April 18, 2003
The New York Times
Oil, Food and a Whole Lot of Questions
By CLAUDIA ROSETT

President Bush's call to lift economic sanctions against Iraq could mean the end of the United Nations oil-for-food program, which has overseen the country's oil sales since 1996. Not only are France and Russia likely to object, but they may well support efforts by Secretary General Kofi Annan to modify the oil-for-food system, which is due to expire on May 12, and give it a large role in rebuilding the country. Whatever Mr. Annan's reasons for wanting to reincarnate the operation, before he makes his case there's something he needs to do: open the books.

The oil-for-food program is no ordinary relief effort. Not only does it involve astronomical amounts of money, it also operates with alarming secrecy. Intended to ease the human cost of economic sanctions by letting Iraq sell oil and use the profits for staples like milk and medicine, the program has morphed into big business. Since its inception, the program has overseen more than $100 billion in contracts for oil exports and relief imports combined.

It also collects a 2.2 percent commission on every barrel — more than $1 billion to date — that is supposed to cover its administrative costs. According to staff members, the program's bank accounts over the past year have held balances upward of $12 billion. With all that money pouring straight from Iraq's oil taps — thus obviating the need to wring donations from member countries — the oil-for-food program has evolved into a bonanza of jobs and commercial clout. Before the war it employed some 1,000 international workers and 3,000 Iraqis. (The Iraqi employees — charged with monitoring Saddam Hussein's imports and distribution of relief goods — of course all had to be approved by the Baath Party.)

Initially, all contracts were to be approved by the Security Council. Nonetheless, the program facilitated a string of business deals tilted heavily toward Saddam Hussein's preferred trading partners, like Russia, France and, to a lesser extent, Syria. About a year ago, in the name of expediency, Mr. Annan was given direct authority to sign off on all goods not itemized on a special watch list. Yet shipments with Mr. Annan's go-ahead have included so-called relief items such as "boats" and boat "accessories" from France and "sport supplies" from Lebanon (sports in Iraq having been the domain of Saddam's Hussein's sadistic elder son, Uday).

On Feb. 7, with war all but inevitable, Mr. Annan approved a request by the regime for TV broadcasting equipment from Russia. Was this material intended to shore up the propaganda machine Saddam Hussein had built in recent years? After all, the United Nations in 2000 and 2001 approved more than a dozen contracts with Jordan and France for Iraq to import equipment for "educational TV."

It is impossible to find out for certain. The quantities of goods involved in shipments are confidential, and almost all descriptions on the contract lists made public by the United Nations are so generic as to be meaningless. For example, a deal with Russia approved last Nov. 19 was described on the contract papers with the enigmatic notation: "goods for resumption of project." Who are the Russian suppliers? The United Nations won't say. What were they promised in payment? That's secret.

I was at least able to confirm that the shipment of Russian TV equipment approved in February was not delivered before the war started. A press officer told me that batch didn't actually get to Iraq because United Nations processing is so slow that "it usually takes three to four months" before the purchases start to arrive.

Bureaucratic lags notwithstanding, putting a veil of secrecy over tens of billions of dollars in contracts is an invitation to kickbacks, political back-scratching and smuggling done under cover of relief operations. Of course, with so little paperwork made public, it is impossible to say whether there has been any malfeasance so far — but I found nothing that would seem to contradict Gen. Tommy Franks's comment that the system should have been named the "oil-for-palace program." Why, for example, are companies in Russia and Syria — hardly powerhouses in the automotive industry — listed as suppliers of Japanese vehicles? Why are desert countries like Libya, Syria and Saudi Arabia delivering powdered milk?

And then there is this menacing list of countries that supplied "detergent": Syria, Lebanon, Libya, Algeria, Yemen and Sudan. Maybe all that multisourced soap was just a terrific bargain for doing the laundry. But there is no way for any independent parties — including the citizens of Iraq, whose money was actually spent on the goods — to know.

Mr. Annan's office does share more detailed records with the Security Council members, but none of those countries makes them public. There is no independent, external audit of the program; financial oversight goes to officials from a revolving trio of member states — currently South Africa, the Philippines and, yes, France.

As for the program's vast bank accounts, the public is told only that letters of credit are issued by a French bank, BNP Paribas. Kurdish leaders in northern Iraq, entitled to goods funded by 13 percent of the program's revenues, have been trying for some time to find out how much interest they are going to receive on $4 billion in relief they are still owed. The United Nations treasurer told me that that no outside party, not even the Kurds, gets access to those figures.

Then there is the program's compensation commission, which is supposed to dole out 25 percent of all oil-for-food proceeds to people and companies harmed by Saddam Hussein's invasion of Kuwait in 1990. It has so far dispensed $17.5 billion and approved a further $26.2 billion. Who decides on compensation claims? Commission members are picked from a "register of experts" supplied by Mr. Annan. One staff member told me that that this register cannot be released because it is "not public." The identities of the individual claimants are, of course, "confidential."

Lifting the sanctions would take away the United Nations' remaining leverage in Iraq. If the oil-for-food operation is extended, however, it will have a tremendous influence on shaping the new Iraq. Before that is allowed to happen, let's see the books.

Claudia Rosett, a former foreign correspondent for The Wall Street Journal, is writing a book on dictatorships and democracy.