Oil-for-food Program: Ten Investigations
KRG
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% account.

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.

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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 aid purchases.

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 safeguards."

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 inspection."

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 charges.

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.