updated 6/28/2006 11:01:36 PM ET 2006-06-29T03:01:36

U.N. member states lifted a $950 million spending cap on the United Nations budget Wednesday, averting a financial crisis for now but dealing a blow to the U.S. which had pushed for the limits as a lever to pressure for reforms.

Members will likely put off many of Secretary-General Kofi Annan’s most important management reform proposals until the next session of the General Assembly, which begins in September — a decision sure to disappoint the U.N. chief.

The decision to lift the spending cap was a defeat for U.S. Ambassador John Bolton, who played a key role in getting the General Assembly to adopt it last year as a way to increase pressure for reform. Most U.N. member states were never committed to their promise to achieve reform before lifting the spending limit.

The decision now shifts the spotlight to the U.S. Congress, which has threatened to block U.S. funding for the United Nations if it does not enact serious reform. The United States pays more than 20 percent of the $2 billion annual U.N. budget.

“We do not believe it is in the long-term interests of the United Nations, much less its member governments, to continue delaying reform that many of us know will make this institution stronger,” Bolton said.

Japan, which pays about 19 percent of the budget, opposed the decision to lift the cap along with the United States and Australia. But they could do nothing to stop it.

The European Union, a leading proponent of reform at the U.N. and also a major contributor to the budget, backed the decision to lift the cap because its members did not want to see the U.N. shut down.

More flexibility
Annan proposed a raft of management reforms a year ago and got world leaders’ backing at a summit in September. But members decided to put off key reforms until the next General Assembly session. They include overhauling U.N. procurement rules and the internal U.N. justice system as well as human resources reforms. Many of the proposals are meant to give the U.N. chief greater flexibility in running the world body.

Still Annan has managed to secure other reforms he sought, such as a new Human Rights Council, a Peacebuilding Commission and an Ethics Office.

The spending cap, which was for the first six months of the year, will be formally lifted in a meeting of the U.N. General Assembly on Friday. Member states could adopt a limited set of Annan’s management reforms then. Those include establishing a chief information technology officer, making more documents publicly available and giving Annan limited discretion over the budget.

The dispute highlighted one reason why the U.N. hasn’t seen a major overhaul in many years: Developing nations are fiercely protective of the voice the U.N. system gives them, and use their overwhelming numbers to block any perceived threats to it.

That was what happened over the spending cap. The United States and its allies, which pay about 80 percent of the budget, could not overcome opposition from the developing nations that have resisted some of the reforms.

‘Turned into poison’
South Africa’s Dumisani Kumalo, the leader of a bloc of developing nations known as the G-77 and China, vowed however that the nations in his group wanted some reform and would keep working for it.

“This spending cap had turned into poison, it had turned into abuse and it had begun to affect the trust that we need to work together,” Kumalo said. “We will work day and night to make sure that the United Nations is strengthened as an org because I believe that the United Nations matters to all of us.”

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