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The Oil-for-Food Scam: What did Kofi Annan Know, and
When Did He Know It?
Charged with bringing relief to the people of Iraq,
the United Nations instead bolstered Saddam's tyranny
and thoroughly corrupted itself.
Commentary
May 2004
By Claudia Rosett
For years, the United Nations Oil-for-Food program was just one
more blip on the multilateral landscape: a relief program for Iraq,
a way to feed hungry children in a far-off land until the world had
settled its quarrels with Saddam Hussein. Last May, after the fall
of Saddam, the UN Security Council voted to lift sanctions on Iraq,
end Oil-for-Food later in the year, and turn over any remaining
business to the U.S.-led authority in Baghdad. On November 20, with
some ceremony, UN Secretary-General Kofi Annan lauded the program's
many accomplishments, praising in particular its long-serving executive
director, Benon Sevan. The next day, Oil-for-Food came to an end.
But it has not ended. Suddenly, Oil-for-Food is with us again, this
time splashed all over the news as the subject of scandal at the UN:
bribes, kickbacks, fraud, smuggling; stories of graft involving tens of
billions of dollars and countless barrels of oil, and implicating big
business and high officials in dozens of countries; allegations that
the head of the program himself was on the take. In February, having
at first denied any wrongdoing, Sevan stopped giving interviews and was
then reported to be on vacation, heading into retirement. By March, the
U.S. Congress was preparing to hold hearings into Oil-for-Food. Kofi
Annan, having denied any knowledge of misdeeds by UN staff, finally
bowed to demands for an independent inquiry into the UN program,
saying, "I don't think we need to have our reputation impugned."
The tale has been all very interesting, and all very complicated. For
those who look yearningly to the UN for answers to the world's
problems, it has provoked, perhaps, some introspection about
the pardonable corruption that threatens even the most selfless
undertakings. For those who believe the UN can do nothing right,
Oil-for-Food, whatever it was about, is a delicious vindication that
everyone and everything at the world organization is crooked, the
institution a fiasco, and politicians who support it fit for recall
at the next electoral opportunity.
The excitement may be justified, but a number of important facts and
conclusions have gone missing. Oil-for-Food, run by the UN from 1996
to 2003, did, in fact, deliver some limited relief to Iraqis. It
also evolved into not only the biggest but the most extravagant,
hypocritical, and blatantly perverse relief program ever administered
by the UN. But Oil-for-Food is not simply a saga of one UN program
gone wrong. It is also the tale of a systematic failure on the part
of what is grandly called the international community.
Oil-for-Food tainted almost everything it touched. It was such
a kaleidoscope of corruption as to defy easy summary, let alone
concentration on the main issues. But let us try.
Oil-for-Food had its beginnings in the UN sanctions imposed on Iraq
following Saddam Hussein's August 1990 invasion of Kuwait. These
prohibited UN member states from trading with Iraq until the regime
had satisfactorily disarmed. Saddam refused to comply, and in the
aftermath of the first Gulf war the sanctions remained in place. (Even
under sanctions, Iraqis were theoretically allowed to import essential
foods and medicines, but Saddam's repressive system prevented them
from earning the necessary foreign exchange.) Reports fed by Saddam's
regime soon began to surface that the sanctions were imposing severe
suffering on ordinary Iraqis. The UN, then led by Secretary-General
Javier Perez de Cuellar, broached the idea of allowing Iraq to sell
oil in limited quantities, strictly to buy relief supplies.
At first, Saddam resisted this, too. But in the mid-1990's, perhaps
because he was feeling the pinch, or quite likely because he had
by then seen ways and built up the leverage to turn such a plan to
his advantage, he finally agreed. On April 14, 1995, the UN (then
under Boutros Boutros-Ghali) passed Resolution 986, authorizing
as a "temporary measure" what become known as the Oil-for-Food
program, and then spent months working out with Saddam the details
of implementation.
>>From the start, the program was poorly designed. Saddam had
blamed the fate of starving Iraqi children on the sanctions regime
and specifically on the United States. Seeking to address these
charges, the Clinton administration went looking for a compromise;
with the Secretariat in the lead, the Security Council agreed to
conditions on Oil-for-Food that were, to say the least, amenable to
manipulation. Saddam, the author of the miseries of Iraq, was given
the right to negotiate his own contracts to sell Iraqi oil and to
choose his own foreign customers. He was also allowed to draw up the
shopping lists of humanitarian supplies - the "distribution plans"
- and to strike his own deals for these goods, picking his foreign
suppliers. The UN also granted Saddam a say in the choice of the bank
that would mainly handle the funds and issue the letters of credit
to pay these suppliers; the designated institution was a French bank
now known as BNP Paribas.1
To be sure, the UN reserved for itself the authority to reject
Saddam's proposed contracts and his plans for distribution of goods
inside Iraq; to control the program's bank accounts; and to ensure
that Saddam's buying and selling were in compliance with the UN's
humanitarian plan. As spelled out in Resolution 986, oil was to be
sold "at fair-market value," and the proceeds were to pay solely for
goods and services that would be used "for equitable distribution of
humanitarian relief to all segments of the Iraqi population throughout
the country."
To all this, the UN added another twist. Unlike most of its relief
programs, in which both the cost of the relief itself and UN overhead
were paid for by contributions from member states, Oil-for-Food would
in every respect be funded entirely out of Saddam's oil revenues. The
UN Secretariat would collect a 2.2-percent commission on every barrel
of Iraqi oil sold, plus 0.8 percent to pay for UN weapons inspections
in Iraq.
If the aim of this provision was to make Saddam bear the cost of
his own obstinacy, the effect was to create a situation in which
the UN Secretariat was paid handsomely, on commission, by Saddam -
to supervise Saddam. And the bigger Oil-for-Food got, the bigger the
fees collected by Annan's office. Over the seven years of the program,
oil sales ultimately totaled some $65 billion. On the spending side,
the UN says $46 billion went for aid to Iraq, and $18.2 billion was
paid out as compensation to victims of Saddam's 1990-91 occupation
of Kuwait. As for commissions to the Secretariat, these ran to about
$1.9 billion, of which $1.4 billion was earmarked for administrative
overhead for the humanitarian program (the UN says it turned over $300
million of this to help pay for relief, but no public accounting has
ever been given) and another $500 million or so for weapons inspections
in Iraq. Discrepancies in these numbers can be chalked up to interest
paid on some of the funds, exchange-rate fluctuations, or simply the
murk in which most of the Oil-for-Food transactions remain shrouded
to this day.
Whether Saddam should have enjoyed the right to dispose of all Iraqi
oil was never questioned. In Iraq, oil was the province of a state
monopoly, which Saddam in effect claimed for his own, and on that basis
was the UN deal struck. The arrangement actually helped strengthen
Saddam's chokehold at home. With sanctions effectively forbidding all
other foreign commerce, Iraq's only legitimate trade was whatever
flowed through Saddam's ministries under the supervision of the UN
program. Thus the UN gave to Saddam the entire import-export franchise
for Iraq, taking upon itself the responsibility for ensuring that he
would use this arrangement to help Iraq's 26 million people. The
success of the program depended wholly on the UN's integrity,
competence, and willingness to prevent Saddam from subverting the
setup to his own benefit.
This was perhaps an impossible brief. But the Secretariat eagerly
shouldered the burden, accepting along with it the commissions that
flowed straight from Iraq's oil spigots. Introduced as an ad-hoc deal,
Oil-for-Food soon took on the marks of a more permanent arrangement. It
was a project in which Annan had a direct hand from the beginning. As
Under-Secretary General, he had led the first UN team to negotiate
with Saddam over the terms of the sales under Oil-for-Food. The
first shipment went out in December 1996; the following month, Annan
succeeded Boutros-Ghali as Secretary-General.
Nine months later, in October 1997, Annan tapped Benon Sevan, an
Armenian Cypriot and longtime UN official, to consolidate and run the
various aspects of the Iraq relief operation under a newly established
agency called the Office of the Iraq Program (but usually referred
to simply as Oil-for-Food). Sevan served as executive director for
the duration, reporting directly to Annan. The program was divided
into roughly six-month phases; at the start of each phase, Sevan
would report and Annan would recommend the program's continuation to
the Security Council, signing off directly on Saddam's "distribution
plans."
An issue that would later become important was how, precisely, the
responsibilities for executing the program were parceled out between
the Security Council - a committee of fifteen member states - and the
Secretariat, run by Annan. All of Saddam's proposed contracts flowed
through the Security Council, which doubled as the Iraq "sanctions
committee." But in practice, the fifteen member governments were
mostly on the watch for so-called dual-use items: goods that might
be used to make weapons.
As it turned out, only two of the five permanent, veto-wielding members
appear to have done any overseeing at all. These were the UK and
the U.S., both of which had almost no direct business with Saddam's
Iraq. The UN representatives of the other three - France, Russia,
and China - devoted their energies chiefly to urging expansion of the
program and forwarding the paperwork submitted by the many contractors
in their respective nations whom Saddam had selected as his buyers and
suppliers. As for the ten rotating members of the Security Council,
some - like Syria - were among Saddam's favored trading partners,
while most of the others lacked the resources to keep track of the
huge volume of business the program soon generated.
If final responsibility lay anywhere at all, it lay with the
Secretariat. It was this body that fielded a substantial presence
in Iraq (the U.S., apart from weapons inspectors ejected early on,
had none), employing at the height of the program some 3,600 Iraqis
plus 893 international staff working in Iraq for the nine UN agencies
coordinated by the Oil-for-Food office; another 100 or so were employed
back in New York. The Secretariat was the keeper of the contract
records and the books, and controller of the bank accounts, with
sole power to authorize the release of Saddam's earnings to pay for
imports to Iraq. The Secretariat arranged for audits of the program,
was the chief interlocutor with Saddam, got paid well for its pains,
and disseminated to the public extremely long reports in which most
of the critical details of the transactions were not included.
One of the first changes introduced by Sevan was greater
secrecy. According to John Fawcett, the co-author of a 70-page
report on Saddam's finances released in 2002 by the Washington-based
Coalition for International Justice, the UN had been fairly open
about the specifics of Saddam's contracts during the first year
of the program. From about 1998 on, however, it categorized the
most germane details as "proprietary" - carefully guarding Saddam's
privacy in his business deals. Thus, there was no disclosure of such
basic information as the names of individual contractors or the price,
quality, or quantity of goods involved in any given deal - all vital
to judging the integrity of contracts.
Instead, the Office of the Iraq Program released long lists
representing billions of dollars in business but noting only the date,
country of origin, whether or not the contract had been approved
for release of funding, and highly generic descriptions of goods.
Typical of the level of detail were notations like "electric motor"
from France, "adult milk" from Saudi Arabia, "detergent" from Russia,
"cable" from China. Who in particular might be profiting, or at what
price, was kept confidential. Nor did the UN disclose interest paid on
the Oil-for-Food accounts at BNP Paribas or (possibly) other banks,
which toward the end of the program held balances of more than $12
billion. Nor did it ever share with the public the details of how
the $1.9 billion in commissions flowing from Saddam for aid and arms
inspections (the latter were discontinued from late 1998 to late 2002)
were spent by the UN Secretariat.
The year 1998, the first full year of the program under Sevan's
directorship, is of special interest in this connection. For
starters, if evidence cited in the Wall Street Journal turns out
to be correct, this was the year in which Saddam's government may
have begun covertly sending gifts of oil to Sevan himself by way of
a Panamanian firm. It was also the year in which the UN terminated
a contract with a UK-based firm, Lloyd's Register, for the crucial
job of inspecting all Oil-for-Food shipments into Iraq, and replaced
it with a Swiss-based firm, Cotecna Inspections, with ties to Kofi
Annan's son Kojo. At the time, neither Cotecna nor the UN declared
these ties as a possible conflict of interest, which they were.2
Also in 1998, at Sevan's urging, the UN expanded Oil-for-Food to
allow Saddam to import not just food and medicine but oil-industry
equipment, and at Annan's urging more than doubled the amount of oil
Iraq was allowed to sell, raising the cap from roughly $4 billion to
more than $10 billion per year. That same year, after much hindering
and dickering, Saddam threw out the UN weapons inspectors - forbidding
their return until the U.S. and Britain finally forced the issue four
years later.
This brings us to 1999-2000, when, following Sevan's urging, the
program expanded yet further; with more funds devoted to the oil
sector, and with the weapons inspectors gone, the UN now removed the
limits on sales. In 2000, Saddam enjoyed a blockbuster year. By this
time he was not only selling vastly more oil but had institutionalized
a system for pocketing cash on the side.
It worked like this. Saddam would sell at below-market prices to
his hand-picked customers - the Russians and the French were special
favorites - and they could then sell the oil to third parties at a
fat profit. Part of this profit they would keep, part they would kick
back to Saddam as a "surcharge," paid into bank accounts outside the
UN program, in violation of UN sanctions.
By means of this scam, Saddam's regime ultimately skimmed off for
itself billions of dollars in proceeds that were supposed to have been
spent on relief for the Iraqi people. When the scheme was reported
in the international press - in November 2000, for example, Reuters
carried a long dispatch about Saddam's demands for a 50-cent premium
over official UN prices on every barrel of Iraqi oil - the UN haggled
with Saddam but did not stop it.
Beyond that, Saddam had also begun smuggling out oil through Turkey,
Jordan, and Syria. This was in flagrant defiance of UN sanctions
and made a complete mockery of Oil-for-Food, whose whole point was
to channel all of Saddam's trade. The smuggling, too, was widely
reported in the press - and shrugged off by the UN. In the same period,
Saddam imposed his own version of sanctions on the U.S., demanding
that Oil-for-Food funds be switched from dollars into euros. The UN
complied, thereby making it even harder for observers to keep track
of its largely secretive and confusing bookkeeping.
As Oil-for-Food grew in size and scope, the U.S. mission to the UN
began putting a significant number of its relief contracts on hold
for closer scrutiny. Both Sevan and Annan complained publicly and
often about these delays, describing them as injurious to the people
of Iraq and urging the Security Council to push the contracts through
faster. What Sevan did not convey was that, by 2000, complaints had
begun reaching him about Iraqi government demands for kickbacks from
suppliers on the relief side. These (according to a recent report
in the Financial Times) Sevan simply buried, telling complainants
to submit formal documents to the Security Council through their
countries' UN missions (something they had no incentive to do since
Saddam would most likely have responded by scrapping the deals
altogether).
By 2002, the sixth year of the program, it was no longer
credible that the UN Secretariat could be clueless about Saddam's
systematic violations and exploitation of the humanitarian purpose of
Oil-for-Food. On May 2, in a front-page story by Alix M. Freedman and
Steve Stecklow, the Wall Street Journal documented in detail Saddam's
illicit kickbacks on underpriced oil contracts, noting that "at least
until recently, the UN has given Iraq surprising influence over the
official price of its oil." In fact, against the resistance of Russia,
France, China, and the UN Secretariat, the U.S. and Britain had been
trying to put a halt to the kickbacks through an elaborate system to
enforce fairer pricing - but with only limited success. Sevan, clearly
aware of the scam, was quoted in the Journal article as saying he had
"no mandate" to stop it.
Apparently, however, there was a near-boundless mandate for the
Secretariat to expand the scope of the spending. A mere fortnight
later, on May 14, 2002, the Security Council passed a resolution
cutting itself out of the loop entirely on all Oil-for-Food contracts
deemed humanitarian, and giving direct power of approval to the
Secretary-General. Henceforth, the Security Council would confine
its oversight to items of potential dual use, such as chemical
spraying equipment, or forbidden goods like highly enriched uranium,
nuclear-reactor components, and the like. Unimpeded responsibility
for the "humanitarian" aspect of the program fell to Annan.
The next month, "humanitarian" became a broad category indeed. On June
2, Annan approved a newly expanded shopping list by Saddam that the
Secretariat dubbed "Oil-for-Food Plus." This added ten new sectors
to be funded by the program, including "labor and social affairs,"
"information," "justice," and "sports." Either the Secretary-General
had failed to notice or he did not care that none of these had
anything to do with the equitable distribution of relief. By contrast,
they had everything to do with the running of Saddam's totalitarian
state. "Labor," "information," and "justice" were the realms of
Baathist party patronage, propaganda, censorship, secret police,
rape rooms, and mass graves. As for sports, that was the favorite
arena of Saddam's sadistic son Uday, already infamous for torturing
Iraqi athletes.
Then came the autumn of 2002, when President Bush delivered his warning
to Saddam to comply with sixteen previous UN resolutions to disarm,
and the U.S. persuaded the Security Council to pass a seventeenth.
Though there was by this time no dearth of damning information in the
public domain, Oil-for-Food rolled on. On September 18, the Coalition
for International Justice released its heavily researched report,
Sources of Revenue for Saddam & Sons, documenting rampant corruption
and smuggling under UN sanctions and Oil-for-Food, warning of an
Iraqi shift from "informal, on-the-sly deals" to increasingly "brazen
and formal government-to-government arrangements," and asking how,
"given . . . the world's largest humanitarian program ever, can there
remain shortages of basic medicines and foodstuffs" in Iraq? Four
months later, with Saddam still defiant and war looking likely, Annan
signed a letter to the Security Council in which, among other things,
he approved the use of $20 million in Oil-for-Food funds to pay for an
"Olympic sport city" and $50 million to equip Saddam's propaganda arm,
the Ministry of Information.3
By then, of course, debate over Iraq was raging in the Security
Council, and the U.S. and Britain were bitterly at odds with France and
Russia. Annan weighed in publicly on the side of the latter, urging
yet more time and tolerance. He did not mention his own interest as
the boss of a massive relief program funded by Saddam. Neither did
he mention that Saddam's commercial deals heavily favored French and
Russian companies, though he had access to actual numbers about those
deals that, thanks to UN secretiveness, the public did not.
On March 17, with the U.S.-led coalition poised to invade, Annan
pulled his international staff out of Iraq. Three days later, as
coalition forces rolled into Iraq, he expressed regret that war had
come "despite the best efforts of the international community and
the United Nations." Describing the UN as the keeper of international
"legitimacy," he assured the Iraqi people that, as soon as possible,
the UN would be back to do "whatever it can to bring them assistance
and support."
Following the fall of Saddam's regime, the U.S.-led coalition
decided that Iraq had experienced enough of UN-style "assistance and
support," at least as far as Oil-for-Food was concerned. With Russia
and France suddenly willing to go along, perhaps to avoid scrutiny
of Oil-for-Russia and Oil-for-France, the Security Council voted
unanimously on May 22 that the program should be wound down. No more
oil revenues were to flow in, but the UN Secretariat was to continue
administering the remaining relief contracts until November, when any
unfinished business would be turned over to the Coalition Provisional
Authority (CPA) in Baghdad.
At that stage, Oil-for-Food had close to $13 billion in BNP Paribas's
Iraq accounts, most of it set aside to pay for contracts already
approved. During the summer and early fall, the New York office began
tidying up loose ends, renegotiating, "prioritizing," and basically
removing the graft elements from the remaining contracts before
handover to the CPA. In these efforts, the UN got some prompting from
the U.S. Defense Contract Management Agency (DCMA) - the agency that
has been auditing Halliburton's recent activities in Iraq.
>>From the thousands of remaining contracts, the DCMA (together
with the Defense Contract Audit Agency) culled a batch of 759 of
the largest deals, valued altogether at $6.9 billion. The reviewers
estimated that among these contracts, almost half were overpriced by
about 21 percent, for a total of $656 million that Saddam's regime
had overpaid. This was in all likelihood the kickback component,
part of which the suppliers were meant to share illicitly with the
regime. Dryly, the DCMA's report adds that, in the course of its
researches, "Some items of questionable utility for the Iraqi people
(e.g., Mercedes Benz touring sedans) were identified."
By the time the Oil-for-Food office was finished renegotiating its
contracts, it had scrapped more than a quarter of them. Some of the
reasons, listed in UN public documents, are intriguing. There was, for
example, the Syrian supplier of "spare parts for rotating equipment"
whom it was "not possible to contact"; the Lebanese vendor of "welding
machines" who was "unwilling to accept the 10-percent deduction"
- i.e., a price minus the bribe-plus-kickback; and the Jordanian
seller of school furniture whose contract had to be dropped because
"company does not exist and the person in charge moved to Egypt."
Then came the formal ceremonies to which I have already alluded. On
November 19, Sevan's office put out a press release praising
Oil-for-Food as "one of the most efficient of UN programs." On November
20, Annan chimed in with his own praise for Oil-for-Food, paying
tribute to the staff and "particularly to its executive director, Benon
Sevan." On November 21, almost seven years after setting up shop as
a temporary and limited measure to bring food and medicine to hungry
people in Iraq, the program shut down, handing the CPA a royal mess.
Sevan had assured the Security Council that, along with control of the
more than $8 billion in funds and contracts still to be administered,
the CPA would get "the entire Oil-for-Food database." In fact,
the transfer was incomplete. Plenty of contract information was
missing. So Byzantine were the BNP Paribas accounts that, rather than
risk interrupting relief deliveries, the CPA simply left them under
the management of the UN treasurer, who until almost a year after the
fall of Saddam never got around to sending any current bank statements,
let alone prior records.4
Meanwhile, however, the Iraqi Governing Council had itself begun
to pore over records of the Saddam regime from various ministries,
and former Baath officials were also starting to talk. On December
5, a British adviser to the Council, Claude Hankes-Drielsma, wrote
from Baghdad to Annan, urging the UN to "take the moral high ground"
and appoint an independent commission to investigate profiteering
under Oil-for-Food.
Not a moment too soon: now the revelations were beginning to flow
rapidly. On January 25 of this year, the Iraqi newspaper Al-Mada
published a list, reportedly recovered from the Iraqi oil ministry, of
some 270 individuals and entities in some 50 countries who were alleged
to have received vouchers good for oil from Saddam Hussein. The list
was an eye-opener. It included the former French Interior Minister
Charles Pasqua, British MP George Galloway, Indonesian President
Megawati Sukarnoputri, the Russian nationalist Vladimir Zhirinovsky,
a large number of Russian oil companies, the Russian state, and the
Russian Orthodox Church. It also included the family name of the head
of the UN Oil-for-Food program: Sevan.
Those named in Al-Mada's list ignored, denied, or dismissed it
on grounds that they had legitimately bought oil from Saddam. As
for Sevan, he categorically repudiated the notion that he had ever
received oil or oil money from the Iraqi regime, while Annan, in a
statement more artfully hedged, said: "As far as I know, nobody in
the Secretariat has committed any wrongdoing." A spokesman for the
UN Secretariat repeated the by-now usual line that Oil-for-Food had
been the most audited program at the UN - "audited to death" was the
exact phrase - and in late February the Oil-for-Food office released a
seven-page statement clearly aimed at deflecting blame for any graft
involved with the program.
According to this official account, the Secretariat had no
responsibility for confirming that contract-pricing was fair, or
that suppliers were legitimate (that was the job of Saddam and the
UN country missions); no responsibility for implementing the program
(that too was the job of Saddam); no responsibility for either spotting
or stopping corruption by Saddam via Oil-for-Food contracts (that was
the job of the Security Council); and no awareness of unauthorized
oil exports (though the office confirmed its knowledge of "media
reports on alleged violations"). By the light of this clarification,
indeed, it was hard to tell what the Oil-for-Food program was, in
fact, responsible for, beyond controlling the opaque bank accounts,
checking that the contracts - honest or not - were properly punctuated,
watching Saddam do whatever he chose, and collecting a 2.2-percent
commission on his oil.
And so we arrive at the denouement - at least so far. On February
29, the New York Times published a long news article based on "a
trove of internal Iraqi government documents and financial records"
unearthed by the Iraqi Governing Council. The article described oil
traders lugging suitcases full of illicit cash to the ministries and
cited stacks of evidence showing that, through Oil-for-Food, Saddam's
regime had squirreled away billions for itself while ordinary Iraqis
received expired medicines and substandard rations.
Still the UN hung tough. On March 3, Hankes-Drielsma notified
Annan that Iraqi authorities had asked an auditing firm, KPMG
International, and a law firm, Freshfields Bruckhaus Deringer,
to prepare an independent report. In his letter, Hankes-Drielsma
explained his reasoning:
Based on the facts as I know them at the present time, the UN failed
in its responsibility to the Iraqi people and the international
community at large. The UN should not be surprised that the Iraqi
people question the UN's credibility at this time and any future role
for the UN in Iraq. It will not come as a surprise if the Oil-for-Food
program turns out to be one of the world's most disgraceful scams and
an example of inadequate control, responsibility, and transparency,
providing an opportune vehicle for Saddam Hussein to operate under
the UN aegis to continue his reign of terror and oppression.
On March 10 came confirmation that Annan's son Kojo had held a
consultancy with Cotecna right around the time the company won the UN
job to inspect goods coming into Iraq. On March 11 came an article
in the Wall Street Journal detailing further links between Saddam's
oil largesse and Sevan. The following week came word that Congress
would hold hearings on Oil-for-Food. And on March 19, having ignored,
stonewalled, and denied, Annan finally conceded that "it is highly
possible there has been quite a lot of wrongdoing," and called for
an independent inquiry.
As the various audits, investigations, and hearings gear up to
delve into the saga of UN involvement in Saddam's Iraq, we may
learn even more about his worldwide net of corruption. With skill,
we may locate some of the billions he is believed to have salted
away under UN oversight. With luck, we may get to this money ahead
of the terrorists with whom he consorted - if they have not gotten
to it already. Already known, for example, is that two firms doing
business with Saddam through Oil-for-Food were linked to financier
Ahmed Idris Nasreddin, now on the UN's own watchlist of individuals
"belonging to or associated with" al Qaeda.
But let us retain our focus. That Saddam Hussein was a monster and
a corrupt monster is not news. That he would exploit, for massive
personal gain, a humanitarian program meant to relieve the miseries of
his countrymen is horrifying but hardly astonishing. Nevertheless,
any investigation that confines itself to detailing the abundantly
evident corruption of Saddam Hussein will have missed the point.
What lies at the core of this story is the United Nations, and how
it came to pass that an institution charged with bringing peace
and probity to the world should have offered itself up - willingly,
even eagerly - as the vehicle for a festival of abuse and fraud.
To begin with, Oil-for-Food was an enormous venture in central
planning, the biggest project of its kind launched in many a decade
and one that utterly ignored the lessons about such systems learned
at agonizing cost over the past century. The UN Secretariat, in its
well-paid arrogance, set out to administer virtually the entire economy
of Iraq. Under its eye, all legitimate trading privileges became the
franchise of a tyrant who laid first claim to every barrel of oil
and every dollar (or euro) of proceeds. How could Oil-for-Food not
help consolidate Saddam's grip on power? Nevertheless, it was with
this grand thief of Baghdad that the UN cut its humanitarian deal,
chalking in a fat commission for the Secretariat.
Nor did anyone in the UN system so much as lift an eyebrow, even
after questions began to be raised. Last November, before the Security
Council of the United Nations, the organization's Secretary-General
proclaimed it a splendid achievement that the UN had legitimized a
scheme by which 60 percent of Iraq's population depended entirely
on the rationing cards of a totalitarian state. This was an event
that should have seized the vaunted international community with
horror. Instead, from out of the mouth of the Angolan ambassador who
that month was chairing the UN Security Council there issued only
unctuous praise for "the exceptionally important role of the program
in providing humanitarian assistance to the people of Iraq."
But all that is only prelude. The scope of UN dereliction is much
broader, encompassing factors institutional, personal, and, finally,
political.
It is true that Oil-for-Food managed to deliver to Iraqis some
portion of what it promised. On sales totaling $65 billion, some $46
billion (by Annan's uncheckable reckoning) went for "humanitarian"
spending. Of this amount, an official total of $15 billion worth of
food and health supplies - the original rationale for the program - had
been received by the time Saddam fell. The actual figure was no doubt
considerably less if you factor in the kickbacks and spoiled goods;
from the remainder came the equipment for Saddam's oil monopoly,
the construction materials, the TV studio systems, the carpets and
air conditioners for the ministries, and all the rest.
But at what cost? Are we supposed to conclude that, in order to
deliver this amount of aid, the UN had to approve Saddam's more
than $100 billion worth of largely crooked business, had to look the
other way while he skimmed money, bought influence, built palaces,
and stashed away billions on the side, at least some of which may
now be funding terror in Iraq or beyond?
No, something was at work here other than passive acquiescence. At
precisely what moment during the years of Oil-for-Food did the UN
Secretariat cross the line from "supervising" Saddam to collaborating
with him? With precisely what deed did it enter into collusion? Even
setting aside such obvious questions as whether individual UN officials
took bribes, did the complicity begin in 1998, when Saddam flexed his
muscles by throwing out the weapons inspectors and when Oil-for-Food,
instead of leaving along with them, raised the cap on his oil
sales? Did it come in 1999, when, even as Saddam's theft was becoming
apparent, the UN scrapped the oil-sales limits altogether? Or in 2000
and 2001, when Sevan dismissed complaints and reports about blatant
kickbacks? Did it start in 2002, when Annan, empowered by Oil-for-Food
Plus, signed his name to projects for furnishing Saddam with luxury
cars, stadiums, and office equipment for his dictatorship? Or did
the defining moment arrive in 2003, when Annan, ignoring the immense
conflict posed by the fact that his own institution was officially on
Saddam's payroll, lobbied alongside two of Saddam's other top clients,
Russia and France, to preserve his regime? Certainly by the time
Annan and Sevan, neck-deep in revelatory press reports and standing
indignantly athwart their own secret records, continued to offer to the
world their evasions and denials, the balance had definitively tipped.
Annan's studied bewilderment is itself an indictment not only of his
person but of the system he heads. If anyone is going to take the fall
for the Oil-for-Food scandal, Sevan seems the likeliest candidate. But
it was the UN Secretary-General who compliantly condoned Saddam's
ever-escalating schemes and conditions, and who lobbied to the last
to preserve Saddam's totalitarian regime while the UN Secretariat
was swimming in his cash.
Annan has been with the UN for 32 years. He moved up through its
ranks; he knows it well. He was there at the creation of Oil-for-Food,
he chose the director, he signed the distribution plans, he visited
Saddam, he knew plenty about Iraq, and one might assume he read the
newspapers. We are left to contemplate a UN system that has engendered
a Secretary-General either so dishonest that he should be dismissed
or so incompetent that he is truly dangerous - and should be dismissed.
The final perfidy, though, is not personal but political. The UN,
in the name of its own lofty principles, and to its rich emolument,
actively helped sustain and protect a tyrant whose brutality
and repression were the cause of Iraqi deprivation in the first
place. What can this mean? The answer may be simply that, along with
its secrecy, its massed cadres of bureaucrats beholden to the favor
of the man at the top, its almost complete lack of accountability,
external oversight, or the most elementary checks and balances,
the UN suffers from an endemic affinity with anti-Western despots,
and will turn a blind eye to the devil himself in order to keep them
in power. Certainly there is much in its history and its behavior
to support this view.
Perhaps, then, the complicity was there all along, built in,
and was merely reinforced year after year as the UN collected the
commissions and processed the funds that transformed Oil-for-Food
into the sleaziest program ever to fly the UN flag and the single
largest item on every budget of all nine UN agencies involved, plus
the Secretariat itself. That, in the end, may be the dirty secret at
the center of the Oil-for-Food scandal.
And is this the same United Nations that, now, we are planning to
entrust with bringing democracy to Iraq?
NOTES
1) As of 2001, one of the largest shareholders in BNP was Iraqi-born
Nadhmi Auchi, among Britain's richest citizens. In the 1980's Auchi
had brokered business deals for Saddam; last year he was convicted in
France of illicit profiteering as part of the huge Elf oil scandal. The
UN says the Oil-for-Food contract was awarded to BNP on a strictly
competitive basis.
2) According to a spokesman at the UN Secretary-General's office,
Kojo Annan had been a trainee at Cotecna from December 1995 to
February 1998, and two months later was back at work for the firm
as a consultant; his consultancy, which lasted until December 1998,
thus coincided with the period during which the UN would have been
receiving and reviewing bids for the Oil-for-Food inspection job.
Both Kojo and Kofi Annan have denied that Kojo's consulting work was
in any way related to the UN.
3) This is especially significant in light of the role that would be
played by Saddam's televised propaganda during the war. In the event,
Saddam may have had to rely on equipment brought in earlier under
Oil-for-Food from places like France and Jordan. He was unable to take
delivery of TV studio equipment ordered from Russia and approved and
funded by the Secretariat on February 7, 2003, just six weeks before
the war. But that was not for want of Kofi Annan's approval.
4) Not only the occupation authority but the Iraqis themselves have
failed to penetrate the UN wall of disdain, although it is their own
money they wish to know about. The Iraqi Central Bank began requesting
copies of the relevant BNP bank statements in July 2003. Not until late
March of this year, after I aired the matter in a piece in National
Review Online, was there some halting sign of movement in the UN
treasurer's office. Similar stonewalling - no accounting given,
no access to statements - has met the repeated efforts of Kurds
in northern Iraq to find out what happened to about $4 billion in
separate allocations owed to them under Oil-for-Food.
Claudia Rosett, who contributes a bi-weekly column on foreign affairs
to the Wall Street Journal's online edition, OpinionJournal.com,
is a senior fellow at the Foundation for the Defense of Democracies
and an adjunct fellow of the Hudson Institute.
Commentary is published monthly (except for a combined July-August
issue) by the American Jewish Committee.
http://www.commentarymagazine.com/article.asp?aid=11705017_1
When Did He Know It?
Charged with bringing relief to the people of Iraq,
the United Nations instead bolstered Saddam's tyranny
and thoroughly corrupted itself.
Commentary
May 2004
By Claudia Rosett
For years, the United Nations Oil-for-Food program was just one
more blip on the multilateral landscape: a relief program for Iraq,
a way to feed hungry children in a far-off land until the world had
settled its quarrels with Saddam Hussein. Last May, after the fall
of Saddam, the UN Security Council voted to lift sanctions on Iraq,
end Oil-for-Food later in the year, and turn over any remaining
business to the U.S.-led authority in Baghdad. On November 20, with
some ceremony, UN Secretary-General Kofi Annan lauded the program's
many accomplishments, praising in particular its long-serving executive
director, Benon Sevan. The next day, Oil-for-Food came to an end.
But it has not ended. Suddenly, Oil-for-Food is with us again, this
time splashed all over the news as the subject of scandal at the UN:
bribes, kickbacks, fraud, smuggling; stories of graft involving tens of
billions of dollars and countless barrels of oil, and implicating big
business and high officials in dozens of countries; allegations that
the head of the program himself was on the take. In February, having
at first denied any wrongdoing, Sevan stopped giving interviews and was
then reported to be on vacation, heading into retirement. By March, the
U.S. Congress was preparing to hold hearings into Oil-for-Food. Kofi
Annan, having denied any knowledge of misdeeds by UN staff, finally
bowed to demands for an independent inquiry into the UN program,
saying, "I don't think we need to have our reputation impugned."
The tale has been all very interesting, and all very complicated. For
those who look yearningly to the UN for answers to the world's
problems, it has provoked, perhaps, some introspection about
the pardonable corruption that threatens even the most selfless
undertakings. For those who believe the UN can do nothing right,
Oil-for-Food, whatever it was about, is a delicious vindication that
everyone and everything at the world organization is crooked, the
institution a fiasco, and politicians who support it fit for recall
at the next electoral opportunity.
The excitement may be justified, but a number of important facts and
conclusions have gone missing. Oil-for-Food, run by the UN from 1996
to 2003, did, in fact, deliver some limited relief to Iraqis. It
also evolved into not only the biggest but the most extravagant,
hypocritical, and blatantly perverse relief program ever administered
by the UN. But Oil-for-Food is not simply a saga of one UN program
gone wrong. It is also the tale of a systematic failure on the part
of what is grandly called the international community.
Oil-for-Food tainted almost everything it touched. It was such
a kaleidoscope of corruption as to defy easy summary, let alone
concentration on the main issues. But let us try.
Oil-for-Food had its beginnings in the UN sanctions imposed on Iraq
following Saddam Hussein's August 1990 invasion of Kuwait. These
prohibited UN member states from trading with Iraq until the regime
had satisfactorily disarmed. Saddam refused to comply, and in the
aftermath of the first Gulf war the sanctions remained in place. (Even
under sanctions, Iraqis were theoretically allowed to import essential
foods and medicines, but Saddam's repressive system prevented them
from earning the necessary foreign exchange.) Reports fed by Saddam's
regime soon began to surface that the sanctions were imposing severe
suffering on ordinary Iraqis. The UN, then led by Secretary-General
Javier Perez de Cuellar, broached the idea of allowing Iraq to sell
oil in limited quantities, strictly to buy relief supplies.
At first, Saddam resisted this, too. But in the mid-1990's, perhaps
because he was feeling the pinch, or quite likely because he had
by then seen ways and built up the leverage to turn such a plan to
his advantage, he finally agreed. On April 14, 1995, the UN (then
under Boutros Boutros-Ghali) passed Resolution 986, authorizing
as a "temporary measure" what become known as the Oil-for-Food
program, and then spent months working out with Saddam the details
of implementation.
>>From the start, the program was poorly designed. Saddam had
blamed the fate of starving Iraqi children on the sanctions regime
and specifically on the United States. Seeking to address these
charges, the Clinton administration went looking for a compromise;
with the Secretariat in the lead, the Security Council agreed to
conditions on Oil-for-Food that were, to say the least, amenable to
manipulation. Saddam, the author of the miseries of Iraq, was given
the right to negotiate his own contracts to sell Iraqi oil and to
choose his own foreign customers. He was also allowed to draw up the
shopping lists of humanitarian supplies - the "distribution plans"
- and to strike his own deals for these goods, picking his foreign
suppliers. The UN also granted Saddam a say in the choice of the bank
that would mainly handle the funds and issue the letters of credit
to pay these suppliers; the designated institution was a French bank
now known as BNP Paribas.1
To be sure, the UN reserved for itself the authority to reject
Saddam's proposed contracts and his plans for distribution of goods
inside Iraq; to control the program's bank accounts; and to ensure
that Saddam's buying and selling were in compliance with the UN's
humanitarian plan. As spelled out in Resolution 986, oil was to be
sold "at fair-market value," and the proceeds were to pay solely for
goods and services that would be used "for equitable distribution of
humanitarian relief to all segments of the Iraqi population throughout
the country."
To all this, the UN added another twist. Unlike most of its relief
programs, in which both the cost of the relief itself and UN overhead
were paid for by contributions from member states, Oil-for-Food would
in every respect be funded entirely out of Saddam's oil revenues. The
UN Secretariat would collect a 2.2-percent commission on every barrel
of Iraqi oil sold, plus 0.8 percent to pay for UN weapons inspections
in Iraq.
If the aim of this provision was to make Saddam bear the cost of
his own obstinacy, the effect was to create a situation in which
the UN Secretariat was paid handsomely, on commission, by Saddam -
to supervise Saddam. And the bigger Oil-for-Food got, the bigger the
fees collected by Annan's office. Over the seven years of the program,
oil sales ultimately totaled some $65 billion. On the spending side,
the UN says $46 billion went for aid to Iraq, and $18.2 billion was
paid out as compensation to victims of Saddam's 1990-91 occupation
of Kuwait. As for commissions to the Secretariat, these ran to about
$1.9 billion, of which $1.4 billion was earmarked for administrative
overhead for the humanitarian program (the UN says it turned over $300
million of this to help pay for relief, but no public accounting has
ever been given) and another $500 million or so for weapons inspections
in Iraq. Discrepancies in these numbers can be chalked up to interest
paid on some of the funds, exchange-rate fluctuations, or simply the
murk in which most of the Oil-for-Food transactions remain shrouded
to this day.
Whether Saddam should have enjoyed the right to dispose of all Iraqi
oil was never questioned. In Iraq, oil was the province of a state
monopoly, which Saddam in effect claimed for his own, and on that basis
was the UN deal struck. The arrangement actually helped strengthen
Saddam's chokehold at home. With sanctions effectively forbidding all
other foreign commerce, Iraq's only legitimate trade was whatever
flowed through Saddam's ministries under the supervision of the UN
program. Thus the UN gave to Saddam the entire import-export franchise
for Iraq, taking upon itself the responsibility for ensuring that he
would use this arrangement to help Iraq's 26 million people. The
success of the program depended wholly on the UN's integrity,
competence, and willingness to prevent Saddam from subverting the
setup to his own benefit.
This was perhaps an impossible brief. But the Secretariat eagerly
shouldered the burden, accepting along with it the commissions that
flowed straight from Iraq's oil spigots. Introduced as an ad-hoc deal,
Oil-for-Food soon took on the marks of a more permanent arrangement. It
was a project in which Annan had a direct hand from the beginning. As
Under-Secretary General, he had led the first UN team to negotiate
with Saddam over the terms of the sales under Oil-for-Food. The
first shipment went out in December 1996; the following month, Annan
succeeded Boutros-Ghali as Secretary-General.
Nine months later, in October 1997, Annan tapped Benon Sevan, an
Armenian Cypriot and longtime UN official, to consolidate and run the
various aspects of the Iraq relief operation under a newly established
agency called the Office of the Iraq Program (but usually referred
to simply as Oil-for-Food). Sevan served as executive director for
the duration, reporting directly to Annan. The program was divided
into roughly six-month phases; at the start of each phase, Sevan
would report and Annan would recommend the program's continuation to
the Security Council, signing off directly on Saddam's "distribution
plans."
An issue that would later become important was how, precisely, the
responsibilities for executing the program were parceled out between
the Security Council - a committee of fifteen member states - and the
Secretariat, run by Annan. All of Saddam's proposed contracts flowed
through the Security Council, which doubled as the Iraq "sanctions
committee." But in practice, the fifteen member governments were
mostly on the watch for so-called dual-use items: goods that might
be used to make weapons.
As it turned out, only two of the five permanent, veto-wielding members
appear to have done any overseeing at all. These were the UK and
the U.S., both of which had almost no direct business with Saddam's
Iraq. The UN representatives of the other three - France, Russia,
and China - devoted their energies chiefly to urging expansion of the
program and forwarding the paperwork submitted by the many contractors
in their respective nations whom Saddam had selected as his buyers and
suppliers. As for the ten rotating members of the Security Council,
some - like Syria - were among Saddam's favored trading partners,
while most of the others lacked the resources to keep track of the
huge volume of business the program soon generated.
If final responsibility lay anywhere at all, it lay with the
Secretariat. It was this body that fielded a substantial presence
in Iraq (the U.S., apart from weapons inspectors ejected early on,
had none), employing at the height of the program some 3,600 Iraqis
plus 893 international staff working in Iraq for the nine UN agencies
coordinated by the Oil-for-Food office; another 100 or so were employed
back in New York. The Secretariat was the keeper of the contract
records and the books, and controller of the bank accounts, with
sole power to authorize the release of Saddam's earnings to pay for
imports to Iraq. The Secretariat arranged for audits of the program,
was the chief interlocutor with Saddam, got paid well for its pains,
and disseminated to the public extremely long reports in which most
of the critical details of the transactions were not included.
One of the first changes introduced by Sevan was greater
secrecy. According to John Fawcett, the co-author of a 70-page
report on Saddam's finances released in 2002 by the Washington-based
Coalition for International Justice, the UN had been fairly open
about the specifics of Saddam's contracts during the first year
of the program. From about 1998 on, however, it categorized the
most germane details as "proprietary" - carefully guarding Saddam's
privacy in his business deals. Thus, there was no disclosure of such
basic information as the names of individual contractors or the price,
quality, or quantity of goods involved in any given deal - all vital
to judging the integrity of contracts.
Instead, the Office of the Iraq Program released long lists
representing billions of dollars in business but noting only the date,
country of origin, whether or not the contract had been approved
for release of funding, and highly generic descriptions of goods.
Typical of the level of detail were notations like "electric motor"
from France, "adult milk" from Saudi Arabia, "detergent" from Russia,
"cable" from China. Who in particular might be profiting, or at what
price, was kept confidential. Nor did the UN disclose interest paid on
the Oil-for-Food accounts at BNP Paribas or (possibly) other banks,
which toward the end of the program held balances of more than $12
billion. Nor did it ever share with the public the details of how
the $1.9 billion in commissions flowing from Saddam for aid and arms
inspections (the latter were discontinued from late 1998 to late 2002)
were spent by the UN Secretariat.
The year 1998, the first full year of the program under Sevan's
directorship, is of special interest in this connection. For
starters, if evidence cited in the Wall Street Journal turns out
to be correct, this was the year in which Saddam's government may
have begun covertly sending gifts of oil to Sevan himself by way of
a Panamanian firm. It was also the year in which the UN terminated
a contract with a UK-based firm, Lloyd's Register, for the crucial
job of inspecting all Oil-for-Food shipments into Iraq, and replaced
it with a Swiss-based firm, Cotecna Inspections, with ties to Kofi
Annan's son Kojo. At the time, neither Cotecna nor the UN declared
these ties as a possible conflict of interest, which they were.2
Also in 1998, at Sevan's urging, the UN expanded Oil-for-Food to
allow Saddam to import not just food and medicine but oil-industry
equipment, and at Annan's urging more than doubled the amount of oil
Iraq was allowed to sell, raising the cap from roughly $4 billion to
more than $10 billion per year. That same year, after much hindering
and dickering, Saddam threw out the UN weapons inspectors - forbidding
their return until the U.S. and Britain finally forced the issue four
years later.
This brings us to 1999-2000, when, following Sevan's urging, the
program expanded yet further; with more funds devoted to the oil
sector, and with the weapons inspectors gone, the UN now removed the
limits on sales. In 2000, Saddam enjoyed a blockbuster year. By this
time he was not only selling vastly more oil but had institutionalized
a system for pocketing cash on the side.
It worked like this. Saddam would sell at below-market prices to
his hand-picked customers - the Russians and the French were special
favorites - and they could then sell the oil to third parties at a
fat profit. Part of this profit they would keep, part they would kick
back to Saddam as a "surcharge," paid into bank accounts outside the
UN program, in violation of UN sanctions.
By means of this scam, Saddam's regime ultimately skimmed off for
itself billions of dollars in proceeds that were supposed to have been
spent on relief for the Iraqi people. When the scheme was reported
in the international press - in November 2000, for example, Reuters
carried a long dispatch about Saddam's demands for a 50-cent premium
over official UN prices on every barrel of Iraqi oil - the UN haggled
with Saddam but did not stop it.
Beyond that, Saddam had also begun smuggling out oil through Turkey,
Jordan, and Syria. This was in flagrant defiance of UN sanctions
and made a complete mockery of Oil-for-Food, whose whole point was
to channel all of Saddam's trade. The smuggling, too, was widely
reported in the press - and shrugged off by the UN. In the same period,
Saddam imposed his own version of sanctions on the U.S., demanding
that Oil-for-Food funds be switched from dollars into euros. The UN
complied, thereby making it even harder for observers to keep track
of its largely secretive and confusing bookkeeping.
As Oil-for-Food grew in size and scope, the U.S. mission to the UN
began putting a significant number of its relief contracts on hold
for closer scrutiny. Both Sevan and Annan complained publicly and
often about these delays, describing them as injurious to the people
of Iraq and urging the Security Council to push the contracts through
faster. What Sevan did not convey was that, by 2000, complaints had
begun reaching him about Iraqi government demands for kickbacks from
suppliers on the relief side. These (according to a recent report
in the Financial Times) Sevan simply buried, telling complainants
to submit formal documents to the Security Council through their
countries' UN missions (something they had no incentive to do since
Saddam would most likely have responded by scrapping the deals
altogether).
By 2002, the sixth year of the program, it was no longer
credible that the UN Secretariat could be clueless about Saddam's
systematic violations and exploitation of the humanitarian purpose of
Oil-for-Food. On May 2, in a front-page story by Alix M. Freedman and
Steve Stecklow, the Wall Street Journal documented in detail Saddam's
illicit kickbacks on underpriced oil contracts, noting that "at least
until recently, the UN has given Iraq surprising influence over the
official price of its oil." In fact, against the resistance of Russia,
France, China, and the UN Secretariat, the U.S. and Britain had been
trying to put a halt to the kickbacks through an elaborate system to
enforce fairer pricing - but with only limited success. Sevan, clearly
aware of the scam, was quoted in the Journal article as saying he had
"no mandate" to stop it.
Apparently, however, there was a near-boundless mandate for the
Secretariat to expand the scope of the spending. A mere fortnight
later, on May 14, 2002, the Security Council passed a resolution
cutting itself out of the loop entirely on all Oil-for-Food contracts
deemed humanitarian, and giving direct power of approval to the
Secretary-General. Henceforth, the Security Council would confine
its oversight to items of potential dual use, such as chemical
spraying equipment, or forbidden goods like highly enriched uranium,
nuclear-reactor components, and the like. Unimpeded responsibility
for the "humanitarian" aspect of the program fell to Annan.
The next month, "humanitarian" became a broad category indeed. On June
2, Annan approved a newly expanded shopping list by Saddam that the
Secretariat dubbed "Oil-for-Food Plus." This added ten new sectors
to be funded by the program, including "labor and social affairs,"
"information," "justice," and "sports." Either the Secretary-General
had failed to notice or he did not care that none of these had
anything to do with the equitable distribution of relief. By contrast,
they had everything to do with the running of Saddam's totalitarian
state. "Labor," "information," and "justice" were the realms of
Baathist party patronage, propaganda, censorship, secret police,
rape rooms, and mass graves. As for sports, that was the favorite
arena of Saddam's sadistic son Uday, already infamous for torturing
Iraqi athletes.
Then came the autumn of 2002, when President Bush delivered his warning
to Saddam to comply with sixteen previous UN resolutions to disarm,
and the U.S. persuaded the Security Council to pass a seventeenth.
Though there was by this time no dearth of damning information in the
public domain, Oil-for-Food rolled on. On September 18, the Coalition
for International Justice released its heavily researched report,
Sources of Revenue for Saddam & Sons, documenting rampant corruption
and smuggling under UN sanctions and Oil-for-Food, warning of an
Iraqi shift from "informal, on-the-sly deals" to increasingly "brazen
and formal government-to-government arrangements," and asking how,
"given . . . the world's largest humanitarian program ever, can there
remain shortages of basic medicines and foodstuffs" in Iraq? Four
months later, with Saddam still defiant and war looking likely, Annan
signed a letter to the Security Council in which, among other things,
he approved the use of $20 million in Oil-for-Food funds to pay for an
"Olympic sport city" and $50 million to equip Saddam's propaganda arm,
the Ministry of Information.3
By then, of course, debate over Iraq was raging in the Security
Council, and the U.S. and Britain were bitterly at odds with France and
Russia. Annan weighed in publicly on the side of the latter, urging
yet more time and tolerance. He did not mention his own interest as
the boss of a massive relief program funded by Saddam. Neither did
he mention that Saddam's commercial deals heavily favored French and
Russian companies, though he had access to actual numbers about those
deals that, thanks to UN secretiveness, the public did not.
On March 17, with the U.S.-led coalition poised to invade, Annan
pulled his international staff out of Iraq. Three days later, as
coalition forces rolled into Iraq, he expressed regret that war had
come "despite the best efforts of the international community and
the United Nations." Describing the UN as the keeper of international
"legitimacy," he assured the Iraqi people that, as soon as possible,
the UN would be back to do "whatever it can to bring them assistance
and support."
Following the fall of Saddam's regime, the U.S.-led coalition
decided that Iraq had experienced enough of UN-style "assistance and
support," at least as far as Oil-for-Food was concerned. With Russia
and France suddenly willing to go along, perhaps to avoid scrutiny
of Oil-for-Russia and Oil-for-France, the Security Council voted
unanimously on May 22 that the program should be wound down. No more
oil revenues were to flow in, but the UN Secretariat was to continue
administering the remaining relief contracts until November, when any
unfinished business would be turned over to the Coalition Provisional
Authority (CPA) in Baghdad.
At that stage, Oil-for-Food had close to $13 billion in BNP Paribas's
Iraq accounts, most of it set aside to pay for contracts already
approved. During the summer and early fall, the New York office began
tidying up loose ends, renegotiating, "prioritizing," and basically
removing the graft elements from the remaining contracts before
handover to the CPA. In these efforts, the UN got some prompting from
the U.S. Defense Contract Management Agency (DCMA) - the agency that
has been auditing Halliburton's recent activities in Iraq.
>>From the thousands of remaining contracts, the DCMA (together
with the Defense Contract Audit Agency) culled a batch of 759 of
the largest deals, valued altogether at $6.9 billion. The reviewers
estimated that among these contracts, almost half were overpriced by
about 21 percent, for a total of $656 million that Saddam's regime
had overpaid. This was in all likelihood the kickback component,
part of which the suppliers were meant to share illicitly with the
regime. Dryly, the DCMA's report adds that, in the course of its
researches, "Some items of questionable utility for the Iraqi people
(e.g., Mercedes Benz touring sedans) were identified."
By the time the Oil-for-Food office was finished renegotiating its
contracts, it had scrapped more than a quarter of them. Some of the
reasons, listed in UN public documents, are intriguing. There was, for
example, the Syrian supplier of "spare parts for rotating equipment"
whom it was "not possible to contact"; the Lebanese vendor of "welding
machines" who was "unwilling to accept the 10-percent deduction"
- i.e., a price minus the bribe-plus-kickback; and the Jordanian
seller of school furniture whose contract had to be dropped because
"company does not exist and the person in charge moved to Egypt."
Then came the formal ceremonies to which I have already alluded. On
November 19, Sevan's office put out a press release praising
Oil-for-Food as "one of the most efficient of UN programs." On November
20, Annan chimed in with his own praise for Oil-for-Food, paying
tribute to the staff and "particularly to its executive director, Benon
Sevan." On November 21, almost seven years after setting up shop as
a temporary and limited measure to bring food and medicine to hungry
people in Iraq, the program shut down, handing the CPA a royal mess.
Sevan had assured the Security Council that, along with control of the
more than $8 billion in funds and contracts still to be administered,
the CPA would get "the entire Oil-for-Food database." In fact,
the transfer was incomplete. Plenty of contract information was
missing. So Byzantine were the BNP Paribas accounts that, rather than
risk interrupting relief deliveries, the CPA simply left them under
the management of the UN treasurer, who until almost a year after the
fall of Saddam never got around to sending any current bank statements,
let alone prior records.4
Meanwhile, however, the Iraqi Governing Council had itself begun
to pore over records of the Saddam regime from various ministries,
and former Baath officials were also starting to talk. On December
5, a British adviser to the Council, Claude Hankes-Drielsma, wrote
from Baghdad to Annan, urging the UN to "take the moral high ground"
and appoint an independent commission to investigate profiteering
under Oil-for-Food.
Not a moment too soon: now the revelations were beginning to flow
rapidly. On January 25 of this year, the Iraqi newspaper Al-Mada
published a list, reportedly recovered from the Iraqi oil ministry, of
some 270 individuals and entities in some 50 countries who were alleged
to have received vouchers good for oil from Saddam Hussein. The list
was an eye-opener. It included the former French Interior Minister
Charles Pasqua, British MP George Galloway, Indonesian President
Megawati Sukarnoputri, the Russian nationalist Vladimir Zhirinovsky,
a large number of Russian oil companies, the Russian state, and the
Russian Orthodox Church. It also included the family name of the head
of the UN Oil-for-Food program: Sevan.
Those named in Al-Mada's list ignored, denied, or dismissed it
on grounds that they had legitimately bought oil from Saddam. As
for Sevan, he categorically repudiated the notion that he had ever
received oil or oil money from the Iraqi regime, while Annan, in a
statement more artfully hedged, said: "As far as I know, nobody in
the Secretariat has committed any wrongdoing." A spokesman for the
UN Secretariat repeated the by-now usual line that Oil-for-Food had
been the most audited program at the UN - "audited to death" was the
exact phrase - and in late February the Oil-for-Food office released a
seven-page statement clearly aimed at deflecting blame for any graft
involved with the program.
According to this official account, the Secretariat had no
responsibility for confirming that contract-pricing was fair, or
that suppliers were legitimate (that was the job of Saddam and the
UN country missions); no responsibility for implementing the program
(that too was the job of Saddam); no responsibility for either spotting
or stopping corruption by Saddam via Oil-for-Food contracts (that was
the job of the Security Council); and no awareness of unauthorized
oil exports (though the office confirmed its knowledge of "media
reports on alleged violations"). By the light of this clarification,
indeed, it was hard to tell what the Oil-for-Food program was, in
fact, responsible for, beyond controlling the opaque bank accounts,
checking that the contracts - honest or not - were properly punctuated,
watching Saddam do whatever he chose, and collecting a 2.2-percent
commission on his oil.
And so we arrive at the denouement - at least so far. On February
29, the New York Times published a long news article based on "a
trove of internal Iraqi government documents and financial records"
unearthed by the Iraqi Governing Council. The article described oil
traders lugging suitcases full of illicit cash to the ministries and
cited stacks of evidence showing that, through Oil-for-Food, Saddam's
regime had squirreled away billions for itself while ordinary Iraqis
received expired medicines and substandard rations.
Still the UN hung tough. On March 3, Hankes-Drielsma notified
Annan that Iraqi authorities had asked an auditing firm, KPMG
International, and a law firm, Freshfields Bruckhaus Deringer,
to prepare an independent report. In his letter, Hankes-Drielsma
explained his reasoning:
Based on the facts as I know them at the present time, the UN failed
in its responsibility to the Iraqi people and the international
community at large. The UN should not be surprised that the Iraqi
people question the UN's credibility at this time and any future role
for the UN in Iraq. It will not come as a surprise if the Oil-for-Food
program turns out to be one of the world's most disgraceful scams and
an example of inadequate control, responsibility, and transparency,
providing an opportune vehicle for Saddam Hussein to operate under
the UN aegis to continue his reign of terror and oppression.
On March 10 came confirmation that Annan's son Kojo had held a
consultancy with Cotecna right around the time the company won the UN
job to inspect goods coming into Iraq. On March 11 came an article
in the Wall Street Journal detailing further links between Saddam's
oil largesse and Sevan. The following week came word that Congress
would hold hearings on Oil-for-Food. And on March 19, having ignored,
stonewalled, and denied, Annan finally conceded that "it is highly
possible there has been quite a lot of wrongdoing," and called for
an independent inquiry.
As the various audits, investigations, and hearings gear up to
delve into the saga of UN involvement in Saddam's Iraq, we may
learn even more about his worldwide net of corruption. With skill,
we may locate some of the billions he is believed to have salted
away under UN oversight. With luck, we may get to this money ahead
of the terrorists with whom he consorted - if they have not gotten
to it already. Already known, for example, is that two firms doing
business with Saddam through Oil-for-Food were linked to financier
Ahmed Idris Nasreddin, now on the UN's own watchlist of individuals
"belonging to or associated with" al Qaeda.
But let us retain our focus. That Saddam Hussein was a monster and
a corrupt monster is not news. That he would exploit, for massive
personal gain, a humanitarian program meant to relieve the miseries of
his countrymen is horrifying but hardly astonishing. Nevertheless,
any investigation that confines itself to detailing the abundantly
evident corruption of Saddam Hussein will have missed the point.
What lies at the core of this story is the United Nations, and how
it came to pass that an institution charged with bringing peace
and probity to the world should have offered itself up - willingly,
even eagerly - as the vehicle for a festival of abuse and fraud.
To begin with, Oil-for-Food was an enormous venture in central
planning, the biggest project of its kind launched in many a decade
and one that utterly ignored the lessons about such systems learned
at agonizing cost over the past century. The UN Secretariat, in its
well-paid arrogance, set out to administer virtually the entire economy
of Iraq. Under its eye, all legitimate trading privileges became the
franchise of a tyrant who laid first claim to every barrel of oil
and every dollar (or euro) of proceeds. How could Oil-for-Food not
help consolidate Saddam's grip on power? Nevertheless, it was with
this grand thief of Baghdad that the UN cut its humanitarian deal,
chalking in a fat commission for the Secretariat.
Nor did anyone in the UN system so much as lift an eyebrow, even
after questions began to be raised. Last November, before the Security
Council of the United Nations, the organization's Secretary-General
proclaimed it a splendid achievement that the UN had legitimized a
scheme by which 60 percent of Iraq's population depended entirely
on the rationing cards of a totalitarian state. This was an event
that should have seized the vaunted international community with
horror. Instead, from out of the mouth of the Angolan ambassador who
that month was chairing the UN Security Council there issued only
unctuous praise for "the exceptionally important role of the program
in providing humanitarian assistance to the people of Iraq."
But all that is only prelude. The scope of UN dereliction is much
broader, encompassing factors institutional, personal, and, finally,
political.
It is true that Oil-for-Food managed to deliver to Iraqis some
portion of what it promised. On sales totaling $65 billion, some $46
billion (by Annan's uncheckable reckoning) went for "humanitarian"
spending. Of this amount, an official total of $15 billion worth of
food and health supplies - the original rationale for the program - had
been received by the time Saddam fell. The actual figure was no doubt
considerably less if you factor in the kickbacks and spoiled goods;
from the remainder came the equipment for Saddam's oil monopoly,
the construction materials, the TV studio systems, the carpets and
air conditioners for the ministries, and all the rest.
But at what cost? Are we supposed to conclude that, in order to
deliver this amount of aid, the UN had to approve Saddam's more
than $100 billion worth of largely crooked business, had to look the
other way while he skimmed money, bought influence, built palaces,
and stashed away billions on the side, at least some of which may
now be funding terror in Iraq or beyond?
No, something was at work here other than passive acquiescence. At
precisely what moment during the years of Oil-for-Food did the UN
Secretariat cross the line from "supervising" Saddam to collaborating
with him? With precisely what deed did it enter into collusion? Even
setting aside such obvious questions as whether individual UN officials
took bribes, did the complicity begin in 1998, when Saddam flexed his
muscles by throwing out the weapons inspectors and when Oil-for-Food,
instead of leaving along with them, raised the cap on his oil
sales? Did it come in 1999, when, even as Saddam's theft was becoming
apparent, the UN scrapped the oil-sales limits altogether? Or in 2000
and 2001, when Sevan dismissed complaints and reports about blatant
kickbacks? Did it start in 2002, when Annan, empowered by Oil-for-Food
Plus, signed his name to projects for furnishing Saddam with luxury
cars, stadiums, and office equipment for his dictatorship? Or did
the defining moment arrive in 2003, when Annan, ignoring the immense
conflict posed by the fact that his own institution was officially on
Saddam's payroll, lobbied alongside two of Saddam's other top clients,
Russia and France, to preserve his regime? Certainly by the time
Annan and Sevan, neck-deep in revelatory press reports and standing
indignantly athwart their own secret records, continued to offer to the
world their evasions and denials, the balance had definitively tipped.
Annan's studied bewilderment is itself an indictment not only of his
person but of the system he heads. If anyone is going to take the fall
for the Oil-for-Food scandal, Sevan seems the likeliest candidate. But
it was the UN Secretary-General who compliantly condoned Saddam's
ever-escalating schemes and conditions, and who lobbied to the last
to preserve Saddam's totalitarian regime while the UN Secretariat
was swimming in his cash.
Annan has been with the UN for 32 years. He moved up through its
ranks; he knows it well. He was there at the creation of Oil-for-Food,
he chose the director, he signed the distribution plans, he visited
Saddam, he knew plenty about Iraq, and one might assume he read the
newspapers. We are left to contemplate a UN system that has engendered
a Secretary-General either so dishonest that he should be dismissed
or so incompetent that he is truly dangerous - and should be dismissed.
The final perfidy, though, is not personal but political. The UN,
in the name of its own lofty principles, and to its rich emolument,
actively helped sustain and protect a tyrant whose brutality
and repression were the cause of Iraqi deprivation in the first
place. What can this mean? The answer may be simply that, along with
its secrecy, its massed cadres of bureaucrats beholden to the favor
of the man at the top, its almost complete lack of accountability,
external oversight, or the most elementary checks and balances,
the UN suffers from an endemic affinity with anti-Western despots,
and will turn a blind eye to the devil himself in order to keep them
in power. Certainly there is much in its history and its behavior
to support this view.
Perhaps, then, the complicity was there all along, built in,
and was merely reinforced year after year as the UN collected the
commissions and processed the funds that transformed Oil-for-Food
into the sleaziest program ever to fly the UN flag and the single
largest item on every budget of all nine UN agencies involved, plus
the Secretariat itself. That, in the end, may be the dirty secret at
the center of the Oil-for-Food scandal.
And is this the same United Nations that, now, we are planning to
entrust with bringing democracy to Iraq?
NOTES
1) As of 2001, one of the largest shareholders in BNP was Iraqi-born
Nadhmi Auchi, among Britain's richest citizens. In the 1980's Auchi
had brokered business deals for Saddam; last year he was convicted in
France of illicit profiteering as part of the huge Elf oil scandal. The
UN says the Oil-for-Food contract was awarded to BNP on a strictly
competitive basis.
2) According to a spokesman at the UN Secretary-General's office,
Kojo Annan had been a trainee at Cotecna from December 1995 to
February 1998, and two months later was back at work for the firm
as a consultant; his consultancy, which lasted until December 1998,
thus coincided with the period during which the UN would have been
receiving and reviewing bids for the Oil-for-Food inspection job.
Both Kojo and Kofi Annan have denied that Kojo's consulting work was
in any way related to the UN.
3) This is especially significant in light of the role that would be
played by Saddam's televised propaganda during the war. In the event,
Saddam may have had to rely on equipment brought in earlier under
Oil-for-Food from places like France and Jordan. He was unable to take
delivery of TV studio equipment ordered from Russia and approved and
funded by the Secretariat on February 7, 2003, just six weeks before
the war. But that was not for want of Kofi Annan's approval.
4) Not only the occupation authority but the Iraqis themselves have
failed to penetrate the UN wall of disdain, although it is their own
money they wish to know about. The Iraqi Central Bank began requesting
copies of the relevant BNP bank statements in July 2003. Not until late
March of this year, after I aired the matter in a piece in National
Review Online, was there some halting sign of movement in the UN
treasurer's office. Similar stonewalling - no accounting given,
no access to statements - has met the repeated efforts of Kurds
in northern Iraq to find out what happened to about $4 billion in
separate allocations owed to them under Oil-for-Food.
Claudia Rosett, who contributes a bi-weekly column on foreign affairs
to the Wall Street Journal's online edition, OpinionJournal.com,
is a senior fellow at the Foundation for the Defense of Democracies
and an adjunct fellow of the Hudson Institute.
Commentary is published monthly (except for a combined July-August
issue) by the American Jewish Committee.
http://www.commentarymagazine.com/article.asp?aid=11705017_1