Oil-for-fraud

April 22, 2004 
From The Economist Global Agenda
http://www.economist.com/agenda/displayStory.cfm?story_id=2618260

A scandal surrounding the UN’s former oil-for-food programme in Iraq has begun to heat up, just as the Bush administration is approaching the UN to take a greater role in the country
IT COULDN’T be a worse time for a scandal. George Bush’s administration recently praised a proposal for greater involvement by the United Nations in Iraq’s political future. The plan, drafted by the UN’s special envoy to Iraq, Lakhdar Brahimi, would let the UN choose, in consultation with America, ministers to run Iraq after the June 30th handover of sovereignty. Yet just as the Bush administration and the UN are starting to cosy up to each other, allegations of massive fraud in the UN’s former oil-for-food programme for Iraq have heated up. On Wednesday April 21st, the Security Council unanimously approved a resolution requiring all UN members to co-operate with an official probe into the affair, led by Paul Volcker, a former head of America’s Federal Reserve. American conservatives who dislike the world body can hardly contain their glee.
The oil-for-food programme was established in 1996 to allow Iraq, devastated by years of sanctions, to sell oil in exchange for humanitarian supplies, principally food and medicine. The programme was run out of the UN secretariat, and supervised by members of the Security Council. It is often described as the biggest humanitarian programme in history, delivering over $30 billion-worth of goods to Iraq. The programme ended in 2003, after the war that toppled Saddam’s regime.
Allegations of wrongdoing in the programme are nothing new; Britain and America complained of this before the war. But the breadth and depth of the alleged fraud now go far beyond what was thought at the time. In January, an independent Iraqi newspaper, al-Mada, published a list of 270 names (of individuals, companies and institutions) it claimed to have found in Iraqi oil ministry documents. Those named were said to have received oil contracts under the programme, either as thanks for political support for Saddam’s regime, for turning a blind eye to corruption or in payment for illegal imports. Those who were handed these contracts could then sell them on to legitimate oil traders. The scheme appeared to allow its beneficiaries to say they had never taken money from the Iraqi government. The list of alleged beneficiaries includes a senior UN official and top French, Indonesian and Russian politicians. The documents behind the list have yet to be authenticated, however.
In addition to allegedly buying political support through the oil contracts, Saddam’s regime itself looks to have profited enormously from the scheme. The General Accounting Office (GAO), an arm of the American Congress, reported last month that prices for humanitarian imports were inflated by some 10%. This allowed the regime to sell 10% more oil to pay for the imports and to cream the extra money off for itself. In addition, the GAO said that the regime managed to sell over $5 billion-worth of oil illegally outside the programme. In all, Saddam’s government may have netted almost $10 billion from its chicanery.
The accusations have triggered a round of finger-pointing. Richard Lugar, the head of a Senate panel conducting one of three congressional probes into the scandal, said on April 7th that, to pull off the scam, Saddam would have needed members of the Security Council to be “complicit in his activities”. The French ambassador to America, Jean-David Levitte, noted in response that America sat on the sanctions committee that approved all contracts. John Negroponte, America’s ambassador to the UN, admitted that while sitting on that committee, America had been more worried about keeping military goods out of Iraq than about corruption. The Iraqi Governing Council, for its part, is conducting its own investigation through KPMG, a consultancy.
This all comes at a delicate time, when America is hoping that a new UN resolution on Iraq will convince more countries to offer troops or financial support. A reconciliation between the United States and the UN has been slow in coming after the Bush administration’s decision to go to war without the backing of the body, and given its continued wariness towards multilateralism. Congressional conservatives and right-wing journalists have long warned against giving the UN a major role in Iraq. According to these critics, the organisation is at best inefficient and at worst corrupt; and the Security Council is an unrepresentative relic of the 1940s, where France and Russia wield vetoes despite their fall from global pre-eminence, while big players like Japan, Germany, India and Brazil clamour in vain for the same privilege. 
Moreover, opponents pin a number of abject humanitarian failures, from Rwanda to Bosnia, on the UN. Just this week, a report on a “reign of terror” by the Sudanese government in the western region of Darfur was kept out of a meeting of the Commission on Human Rights. This was because the UN has only just been given permission to visit Darfur. Human-rights groups accuse Sudan of manipulating the world body to play for time.
Of those named in the oil-for-food inquiry, few, if any, are expected to come out unscathed. Mr Volcker hopes to give an update in three months. He has said that if there is any substance to the accusations, best to “get it out in a hurry and cauterise the wound”. Given the depth of divisions at the “United” Nations, this looks optimistic.