Investigating abuses within the oil-for-food program in Iraq

Edward Mortimer, Jakarta

As the June 30 deadline for the restoration of Iraqi sovereignty approaches, it is becoming clear that the United Nations will be called on to play a crucial role in the transition -- by helping to choose a caretaker government, which will be in charge of Iraq from July 1 until elections are held in January 2005, and by advising on the conduct of those elections.

Some critics of the UN have been seeking to question its fitness for this role by seizing on allegations of corruption and mismanagement in the "oil-for-food" program, through which, from 1996 to 2003, the UN Security Council sought to relieve the suffering inflicted on ordinary Iraqis by sanctions aimed at Saddam Hussein's regime.

These allegations are as yet unsubstantiated. But Secretary- General Kofi Annan is taking them very seriously. Two weeks ago he appointed a panel of eminent persons to investigate.

It's hard to imagine people better qualified for this than the three Annan chose: Paul Volcker, former head of the U.S. Federal Reserve; Richard Goldstone, who played a key role in South Africa's Truth and Reconciliation Commission, which conducted a searching inquiry into the abuses of the apartheid regime; and Mark Pieth, one of the world's leading experts on bribery and money-laundering. All three have the highest reputation for integrity, expertise and ability to get at the truth.

They will investigate not only actions by UN officials but also those of agents and contractors engaged by the UN, or by Iraq, in connection with the oil-for-food program. They will have access to all UN documents and personnel. The Security Council has called on all governments to cooperate fully. Annan has promised to take action against any UN officials found guilty of wrongdoing, and will not allow any who are found to have broken the law to claim immunity.

As Volcker himself has said, "there is always some damage in the accusations, but what seems to be important is finding out whether there is any substance to those. If there is any substance to them, get it out there, get it out in a hurry and cauterize the wound."

No one should pre-judge the panel's findings. For the moment, we have only allegations -- some precise, against named individuals, others vague and general, and quite a few based on misunderstandings about the nature and purpose of the program.

Some widely quoted figures are clearly wrong.

For instance, oil-for-food was not "a US$100 billion plus program", unless you count the money twice, adding oil exports to humanitarian imports. Iraqi oil sales under the program totaled $64.2 billion during the whole seven years of its life.

Next, the estimate of the U.S. General Accounting Office (GAO) that "from 1997-2002, the former Iraqi regime attained $10.1 billion in illegal revenues from the Oil-for-Food Program" is misleadingly phrased, since more than half that figure ($5.7 billion) relates to "oil smuggled out of Iraq" in violation of UN sanctions. This had been going on for years before the program was established, and was quite unconnected with it.

UN officials had neither mandate nor capacity to police such smuggling. That was the task of the Multinational Interception Force created by the Security Council in 1990, and of national authorities in the countries through which the oil passed. When the oil-for-food program was set up, its agents were authorized only to check the quantities of oil exported legally by Iraq, through two specified export points.

That leaves $4.4 billion -- if the GAO figures are correct -- which may have been "skimmed off", in two ways:

First, there is evidence that Saddam deliberately underpriced his oil, so that, instead of the full price going into the UN escrow account, a secret premium could be demanded from purchasers, which was not declared to the UN but either paid into secret accounts or pocketed by middlemen to whom Saddam gave negotiable vouchers as political favors. The UN's oil overseers got wind of this practice in 2000 and alerted the Security Council -- which agreed, some months later, that henceforth Iraq should be required to fix its prices retroactively, reducing the scope for illicit premiums.

Secondly, Saddam encouraged companies from which he was buying food and other items authorized under the program to overprice their goods, and required them to pay back the difference -- not into the UN escrow account but into secret accounts of his own. This abuse was much harder for UN officials to detect. In some cases they did query the prices and, if no satisfactory answer was given, reported their concerns to the Security Council's sanctions committee, which gave final approval to the contracts.

The whole program was designed and supervised by the Council, all of whose 15 members served on this committee. Any one of them could put a contract on hold for further investigation. The U.S. and UK put thousands of contracts on hold, citing fears that the goods involved might have military uses. In no such case since 1998 did they cite concerns about the price or quality of the goods. Only after Saddam Hussein's fall was the full extent of these "kickbacks" revealed.

Finally, whatever illicit gains Saddam may or may not have been able to skim off, the program did provide a basic food ration for all 27 million residents of Iraq. Between 1996 and 2001 the average Iraqi's daily food intake increased from 1200 to 2200 kilocalories per day. Malnutrition among Iraqi children dropped by 50 percent during the life of the program, as did deaths of children under five in the center and south of the country. During the same period polio was eradicated from Iraq, thanks to vaccination campaigns funded by the program.

The combined pressures of sanctions and Saddam's oppressive regime undoubtedly made the 1990s a dark decade for most Iraqis. The blame belongs mainly to Saddam Hussein, who not only imposed his brutal rule but also brought down the wrath of the world on his country -- first by invading Kuwait and then by refusing full cooperation with UN disarmament inspectors. The oil-for-food program was an effort to spare ordinary Iraqis some of the bitter hardships that their leaders had brought upon them. No doubt it could have been better designed, and better implemented. But in its basic mission, it succeeded.

The author is Director of Communications in the office of the UN Secretary-General.