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 General.
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KRG Commentary

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 corruption.

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 stewardship.

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.