The Wall Street Journal
Oil-for-Food: The U.N. View
By EDWARD MORTIMER
April 30, 2004; Page A14
As the June 30 deadline for the restoration of Iraqi sovereignty approaches, it
is becoming clear that the U.N. will be called on to play a crucial role in the
transition -- by helping to choose a caretaker government, which will be in
charge of Iraq from July 1 until elections are held in January 2005, and by
advising on the conduct of those elections.
Some critics of the U.N., particularly well represented on this page, have been
seeking to question its fitness for this role by seizing on allegations of
corruption and mismanagement in the "Oil-for-Food" program, through which, from
1996-2003, the Security Council sought to relieve the suffering inflicted on
ordinary Iraqis by sanctions aimed at Saddam Hussein's regime. These allegations
are as yet unsubstantiated. But Secretary-General Kofi Annan is taking them very
seriously. Last week he appointed a panel of eminent persons to investigate.
It's hard to imagine people better qualified for this than the three Mr. Annan
chose: Paul Volcker, former head of the Federal Reserve; Richard Goldstone, who
played a key role in South Africa's Truth and Reconciliation Commission, which
conducted a searching inquiry into the abuses of the apartheid regime; and Mark
Pieth, one of the world's leading experts on bribery and money-laundering. All
three have the highest reputation for integrity, expertise and an ability to get
at the truth.
They will investigate not only actions by U.N. officials but also those of
agents and contractors engaged by the U.N., or by Iraq, in connection with the
Oil-for-Food program. They will have access to all U.N. documents and personnel.
The Security Council has called on all governments to cooperate fully. Mr. Annan
has promised to take action against any U.N. officials found guilty of
wrongdoing, and will not allow any who are found to have broken the law to claim
immunity. As Mr. Volcker has said, "There is always some damage in the
accusations, but what seems to be important is finding out whether there is any
substance to those. If there is any substance to them, get it out there, get it
out in a hurry and cauterize the wound."
No one should prejudge the panel's findings. For the moment, we have only
allegations -- some precise, against named individuals; others vague and
general; and quite a few based on misunderstandings about the nature and purpose
of the program.
Some widely quoted figures are clearly wrong. For instance, Oil-for-Food was not
"a $100 billion plus program," unless you count the money twice, adding oil
exports to humanitarian imports. Iraqi oil sales under the program totaled $64.2
billion in the seven years of its life.
Next, the estimate of the General Accounting Office (GAO) that "from 1997-2002,
the former Iraqi regime attained $10.1 billion in illegal revenues from the
Oil-for-Food Program" is misleadingly phrased, since more than half that figure
($5.7 billion) relates to "oil smuggled out of Iraq" in violation of U.N.
sanctions. This had been going on for years before the program was established,
and was quite unconnected with it.
U.N. officials had neither mandate nor capacity to police such smuggling. That
was the task of the Multinational Interception Force created by the Security
Council in 1990, and of national authorities in the countries through which the
oil passed. When the Oil-for-Food program was set up, its agents were authorized
only to check the quantities of oil exported legally by Iraq, through two
specified export points.
That leaves $4.4 billion -- if GAO figures are correct -- which may have been
"skimmed off" in two ways:
• First, there is evidence that Saddam deliberately underpriced his oil, so
that, instead of the full price going into the U.N. escrow account, a secret
premium could be demanded from purchasers, which was not declared to the U.N.
but either paid into secret accounts or pocketed by middlemen to whom Saddam
gave negotiable vouchers as political favors. The U.N.'s oil overseers got wind
of this practice in 2000 and alerted the Security Council -- which agreed, some
months later, that henceforth Iraq should be required to fix its prices
retroactively, reducing the scope for illicit premiums.
• Secondly, Saddam encouraged companies from which he was buying food and other
items authorized under the program to overprice their goods, and required them
to pay back the difference -- not into the U.N. escrow account but into secret
accounts of his own. This abuse was much harder for U.N. officials to detect. In
some cases they did query the prices and, if no satisfactory answer was given,
reported their concerns to the Security Council's sanctions committee, which
gave final approval to the contracts. The whole program was designed and
supervised by the Council, all of whose 15 members served on this committee. Any
one of them could put a contract on hold for further investigation. The U.S. and
Britain put thousands of contracts on hold, citing fears that the goods involved
might have military uses. In no such case since 1998 did they cite concerns
about the price or quality of the goods. Only after Saddam's fall was the full
extent of these "kickbacks" revealed.
• Finally, whatever illicit gains Saddam may or may not have been able to skim
off, the program did provide a basic food ration for all 27 million residents of
Iraq. Between 1996-2001, the average Iraqi's daily food intake increased from
1200 to 2200 kilocalories per day. Malnutrition among Iraqi children dropped by
50% during the life of the program, as did deaths of children under five in the
center and south of the country. During the same period, polio was eradicated
from Iraq, thanks to vaccination campaigns funded by the program.
The combined pressures of sanctions and Saddam's oppressive regime undoubtedly
made the '90s a dark decade for most Iraqis. The blame belongs mainly to Saddam,
who not only imposed his brutal rule but also brought down the wrath of the
world on his country -- first by invading Kuwait and then by refusing full
cooperation with U.N. disarmament inspectors. The Oil-for-Food program was an
effort to spare ordinary Iraqis some of the bitter hardships that their leaders
had brought upon them. No doubt it could have been better designed, and better
implemented. But in its basic mission, it succeeded.
Mr. Mortimer is director of communications in the office of the U.N. Secretary
UN director of communications Edward Mortimer tries to obfuscate what could turn
out to be the biggest (greatest?) financial scandal in the history of the world.
He tries to find fault with the $100+ billion figure used in some media
articles. In actuality, this figure is correct when viewing the opportunities
for corruption. First, $64.2 billion was earned in a series of earning
transactions. (Interest earned on unspent amounts, estimated at $2 billion,
should be added to this amount.) And then nearly the same amount was spent in a
series of expenditure transactions. Together, both earning and expenditure
transactions offered Saddam Hussein's regime double the opportunity for
Yes, of course, the program could have been better designed and implemented.
While the program may have succeeded in its basic mission, at whose expense? And
what were the concomitant consequences? Who are the winners and who are the
losers? By how much?
As the program was being implemented, course corrections could have been made as
learnings were being learned. More funds could have been better applied. But no
substantial change was made during the program's 7-year history other than
increasing the oil being exported from an initial limit of $4 billion per year
to an unlimited amount with the sky as the limit.
The program is about the stewardship of Iraq's resources for the Iraqi people.
The investigations should be about UN leadership and management of the
Mortimer is right about Security Council members being complicit. After all,
having passed resolutions authorizing the program the members are ultimately
responsible for its performance. The SC received reports from the Office of the
Iraq Programme (OIP) and had official opportunity to ask appropriate questions
that could have moved UN implementing organizations to improved action.