Oil-for-food Program: Ten Investigations
2 October 2004
Program integrity. Lots of questions, innumerable. The oil-for-food program
initiated by UN Security Council resolution 986 ended in November 2003. But the
program is still not over.
Ten separate investigations have been in the works: eight by organizations of
the US Government including one in Iraq, one by Iraqis, and one by the UN.
The seven-year program was implemented in thirteen 6-month phases from December
1996 to November 2003. (The last six months of the program that followed the
2003 war were not considered a separate implementation phase.)
The program earned $64.2 billion on UN-monitored Iraqi oil sales. The funds were
deposited in five escrow accounts, in a French bank.
Not to be overlooked, there was an additional $3 billion in bank interest earned
on unspent funds.
Part way through the seven-year program, the GOI (Government of Iraq) moved the
UN to change the bank accounts from dollar accounts to euro accounts. What were
the exchange losses and gains?
74.2% was applied to humanitarian goods and services, from three of the five
escrow accounts: 59% account for Iraqis in the center-south, 13% account for
Iraqis in the Iraqi Kurdistan Region, and 2.2% account for the UN.
Given the huge purchases, the program should have commanded the lowest prices on
the global market.
The GOI directly controlled the spending of the 59% account, more than $35
billion. The GOI also directly controlled the spending of 40% of the 13% account
(food, medical supplies, oil spare parts), more than $3 billion. The UN directly
controlled the spending of the balance of more than $5 billion in the 13%
The GOI chose the country, contractor, and negotiated the price to be paid.
Global tendering was not required. How do the prices actually paid compare with
the prices that could have, should have, been paid?
Here's an exercise that would be very revealing. First, obtain a database with
the following few data items and compute using readily available database
analysis and statistical programs:
1) comm number
2) contractor's name (doublecheck spelling)
3) contract value ($)
4) contractor's country (each contract had to submitted to the UN for approval
through the government of the country where the contractor was registered)
5) one or two word, or code, describing the goods/services
6) sector (food, medicines, education, agriculture, electricity, water, etc.)
All data items, except (6) used to be available on the UN's OIP (Office of the
Iraq Programme) website. It would be very helpful, of course, if the UN made the
data readily available in database format on the website or separately on CD.
But if the database is not available from the UN, if what used to be available
on the UN's website could be obtained, then it's just a lot of data entry work
that could be done by a good team within a week or two.
Once the data is entered, checked and verified, there are many examinations that
could be very simply done by database analysis and statistical programs commonly
used by students and others. One basic analysis: by country, list the total
number of contracts, total value of contracts, % of total number of contracts,
and % of total value of all contracts. What would the results indicate?
In which countries could the lowest prices have been paid?
Not so by the way: the UN had two layers of monitoring the distribution of goods
and services in center-south Iraq. In Kurdistan, the UN monitored itself. How
many real monitors were there compared to the number authorized or required, and
how many man-days were they actually available? What were their findings and
what corrective actions were attempted/taken? Saybolt, the export surveyors, and
the GOI were apparently very closely connected; they lived together. Cotecna,
the import surveyors, was not properly set up to monitor quality, notably of
food and medicines, and quantity. For instance, at border inspection points they
had neither lab nor truck weighing scales.
If it wasn't for Iraq and the US presidential election dominating the news,
might the oil-for-food program be right up in front?
It's not over until it is over.
The New York Times
October 2, 2004
3 Nations Reportedly Slowed Probe of Oil Sales
By JUDITH MILLER
Congressional investigators say that France, Russia and China systematically
sabotaged the former United Nations oil-for-food program in Iraq by preventing
the United States and Britain from investigating whether Saddam Hussein was
diverting billions of dollars.
In a briefing paper given yesterday to members of the House subcommittee
investigating the program, the investigators said their review of the minutes of
a United Nations Security Council subcommittee meeting showed that the three
nations "continually refused to support the U.S. and U.K. efforts to maintain
the integrity" of the program.
The program, set up in 1996, was an effort to keep pressure on Mr. Hussein to
disarm while helping the Iraqi people survive the sanctions imposed after the
invasion of Kuwait in 1990. The briefing paper was prepared by the House
Subcommittee on National Security, Emerging Threats and International Relations,
before hearings scheduled for Tuesday on the scandal-ridden program.
The paper suggests that France, Russia and China blocked inquiries into Iraq's
manipulation of the program because their companies "had much to gain from
maintaining'' the status quo. "Their businesses made billions of dollars through
their involvement with the Hussein regime and O.F.F.P.," the document states,
using the initials for the program. No officials of the three governments could
be reached for comment.
The paper also accuses the United Nations office charged with overseeing the
program of having "pressed" contractors not to rigorously inspect Iraqi oil
being sold and the foreign goods being bought. The program office, headed by
Benan Sevan, who is also under investigation by a committee appointed by the
United Nations, turned a blind eye to corruption charges, the paper says,
because it apparently saw oil-for-food "strictly as a humanitarian program."
Representative Christopher Shays, the Connecticut Republican who chairs the
subcommittee, said in an interview that there was no doubt that the abuses were
systemic and that blame for the widespread corruption must be shared by Security
Council members, the United Nations office that administered the program, and
the contractors hired by the United Nations to inspect Iraq's oil exports and
The briefing paper said the hearing would focus on Cotecna, the
Switzerland-based company hired by the United Nations in 1999 to monitor goods
shipped to Iraq, and Saybolt International B.V., the Dutch company that
monitored Iraqi oil exports.
Also under scrutiny will be BNP Paribas, the French bank that handled oil
revenues under the program and which "never initiated a review of the program or
the reputation of those involved," the paper says. This "apparent incuriosity,"
it adds, "raises questions about its internal due diligence and ethical
The paper said Mr. Hussein's government had influenced whom Saybolt and Cotecna
employed and had made it hard for them to obtain the equipment and supplies they
needed. "This slowed the inspection process, making it difficult for the
inspectors to carry out their duties and easier for the Iraqis to pressure the
inspectors or sneak things past the inspection regime,'' the paper says.
Cotecna, which monitored goods bought by Iraq, "had no authority to force
authentication or inspection on shipments coming across the border, nor did they
have the practical authority to detain shipments that failed authentication or
The subcommittee paper called Cotecna a "paper tiger.''
The paper concludes that the program's greatest weakness was a lack of
transparency. "Most transactions involving the program were done behind closed
doors or sometimes illicitly," it states. The lists of oil purchasers and aid
providers were not known. The United Nations internal audits continue to be
withheld from United Nations members and the public.
A recent report issued in Washington by the Government Accountability Office,
formerly the General Accounting Office, accused the Hussein government of having
pocketed more than $10 billion from the six-year oil-for-food program, which
used $64.2 billion in Iraqi oil sales to pay for food, medicine and other goods
from 1997 to 2003. Last February, a document from Iraqi ministries reportedly
cited Mr. Sevan, the chief of the United Nations office that administered the
program, as having received oil allotments himself. Mr. Sevan has denied the
The Shays subcommittee is investigating all aspects of the program, as are
several other Congressional panels and the United Nations-appointed panel, which
is headed by Paul A. Volcker, former chairman of the Federal Reserve.