement added. The Council also "underscored the importance of Iraq's continued compliance" with relevant resolutions, namely resolution 1483 of 2003 which said "5 per cent of the proceeds "shall be deposited into the Compensation Fund established" in 1991. This requirement shall be binding on a properly constituted, internationally recognized, representative government of Iraq and any successor (government.)" Iraqi Foreign Minister Hoshyar Zebari informed the Security Council President in mid-June that his Government has taken the necessary arrangements for the post DFI, including for the five percent of oil sales to be deposited in the Geneva-based Compensation Fund.

Zebari annexed to his letter a report containing measures and decisions Baghdad took towards a "full and effective" transition to a post-Development Fund mechanism that will enable Iraq to fulfill its obligations under relevant Council resolutions.
"We should like to inform the Security Council that the Government of Iraq has completed the arrangements that will ensure full and effective transition to such a mechanism," Zebari wrote in his letter.

Those measures, he indicated, include arrangements for the external auditing of accounts; Deduction of the 5 per cent compensation percentage "or any other lesser percentage;" and settlement of the foreign debts of Iraq.

He explained that in replacement of the DFI account, a new account will be opened in the name of the Government of Iraq, to be held by the Central Bank of Iraq at the US Federal Reserve Bank, and transfer will be made to that new account of all the financial assets currently held in the DFI and any other Iraqi Government assets. Concerning proceeds from export sales of oil and natural gas, he said the UN Secretariat "will be consulted with a view to finding a transparent mechanism to ensure that 5 per cent or any other lesser percentage is deducted and deposited to the UN Compensation Fund." This will also ensure that Iraq will be able to continue to meet its UN obligations, he said.

As to the arrangements for the external auditing, Zebari said a request was made and proposals were received from four firms to audit the DFI successor account. They are Ernst Young; PricewaterhouseCoopers; KPMG; and Deloitte.
Among other arrangements, he said, the Iraqi Committee of Financial Experts will replace the International Advisory and Monitoring Board (IAMB) starting July 1, 2011.

He finally said that Iraq will continue its serious attempts to settle its foreign debts in accordance with the Paris Club agreement that was signed in November 2004.

Source: http://www.kuna.net.kw/NewsAgenciesPublicSite/ArticleDetails.aspx?id=2177433&Language=en