Although they have yet to present any formal proposals, Britain and the United States want the United Nations Security Council to lift the UN sanctions on Iraq’s oil revenues and to abolish the sanctions sub-committee that vets all expenditure of Iraqi oil money.

The UN sanctions regime gives France, Russia and China great leverage over the country’s future oil sales, which the three powers are expected to exploit for their own economic advantage.

Diplomats say that the three are likely to use their UN veto to extract a measure of control over oil sales as the price for agreeing to lift the embargo, a move that requires a positive vote by the Security Council.

The UN imposed a total trade embargo on Iraq after its 1990 invasion of Kuwait, but allowed an increasing range of goods into the country under the “oil-for-food” scheme that began in 1996. Under the scheme Iraq could spend its oil money on almost any goods except military equipment and certain “dual-use” items.

Private companies working for the UN checked all Iraqi oil exports and signed off on all goods entering the country.

The scheme, which provided a monthly food basket to 60 per cent of the Iraqi population, was suspended at the start of the war when the 900 international UN staff, including the oil monitors, were withdrawn for their safety. But the distribution network of 3,400 local UN employees and 44,000 “food agents”, akin to corner-shop owners, still exists and Britain and America want to reactivate it before Iraqis start to run out of stockpiled food.

Last month the Security Council approved unanimously emergency arrangements for a 45-day period, until May 12, that allows the UN to approve imports into Iraq despite the regime’s collapse.

The challenge facing diplomats now is to agree the terms for lifting sanctions. Under existing UN resolutions, sanctions are to be lifted once UN arms inspectors verify that Iraq has rid itself of weapons of mass destruction. But America is resisting efforts to send the UN inspectors back to Iraq.

The US could ask the Security Council to lift the sanctions and abolish the sub-committee, but they would have to get Russian, French and Chinese consent to do so.

The first showdown will come on May 12, but diplomats say that the Security Council may extend the emergency period until the end of the designated “Oil-for-Food” phase on June 3.

That would give Britain and America time to come up with proposals and to hold detailed talks with other veto-bearing Security Council members.

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