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The Oil-for-Food Scam: What did Kofi Annan Know,and When Did He Know

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  • The Oil-for-Food Scam: What did Kofi Annan Know,and When Did He Know

    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
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