Oil for Palace Program

[Dreadsox]

Oil, Food and a Whole Lot of Questions
By CLAUDIA ROSETT


President Bush's call to lift economic sanctions against Iraq could mean the end of the United Nations oil-for-food program, which has overseen the country's oil sales since 1996. Not only are France and Russia likely to object, but they may well support efforts by Secretary General Kofi Annan to modify the oil-for-food system, which is due to expire on May 12, and give it a large role in rebuilding the country. Whatever Mr. Annan's reasons for wanting to reincarnate the operation, before he makes his case there's something he needs to do: open the books.

The oil-for-food program is no ordinary relief effort. Not only does it involve astronomical amounts of money, it also operates with alarming secrecy. Intended to ease the human cost of economic sanctions by letting Iraq sell oil and use the profits for staples like milk and medicine, the program has morphed into big business. Since its inception, the program has overseen more than $100 billion in contracts for oil exports and relief imports combined.

It also collects a 2.2 percent commission on every barrel ? more than $1 billion to date ? that is supposed to cover its administrative costs. According to staff members, the program's bank accounts over the past year have held balances upward of $12 billion. With all that money pouring straight from Iraq's oil taps ? thus obviating the need to wring donations from member countries ? the oil-for-food program has evolved into a bonanza of jobs and commercial clout. Before the war it employed some 1,000 international workers and 3,000 Iraqis. (The Iraqi employees ? charged with monitoring Saddam Hussein's imports and distribution of relief goods ? of course all had to be approved by the Baath Party.)

Initially, all contracts were to be approved by the Security Council. Nonetheless, the program facilitated a string of business deals tilted heavily toward Saddam Hussein's preferred trading partners, like Russia, France and, to a lesser extent, Syria. About a year ago, in the name of expediency, Mr. Annan was given direct authority to sign off on all goods not itemized on a special watch list. Yet shipments with Mr. Annan's go-ahead have included so-called relief items such as "boats" and boat "accessories" from France and "sport supplies" from Lebanon (sports in Iraq having been the domain of Saddam's Hussein's sadistic elder son, Uday).

On Feb. 7, with war all but inevitable, Mr. Annan approved a request by the regime for TV broadcasting equipment from Russia. Was this material intended to shore up the propaganda machine Saddam Hussein had built in recent years? After all, the United Nations in 2000 and 2001 approved more than a dozen contracts with Jordan and France for Iraq to import equipment for "educational TV."

It is impossible to find out for certain. The quantities of goods involved in shipments are confidential, and almost all descriptions on the contract lists made public by the United Nations are so generic as to be meaningless. For example, a deal with Russia approved last Nov. 19 was described on the contract papers with the enigmatic notation: "goods for resumption of project." Who are the Russian suppliers? The United Nations won't say. What were they promised in payment? That's secret.

I was at least able to confirm that the shipment of Russian TV equipment approved in February was not delivered before the war started. A press officer told me that batch didn't actually get to Iraq because United Nations processing is so slow that "it usually takes three to four months" before the purchases start to arrive.

Bureaucratic lags notwithstanding, putting a veil of secrecy over tens of billions of dollars in contracts is an invitation to kickbacks, political back-scratching and smuggling done under cover of relief operations. Of course, with so little paperwork made public, it is impossible to say whether there has been any malfeasance so far ? but I found nothing that would seem to contradict Gen. Tommy Franks's comment that the system should have been named the "oil-for-palace program." Why, for example, are companies in Russia and Syria ? hardly powerhouses in the automotive industry ? listed as suppliers of Japanese vehicles? Why are desert countries like Libya, Syria and Saudi Arabia delivering powdered milk?

And then there is this menacing list of countries that supplied "detergent": Syria, Lebanon, Libya, Algeria, Yemen and Sudan. Maybe all that multisourced soap was just a terrific bargain for doing the laundry. But there is no way for any independent parties ? including the citizens of Iraq, whose money was actually spent on the goods ? to know.

Mr. Annan's office does share more detailed records with the Security Council members, but none of those countries makes them public. There is no independent, external audit of the program; financial oversight goes to officials from a revolving trio of member states ? currently South Africa, the Philippines and, yes, France.

As for the program's vast bank accounts, the public is told only that letters of credit are issued by a French bank, BNP Paribas. Kurdish leaders in northern Iraq, entitled to goods funded by 13 percent of the program's revenues, have been trying for some time to find out how much interest they are going to receive on $4 billion in relief they are still owed. The United Nations treasurer told me that that no outside party, not even the Kurds, gets access to those figures.

Then there is the program's compensation commission, which is supposed to dole out 25 percent of all oil-for-food proceeds to people and companies harmed by Saddam Hussein's invasion of Kuwait in 1990. It has so far dispensed $17.5 billion and approved a further $26.2 billion. Who decides on compensation claims? Commission members are picked from a "register of experts" supplied by Mr. Annan. One staff member told me that that this register cannot be released because it is "not public." The identities of the individual claimants are, of course, "confidential."

Lifting the sanctions would take away the United Nations' remaining leverage in Iraq. If the oil-for-food operation is extended, however, it will have a tremendous influence on shaping the new Iraq. Before that is allowed to happen, let's see the books.


Claudia Rosett, a former foreign correspondent for The Wall Street Journal, is writing a book on dictatorships and democracy.
http://www.nytimes.com/2003/04/18/opinion/18ROSE.html?ex=1051243200&en=ea81499263030ef1&ei=5062&partner=GOOGLE

 

[Dreadsox]

Yes, now I understand why people quit over this program....

TV Equiptment, Cars, and Sports equiptment for OIL?

Give me a break. Japanese cars bought from Russia?

Hello? This whole program benefitted members of the Security Council.

I shout my claim from the highest mountain.....Russia and France could have given a SHITE about peace. It was about $$$$$$$.

 

[Scarletwine]

I shout my claim from the highest mountain.....Russia and France could have given a SHITE about peace. It was about $$$$$$$.

Just so you don't think we're dead. I'll bite.

In my heart of hearts I'll always believe that this war from our side was about POWER and $$$$$$$. Getting rid of Sadaam was a great sideline and PR.
Nothing I've read here has changed that basic assumption. So yes F & R may have also been for $$$$. But aren't it's possible we also receiving a commission.

 

[Dreadsox]

Just so you don't think we're dead. I'll bite.

I do not think anyone is dead. I am pretty sure this entire forum is dead. Months ago, articles would spur a debate. Today...if something gets responded to it is by relatively few.

In my heart of hearts I'll always believe that this war from our side was about POWER and $$$$$$$. Getting rid of Sadaam was a great sideline and PR.
Nothing I've read here has changed that basic assumption.

Yep. But again what does this have to do with the "Food for OIL" program? Nothing. If I thought I could change your mind on Bush I would post a different article. Fact is, Bush has nothing to do with this program. Neither does getting rid of Saddam, although, maybe the program will be run for the Iraqi people instead of for Palaces...ect.

So yes F & R may have also been for $$$$. But aren't it's possible we also receiving a commission.

Again, did you read the article? You have asked others to read your article, did you read this? I wonder. Somehow again, you are throwing stones at the US when the article has nothing to do with that.

Peace

 

[STING2]

The only way America benefits from this is the potential lower price of gas the next time you go to the filling station. Lower gas prices are one thing that could help the average American out, giving him more money to spend on other things, which would give the economy a kick in the ass, which would get George Bush re-elected for sure in 2004. Lower gas prices don't benefit W's oil buddies in Texas, but it certainly helps the family that has trouble paying the bills and would make them more likely to vote for W in 2004. Not saying conclusively that there will be a significant drop in oil prices by then(2004), but eventually it will happen. Everyone benefits when the cost of energy goes down. More supply and competition drop prices.

 

[pax]

I am pretty sure this entire forum is dead.

You're not the only one.

 

[diamond]

cuz we won the war
cuz gw will b reelected
and cuz it could b argued gw is a sexy..

if i were them i would b spitting nails too

thank u
db3

 

[anitram]

cuz we won the war
cuz gw will b reelected
and cuz it could b argued gw is a sexy..

if i were them i would b spitting nails too

Dreadsox,

With comments like these on nearly EVERY thread, why are you surprised the forum is dead? Honestly, I keep seeing you and others posting valuable and valid articles, I see the start of a discussion and then there's this. Well sorry to be blunt, but it makes me tired and it makes me not want to click on any threads anymore. It's just not fun nor funny anymore.

 

[verte76]

Actually I think both France and the U.S. and others acted, in part, because of gain. No doubt some French businesses made $$ from not going to war. Some U.S. businesses now have juicy contracts because of the war. It all sucks. Now there are disputes going on over the sanctions, etc, etc, etc. I don't think either side is innocent. I don't have a crystal ball as per the next presidential election is concerned because the current president's father lost in '92 because of the economy *and* a general sense that he was too much into foreign policy and not enough into domestic. In a way it was crude and nativist, but I would have voted Democratic if Bush had never done Desert Storm because, well, heck, I'm a liberal. Horrors. Can you say "busted"??

 

[ALEXRUS]

Yes, now I understand why people quit over this program...

TV Equiptment, Cars, and Sports equiptment for OIL?

Give me a break. Japanese cars bought from Russia?

Hello? This whole program benefitted members of the Security Council.

I shout my claim from the highest mountain.....Russia and France could have given a SHITE about peace. It was about $$$$$$$.

Very far-fetched article The girl made quite lame attempt to accuse Russia, France and others of... what? Of participating in the UN programs? In the UN programs, all of which were approved by the US, by the way
Russia among suppliers of Japanese cars? So what? Maybe Iraqis preferred to buy second-hand Japanese cars from Russia. Anyway, has there been a single delivery of Japanese cars from Russia? But you, Dread, seem to be very delighted by this incompetent nit-picking. Congratulations!!
You'd better find something about Saddam being a KGB general or well...u know...real sensation.... I know u can if u will...whicj will never excuse the US agression on sovereign Iraq, by the way

 

[verte76]

The U.S. has only won the war in the military sense. It hasn't won in the political sense. We will only "win" the political war when there is a functioning democratic state in Iraq. Right now the Iraqi people don't have a democratically elected government. I understand that this takes time. But for all the time it takes to accomplish this we can't say we've won the war. I think it's premature to say this.

 

[Dreadsox]

THE REAL WORLD

Kofi Annandersen
Enron-style accounting at the U.N. Oil-for-Food Program.

BY CLAUDIA ROSETT
Wednesday, September 25, 2002 12:01 a.m. EDT

Who is Saddam Hussein's biggest business partner?

The United Nations. The same U.N. whose secretary-general, Kofi Annan, stands as one of the chief ditherers over removing Saddam. Here are the ingredients of a conflict of interest.

Under the U.N.'s Office of the Iraq Program, which supervises the six-year-old Oil-for-Food Program, the U.N. has had a hand in the sale of more than $55 billion worth of Iraqi oil. Iraq ships oil out to U.N.-approved buyers under the terms of the sanctions agreement. The U.N. vets the inflow of "humanitarian" imports into Iraq.

The process is simple. Iraq contracts to import goods, and the U.N. gives the outside vendors cash collected from the oil sales. The U.N. has approved about $34 billion in such deals so far. The money it hasn't yet doled out--at least $21 billion--sits in U.N.-administered bank accounts. U.N. officials refuse to divulge much information about these accounts--not even the countries in which they're held.

Measured in dollars, this is by far the U.N.'s largest program. The sums involved are large enough--and their handling has been perverse enough--for this program to deserve more attention than it has so far received.





Conceived in 1995 as a way to deliver humanitarian aid despite sanctions against Iraq, Oil-for-Food has matured into an unholy union between Saddam Hussein, with his command economy, and the U.N., with its big, buck-passing bureaucracy. By now, the two are effectively partners in what might just as well be called the Oil-for-U.N.-Jobs program. Even with its weapons inspectors barred from the country, the U.N. by now has 10 agencies employing 900 international staffers and 3,000 Iraqi nationals inside Iraq to administer the program, plus another 120 or so in New York.
Combining Iraq's oil exports and aid imports, they oversee a flow of funds averaging about $15 billion a year, more than five times the U.N.'s core annual budget. Even assuming the utmost integrity by the U.N. staff, it is worth asking whether Mr. Annan and his entourage might by now have a stake in the status quo. In which case, listening to Mr. Annan's views on Iraq makes about as much sense as once upon a time heeding Arthur Andersen's pronouncements on Enron.

Making this picture all the more Enron-like is the extent to which Mr. Annan and his crew have winked at Iraq's gross violations of U.N. agreements, and not only on weapons inspections. The U.N. sanctions on Iraqi oil sales were meant to stop Saddam from diverting oil revenues to his own uses. Instead, they provide a facde of control that is dangerously misleading. Saddam has been getting around the sanctions via surcharge-kickback deals and flat-out smuggling, to the tune of $3 billion a year, according to the dossier released yesterday by Britain's Prime Minister Tony Blair.

Back in May, The Wall Street Journal's Alix Freedman and Steve Stecklow gave a thoroughly documented account of how Iraq "has imposed illegal surcharges on every barrel of oil it has sold, using a maze of intermediaries to cover its tracks." Last week, the Washington-based Coalition for International Justice released an exhaustively researched 70-page report, detailing Saddam's dodges and how this year alone, despite "smarter" U.N. sanctions, he will rake in billions for his "personal treasury." When President Bush on Sept. 12 addressed the U.N., he charged that Saddam has "subverted" Oil-for-Food, "working around the sanctions to buy missile technology and military materials."

So the remaining virtue of the U.N.'s Iraq program would have to be the humanitarian relief. Not quite. Under the Oil-for-Food deal, it is not the U.N. but Saddam who decides what is needed, who in Iraq gets what, and which countries he should contract with. He must submit his proposals to the U.N. Security Council, which can turn them down. But the bulk of his requests are approved. The U.N. then disburses the cash from the "Iraq accounts" and monitors the delivery, trying to ensure it follows Saddam's plan.

The result is that U.N.-approved aid goes to reinforce Saddam's control over what is already a Soviet-league state-run economy. Part of what helped Saddam rise to power in the first place was Iraq's embrace in the 1960s of Soviet-style central planning, which by rationing goods and controlling people's livelihoods serves as a powerful tool for political control.

Today, with private business largely smothered, except in Kurdish-controlled northern Iraq, the only significant source of foreign exchange is oil. All oil in Iraq belongs to the state. Saddam decides who will benefit from its sale, and who will be deprived. "The government of Iraq has the sole responsibility for allocating the money," says an official of the U.N.'s Oil-for-Food Program. "We cannot tell them, we only advise them." An author of the Coalition for International Justice report, Susan Blaustein, notes that Saddam has stolen Iraq's oil from his fellow countrymen. She points out that in accommodating this arrangement, "the U.N. is colluding in that theft."

The U.N. designates that Kurdish-controlled northern Iraq is to receive a share of the Oil-for-Food revenues, with some of that administered on the ground directly by the U.N. It is Saddam, however, who controls the buying of food and medicine. Though the U.N. has allocated $6.8 billion for northern Iraq since the start of the program, only $4.6 billion has been contracted for. Even less has been delivered. Under the category of medical supplies, for example, only 28% of the total allocated funds have been translated into goods received. While billions sit in U.N.-run accounts, sources in the north report shortages of such staples as surgical gloves.





Delving into these matters gets tough, because the U.N. shuns transparency. Given that more than $20 billion from the Iraq program is now sitting in U.N. escrow accounts awaiting some combination of Saddam's planning and U.N. processing, one wonders which banks, and which of those countries now taking part in the Iraq debate, might be getting thick slices of Saddam's business. A few years ago, all Oil-for-Food funds were kept at a French bank, Banque Nationale de Paris. More recently, the funds have been diversified among five or six banks, according to U.N. treasurer Suzanne Bishopric. But the U.N. does not permit her to disclose the names or locations of the banks, or details such as interest accrued.
"We don't like to make public where our money is," says Ms. Bishopric. Who audits the program? It's a strictly insider job: The U.N. secretariat, supplemented by a rotating set of member nations, with the task currently delegated to the government of the Philippines.

Neither does the U.N. disclose which countries get what amount of Saddam's trade. Oil industry experts say France and Russia--both of which have resisted removing Saddam--have led the pack, with billions in deals. Russia being a big oil producer itself, these purchases are not for home consumption, but for resale at a profit. An official in the U.N. controller's office says he is forbidden to disclose figures on Iraqi trade with individual countries. "If I did, I would get an earful from the countries' missions."

In another craven move, the U.N.'s Iraq program even allowed Saddam to dictate in October 2000 that he no longer wanted the Oil-for-Food accounts to be held in the currency of the enemy, meaning U.S. dollars. Obediently, the U.N. switched all Iraq funds from that stage forward to euros, in effect helping Saddam impose his own version of sanctions on the U.S.

What helped breed this monstrosity of a program was a system that at its inception sounded worthy enough. To fund most of its operations, the U.N. has to assess its members, rattling the cup for funds. Not so with Iraq. Oil-for-Food aims to make Saddam's government pay for all the evaluating and inspecting and directing meant to ensure that Saddam's oil gains go for humanitarian uses. So the U.N. plan allocates various percentages of the revenues for different parts of the program.

Today, that means 59% for Baghdad-controlled central and southern Iraq, 13% to the autonomous Kurdish north, 25% for Gulf War reparations and 0.8% for weapons inspections (what weapons inspections?). And--oh yes--2.2% for U.N. administration of the program, $1.2 billion so far. That's enough that the U.N. secretariat, awash in Iraqi cash, has turned over a surplus $211 million for aid to Iraq. That still leaves a cumulative $1 billion bankrolling U.N. administration of a program that by now, in effect, has the U.N. working, on commission, for Saddam. As a man of integrity, Mr. Annan might want to footnote that in the debate over what to do about Iraq.

Ms. Rosett is a member of The Wall Street Journal's editorial board. Her column appears Wednesdays here and in The Wall Street Journal Europe.

 

[diamond]

Finally.
The truth comes out.
Those afraid of thre truth scurry like cockroaches in the blazing sunlight....
db9

 

[John Milton]

Very true.

Look how all the anti-war protestors have been silenced all of a sudden. The truth and harsh reality is, the Iraqi people have been liberated, but 'not in your name'.

Peace to all.

 

[Klaus]

John: it might be that lots of them were silenced because of the frustration that noone listened to them also they were millions and millions on the streets.

Klaus

 

[ALEXRUS]

I'm happy, Dread, you finally started differentiating between Russia and UN

 

[Dreadsox]

I'm happy, Dread, you finally started differentiating between Russia and UN

I still think Russia, France and Germany had ulterior motives, and I think this program is tied into it.

Peace