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UN Performance Problems UN Management Accountability Struggles Where is the Rule of Law? Inadequate UN Oversight Recent Developments
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Iraq oil-for-food
programme The oil-for-food
programme was established by the United Nations and Iraq in 1996, with the
first UN negotiating team led by now-Secretary-General Kofi Annan. It was intended to address
concerns about the humanitarian situation that arose in Iraq after
international sanctions were imposed in 1990. The programme allowed the
Iraqi government to use the proceeds of its oil sales to pay for food,
medicine, and infrastructure maintenance. From 1997-2002, Iraq sold more
than $67 billion of oil through the program and issued $38 billion in
letters of credit to purchase commodities. From 1996 to 2001, the average
daily food intake increased from 1,300 to 2,300 calories. In May 2003, the
Security Council phased out the programme, turning it over to
Iraq. "United Nations: Observations on the Oil for Food
Program and Areas for Investigation", U.S. General Accounting Office,
GAO-04-953T, of July 8, 2004, "Highlights".
In early 2004 this
UN-administered programme exploded into an international media scandal,
with estimates of some billions of dollars which had been siphoned off by
the Iraqi government. There are many detailed charges and criticisms of
Iraqi regime duplicity, mismanagement by the UN, poor oversight by the UN
Security Council, and corruption in the main companies from many countries
who were involved in the process. Like the Enron scandal
in the United States, it will take several years to unravel all the
complexities and scandals involved in this massive financial tangle. There
is certainly no shortage of accusations to be sorted out. Meanwhile, it is
being billed in some quarters as the biggest humanitarian scandal ever,
and indeed as one of the largest international financial scandals of any
kind. IO Watch will try
here to sketch some of the key charges and implications, to
focus on the accountability issues, and to follow up in future as
the complete details of the story
gradually emerge. UN documents did not
indicate any grave problems in the programme in recent years. The UN Office of the Iraq
Programme was created in 1997 to "improve implementation." OIOS set up a new audit section
for the Iraq programme as well, to oversee the "complexity" of the UN's
responsibilities, and inter alia to process applications for
contracts for importing humanitarian supplies and approve contracts for
oil exports from Iraq. In 2002 the OIOS noted
that certain aspects of central contract management needed improvement,
but stated that the resident audit group assured that OIP activities
"receive close and continuous audit coverage." In 2003 (which was released after
the initial media articles began reporting scandals in the programme) the
OIOS annual report cited satisfactory progress in implementing previous
OIOS audit recommendations as the OIP prepared to phase down. A specific
April 2002 audit gave the general tenor: "… The oil-for-food programme inherently
involves high risks owing to the wide range of activities carried out, the
large number of United Nations organizations involved and the
unprecedented level of funds … In the view of OIOS, the OIP and [Humanitarian
coordinator] have welcomed audits … and also been responsive to audit
recommendations … However, a
number of issues need to be further addressed by the management of the
[OIP]. These include improved
management of major contracts in Iraq, as well as enhanced coordination
and monitoring of project activities carried out by United Nations
agencies in northern Iraq." "Update of oversight activities concerning the
oil-for-food programme … : Note by the Secretary-General, UN document
A/56/903 of 4 April 2002, "Summary",
"Report of the OIOS", UN
document A/55/436, 2000, paras. 71-81,
"Report of the OIOS", UN document A/56/381, 2001, paras. 52-55,
"Report of the OIOS", UN document A/57/451, 2002, Preface and paras. 31-
36, and
"Report of the OIOS", UN document A/58/364, 2003, paras. 30-34.
In
1998 an initial ominous note had appeared in the International
Documents Review in New York: "In Iraq,
where OIOS appointed a resident auditor to keep tabs on the $2 billion per
quarter Oil-for-Food programme, recommendations have been made to improve
coordination in a number of areas.
In one case, a recommendation about uncoordinated computer
purchases saved $229,000.
The resident auditor in Iraq met an untimely death a few weeks
ago, but this was neither announced publicly by the UN nor is it reflected
in the report." "Reviewing 3+ years of work, [OIOS] sees continuing
problems -- but reforms are afoot", International Documents Review,
2 November 1998, p. 3.
Warnings about major
troubles began to appear in the media from late 2002 onwards. An article on economic sanctions
in Iraq in late 2002, for instance, noted that:" "Since the U.N. adopted economic sanctions in
1945 … it has used them fourteen times (twelve times since 1990). But only
those sanctions imposed on Iraq have been comprehensive, meaning that
virtually every aspect of the country's imports and experts is controlled
… Over [three years of research and interviews] I
have acquired many of the key confidential U.N. documents concerning the
administration of Iraq sanctions … from anonymous sources. … The Office of Iraq Programme does not release
information on which countries are blocking contracts, nor does any other
body. Access to the minutes of the Security Council's 661 Committee is
'restricted.' The committee
operates by consensus, effectively giving every member veto power.
… Many members of the Security Council have been
sharply critical of these practices. … It is no accident that the operation of the 661
Committee is so obscured. [It operates] … behind closed doors, ensconced
in a U.N. bureaucracy few citizens could parse …" Joy Gordon, "Cool war: Economic sanctions as a
weapon of mass destruction", Harper's Magazine, November,
2002, pp. 43-49 [43, 44, 45, 46, 48].
Another article
focusing on the emerging scandal also appeared, in Newsweek, in
November 2002.
"Uday [Hussein explained that] … the Iraqi government would
[let Luguev buy] … Iraqi oil
at below-market prices. He
could … sell [it] .. at a higher price, and pocket the profits. … the deals were entirely legal
under the Oil for Food program … the money Luguev paid … would be … used
to feed starving Iraqi kids.
[Lugaev paid $60,000, with part to go to the
Husseins, but they simply kept his money.] Luguev did something
remarkable: he [filed] … a formal complaint to the United
Nations. Luguev's allegations
provide, for the first time, hard evidence of how Saddam has cleverly used
… oil profits … to bypass the sanctions imposed on his regime
… United Nations officials, who are now
investigating the charges, could hardly pretend to be shocked … For years
it had been an open secret that Saddam was plundering the Oil for Food
program … U.S. government
figures estimate that Iraq has received at least $2.3 billion in
oil-contract kickbacks since 1997. … Yet … U.N. officials in charge of
policing the oil sales instead unwittingly approved corrupt deals … [and] Western countries … seemed
willing to … ignore the
dubious trade. …" Mark Hosenball, "Iraq's black gold: How Saddam
skimmed oil profits while the United Nations looked the other way,"
Newsweek International, November 11, 2002, pp. 37-40. Another early article
on corruption in the oil-for-food programme, by Claudia Rosett, also
appeared in April 2003: "[There are calls to end economic sanctions
against Iraq and thus the oil-for-food programme, but it might be
continued] …
… the programme has morphed into big business …
[it] has overseen more than $100 billion in contracts for oil exports and
relief imports combined … [and its] bank accounts have held balances
upward of $12 billion. Initially, all contracts were to be approved by
the Security Council. … About a year ago, in the name of expediency,
[Secretary-General Kofi] Annan was given direct authority to sign of on
all goods not itemized on a special watch list. … Putting a veil of secrecy over billions of
dollars in contracts is an invitation to kickbacks, political
back-scratching and smuggling done under cover of relief operations. Of course, with so little paperwork made
public, it is impossible to say whether there has been any malfeasance so
far -- but I found nothing
that would seem to contradict General Tommy Frank's comment that the
system should have been named the 'oil-for-palace program.' … If the oil-for-food program is extended,
however, it will have a tremendous influence on shaping the new Iraq. Before that is allowed to happen,
let's see the books." Claudia Rosett, "Open the books on oil-for-food: When UN sanctions invite corruption", International Herald Tribune, April 21, 2003.
As if the situation
was not complex enough, other articles have noted that the oil-for-food
programme also has had major implications for the Kurdish area of Iraq;
for future Iraqi national debt settlement; and for continuing reparations
to Kuwait for Iraq's 1990 invasion there, which large sums are
administered by another (accounting-challenged) UN body, as shown in the
following three quotes: "The phasing out of the oil-for food programme
… [and transfer of funds] into a National Development Fund for Iraq would
include the … 13% of oil revenues specifically earmarked for the Kurdish
regions … … $3.7 billion in unspent oil revenue … [rests
in their] account. This [holdup], the Kurds say, was due partly to
the UN's inefficiency and lack of transparency (to put it charitably) in
approving projects, partly to Baghdad's blocking tactics. … The result, according to the
Kurds, was that health and engineering projects intended for the north
remained at the drawing-board stage, some of them for as long as five
years. An official in the [OIP] says that … [$1.7]
billion in the Kurdish escrow account has been allocated to specific
projects but remains unspent, while a further $2 billion is unallocated
and unspent.
A senior British official at the UN … said the
$1.7 billion was safe. So was
the $2 billion, [if] the
Kurds could come up with enough projects to absorb the money in the next
six months. That is a taxing
task for a developed country, let alone an area in economic and political
limbo." "What's happened to our cash? A quarrel between the Kurds and the UN over unspent
oil revenue", The Economist,
June 14th, 2003, p. 40.
"[Saddam Hussein may have] left his country in
hock to the tune of $350 billion, a crippling burden
… Some American officials [would prefer] for
Iraq's debts to be written
off … The political risks are obvious. Iraq owes
America little money. It's
two biggest creditors by far are France and Russia … [and they would quite
probably object.] Some economists … argue that, after a change of
regime, a country's new government should have no obligation to service
the 'odious debt' of an illegitimate predecessor, [an old idea dating back
to 1898] … … but applying the odious-debt doctrine … to debt already incurred, as in
Iraq, is less straightforward.
… it could destabilize the global credit markets by making
creditors fearful that other countries might one day describe their debt
as odious ." "Paying for Saddam's sins: Should the new Iraq honour the financial obligations of the old regime?", The Economist, May 17th, 2003, p. 76. "The UN Compensation Commission (set up to pay
those who suffered financial loss from Iraq's 1990 invasion of Kuwait)
asked for an OIOS audit and evidently needed one. It was found to have 'placed
excessive reliance on external consultants' for the crucial areas of
accounting and cost adjusting, without having the mechanisms to control
and monitor the quality of their work. Remedial action … was
taken. "Reviewing 3+ years of work, [OIOS] sees continuing problems -- but reforms are afoot", International Documents Review, 2 November 1998, p. 3. [Note: the preceding Economist article noted that $200 billion of the $350 billion Iraqi debt was for war reparations, mostly to Kuwait, and 25% of the oil-for-food money had gone into a reparations compensation fund. A further Reuters article said that the UNCC had paid out $18 billion, in total, to date , mostly to individuals and companies in Kuwait and Jordan, "UN pays out $190 million in claims against Iraq", Reuters, July 17, 2003.] As the United States
became much more enmeshed in governance matters in Iraq in late 2003, and
began organizing reconstruction contracts for the country, other
complications, political and economic tensions, and temptations
emerged. " … plenty of money flowed through Saddam's
Iraq, … [with big debts run up] in the 1980's before the Gulf War … [and]
Japan as the No. 1 sovereign lender.
Then came Russia, France, Germany and … the United States
… However, in the 1990s, … under the [UN]
oil-for-food programme, the despot got to tap his preferred business
partners. … What began as a relief program for Iraqis
suffering under sanctions turned into a multibillion-dollar contracting
business flowing through the shrouded books of the United Nations. By the end, the Russians were
selling the Baathist elite luxury cars, the French were providing
broadcasting equipment for the Information Ministry, and the Germans and
Chinese worked on the phone system. The United Nations refused to
disclose anything beyond the generic details of the contracts … Now, with
control over the remains of the program to be shifted to the Coalition
Provisional Authority, those records should be
released. Not only should the Iraqi people know what
their money went for, the data could provide an illuminating context for
the current Russian, French, and German indignation over the American
contracting list, and for the diplomatic jousting of the past
year." Claudia Rosett, "Bush is right to snub the 'axis of avarice': Contracts in Iraq", International Herald Tribune, December 17, 2003. The story began to
break wide open in the spring of 2004, as revealed in an article by Susan
Sachs. "In its final years in power, Saddam Hussein's
government systematically extracted billions of dollars in kickbacks …
funneling most of the illicit funds through a network of foreign bank
accounts in violation of United Nations sanctions. … Iraq's sanctions-busting has long been an open
secret. Two years ago, the
U.S. General Accounting Office estimated that oil smuggling had generated
nearly $900 million a year for Iraq.
But the dimensions of the corruption have only
lately become clear from … newly available documents and from revelations
by government officials. … …
70 percent of … [suppliers of $8.7 billion in outstanding
oil-for-food contracts] had inflated their prices and agreed to pay a 10
percent kickback … UN overseers said they were unaware of the
systematic skimming of oil-for-food revenues … [adding that] they were
focused on running aid programs. … Ali Allawi, … [the] interim Iraqi trade
minister [said] 'You had rings involved in supplying shoddy goods. You had a system of payoffs to …
nearby countries.' 'Everybody was feeding off the carcass of what
was Iraq.' As ministry officials and government documents
portrayed it, the oil-for-food programme quickly evolved into an open
bazaar of payoffs, favoritism and kickbacks." Susan Sachs, "Saddam team skimmed billions in aid project: Cash in suitcases: UN sanctions violated", International Herald Tribune, March 1, 2004. The pressures forced
Secretary-General Kofi Annan to respond: "Seeking to blunt allegations of a United
Nations cover-up of corruption in its ranks and shore up its international
credibility, Secretary-General Kofi Annan has asked the Security
Council to assist him in with an independent investigation into
the oil-for-food program that the UN ran in Iraq. Acting in response to criticism that the
in-house inquiry already in place was insufficient, Annan said a wider investigation was needed
to 'prevent an erosion of trust and hope that the international community
has invested in the organization.' The Council has shown no enthusiasm for a
comprehensive inquiry that inevitably would look into the activities of
middlemen and banks, many of whom are from some of its principal countries
like France and Russia. [The French president of the Security Council
for this month] dismissed the possibility earlier Friday, saying the
council was "not seized of the matter" … According to the US [GAO], Saddam Hussein's
government pocketed more than $10.1 billion between 1997 and 2002 through
smuggling, kickbacks and excessive surcharges. … The allegations first arose in an Iraqi
newspaper last month … The
editorial page of the Wall Street Journal called Thursday for
Annan's resignation over the matter." Warren Hoge, "Annan asks for inquiry on oil-for-food program", International Herald Tribune, March 22, 2004. [emphasis added.] [Note: the favorite UN solution -- self-investigation of allegations of its misconduct -- did not work in this case, although Mr. Annan did set the scope and terms of the Volcker investigation, see the items of April 21 and 23 which follow.]
An early attempt at
taking stock of the evolving oil-for-food scandal came in April
2004: " … US forces [are again] engaged in serious
combat in Iraq … a grim reminder of how badly the United States needs a
strong, credible and engaged United Nations. Unfortunately, not only is the role of the
United Nations still unsettled; the world organization is also suffering
from two self-inflicted wounds.
One is a kickback scandal of multi-billion-dollar proportions
swirling around the UN-run oil-for-food program that kept ordinary Iraqis
from starving during the long years of punishing economic sanctions. [For
the other, see this archive's subsection on the Baghdad headquarters
bombing .]
Ferreting out the murky details of the
financial scandal, and meting out appropriate punishments, is …
urgent. At the heart of the scandal are reports that
Iraq collected billions of unauthorized dollars … and kickbacks … under
the oil-for-food program. UN
officials clearly failed to supervise effectively the roughly $10 billion
a year in transactions and may have been involved in illicit deals.
UN officials have been reporting corruption in
the program for years, but the Security Council never insisted on a
thorough clean up
…
The investigators must
[now] put aside diplomatic
niceties and concentrate on cleansing the UN's reputation."
"Clean up the UN," International Herald Tribune, April 8, 2004. After some debate and
concern within the Security Council, and criticism of his proposed
internal investigations, Mr. Annan set up an independent external
investigation, as indicated by the next two quotes. "Russia dropped its objection on Tuesday to a
proposed investigation of the United Nation's scandal-ridden oil-for-food
program … Critics of the United Nations have seized on
the accusations to discredit the organization … and cast doubts on
Annan's willingness to permit a thorough
investigation. Annan disclosed last week that he had
selected [former US Federal Reserve chairman Paul Volcker, 76, to
head the panel]… … the nomination had stalled on Friday when
Russia said it would not agree to a Security Council resolution that
Volcker said he needed to [have] the necessary authority to conduct the
wide-ranging inquiry that Annan was seeking.
Among the people named in documents that have
emerged in Iraq are Benon Sevan, a UN official who headed the oil-for-food
program and allegedly accepted oil allotments himself. He has denied the charges. The documents also showed that
Kojo Annan, the Secretary-General's son, was a consultant for Cotecna, a
Swiss company contracted by the program. UN officials say an
[internal UN] investigation in 1999 … showed that no one handling
the contract was aware of the affiliation." Warren Hoge, "Russia backs inquiry into UN oil program: Reversal clears way for role by Volcker", International Herald Tribune, April 21, 2004. [emphasis added.]
"Secretary-General Kofi Annan struck back at
critics of the United Nations and his leadership of the world
organization, saying they were treating unproven charges as facts and
ignoring the good that the scandal-ridden oil-for-food program had done
for individual Iraqis. The allegations of corruption have battered the
UN … Several [US] congressional committees,
saying they mistrust the UN's willingness to examine itself, are
looking into the charges, and some critics say the scandal calls into
question the organization's work in the Iraqi transition and Annan's
fitness to remain in office. … Joining [Paul] Volcker on the new panel are
Richard Goldstone, a prosecutor for the international criminal tribunals
in Rwanda and Yugoslavia, and Mark Peith, a Swiss law professor with
expertise in tracking money laundering. Volcker pledged that the inquiry would be
'full', 'fair', and 'conclusive.'
He said his first task would be to see if any UN officials
were involved in the corruption, and he said he hoped to have
preliminary conclusions in three months." Warren Hoge, "UN critics ignore good being done, Annan says", International Herald Tribune, April 23, 2004. [emphasis added.] [Note: Mr. Volcker and Mr. Goldstone are men of high repute and have worked for the UN before (Mr. Volcker was co-head of the report on Financing an effective United Nations: A report of the Independent Advisory Group on U.N. financing, Ford Foundation, New York, February 1993. That report concluded inter alia that "The
future credibility of the U.N. will depend in large measure on the
effectiveness of its management, on the quality of its staff, and on
improvements in its structure and administration." (p. 3) Mr. Annan and others
also went on the attack aggressively, starting with the Security Council,
and continuing with the Coalition Provisional Authority. "There is now no doubt that the [UN
Oil-for-Food] program was subject to massive fraud, perhaps … more than $4
billion.
… Saddam [Hussein] finally signed on [to the
program] … in 1996, on
condition that Iraq should determine who bought the oil and which firms
supplied the food and medicines.
The [UN, seeking to get aid] flowing to the increasingly desperate
Iraqi masses, agreed. … … The question is whether the UN Secretariat
was to blame … or the Security Council … In fact, the [UN OIP] … did report problems on
pricing to the Security Council … … [and] also alerted [it] to pricing problems in the
purchase of humanitarian goods. …
Yet not one of the 36,000 … contracts … was blocked by the Council
because of suspect pricing … … the British and Americans … knew that there
were crooked deals [but] … had other priorities … Paris and Moscow … were bitterly opposed to
the sanctions and had no interest in pushing investigations …
Thus it was Security Council realpolitik that
ensured that the Oil-for-Food
scams were never seriously investigated, and it is here that
primary responsibility for UN inaction must lie." Andrew Mack, "The Security Council is to blame", Interrnational Herald Tribune, May 12, 2004. [Note: Mr. Mack was director of the strategic planning unit in the executive office of the UN Secretary general from 1998 to 2001.]
"United Nations-mandated auditors have sharply
criticized the US occupation authority for the way it has spent more than
$11 billion in Iraq oil revenues … The auditors criticize the [authority's]
bookkeeping and warn: 'The [Coalition Provisional Authority] does not have effective controls
over the ministries' spending' … The findings come after US complaints about the
UN's administration of the oil-for-food scandal program under Saddam
Hussein. … The KPMG auditors are answerable to the
International Advisory and Monitoring Board, set up by the UN Security
Council in May last year to oversee coalition spending from the
development fund [including] … money left over from the UN's oil-for-food
program. The watchdog comprises representatives of [the World Bank, IMF, and an Arab
development fund] and spent much of last year battling over [their]
remit. … They … began working
in earnest only in April. The UN decided this month that responsibility
for the Development Fund for Iraq will pass to the Iraqi interim
government and be monitored by the IAMB. The panel also intends to widen
its scrutiny of past CPA spending by examining reports and audits by the
Pentagon's inspector general and the General Accounting Office
…" Gareth Symth and Thomas Catan, "UN slams U.S. over spending Iraq funds: Report: Oil-funded projects 'open to fraudulent acts'", FT.com, June 22, 2004. As these two quotes
and others indicate, there is much blame to spread almost everywhere in
the UN oil-for-food programme scandal: to the Secretariat, the Security
Council, its permanent members, other Member States, the OIOS, the General
Assembly's Fifth Committee, and contractors. However, the two above quotes
also illustrate another enduring UN trait, which was summarized by Shirley
Hazard some 15 years ago: Accountability, that source of institutional
health, had been excluded from United Nations experience; and, along with
it, indivisibly, the stimulus of direct public engagement and
response. 'It is not a United
Nations Organization', Aleksander Solzhenitsyn was to say, in his Nobel
address of 1972, 'but a United Governments Organization.' In offering itself as the mere
creature of its member governments, the United Nations system entered a
state of arrested moral development, marked by the habitual emblems of
immaturity: demands for approval, and incapacity for individual or
collective self-questioning." Shirley
Hazzard, "Breaking Faith: I", The New Yorker, September 25,
1989, pp. 63-99, [76].
[Note: Ms. Hazzard worked at the UN for ten years,
resigning in 1962 to become a very successful full-time writer.] Subsequently, the
scandal continued to boil in many directions, and among all involved
parties. "The United Nations, once snubbed and excluded
… suddenly finds itself pressed to play the major role in [shaping Iraq's
future, but]
… [UN officials] are conscious of lingering
resentment in Iraq from the days when the United Nations oversaw economic
sanctions … They are fearful of taking on ill-defined responsibility and
being blamed for any subsequent failure. And they face mounting criticism
…over the scandal-ridden United Nations oil-for-food program … The prospect of the return of the United
Nations to Iraq … arouses mixed feelings among ordinary Iraqis. … [They] came to know the United Nations at
close quarters during the years when economic sanctions were applied
… Although the [oil-for-food] program was badly
corrupted, many Iraqis remain grateful … But there is also a widespread feeling that the
United Nations, lacking any powers other than persuasion, may not be
resolute enough to withstand the sort of pressures it is likely to endure
during a period of potential tumult in Iraqi politics.
… When [UN representative Lakhdar] Brahimi spoke
on Iraqi television this week … some Iraqis watched with concern. 'It sounds good', an Iraqi
engineer said. 'But how
strong is Brahimi? How strong
is the U.N.?" Warren Hoge, "Recast in key role, U.N. envoys are wary", New York Times, April 18, 2004. "Cronyism and corruption are major factors in
Iraq's downward spiral. This
week the public radio program 'Marketplace' is running a series titled
"The Spoils of War', which documents a level of corruption in Iraq worse
than even harsh critics had suspected. The waste of money, though it may
run into the billions, is arguably the least of it -- though military
expenses are now $4.7 billion a month. … the 'Marketplace' report confirms what is
being widely reported: that the common view in Iraq is that members of the
U.S.-appointed Governing Council are using their positions to enrich
themselves, and that U.S. companies are doing the same. … many Iraqis see
U.S. forces as there to back a corrupt regime, not
democracy. Now what?
There's a growing sense of foreboding, even panic, about Iraq among
national security experts …" Paul Krugman, "The mess in Iraq is no surprise",
International Herald Tribune, April 24-25,
2004. "In the [UN oil-for-food programme scandal,] …
little hard evidence has come to light beyond a list of 265 supposed
beneficiaries of … illicit largesse in 52 countries, including …
Indonesia's President … a former French interior minister … and a senior
UN official. All deny any
wrongdoing. There are dark hints that Kofi Annan … [could
be] compromised … His son … worked for a company that won a juicy
[program] contract … [but he] left before the contract was awarded.
… [Much of the scandal] has been known for at
least three years. What is
new is the magnitude … and the naming of people and organizations
allegedly involved. … Nothing, so far, has been proved. …
… seven inquiries have been set up in an
attempt to get to the bottom of this murky affair … [including one] by the
UN itself, to be chaired by Paul Volcker … 'You can't sit on this and let it fester', Mr.
Volcker said. 'You have to
get it investigated, whatever it shows.' … Mr. Annan has told all his
staff to co-operate fully with the inquiry. Anyone found guilty, he says,
will be dealt with 'very severely.'" 'The biggest scandal ever? There are seven inquiries into an
alleged UN oil-for-food scam.
Why?", The Economist, May 1st, 2004.
In July 2004, the US
Government Accountability Office (GAO) released the first in-depth study
on the Oil for Food programme.
It estimated that: " … the former Iraqi regime acquired $10.1
billion in illegal revenues -- $5.7 billion in oil smuggled out of Iraq
and $4.4 billion in surcharges on oil sales and illicit charges from
suppliers exporting goods to Iraq through the Oil for Food program. The United Nations … Office of the
Iraq Program (OIP) and the Security Council's Iraq sanctions committee
[were] … responsible for … [program oversight.] However, the Security
Council allowed the Iraqi government, as a sovereign entity, to negotiate
contracts directly with purchasers of Iraqi oil and suppliers of
commodities … an important factor in enabling Iraq to levy illegal
surcharges and commissions. OIP was responsible for examining Iraqi
contracts for price and value, but it is unclear how it performed this
function. … U.N. external audit reports contained no findings of program
fraud. Summaries of internal
audit reports provided to GAO pointed to some operational concerns in
procurement, coordination, monitoring and oversight. Ongoing investigations [might] examine … [how
the program structure enabled Iraq to obtain illegal revenues], the role
of member states in monitoring and enforcing the sanctions, actions taken
to reduce oil smuggling, and responsibilities and procedures for assessing
price reasonableness in commodity contracts." "United Nations: Observations on the Oil for Food Program and Areas for Investigation", U.S. General Accounting Office, GAO-04-953T, of July 8, 2004. [Note: the entire report is available at www.gao.gov . Also, the GAO has changed its name to the
"Government Accountability Office" as of July 7, 2004.] The multidimensional
costs of the oil-for-food programme scandal include not only UN services,
credibility, and oversight, but also current budgetary funding which must
be diverted to get to the bottom of the mess. Paul Volcker quickly realized that
his task would be very complex and require much time. “[Paul Volcker] … who heads a U.N.-appointed
panel investigating corruption in its oil-for-food program in Iraq, has
said that he will need at least $30 million, a staff of 60 and probably
another year to determine whether UN officials took bribes or engaged in
other corruption while administering the huge relief program.
… Secretary-General Kofi Annan established the
independent committee under pressure in April to respond to allegations
that UN officials and diplomats had taken bribes from Saddam Hussein while
administering or overseeing the program. A recent [US GAO] … report accused
the Iraqi regime of having pocketed more than $10 billion from the
six-year program, which used $64.2 billion in Iraqi oil sales to pay for
food, medicine and other goods from 1997 to 2003. …. Volcker said that his panel had not yet
received the original list of oil vouchers supposedly awarded to diplomats
and UN officials, which was published by an Iraqi newspaper several months
ago. So far, he said, his
panel has $4 million for the inquiry, but he said Annan had promised him
whatever he needs.” Judith Miller, “UN panel seeks more money, and
time, for Iraq graft inquiry”, International Herald Tribune,
August 11,
2004.
As shown by his annual
report to the General Assembly in August 2004, Secretary-General Annan
distinctly chose to minimalize the oil-for-food programme scandal, while
emphasizing that his actions have things “under control.” The report highlighted OIOS
“clean-up” actions in Kosovo following a fraudulent diversion of some $4.3
million there. But it then
minimally characterized the billions of dollars under investigation in the
Iraq oil-for-food programme as “allegations of impropriety”, cited his
appointment of the Volcker group “to ensure a thorough and meticulous
inquiry”, expressed appreciation for Security Council endorsement of his
action, and called on all Member States and their regulatory authorities
to cooperate with the Volcker group. “Report of the Secretary-General on the work of the Organization”, UN document A/59/1, August 20, 2004, paras. 253-254.
Since that time,
details of the oil-for-food programme’s operating problems, and
allegations of serious wrongdoing by all concerned, continue to grow
relentlessly, as shown by the following set of
quotes. “A hallmark of the [United Nations Oil-for-Food
relief program in Iraq was secrecy, which served Saddam Hussein all too
well. Since Oil-for-Food
ended last November, its records have been handled with . . . yet more
secrecy. … The problem at this stage is not a lack of
investigations, there
being at least nine of these now in motion, including the U.N.’s own
inquiry into itself … headed by … Paul Volcker – who
now has the monopoly on the U.N.’s central hoard of Oil-for-Food
records. But [his group] … may not be ready to issue a report until the
middle of next year. … All told, the reported inventory of paperwork …
[involves] upwards of 15 million documents, with more expected … [and tons
more in Baghdad.] … Oil-for-Food was a program so vast, so
obviously packed with perverse policies and incentives, and so disturbing
to a number of honest people who encountered it … - that the array of
whistle-blowers is quite extensive and highly varied. … The difficulty,
over and over, has been to get at some of those [many documents to help
substantiate] who did exactly what to produce the biggest aid scam in U.N.
history.” Claudia Rosett, “Strip poker: It’s time for the UN to bare all and release its Oil-for-Food documents”, Wall Street Journal, www.opinionjournal.com, August 11, 2004. [emphasis added] “Toward the end of 2000, when Saddam Hussein’s
skimming from the oil-for-food program for Iraq kicked into high gear,
reports spread quickly to the program’s supervisors at the United Nations.
… In the halls of the UN, the programme became a
battleground for the competing commercial interests and political agendas
of the 15 individual nations that made up the Security Council [who also
served on the sanctions committee], diplomats said. …
While the diplomats were deadlocked over how to
address violations of the sanctions, money and contracts continued to flow
through the Office of the Iraq Program … The work of that office, and its
former director Benon Sevan, are the focus of a UN investigation of
mismanagement and corruption in the program … Sevan … has said in a statement that his office
was not responsible for ferreting out corruption. Evidence of fraud passed from
office to office in a round robin ending nowhere. … … While UN auditors produced 55 reports on the
program, several diplomats on the sanctions committee said in interviews
that they never even saw them. In the end, a complicated set of political and
financial pressures kept the program ripe for
corruption.” Susan Sachs and Judith Miller, “Saddam’s oil-food fraud: ‘UN let him do it’”, International Herald Tribune, August 13, 2004. “Iraq may be tormented by ethnic and religious
divisions, but one thing still unites all its people … the central
government’s monthly gift of free food. The system has enormous costs, direct and
indirect. Importing and
distributing the goods eats up $3.8 billion a year, or close to one-fifth
of the national budget. It
has fostered bureaucratic corruption, a culture of dependency, and by
relying almost entirely on imported goods, suppresses domestic farming and
industry. By United Nations estimates, 60 percent of
Iraqis depend for an important part of their diets on their [food] rations
… Most other families collect the rations, too, with many selling off
undesired goods for cash. … Fearful of any backlash … the interim
government has pledged to leave the program in place at least through
2005. … But even as people cling to the security of
free food, many complain about poor quality and erratic delivery. People say the flour is often
half-spoiled and the cooking oil stinks, and corruption in the
procurement process is legendary. ‘The officials who run this are thieves’, …
[said a shopkeeper.] ‘They
import good quality food, sell it and then give bad quality food to the
people.” Erik Eckholm, Iraq remains ultimate welfare state: Virtually everyone is still dependent on handouts of free food”, International Herald Tribune, September 14, 2004. [Note: this analysis, while scarcely mentioning the UN, is a very damning one, indicating that the food program within Iraq has long been, and continues to be, very costly, riddled with entrenched corruption and manipulation, and solidifying the Iraqi peoples’ dependence on it to the detriment of the domestic economy and domestic food production.] “When U.N. Secretary-General Kofi Annan opined
last week …that the U.S.-led overthrow of Saddam Hussein had been
‘illegal,’ … [I thought]: baby food. … … The heart and soul of Oil-for-Food was
supposed to be the feeding of sick and hungry Iraqi babies. … After
visiting with Saddam in 1998 [Mr. Annan] returned to New York to report:
‘I think I can do business with him.’ And oh what a lot of business the U.N.
did. Mr. Annan’s
Secretariat collected more than $1.4 billion in commissions …, all to
supervise the integrity of Saddam’s $65 billion in oil sales and $46
billion in relief purchases. … Mr. Annan’s Secretariat, while swimming in cash
from its 2.2% commission on Saddam’s oil sales, never got around to
systematically examining Saddam’s contract prices. [A U.S. Defense Department auditors’ pricing
study of] … 178 recent contracts for food [in Iraq found that] almost 90%
were overpriced by an average of about 22% … [and] the potential rake-off
totaled $390 million. … the
baby formula deals were … even more egregiously overpriced.
… Mr. Annan … has never apologized for
presiding over [this gigantic relief fraud.] He has not used the word
‘illegal.’” Claudia Rosett, “What’s ‘illegal’: Kofi Annan helped Saddam Hussein steal food from babies”, Wall Street Journal, www.opinionjournal.com, September 22, 2004. [emphasis added] “A bombshell report prepared by the [U.S.
Congress] House Government Reform Subcommittee on National Security
charges that two companies hired by the United Nations to police shipments
of goods going in and out of Iraq have complained that they lacked the
authority to adequately do their job and stop the massive smuggling scams.
… The two companies hired by the U.N., Cotecna
S.A. and Saybolt International, ‘raised occasional concerns about the
ability to carry out their duties and possible corruption,’ the report
says. ‘However, many of these concerns appear to have
fallen on deaf ears at the U.N., or at least confused ears, as various
offices gave ambiguous responses to the contractors,’ the report
said. The report noted that Benon Sevan, the head of
the oil-for-food program, is facing allegations of accepting sweetheart
deals from Saddam, which call into question ‘the willingness of the U.N.
to address weaknesses in the program.’” Niles Lathem, “House report rips U.N. on oil-for-food”, New York Post, October 2, 2004. “[US House committee] … investigators say that
France, Russia, and China systematically sabotaged the former United
Nations oil-for-food program in Iraq by preventing the United States and
Britain from investigating whether Saddam Hussein was diverting billions
of dollars. … The paper suggests that [the three countries] …
blocked inquiries … because their companies ‘had much to gain from
maintaining the status quo.’ … The paper also accuses the UN [Iraq program]
office … of having ‘pressed’ contractors not to rigorously inspect Iraqi
oil being sold and the foreign goods being bought. … [The subcommittee chairman], Christopher Shays
… said … that there was no doubt that the abuses were systemic and that
blame for the widespread corruption must be shared by Security Council
members, the UN office that administered the program and the contractors
hired by the United Nations to inspect Iraq’s oil exports and aid
purchases. … The paper concludes that the program’s greatest
weakness was the lack of transparency. ‘Most transactions involving the
program were done behind closed doors or sometimes illicitly’, the paper
states. The list of oil purchasers was not known. The list of humanitarian providers
was not known.”
Judith Miller, “3 nations blocked UN oil-for-food probe, report says”, International Herald Tribune, October 4, 2004.
“Saddam Hussein personally oversaw a scheme
that directed secret gifts of oil to hundreds of individuals and companies
round the world who he believed could help get United Nations sanctions
lifted, according to the chief US weapons inspector. A report from Charles Duelfer, head of the Iraq
Survey Group charged with looking for weapons of mass destruction after
last year’s US-led invasion, describes the granting of oil allocations as
part of an effort to give others a stake in the regime’s
survival. | |||
