Behind the UN Oil for Food Programme
Iraq: the real sanctions scandal
The recent interim report by the independent commission investigating the United Nations oil-for-food programme accuses UN officials of favouritism, violation of competitive bidding rules, and a dangerous lack of auditing. But the truth may be far more complicated.
By Joy Gordon
ANOTHER Iraq scandal emerged last spring, quite different from the Abu Ghraib prison torture allegations, complete with photographs, that were then embarrassing the Bush adminstration in the United States. The Iraqi newspaper Al Mada focused attention on charges that the United Nations-run oil-for-food programme had been corrupt. In April the US general accounting office published a report claiming that Saddam Hussein had accumulated over $10bn in funds from illicit oil sales and kickbacks on import contracts (1). Later a 900-page CIA report found there were no weapons of mass destruction in Iraq, but noted that the Iraqi government had none the less engaged in smuggling and fraud to raise money for weapons of mass destruction.
The rightwing press in the US has been eager to follow up on the accusations, and histrionically. William Safire proclaimed it “the worst financial scandal in human history” (2), although the recent Enron company scandal involving Kenneth Lay, a long-time friend of President George Bush, resulted in similar losses, including billions of dollars of employee pension funds. Claudia Rosett of the Wall Street Journal described the UN programme as marked by “privilege and secrecy”, suggesting this put the UN in the same category as dictatorships (3). Congressman Christopher Shays, who presided over two of the nine congressional hearings that investigated the accusations, claimed that the programme had “trust[ed] Saddam Hussein to exercise sovereign control over billions of dollars of oil sales and commodity purchases” (4).
Many of these claims could not be further from the truth. The programme provided enormous amounts of information, all of it easily accessible on its website (5). It has always been possible to discover on the website within a few seconds the distribution list for every six-month period of the programme’s operation - a list of every item that Iraq was permitted to buy using the funds. It has always has been possible to look at the UN secretary general’s quarterly reports that described in detail the condition of every sector of Iraq’s economy and society, the goods delivered, the programme’s priorities, the oil exports and condition of Iraq’s oil industry, and the elaborate monitoring process.
The website contained charts showing the status of every contract for oil sales and imports. It also gave weekly updates, with current information on policy decisions, problems and changes in the contracting process. And it contained every security council resolution, programme report, and every other related document, except for those specifically deemed confidential.
Nor was it ever the case that the UN gave Saddam sovereign control over anything: purchasing decisions, the transfer of funds or oil sales. Far from giving the Iraqi government free rein, the programme had an elaborate system of monitoring and accountability. Before Iraq could purchase anything, it had to submit a list of every item it wished to buy, stating how and where it would be used. The list was accompanied by a lengthy explanation of the priorities in each area of need - including agriculture, nutrition, healthcare and education.
Once the UN staff had approved the list, with the input of the UN’s specialist agencies, Iraq was permitted to negotiate with a seller. This was the only thing Iraq could choose freely. And this was not because the UN staff failed to notice, but because the security council had specifically decided to permit Iraq to do so, in resolution 986 and the memorandum of understanding that laid out the terms of the programme.
The attacks have accused the UN of failing to exercise any oversight or providing any accountability for the oil sales and humanitarian imports in the programme. The reality was quite different. Once Iraq had negotiated a contract, that contract was scrutinised at several levels before it could be approved. It was sent to the Unscom (later Unmovic) inspectors to ensure that Iraq was not importing any materials that could be used for illicit arms. It was sent to the programme staff (whose office was housed in the secretariat) to ensure that it conformed to the list of approved goods.
It was then sent to the 661 committee, the security council committee charged with implementing the sanctions regime on Iraq. The US was particularly active on this committee, drawing on a staff of 60 US technical experts to examine Iraq’s contracts. The US was unique in the degree to which it exercised its veto power: it was responsible for blocking billions of dollars of critical humanitarian goods, over the objections of nearly every other nation on the security council. But, according to congressional testimony, the US never once blocked a contract because of price irregularities, even when presented with documentation that these contracts were likely to result in kickbacks to Saddam’s regime (6).
Once a contract was approved, the goods were delivered to Iraq, where independent inspectors (first Lloyd’s Register, later Cotecna) were hired to confirm that the goods corresponded to the contracts. There was a staff of hundreds of UN employees who made thousands of site visits to ensure that the goods were distributed equitably and not diverted to military or other improper uses.
Oil sales were similarly subject to extensive scrutiny. The secretary general appointed a group of oil overseers, experts from the international oil industry, each approved by the 661 committee. Their job was to scrutinise all transactions, including the terms and price of all oil sales, and to make recommendations to the committee regarding transactions. Iraq could not make a single oil sale under the programme as designed: no funds from the programme were to go through the hands of the Iraqi government at any point.
All the funds from oil sales went into an escrow account held by the UN, which paid all vendors directly from the escrow funds. If the government of Iraq succeeded in skimming funds or arranging for kickbacks from oil sales or import contracts in the programme, it was not because the UN handed over billions of dollars to Saddam to do as he wished. Nor was it because there was no system of accountability. Any misappropriation that may have taken place happened despite the most elaborate monitoring and oversight.
According to the general accounting office report, Saddam smuggled $6bn of oil, much of it by tanker, through the Persian Gulf. But neither the secretariat nor the agencies, nor any other part of the UN, was responsible for interdicting smuggling. Instead, there was a security council resolution, 665, that invited member states with naval forces to intervene to prevent Iraqi smuggling, if they chose. The Multinational Interception Force (MIF), a loose coalition of ships, operated from 1990 until the US invasion of Iraq in 2003. But it was not under the command of the secretary general or any other UN personnel: it was at all times under the command of US officers from the Fifth Fleet. Almost all the MIF ships were from the US - in 2001, there were 90 US ships but only a few from all the other countries.
The CIA report, in October 2004 (7), maintained that most of Iraq’s illicit income came from unauthorised trade agreements between the government of Iraq and other nations. Iraq’s illicit trade with Jordan, some $4.4bn, was the largest share. According to the report, this arrangement was particularly valuable to Iraq in the first half of the 1990s and “ensured the regime’s financial survival” until the programme began in December 1996 (8). But the security council, and its most influential member, the US, was well aware of the trade with Jordan, and did nothing.
UN staff are accused of allowing Iraq to skim funds and receive kickbacks from contracts under the programme. Interviews with Iraqi government employees after the fall of Baghdad in 2003 revealed that they had been instructed to inflate the cost of import contracts by 5%-10%, and then recoup the difference from the vendor. Although the US had occasionally told other members of the security council that it believed there were kickbacks, it never provided evidence or enough information to allow UN staff to take action. Increases of 5%-10% were not obvious.
Where the pricing of a purchase was clearly outside normal commercial practices, the UN staff would ask the vendor to provide an explanation. If it was not satisfactory, the UN staff would present the problem to the 661 committee. Many times they notified the committee of contracts with pricing irregularities so extreme that it was likely there were kickbacks. The UN staff was not authorised to block a contract, only to present the information to the members of the security council.
Over the course of sanctions, the US was by far the most aggressive about blocking contracts for security concerns. As of July 2002 there were $5bn of critical humanitarian imports unilaterally placed on hold by the US, and the Iraqi people suffered because of it. But faced with clear documentation showing likely kickbacks, the US again chose to do nothing. In over 70 cases, the UN staff informed the committee of contracts where kickbacks were likely to occur, and in none of these cases did the US choose to block or delay the contract.
While the mainstream press in the US has highlighted these scandals, it has neglected to mention the catastrophic effect that more than 12 years of sanctions had on Iraq, accelerating the weakening of both state and people (9), or the thousands of dollars misspent by the interim Iraqi government (10). Nearly three-quarters of all current contracts of $5m or more, paid for out of Iraqi funds, were not competitively bid (11). It is ironic that so many in the US are focused on the UN’s dealings in Iraq when the US has its own enormous financial scandal in that country. But however shocking these financial scandals are, it would be even more tragic if the credibility of international governance was also compromised.
Joy Gordon is professor of philosophy at Fairfield University, Connecticut
Original text in English
(1) “United Nations: Observations on the oil-for-food programme,” statement of Joseph A Christoff, director, international affairs and trade, US general accounting office, 7 April 2004.
(2) New York Times, 14 June 2004.
(3) Statement for the record of Claudia Rosett, hearings held by subcommittee on national security, emerging threats, and international relations, 21 April 2004.
(4) Hearings on national security, 21 April 2004.
(5) http://www.un.org/Depts/oip/
(6) Testimony of John Ruggie, House of Representatives committee on international relations, 28 April 2004.
(7) Comprehensive report of the special adviser to the DCI on Iraq’s WMD, 30 September 2004.
(8) Ibid, Regime finance and procurement section.
(9) See Alain Gresh, “A debt of dishonour”, Le Monde diplomatique, English language edition, January 1999.
(10) Iraq Revenue Watch, Briefing n° 9, December 2004,
(11) Ibid; Iraq Revenue Watch Report no 7, September 2004.
English language editorial director: Wendy Kristianasen - all rights reserved © 1997-2005 Le Monde diplomatique.
The recent interim report by the independent commission investigating the United Nations oil-for-food programme accuses UN officials of favouritism, violation of competitive bidding rules, and a dangerous lack of auditing. But the truth may be far more complicated.
By Joy Gordon
ANOTHER Iraq scandal emerged last spring, quite different from the Abu Ghraib prison torture allegations, complete with photographs, that were then embarrassing the Bush adminstration in the United States. The Iraqi newspaper Al Mada focused attention on charges that the United Nations-run oil-for-food programme had been corrupt. In April the US general accounting office published a report claiming that Saddam Hussein had accumulated over $10bn in funds from illicit oil sales and kickbacks on import contracts (1). Later a 900-page CIA report found there were no weapons of mass destruction in Iraq, but noted that the Iraqi government had none the less engaged in smuggling and fraud to raise money for weapons of mass destruction.
The rightwing press in the US has been eager to follow up on the accusations, and histrionically. William Safire proclaimed it “the worst financial scandal in human history” (2), although the recent Enron company scandal involving Kenneth Lay, a long-time friend of President George Bush, resulted in similar losses, including billions of dollars of employee pension funds. Claudia Rosett of the Wall Street Journal described the UN programme as marked by “privilege and secrecy”, suggesting this put the UN in the same category as dictatorships (3). Congressman Christopher Shays, who presided over two of the nine congressional hearings that investigated the accusations, claimed that the programme had “trust[ed] Saddam Hussein to exercise sovereign control over billions of dollars of oil sales and commodity purchases” (4).
Many of these claims could not be further from the truth. The programme provided enormous amounts of information, all of it easily accessible on its website (5). It has always been possible to discover on the website within a few seconds the distribution list for every six-month period of the programme’s operation - a list of every item that Iraq was permitted to buy using the funds. It has always has been possible to look at the UN secretary general’s quarterly reports that described in detail the condition of every sector of Iraq’s economy and society, the goods delivered, the programme’s priorities, the oil exports and condition of Iraq’s oil industry, and the elaborate monitoring process.
The website contained charts showing the status of every contract for oil sales and imports. It also gave weekly updates, with current information on policy decisions, problems and changes in the contracting process. And it contained every security council resolution, programme report, and every other related document, except for those specifically deemed confidential.
Nor was it ever the case that the UN gave Saddam sovereign control over anything: purchasing decisions, the transfer of funds or oil sales. Far from giving the Iraqi government free rein, the programme had an elaborate system of monitoring and accountability. Before Iraq could purchase anything, it had to submit a list of every item it wished to buy, stating how and where it would be used. The list was accompanied by a lengthy explanation of the priorities in each area of need - including agriculture, nutrition, healthcare and education.
Once the UN staff had approved the list, with the input of the UN’s specialist agencies, Iraq was permitted to negotiate with a seller. This was the only thing Iraq could choose freely. And this was not because the UN staff failed to notice, but because the security council had specifically decided to permit Iraq to do so, in resolution 986 and the memorandum of understanding that laid out the terms of the programme.
The attacks have accused the UN of failing to exercise any oversight or providing any accountability for the oil sales and humanitarian imports in the programme. The reality was quite different. Once Iraq had negotiated a contract, that contract was scrutinised at several levels before it could be approved. It was sent to the Unscom (later Unmovic) inspectors to ensure that Iraq was not importing any materials that could be used for illicit arms. It was sent to the programme staff (whose office was housed in the secretariat) to ensure that it conformed to the list of approved goods.
It was then sent to the 661 committee, the security council committee charged with implementing the sanctions regime on Iraq. The US was particularly active on this committee, drawing on a staff of 60 US technical experts to examine Iraq’s contracts. The US was unique in the degree to which it exercised its veto power: it was responsible for blocking billions of dollars of critical humanitarian goods, over the objections of nearly every other nation on the security council. But, according to congressional testimony, the US never once blocked a contract because of price irregularities, even when presented with documentation that these contracts were likely to result in kickbacks to Saddam’s regime (6).
Once a contract was approved, the goods were delivered to Iraq, where independent inspectors (first Lloyd’s Register, later Cotecna) were hired to confirm that the goods corresponded to the contracts. There was a staff of hundreds of UN employees who made thousands of site visits to ensure that the goods were distributed equitably and not diverted to military or other improper uses.
Oil sales were similarly subject to extensive scrutiny. The secretary general appointed a group of oil overseers, experts from the international oil industry, each approved by the 661 committee. Their job was to scrutinise all transactions, including the terms and price of all oil sales, and to make recommendations to the committee regarding transactions. Iraq could not make a single oil sale under the programme as designed: no funds from the programme were to go through the hands of the Iraqi government at any point.
All the funds from oil sales went into an escrow account held by the UN, which paid all vendors directly from the escrow funds. If the government of Iraq succeeded in skimming funds or arranging for kickbacks from oil sales or import contracts in the programme, it was not because the UN handed over billions of dollars to Saddam to do as he wished. Nor was it because there was no system of accountability. Any misappropriation that may have taken place happened despite the most elaborate monitoring and oversight.
According to the general accounting office report, Saddam smuggled $6bn of oil, much of it by tanker, through the Persian Gulf. But neither the secretariat nor the agencies, nor any other part of the UN, was responsible for interdicting smuggling. Instead, there was a security council resolution, 665, that invited member states with naval forces to intervene to prevent Iraqi smuggling, if they chose. The Multinational Interception Force (MIF), a loose coalition of ships, operated from 1990 until the US invasion of Iraq in 2003. But it was not under the command of the secretary general or any other UN personnel: it was at all times under the command of US officers from the Fifth Fleet. Almost all the MIF ships were from the US - in 2001, there were 90 US ships but only a few from all the other countries.
The CIA report, in October 2004 (7), maintained that most of Iraq’s illicit income came from unauthorised trade agreements between the government of Iraq and other nations. Iraq’s illicit trade with Jordan, some $4.4bn, was the largest share. According to the report, this arrangement was particularly valuable to Iraq in the first half of the 1990s and “ensured the regime’s financial survival” until the programme began in December 1996 (8). But the security council, and its most influential member, the US, was well aware of the trade with Jordan, and did nothing.
UN staff are accused of allowing Iraq to skim funds and receive kickbacks from contracts under the programme. Interviews with Iraqi government employees after the fall of Baghdad in 2003 revealed that they had been instructed to inflate the cost of import contracts by 5%-10%, and then recoup the difference from the vendor. Although the US had occasionally told other members of the security council that it believed there were kickbacks, it never provided evidence or enough information to allow UN staff to take action. Increases of 5%-10% were not obvious.
Where the pricing of a purchase was clearly outside normal commercial practices, the UN staff would ask the vendor to provide an explanation. If it was not satisfactory, the UN staff would present the problem to the 661 committee. Many times they notified the committee of contracts with pricing irregularities so extreme that it was likely there were kickbacks. The UN staff was not authorised to block a contract, only to present the information to the members of the security council.
Over the course of sanctions, the US was by far the most aggressive about blocking contracts for security concerns. As of July 2002 there were $5bn of critical humanitarian imports unilaterally placed on hold by the US, and the Iraqi people suffered because of it. But faced with clear documentation showing likely kickbacks, the US again chose to do nothing. In over 70 cases, the UN staff informed the committee of contracts where kickbacks were likely to occur, and in none of these cases did the US choose to block or delay the contract.
While the mainstream press in the US has highlighted these scandals, it has neglected to mention the catastrophic effect that more than 12 years of sanctions had on Iraq, accelerating the weakening of both state and people (9), or the thousands of dollars misspent by the interim Iraqi government (10). Nearly three-quarters of all current contracts of $5m or more, paid for out of Iraqi funds, were not competitively bid (11). It is ironic that so many in the US are focused on the UN’s dealings in Iraq when the US has its own enormous financial scandal in that country. But however shocking these financial scandals are, it would be even more tragic if the credibility of international governance was also compromised.
Joy Gordon is professor of philosophy at Fairfield University, Connecticut
Original text in English
(1) “United Nations: Observations on the oil-for-food programme,” statement of Joseph A Christoff, director, international affairs and trade, US general accounting office, 7 April 2004.
(2) New York Times, 14 June 2004.
(3) Statement for the record of Claudia Rosett, hearings held by subcommittee on national security, emerging threats, and international relations, 21 April 2004.
(4) Hearings on national security, 21 April 2004.
(5) http://www.un.org/Depts/oip/
(6) Testimony of John Ruggie, House of Representatives committee on international relations, 28 April 2004.
(7) Comprehensive report of the special adviser to the DCI on Iraq’s WMD, 30 September 2004.
(8) Ibid, Regime finance and procurement section.
(9) See Alain Gresh, “A debt of dishonour”, Le Monde diplomatique, English language edition, January 1999.
(10) Iraq Revenue Watch, Briefing n° 9, December 2004,
(11) Ibid; Iraq Revenue Watch Report no 7, September 2004.
English language editorial director: Wendy Kristianasen - all rights reserved © 1997-2005 Le Monde diplomatique.
posted by R7 | 2/15/2005 09:38:00 AM
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