Kofi Annan’s Silence.
Blame Game

Claudia Rosett 
February 16, 2005
The New Republic
http://www.tnr.com/user/nregi.mhtml?i=20050221&s=rosett022105&pt=jkE1YZ%2FLIut1vpqt9dtikl%3D%3D
On February 3, the United Nations-authorized inquiry into the Oil-for-Food scandal, led by former Federal Reserve Chairman Paul Volcker, issued its first interim report. Volcker's most lurid finding so far is that Saddam Hussein, at the behest of Oil-for-Food Programme Executive Director Benon Sevan, allocated lucrative oil sales to a Panama-based company. This, concluded Volcker, constituted a grave and continuing conflict of interest on Sevan's part and a violation of the U.N. charter. Investigators are now pondering Volcker's disclosure that Sevan's aunt, while living on a government pension in Cyprus, sent Sevan a series of payments from 1999 through 2003 totaling $160,000. The aunt then died in 2004 after falling down an elevator shaft, right around the time the United Nations, after much stonewalling by U.N. Secretary-General Kofi Annan and assorted protests of innocence from Sevan, agreed to launch an official probe into Oil-for-Food.  
But Volcker's recent interim report--there is another interim one expected soon and a final report due out this summer--does not even begin to address the true dimensions of Oil-for-Food, in which the United Nations oversaw more than $110 billion of Saddam's business transactions while Saddam racked up sanctions-busting illicit income estimated at anywhere from $9 to $17 billion. The emerging picture is that Oil-for-Food was the largest scam in the history of humanitarian relief. And the big questions are: Who at the United Nations might be to blame? And what needs fixing? 
At the United Nations, public accountability can ricochet forever between the Secretariat, which functions as its executive branch, and the Security Council. But, in this case, ultimate responsibility must rest with Annan. Although the Security Council created and oversaw the Oil-for-Food Programme, staff from Annan's Secretariat helped design and run the program, and the Secretariat benefited financially from its existence and pushed for its expansion. Annan knew the program was corrupt. In choosing to remain silent about its abuses, he failed to uphold the integrity of his office and of the United Nations as a whole. 
 Authorized by the United Nations in 1995 to relieve the suffering of Iraq's people while keeping Saddam under U.N. sanctions, Oil-for-Food was originally advertised as a way to let Saddam sell oil abroad to buy food and medicine for Iraq's citizens. To cover its costs for overseeing the program, the Secretariat collected 2.2 percent of the revenue on every barrel of oil sold, amounting to $1.4 billion over the life of the program (plus another 0.8 percent, or $500 million, to pay for weapons inspections that ceased in late 1998, when Saddam stopped cooperating with them). This meant that Annan--who was secretary-general for all but the first month of the program--did not have to petition member-states for donations to run Oil-for-Food. Instead, the program was self-perpetuating. Both the relief funds and the U.N. overhead flowed from Iraq's oil wells. The program ran from December 1996 to November 2003, with the United Nations monitoring oil sales totaling $64 billion and relief contracts totaling $46 billion, of which some $39 billion had been delivered by the time the United Nations ended its role, seven months after Saddam's fall. The program racked up a few billion more in interest income and foreign exchange earnings, and it paid out $18 billion to a U.N. commission set up to compensate victims of Saddam's 1990 invasion of Kuwait. The United Nations turned the remaining relief contracts over to the Coalition Provisional Authority in Baghdad.  
As the United Nations designed, expanded, and embellished the program, Saddam was increasingly treated as an esteemed businessman rather than as a tyrant needing close supervision. The United Nations from the start let Saddam choose to whom he would sell oil and decide what goods Iraqis needed, subject to U.N. approval. The Secretariat, which retained records of Saddam's transactions, kept critical details of the deals secret, including the names of his business partners and the prices paid for relief supplies. When it became apparent that Saddam, under cover of this confidentiality, was using graft to siphon money from the deals for his own uses, Annan failed to sound a public alarm--even though he did so on other Oil-for-Food-related matters. When the United States and the United Kingdom slowed down the processing of contracts in order to scrutinize them more closely for weapons matériel, for example, Annan repeatedly criticized them in public, voicing his serious concern. By contrast, when the Security Council's Sanctions Committee approved a series of contracts that the U.N.'s own staff had flagged as suspicious, Annan said nothing publicly. 
Today, many details of these Oil-for-Food deals have come to light. To pore over them is to glimpse a vast tracery of secret bank accounts, bribes, kickbacks, front companies, and bizarre predilections by Saddam for stuff like milk sold by Russian oil companies and soap from Sudan. All the signs are that Saddam's regime worked every possible angle to its own advantage at the expense of Iraq's people--underpricing oil, overpaying for many relief supplies by 10 percent or more, demanding kickbacks, and then either splitting the skimmed-off take with business partners or offering fat profits to some of them in hopes of buying political influence aimed at lifting the sanctions.  
Over the past year, as each fresh Oil-for-Food revelation has hit the headlines, Annan has professed himself surprised, disappointed, and, most recently, shocked. Along the way, his Secretariat has sent out hush letters to contractors, such as the inspectors hired by the Secretariat to monitor aspects of Oil-for-Food. Meanwhile, his senior p.r. staffers have produced a barrage of statements, articles, and letters to the editor explaining that the prime culprit was Saddam Hussein (fair enough, except the point was for the United Nations to oversee him); arguing that, within the U.N. sphere, the Security Council, not the Secretariat, was mainly to blame (but it was Annan whose Secretariat hired the inspectors and had the big budget to keep tabs); and that the Secretariat just followed orders and had no real say in the program (but Annan actively pushed to expand it, handpicked the now-disgraced Sevan to run it, and signed off personally on every six-month phase of the program, recommending to the Security Council that it be continued). 
Another common argument is that, in an institution as large and complex as the United Nations, when administering a program as huge and troublesome as Oil-for-Food, there is bound to be some corruption. This is the real world; live with it. Oil-for-Food worked. Sanctions kept Saddam from rearming. The Iraqi people got fed. In a statement last week to the U.N. staff, Annan said that, despite having to work with a corrupt and despotic Iraqi regime under almost impossible conditions, Oil-for-Food achieved successes he hoped would not be forgotten, delivering rations to 27 million Iraqis. 
But this argument misses the fact that U.N. sanctions, meant to be reinforced by weapons inspections while undermining or even toppling Saddam, were greatly weakened by Oil-for-Food. The result was to strengthen Saddam, who was the cause of the Iraqi people's suffering in the first place. In the report of the U.S. Iraq Survey Group, issued last fall, the CIA's chief weapons inspector, Charles Duelfer--who did not find WMD but did take a good look at Saddam's graft--concluded, The introduction of the Oil-for-Food program (OFF) in late 1996 was a key turning point for the Regime. OFF rescued Baghdad's economy from a terminal decline created by sanctions. 
Investigators for Senator Norm Coleman's Permanent Subcommittee on Investigations found roughly the same inflection point when they looked at the oil-smuggling that became an especially large source of illicit sustenance for Saddam--helping him pay not only for palaces but also, as Duelfer documents, the import of clandestine arms. Under U.N. sanctions from 1991 to 1996, prior to Oil-for-Food, Saddam's estimated smuggling totaled $3.9 billion. Once Oil-for-Food kicked in, from 1996 to 2003, Saddam's smuggling volumes more than doubled to an estimated $9.7 billion. 
The Secretariat has claimed that this smuggling fell outside the purview of Oil-for-Food. But it was Oil-for-Food that helped Saddam revamp the oil infrastructure whence the smuggled oil came. In the Volcker interim report, one of the mentions made about suspicious behavior on the part of Sevan is that he supported proposals to create an 'oil spare parts' program: to grant Iraq's long-standing request to use funds from the humanitarian escrow account for the import of parts and equipment to repair and maintain Iraq's oil production and infrastructure. 
What Volcker did not mention is that the proposals to revive Saddam's oil industry, supported by Sevan, were made to the Security Council by Kofi Annan. Oil parts were not included in the original program. In February 1998, in the midst of a showdown over Saddam's initial attempt to block the U.N. weapons inspectors from several sites, it was Annan, not Sevan, who went to the Security Council and urged that the ceiling on Saddam's oil exports be raised. Annan then flew to Iraq, met with Saddam, and announced, I think I can do business with him. Briefly, Saddam agreed to cooperate with the inspectors. On April 15, in a letter to the Security Council, Annan urged that oil parts be brought into the program to enable Iraq to increase most urgently the export of petroleum. The Security Council agreed. Later that year, Saddam again blocked the inspectors, this time altogether, after which they left the country. On December 29, Annan again urged the Security Council to let Saddam import more oil equipment: Otherwise it may be difficult to sustain even the current level of production and export of oil. Annan included no warning that Saddam was already producing enough oil to be smuggling billions--though it was the Secretariat to which the oil inspectors and experts reported. 
All this was good business not only for Saddam, but for the U.N. Secretariat, which to this day has shrugged off the effects on its own behavior of huge financial incentives essentially supplied by Saddam. So, unfortunately, has the Volcker committee, which commented in its recent report that the Secretariat, in collecting 2.2 percent of Saddam's official oil sales, was not receiving a commission. No one has alleged that the 2.2 percent was collected as a form of profit for the U.N. Secretariat to spend any way it chose. But that money did constitute a big chunk of change for things that, in U.N. realms, are also a form of coin, generating hundreds of millions of dollars for jobs portioned out by the Secretariat. As long as the United Nations approved Saddam's selling of oil abroad, 2.2 percent of the revenue rolled automatically into the Secretariat's coffers--flooding the same account into which Annan dipped last year to fish out $30 million from the residual funds to pay for the Volcker inquiry. That money by rights belongs to the people of Iraq. But Annan, rather than go through the rigors of raising the funds elsewhere to pay for Volcker's inquiry, went right back last October to the old Saddam honey jar. Had Annan from the start been required to fund the administration of Oil-for-Food by soliciting donations from member-states--instead of collecting a percentage from the same sales he was supposed to be monitoring--would he still have pushed to expand the program until it entailed more than $1 billion merely in U.N. overhead? 
 In the run-up to Volcker's interim report, and in the debate now following, much discussion of Oil-for-Food has focused on procedure. Not yet addressed is that, in a system as secretive and creaking as the U.N.'s, the only true safeguard is the character of the boss. And, if anyone is boss at the United Nations, it is the secretary-general, who enjoys the prerogative to speak above the cacophony of the member-states. Nor is Annan shy about doing so. Last fall, during the U.S. presidential campaign, he was willing to pronounce his view that the United States overthrow of Saddam was illegal. Since the Oil-for-Food scandal broke in early 2004, Annan's spokesmen--presumably with his approval--have repeatedly, and publicly, blamed the Security Council. That Annan would in effect point a finger at the Security Council in order to defend himself--but decline to speak up during Oil-for-Food on behalf of the defrauded people of Iraq, the betrayed trust of the world public, or the integrity of the United Nations itself (as opposed to its image)--should be troubling. 
Plus, it seems Annan himself had a family tie to Oil-for-Food. Documents obtained by investigators outside the U.N. inquiry show that Annan's son, Kojo Annan, served as a consultant to a Swiss-based company, Cotecna Inspection, while Cotecna was bidding on a lucrative U.N. Oil-for-Food contract to monitor relief goods arriving in Iraq. Both Kojo Annan's lawyers and Cotecna have denied any wrongdoing, saying that Kojo Annan worked in West Africa, not on Iraq, and that he quit his consultancy in 1998 (on the same day the company won the U.N. contract). But, as discovered last year by the press, for the duration of its Oil-for-Food work--1999 to 2003--Cotecna sent Kojo Annan a series of monthly non-compete payments, which, together with assorted perks, totaled well over $100,000. Volcker has said he will cover these matters in a second interim report before issuing his final word this summer. 
There is one sense in which Oil-for-Food did accomplish something good. In swelling and rotting to a degree that in the end the world could not ignore, Oil-for-Food, in the postmortem, offers an unprecedented view into the inner workings of the United Nations. For anyone who believes there is value to the peace and prosperity-promoting institution the United Nations was meant to be, the work ahead should be not to preserve a Potemkin image of integrity but to take a long, hard look at what's wrong with the foundations and to rebuild the place from the ground up. Far greater transparency would be an immense help in keeping the place honest. But reform has to start with the Secretariat and proceed along lines that will produce secretaries-general willing to work vigorously not to save themselves, or please their pals, but to protect the integrity of the institution.