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Oil-for-Food; the Diminishing Scandal

by ask Fri Dec 2nd, 2005 at 01:28:55 PM EST

Cross-posted at Booman Tribune

I have long thought of writing an entry on the so-called Oil-for-Food scandal (OFF).  But it has been difficult because it was a bit too close to home.  I did not work in the OFF, but over the years, on three occasions, I worked on assignments for them and got to see quite a bit of the inner workings of the place.

The UN has been a perennial target, particularly by the right of American politics for a long time.  But the occasion of the OFF turned a lot of this criticism into rabid attacks.  Senator Norm Coleman, Chair of the Senate Permanent Subcommittee on Investigations has been among those most eager to push the attacks, which is why it gave me such an undivided pleasure to see George Galloway so thoroughly dressing him down during the hearings back in May (regardless of what one may otherwise think of MP Galloway).  Or think John Bolton as Ambassador to the UN.  But I digress.

More below:


As you all will recall, the UN Secretary-General - Mr. Kofi Annan - appointed an independent commission to investigate the allegations.  This panel was chaired by the previous Chairman of the Federal Reserve under Jimmy Carter and Ronald Reagan.

Today, I came across this article, which basically covers all the issues I would have raised myself.

Where Volcker Got It Wrong

Volcker's investigation places much of the onus for this troubling event on the UN Secretariat's office. However, a fair reading of Volcker's conclusions is that Kofi Annan not only did not have a central role in this lamentable affair but bore scant responsibility from the onset. Instead the one nation which shoved the inquiry forward from the beginning was most culpable - the United States.          

Let's review the facts. Washington was complicit in two ways for what happened.

First, starting shortly after the end of the first Gulf War in 1991, it secretly allowed oil to be smuggled from Iraq to two US allies, Jordan and Turkey. Under this arrangement, Saddam Hussein managed to illegally rake in $11 billion of the $12.8 billion which he is estimated to have received overall unlawfully in the 1990s and early 2000 from oil-related transactions.

Then, under the separate oil-for-food program which Washington helped to initiate in the Security Council in 1996, Hussein skimmed off the last $1.8 billion or so (far below original estimates of $4.4 billion) from various contractors.

Critics, however, have hammered Kofi Annan for allowing both operations to go ahead without tight supervision. One must remember, nonetheless, that, for the Jordan/Turkey undertaking, Washington controlled the venture exclusively and would not permit any outsider to oversee its activities, so Annan could do nothing about the smuggling.

On the second matter - the oil-for-food program - commentators have assailed Annan for 1) appointing a smarmy official as head of the UN unit carrying out, on behalf of the Security Council, operations on the ground in Iraq; 2) permitting Saddam Hussein to select his own trading partners; and 3) not arranging internal audits on the program's transactions.

In all three instances, Annan was essentially blameless.

(my bold)

Please read the whole article, I quoted about one third of it.

The author's arguments fully support what I observed for myself.

On the smuggling he is absolutely correct.  The Iraqis had American tacid approval to export oil to important allies - Jordan and Turkey - as their economies were suffering badly because of the sanctions. But in direct violation of the UN sanctions so eagerly pushed by the US.  I saw this for myself in Iraq, both on the road to the border with Jordan as well as with Turkey.  Tanker trucks literally bumper-to-bumper all the way to the border, thousands of them.  Why it is called smuggling is a mystery to me - it was all in the open for all to see (not to mention satellites), but the strongest member of the Security Council made sure that these smuggling operations - I mean sanction violations - were not cause for further sanctions against Iraq or the recipients.

This operation accounted for $11 billion of the $12.8 billion that flowed back to Saddam during the sanctions/OFF.

About $1.5 billion of the remaining $1.8 billion were kick-backs from the contractors that were awarded contracts for supply of humanitarian goods.  All contracts issued by the Iraqi Government were subject to scrutiny by the Sanctions Committee, also known as the 661-committee after Security Council Resolution 661 (1990) (which established the sanctions).  All the 5 permanent members of the Security Council (SC) were also members of this committee - hence, the US Mission to the UN had access to each and every contract issued.

Staff of the OFF alerted the committee over 70 times of suspected price irregularities - leading only to SC adoption of some revised procedures.

But the American government, in the end, never heeded any of its particulars on kickbacks.

Here is a pdf-summary (600KB) of the final Volcker report.

With the above in mind, it is utterly unfair to place the main blame on Annan.

There is still the problem of two UN employees accused of corrupt practices.  The head of the OFF, Mr, Benon Sevan is accused of illegally receiving oil allocations, as well as cash.  Mr. Alexander Yakovlev was not in the OFF - he was an official in the UN procurement division, now cooperating in the investigation that he solicited a bribe to influence the award of an inspection contract.  These are serious issues and major human failures.

However, it is a sad fact of human nature and at the end of the day, considering the thousands of UN staff passing through the OFF over the years and the enormous monetary sums involved - the level of corruption was extremely low by staff involved.

When comparing with the major fiasco that the occupation authorities has handled all aspects of reconstruction and humanitarian intervention - and all the moneys involved, it totally pales.  This could be subject for a separate diary entry, but you all know what I am talking about.  Hundreds of millions carried around in bags and sacks with paperwork missing; corrupt billion dollar no-bid contracts to administration cronies.  Extreme over-billing for shoddy work.  The list goes on.

But the UN 'scandal' is useful deflection from scrutiny of own failures.  And the MSM continue as the same useless tools, not checking, just reciting the administration's agenda.

Think of any huge, major undertaking - whether public or private; there will always some that succumb to temptation.  Can you think of any exceptions?

But look at the current administration; appointments of incompetent cronies, corrupt contracting, propaganda camouflaged as news paid by tax dollars - it appears to be entirely systematic.  Insane tax cuts benefiting the richest.  An immense, thorough, relentless undertaking of further enriching those already excessively privileged.
OK, enough.

by ask on Fri Dec 2nd, 2005 at 01:33:57 PM EST
Tonight, reading this...it depresses me. The corruption is at the level of the Security Council. It must be really weird to be Annan and know all this stuff, and be pretty much completely powerless. AND have to defend himself, to boot.

Excellent article...I didn't realize you worked for the UN...you must have many interesting perspectives on all this (and more).

(And by the way, welcome back ask!)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia

by whataboutbob on Fri Dec 2nd, 2005 at 04:27:27 PM EST
[ Parent ]
Hi bob,
I usually refer to my employer as a large multi-national organization - keeping a low profile.
I wasn't really gone, lurking around here frequently.  But started in a new assignment a couple of months ago - it's been busy.  BTW, I work in the development/humanitarian sphere - not the political one.

It has been very frustrating to see the misdirected criticism.  Yes, the OFF enabled Saddam to siphon off enormous resources, but as outlined above, this was not the UN's responsibility.  It was not staff that failed, it was the respective national delegations (some particular ones) that prevented the UN from fully implementing the sanctions.

In the comments over at BT, Oui posted this link to a Kos-entry early November.  I had missed it then, but it is an excellent piece, which unfortunately did not get much attention.

Anyway, time to wrap up here in the office - it's weekend!  

by ask on Fri Dec 2nd, 2005 at 05:04:44 PM EST
[ Parent ]
Here is the link that I referenced just above.
by ask on Fri Dec 2nd, 2005 at 05:15:45 PM EST
[ Parent ]
Quote from that Dkos article:

In a global economy, distinctions between "American" or "French" companies are essentially a joke. The Volcker report paints a picture of layer upon layer of front companies and cut-outs, off-shore subsidiaries and hastily slapped together strategic partnerships: "Iraq's preference for French companies and the limited number of recipients in France for Iraqi crude oil led certain companies to pass themselves off ... as being French-based." The report cites a 1998 letter from a French official to an Iraqi official based in Paris, in which he expressed "his concerns and his government's concerns ... regarding the increase in British and American companies as well as others who exploit the decision of the Iraqi leadership in providing priority to conducting business with French companies by signing contracts with Iraq through their offices in France."

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Dec 2nd, 2005 at 07:25:50 PM EST
[ Parent ]
I hope there are people out there willing to dig.  Would not surprise me if companies in the Halliburton sphere are found to be the manufacturer of parts supplied to Iraqi oil sector by trading and front companies - usually located in the Middle-East.
In which case, they would have been complicit in the kick-back schemes.
by ask on Sat Dec 3rd, 2005 at 10:18:26 AM EST
[ Parent ]
The UN already ended up with egg all over its face in 1998 when the US infiltrated the weapons inspection teams with CIA agents in order to get coordinates for bombing Saddam's palaces...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Dec 2nd, 2005 at 05:22:33 PM EST
[ Parent ]
So the US provides 22% of the UN's budget. Why doesn't everyone else increase their UN contributions by 28% and get done with it?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Dec 2nd, 2005 at 05:24:28 PM EST
You may be onto something...
It's the usual blackmail - NYT today:
December 2, 2005
Blocking Reform at the U.N.

Muscular diplomacy is one thing. But John Bolton has been all muscle and no diplomacy as the United States ambassador to the United Nations. Now he's threatening to hold up its entire two-year operating budget unless his demands for major reforms are met almost immediately.

by ask on Fri Dec 2nd, 2005 at 06:01:00 PM EST
[ Parent ]
Do yuo have Kofi Annan's e-mail?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Dec 2nd, 2005 at 06:24:31 PM EST
[ Parent ]
The normal e-mail architecture in the Secretariat is lastname@un.org.
Don't know if it will work for Kofi.
by ask on Fri Dec 2nd, 2005 at 07:42:35 PM EST
[ Parent ]
I've often wondered the same thing before, re: if other countries could increase their giving to the UN, so US has not so much influence. But, if the US is cut out, then I wonder if they would stay involved at all (though they are most flagrant in ignoring anything they don't like or agree with). An interesting problem...how to get a giant rogue country to cooperate?

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Sat Dec 3rd, 2005 at 03:08:05 AM EST
[ Parent ]
When comparing with the major fiasco that the occupation authorities has handled all aspects of reconstruction and humanitarian intervention - and all the moneys involved, it totally pales.

You left out the best example: the occupiers laundered off more OFF money than Saddam's entire income: they 'lost' the remaining unspent OFF money on UN and Iraqi accounts, both sums were a dozen billion dollars.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Dec 2nd, 2005 at 07:22:51 PM EST
That is right, though I cannot confirm your number.  The latest of relevance I could find was this (from January):
Audit: U.S. lost track of $9 billion in Iraq funds
Pentagon, Bremer dispute inspector general's report

WASHINGTON (CNN) -- Nearly $9 billion of money spent on Iraqi reconstruction is unaccounted for because of inefficiencies and bad management, according to a watchdog report published Sunday.
An inspector general's report said the U.S.-led administration that ran Iraq until June 2004 is unable to account for the funds.

But there may be fresher info out there (beyond my googling-capacities, which are quite limited).  I know I have seen more recent reports, but cannot recall the figures or find the articles.

Given the chaos under the CPA, I find it likely that most of the losses were due to embezzlement.  Pure and simple.

by ask on Fri Dec 2nd, 2005 at 08:18:12 PM EST
[ Parent ]
Check this webpage from Global Policy Forum for various links to media reports on oil-for-food program investigations.  I certainly haven't had time to go through this material myself, but there might be something useful there.

(Also, for anyone who's interested in the status of the criminal case that was brought against several individuals and companies (Bayoil and others) for their allegedly illegal activities during the oil-for-food program, see this comment over at BMT.)

by The Maven on Fri Dec 2nd, 2005 at 08:32:34 PM EST
[ Parent ]
No, no newer info, having looked it up, I must say I trusted my and Ritter's memory too much - and counted the same sum twice, a sum that included both OFF money and seized funds (and post-invasion oil sales too).

However, there is earlier info that remains relevant the Christian Aid report [pdf!] from June 2004, which estimated unaccounted for Iraqi money at $13 billion. Note that unlike the US audit report, this includes money misappropiated even before paying into the Development Fund for Iraq (DFI): oil sales totals don't add up, nor seized assets. Some numbers:

  • OFF money paid by the UN into the DFI: $8.1 billion
  • post-invasion oil sales until May, Christian Aid estimate: $13 billion
  • post-invasion oil sales paid to the DFI by May 2004: $10 billion (CPA claim)
  • the regime's seized assets & funds: $2.5 billion
  • money from seized assets/funds paid into the DFI: less than $1 billion accounted for by the CPA)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Dec 3rd, 2005 at 11:23:33 AM EST
[ Parent ]
My view of the oil for food kickbacks is similar to yours, but not quite the same. Yes it is a case of the pot calling the kettle black, and the instrumentalization of the scandal as a stick to bash SecGen and the UN as a whole was very annoying. However, I do think that Kofi deserves some blame here. My impression is that he is someone very reluctant to hold senior UN officials to account for serious ethical lapses and not at all sympathetic to whistleblowers. He is a highly competent product of the career UN bureaucracy, but very much part of its institutional culture. It's not just the OIF but also the sexual harassment stuff.  

And as a child of mid level international organization employees I was 'shocked, shocked' to hear that there might be corruption at the UN. Way too many senior international organization managers are there through patronage rather than merit. Accountability is close to non existent, petty corruption (junkets, gifts) is rife.  Again, I'm not saying that this is something unusual for a public bureaucracy, but one shouldn't have any illusions about the UN being any more pure than, say, the DOD or your typical US state bureaucracy.  At the same time, just as one seeks to eliminate that sort of stuff at home, one should also do so at the UN.

by MarekNYC on Fri Dec 2nd, 2005 at 11:31:44 PM EST
Way too many senior international organization managers are there through patronage rather than merit.

There is an unfortunate policy in the Secretariat and some of the larger agencies of geographical distribution of posts.  Some countries have reasonably transparent and competitive processes to select such staff.  Others are using the quota as a means to dispense favors.

There is a need for reform in the UN, and a decent initiative has been underway throughout this year - that is until Bolton showed up.  I did an entry on this back in late August.

by ask on Sat Dec 3rd, 2005 at 09:53:39 AM EST
[ Parent ]
The same is true of the International Olympic Committee, of course.

The US diplomatic corps may be highly professional, but at the highest levels it is just a way to give campaign donors a paid vacation.

The EU has, in many ways, become an elephant cemetery of sorts, at least as far as Spanish political parties are concerned. The losers of national political battles get sent to the EU Commision or the Parliament (Almunia, Borrell, Vidal Quadras, Mayor Oreja). The UK does the same, just look at Peter Mandelson.

So yes, not only is diplomat a fancy word for spy, but diplomacy is a dirty and corrupt. That doesn't mean that international institutions don't play a role, or don't play it well.

The current woes of the UN have a lot to do with the fact that the US does no longer control the international system that they set up after WWII (same with the WTO, for instance) and wants to dismantle it. The whole oild for food scandal (and the reversal of blame for the 1998 inspector crisis) are just for internal US consumption, to justify arrears or outright  undermining of the institution (a la Bolton) to the US public.

Which leads me back to the suggestion that the rest of the world should just increase their contributions by 28% to make the US's 22% unnecessary. After all, the UN already operated without US funds for several years in the 1980's.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Sat Dec 3rd, 2005 at 10:08:21 AM EST
[ Parent ]
I cannot find the link anymore, but I read very recently in Le Monde a summary of the various procedures started by different countries following the Volcker report, and the only one which seems to take it seriously is France, with several high profile indictments (of course, that can be interpreted as a sign that it was the only country with high level officials involved with Saddam, but somehow I doubt that)

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Dec 3rd, 2005 at 11:49:47 AM EST
I thought I best summarize all the various sums associated with the UN's Oil For Food (OFF) programme in a graphic form:

(BTW, according to the UN, by today, $10 billion was transferred to the DFI.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Dec 3rd, 2005 at 01:27:09 PM EST
Great job, DoDo.
I like that presentation.
by ask on Sat Dec 3rd, 2005 at 01:50:25 PM EST
[ Parent ]

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