The Oil-For-Food Problem

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The Oil-For-Food Problem

  1. 1. The Oil-For-Food Problem By: Billy Lepak
  2. 2. Resolution 661 <ul><li>United Nations ban on all Iraqi imports and exports in response to the Iraqi invasion of Kuwait </li></ul><ul><li>Medical supplies and, in humanitarian circumstances, foodstuffs were allowed </li></ul><ul><li>This provision paved the way for the Oil-For-Food program </li></ul><ul><li>United Nations Security Council. Resolution 661 . New York: United Nations, 1990. </li></ul>
  3. 3. 661 Winners & Losers <ul><li>Winners </li></ul><ul><ul><li>Kuwait </li></ul></ul><ul><li>Losers </li></ul><ul><ul><li>Iraqi people </li></ul></ul><ul><ul><li>Saddam Hussein </li></ul></ul>
  4. 4. Resolution 986 <ul><li>Allows countries to import Iraqi petroleum products </li></ul><ul><li>Revenues will be deposited in an escrow account to be used for foodstuffs </li></ul><ul><li>The Iraqi government is given the power to manage the escrow account </li></ul><ul><li>United Nations Security Council. Resolution 986 . New York: United Nations, 1990. </li></ul>
  5. 5. 986 Winners & Losers <ul><li>Winners </li></ul><ul><ul><li>Saddam Hussein </li></ul></ul><ul><ul><li>Iraqi oil-dependent countries </li></ul></ul><ul><li>Losers </li></ul><ul><ul><li>Iraqi people </li></ul></ul><ul><ul><li>United Nations </li></ul></ul><ul><ul><li>Reinisch, August. Developing Human Rights and Humanitarian Law Accountability of the Security Council for the Imposition of Economic Sanctions . The American Journal of International Law: pp. 852. Oct., 2001. </li></ul></ul>
  6. 6. Justification <ul><li>Economic burden gives the Iraqi people an incentive to remove Saddam Hussein </li></ul><ul><li>International sense of justice provides for the punishment of the actions of Iraq </li></ul><ul><li>Iraq infringed on Kuwait’s right to existence and must pay for that action </li></ul><ul><li>Schachter, Oscar. United Nations Law in the Gulf Conflict . The American Journal of International Law: pp. 454. July, 1991. </li></ul>
  7. 7. Economic Policies <ul><li>Economic Efficiency </li></ul><ul><li>Subsidies to revolutionaries </li></ul><ul><li>Money-For-Weapons </li></ul>
  8. 8. Economic Efficiency $ Q Cost of policy to the Iraqi people Demand Supply 1 Supply 2 Due to Iraqi government not operating the program correctly
  9. 9. Economic Efficiency, Cont. <ul><li>Iraqi government is charged with managing the escrow account </li></ul><ul><li>Saddam Hussein is in charge of providing for the humanitarian good of the Iraqi people </li></ul><ul><li>Economic efficiency is found when marginal social benefits (MSB) equal marginal social costs (MSC) </li></ul>
  10. 10. Economic Efficiency, Cont. <ul><li>Saddam Hussein acted in his own benefit and used the escrow account as his personal fund </li></ul><ul><li>Supply of food decreased from supply 1 to supply 2 </li></ul><ul><li>Iraqi people suffered because of this policy seen by the triangle that shows the costs to society </li></ul>
  11. 11. Economic Efficiency, Cont. <ul><li>MSB < MSC because of the policy </li></ul><ul><li>The Oil-For-Food program is economically inefficient due to the management and application of its policies </li></ul>
  12. 12. Revolutionary Subsidy $ Q of Revolutionary Acts Demand Supply 2 Supply 1 Due to the subsidy inducing revolutionary acts Value of the subsidy
  13. 13. Revolutionary Subsidy, Cont. <ul><li>Subsidy will entice revolutionary groups to strike the Iraqi government </li></ul><ul><li>Increase in revolutionary acts will cost less than the cost of a war to remove Saddam Hussein </li></ul><ul><li>Value of the subsidy can be seen as the box on the graph </li></ul>
  14. 14. Revolutionary Subsidy, Cont. <ul><li>Revolutionaries may cheat by constantly revolting from the established government </li></ul><ul><li>Cost of revolutionary acts may be loss of civilian life and outweigh the benefits created </li></ul>
  15. 15. Recommendation <ul><li>Replace the Oil-For-Food program with a Money-For-Weapons program </li></ul><ul><li>Pay the Iraqi government to hand over all weapons that can be used to wage offensive warfare </li></ul><ul><li>Threat of Iraqi weapons is decreasing the amount of social spending in countries threatened by Iraq (negative externality) </li></ul>
  16. 16. Recommendation $ Q of social spending Demand Supply 1 Supply 2 Due to the proposed program Cost of Iraqi weapons
  17. 17. Recommendation <ul><li>Decrease in the supply of Iraqi weapons will be created by a subsidy program from the United Nations </li></ul><ul><li>Benefit of the program will be to increase social spending in countries threatened by Iraqi weapons due to a decrease in defense spending </li></ul><ul><li>Increase in cost is more than offset by the increase in benefit to society </li></ul>
  18. 18. Conclusion <ul><li>Oil-For-Food program is economically inefficient for the Iraqi people </li></ul><ul><li>Revolutionaries might create a higher MSC than MSB </li></ul><ul><li>Money-For-Weapons program will accomplish all of the goals of the United Nations and create greater economic benefits </li></ul>

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