Let inspections work
here | 04.04.2003 11:26
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.
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.
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