REVIEW & OUTLOOK Saddam's U.N. Financiers Only U.S. pressure can pry open the Oil for Food scandal. Wednesday, April 7, 2004 12:01 a.m. The Senate Foreign Relations Committee opens hearings today on the Iraqi Oil for Food scandal, to be followed by the House later this month. We hope the Members are serious, because the unfortunate truth is that without pressure from the U.S. we'll never get to the murky bottom. United Nations chief Kofi Annan has finally conceded the need for an independent probe, but keep in mind that the scandal implicates his son, his handpicked Iraq program chief, and his own management of the largest relief operation the U.N. has ever run. The U.N.'s dissembling continues to this day. Having tried denial and feigned confusion (It's not really clear to us even what the allegations are), Mr. Annan's latest defense is that his office was powerless to do anything about a program run by the Security Council. As a legal matter this is obviously untrue. Under Security Council Resolution 986, which established Oil for Food, Mr. Annan had almost total freedom--and a huge budget consisting of 2.2% of program revenues--to implement a program to ensure the equitable distribution of medicine, health supplies, foodstuffs, and materials and supplies for essential civilian needs. http://www.opinionjournal.com/images/storyend_dingbat.gif \* MERGEFORMATINET What Iraqis got instead was a program so secretively run that it seemed almost designed to facilitate the corruption that fleeced them of billions of dollars in aid. Mr. Annan and Oil for Food director Benon Sevan were at best unhelpful when it came to complaints from the two Security Council governments that actually seemed to care. Today, Chairman Richard Lugar and his fellow Members will have an opportunity to quiz U.S. Ambassador to the U.N. John Negroponte about the history of U.S.-British attempts to do something about Oil for Food corruption. Here's a partial timeline: November 1999: The U.S. holds up a substantial number of supply contracts under Oil for Food because of kickback concerns. Mr. Sevan responds by noting the deleterious effect of the hold on Iraqi food production and electricity supply. December 2000: The Iraqi Oil Ministry introduces a standard surcharge of 25 to 30 cents per barrel of oil, depending on its destination. Iraqi oil sales drop by more than half as major oil traders balk at paying the kickbacks. Hundreds of shady middlemen move in. Every man and his dog is buying Iraqi oil, remarks one trader in January 2001. March 2001: The U.S. and Britain ask the U.N. sanctions committee to cut down the list of more than 600 operators approved by the U.N. to purchase Iraqi oil in order to eliminate companies paying the kickbacks. France and Russia object. Messrs. Sevan and Annan, primarily worried about having enough revenue to fund the next phase of the program, call on Iraq to boost its exports. Mr. Sevan disclaims responsibility for policing the system. November 2001: The U.S. and Britain make another attempt to stop the kickbacks, this time by forcing the sanctions committee to retroactively price Iraqi oil, thus making it harder for Iraq and its buyers to calculate the margin for the surcharge. February 2002: Mr. Sevan criticizes the retroactive pricing policy, saying it may indeed have reduced room for kickbacks, but At the same time, I think, the main result has been the reduction in the oil exports--then around 1.5 million barrels a day, down from 2.2 million before. Mr. Sevan declares a financial crisis, complaining of U.S.-blocked contracts and so many political and procedural hurdles. June 2002: The Oil Daily reports Iraq has informed its customers the oil surcharge will drop to 15 cents per barrel--an apparent victory for U.S.-British policy. August 2002: Mr. Sevan again raises grave concern over an export shortfall he blames on retroactive pricing. September 2002: President Bush addresses the U.N on Iraq. Iraqi oil sales subsequently jump, Mr. Sevan candidly reports to the Security Council, amid industry reports that the surcharge has been removed. Late April 2003: Even after regime change, France, Russia and China--which hold about three-quarters of the Oil for Food contracts--press to keep the program going. Says an anonymous diplomat with a sense of irony: I think once we start to examine the contracts--and the built-in kickbacks--people might decide that it's not the best use of Iraqi money right now. Messrs. Sevan and Annan never once appear to have spoken out against Saddam's manipulation of their program. http://www.opinionjournal.com/images/storyend_dingbat.gif \* MERGEFORMATINET This scandal is not primarily about the employment history of Mr. Annan's son or the Iraqi Oil Ministry list on which Mr. Sevan's name appears--though we will need to find out if it was financial inducements or sheer callousness that made U.N. officials complicit in the looting of Iraq. Rather, this is about the undeniable fact that the U.N. Secretariat and three of five permanent Security Council members knowingly facilitated what Tommy Franks dubbed Saddam's Oil for Palaces program. Surely this sorry history is relevant to whether Iraqis can trust the U.N. to play a major role in the future of their country. Yet the State Department has not even proposed a Security Council resolution demanding the full cooperation of member states in the Oil for Food probe. Apart from Congress, the best hope now for getting at the truth lies in following the money trail. France's BNP Paribas, which handled the Oil for Food accounts, is chartered in New York and the possibility of program-related wrongdoing warrants an investigation by that state's Banking Department. The scrutiny of Manhattan District Attorney Robert Morgenthau (who has been poking around Paribas of late), State Attorney General Eliot Spitzer and the House and Senate Banking Committees would also be welcome. Surely every good liberal preaching the U.N.'s virtues will want to make sure this outrage never happens again. Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved.