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In August 1990 the Security Council adopted resolution 661, imposing comprehensive sanctions on Iraq following that country's invasion of Kuwait. In the immediate aftermath of the Gulf War in 1991, the Secretary-General dispatched an inter-agency mission to assess the humanitarian needs arising in Iraq and Kuwait. The mission visited Iraq from 10 to 17 March 1991 and reported that "the Iraqi people may soon face a further imminent catastrophe, which could include epidemic and famine, if massive life-supporting needs are not rapidly met.".

Throughout 1991, with growing concern over the humanitarian situation in the country, the United Nations proposed measures to enable Iraq to sell limited quantities of oil to meet its people's needs. The Government of Iraq declined these offers, contained in particular, in resolutions 706 (1991) and 712 (1991), adopted, respectively, in August and September 1991.

On 14 April 1995, acting under Chapter VII of the United Nations Charter, the Security Council adopted resolution 986, establishing the "oil-for-food" programme, providing Iraq with another opportunity to sell oil to finance the purchase of humanitarian goods, and various mandated United Nations activities concerning Iraq.

The programme, as established by the Security Council, is intended to be a "temporary measure to provide for the humanitarian needs of the Iraqi people, until the fulfillment by Iraq of the relevant Security Council resolutions, including notably resolution 687 (1991) of 3 April 1991".

Although established in April 1995, the implementation of the programme started only in December 1996, after the signing of the Memorandum of Understanding (MOU) between the United Nations and the Government of Iraq on 20 May 1996. The first Iraqi oil under the Oil-for-Food Programme was exported in December 1996 and the first shipments of food arrived in March 1997.