There is mounting evidence that the United
Nations Oil-for-Food program, originally conceived as a means of
providing humanitarian aid to the Iraqi people, was subverted by
Saddam Hussein's regime and manipulated to help prop up the Iraqi
dictator. Saddam's dictatorship was able to siphon off an estimated
$10 billion from the Oil-for-Food program through oil smuggling and
systematic thievery, by demanding illegal payments from companies
buying Iraqi oil, and through kickbacks from those selling goods to
Iraq--all under the noses of U.N. bureaucrats. The members of the
U.N. staff administering the program have been accused of gross
incompetence, mismanagement, and possible complicity with the Iraqi
regime in perpetrating the biggest scandal in U.N. history.
Iraqi Governing Council (IGC) has already started its own
investigation into the United Nations' handling of Oil-for-Food,
headed by Claude Hankes-Drielsma, a British businessman and
political adviser. Hankes-Drielsma has commissioned KPMG
International, a private accounting firm, to sift through the
mountains of evidence and report its findings. Ambassador L. Paul
Bremer, Administrator of the Coalition Provisional Authority (CPA),
has instructed all CPA offices to cooperate with the probe and
preserve all Oil-for-Food paperwork.
U.S. Congress has also begun to investigate the Oil-for-Food
scam. The Senate
Foreign Relations Committee held initial hearings on April 7. The
House International Relations Committee and the House Subcommittee
on National Security, Emerging Threats, and International Relations
will also hold hearings.
hearings, combined with the IGC probe, have prompted U.N. Secretary
General Kofi Annan to call for an "independent" inquiry, appointed
by Annan himself. He has appointed a three-man commission headed by
former U.S. Federal Reserve Chairman Paul Volcker, with South
African Judge Richard Goldstone and Swiss lawyer Mark Pieth as the
other two members.
While this is a step in the right
direction, however, there is no guarantee that this inquiry will be
fully independent or impartial. Nor will the commission have the
power to bring criminal charges or force U.N. member states to
cooperate. It bears all the hallmarks of an elaborate paper tiger
with no real teeth.
is required is a Security Council-appointed investigation mandated
by a U.N. resolution, with powers of criminal prosecution. In
addition, the Bush Administration should launch its own
investigation of the Oil-for-Food program and link it to a
sustained U.S.-led campaign to reform the United Nations.
- The Security Council should appoint an
independent investigation into Oil-for-Food, completely separate
from the U.N. bureaucracy and staffed by non-U.N. personnel. Kofi
Annan's handpicked commission of inquiry, while led by
distinguished figures, lacks real power and credibility. The U.N.
Secretary General should not be in a position to select members of
a commission investigating allegations against his own
- The United States and Great Britain should
take the lead by putting forward a U.N. resolution calling for a
Security Council-appointed investigation. France and Russia may
initially try to block such a resolution, since French and Russian
politicians and businessmen have been heavily implicated in the
Oil-for-Food scandal. However, the U.S. is likely to gain majority
support in the Security Council: France and Russia will find it
politically difficult to exercise their veto power.
- A leading international accounting firm
with no previous ties to the U.N. should be hired to help conduct
the investigation, alongside top criminal investigators.
Investigators should be drawn from the Federal Bureau of
Investigation (FBI), Interpol, Scotland Yard, and other leading
criminal investigative units.
- If the Security Council investigation
recommends that criminal charges be brought against U.N. employees,
those identified should be suspended pending resolution of the
charges and have their diplomatic immunity waived to permit trial.
U.N. officials and individuals implicated with criminal activity in
the Oil-for-Food fraud should then be extradited to face trial in
Iraq. Since the Iraqi people were the victims of the Oil-for-Food
scam, it is appropriate that the Iraqi legal system try to sentence
those responsible. If convicted, their U.N. employment should be
- The Bush Administration, backed by
Congress, should launch its own separate investigation into the
United Nations' handling of the Oil-for-Food program. The United
States should call for fundamental reform of the U.N. system, an
annual external audit of the world body, and a Security
Council-imposed code of conduct for all U.N. employees. Long-term
U.S. funding of the United Nations should be made dependent upon
widespread and satisfactory reform within the U.N.
History of the Oil-for-Food Program
Security Council established the Oil-for-Food program in 1995 "as a
temporary measure to provide for the humanitarian needs of the
Iraqi people" while economic sanctions remained in place. Of Iraq's population
of 24 million, 60 percent were dependent on food shipments
administered through Oil-for-Food.
Oil-for-Food was the United Nations'
biggest program anywhere in the world. As Claudia Rosett pointed
out in The Wall Street Journal, the U.N. oversaw "a flow of funds
averaging at least $15 billion a year, more than five times the
U.N.'s core annual budget." Oil-for-Food was administered by 10
U.N. agencies employing over 1,000 staff internationally and in New
York, as well as 3,000 Iraqi nationals. The U.N. collected a 2.2
percent commission on every barrel of oil sold, generating more
than $1 billion in revenue.
Until 2001, all Iraqi oil revenues were
held in an escrow account run solely by Banque Nationale de Paris.
The money was later kept by several unnamed international banks,
all approved by Saddam's regime.
program was shrouded in secrecy, with little transparency or public
accountability. There was no system of external auditing or
publishing of accounts. The identity of the banks holding the Iraqi
funds was kept secret. Oil-for-Food became a cash cow for the U.N.
and a lucrative source of contracts for Russian and French
companies. The Times of London calculated that from 1996 to 2003,
Russian companies received $7.3 billion of business through
Oil-for-Food, and French firms earned $3.7 billion.
Oil for Corruption
the 12 months since the fall of the Iraqi dictatorship, a clear
picture has emerged of how Saddam Hussein abused the United
Nations' Oil-for-Food program. The Iraqi Governing Council has
begun to release critical information detailing how, in the words
of The New York Times, "Saddam Hussein's government systematically
extracted billions of dollars in kickbacks from companies doing
business with Iraq, funneling most of the illicit funds through a
network of foreign bank accounts in violation of United Nations
sanctions." In effect the program was little more than "an open
bazaar of payoffs, favoritism and kickbacks."
Between 1997 and 2002, the Oil-for-Food
program generated over $67 billion in revenues for the Iraqi
regime. With little U.N. oversight, the Iraqi dictatorship was able
to circumvent and exploit the program. It is suspected of selling
Iraqi oil at bargain basement prices that benefited numerous
middlemen while overpaying for various imports, which rewarded
suppliers. The Iraqis then demanded kickbacks from both groups. The
program was officially ended in November 2003.
U.S. General Accounting Office (GAO) estimates that the Saddam
Hussein regime generated $10.1 billion in illegal revenues by
exploiting the Oil-for-Food program, including $5.7 billion from
oil smuggling and $4.4 billion in "illicit surcharges on oil sales
and after-sales charges on suppliers." The scale of the fraud was far more
extensive than the GAO had previously estimated.
According to the GAO, the oil was smuggled
by pipeline into Syria, by ship through the Persian Gulf, and by
truck across the borders of Turkey and Jordan. Oil purchasers were
charged a surcharge of up to 50 cents per oil barrel, with an added
commission of 5 percent to 10 percent of the commodity contract. A
U.S. Department of Defense study cited by the GAO evaluated 759
contracts administered through the Oil-for-Food program and found
that nearly half had been overpriced by an average of 21 percent.
An International Network of
Emerging from the evidence is a mosaic of
international corruption involving a patchwork of politicians and
businesses across the world that benefited from the Oil-for-Food
program and helped to keep Hussein in power. The Iraqi Oil Ministry
recently released a partial list of beneficiaries: 270 names of
individuals, political entities, and companies from across the
world who received oil vouchers from Saddam Hussein's regime,
allegedly at below-market prices.
list includes former French Interior Minister Charles Pasqua, the
"director of the Russian President's office," the Russian Communist
Party, the Ukraine Communist Party, the Palestine Liberation
Organization, the Popular Front for the Liberation of Palestine,
the son of Lebanese President Emile Lahud, the son of Syrian
Defense Minister Mustafa Tlass, and George Galloway, a British
Member of Parliament.
Ominously, the list also implicates U.N.
Assistant Secretary General Benon V. Sevan, executive director of
the Oil-for-Food program, who has stringently denied any
wrongdoing. Sevan, a longtime U.N. bureaucrat with close ties to
Kofi Annan, has taken an extended vacation, pending retirement
later this month.
Annan's son Kojo may also be implicated in the mushrooming scandal.
Kojo Annan had ties to Cotecna Inspection SA, a Swiss-based company
that received a contract for inspecting goods shipped to Iraq under
the Oil-for-Food program. The younger Annan worked for Cotecna in
the mid-1990s and became a consultant to the company until shortly
before it won the Oil-for-Food contract. Cotecna, reportedly implicated in
earlier bribery scandals, did not disclose this potential conflict
of interest, and neither did the United Nations.
France, Russia, and Saddam
fewer than 46 Russian and 11 French names appear on the Iraqi Oil
Ministry list. The
Russian government is alleged to have received an astonishing $1.36
billion in oil vouchers from Saddam Hussein.
close ties between French and Russian politicians and the Iraqi
regime may have been an important factor in influencing their
governments' decision to oppose Hussein's removal from power. They
also highlight the close working relationships between Moscow and
Baghdad and between Paris and Baghdad, and the huge French and
Russian financial interests in pre-liberation Iraq.
Prior to the regime change in April 2003,
French and Russian oil companies possessed oil contracts with the
Saddam Hussein regime that covered roughly 40 percent of the
country's oil wealth. French oil giant Total Fina Elf had won
contracts to develop the Majnoon and Nahr Umar oil fields in
southern Iraq, which contain an estimated 26 billion barrels of oil
(25 percent of Iraq's oil reserves). Russian company Lukoil had won
the contract to develop the West Qurna field, also in southern
Iraq, which has an estimated 15 billion barrels of oil.
Political and military ties between Moscow
and Baghdad were extensive. Documents found in the bombed-out
headquarters of the Mukhabarat (the Iraqi intelligence service
under Hussein) reveal the full extent of intelligence cooperation
between the Russian and Iraqi governments. According to reports in
the London Sunday Telegraph:
Russia provided Saddam Hussein's regime
with wide-ranging assistance in the months leading up to the war,
including intelligence on private conversations between Tony Blair
and other Western leaders. Moscow also provided Saddam with lists
of assassins available for "hits" in the West and details of arms
deals to neighbouring countries.
Russians are also believed to have sold arms to Iraq illegally
right up until the outbreak of war with the United States in March
2003. The Bush Administration has accused Russian arms dealers of
selling anti-tank guided missiles, electronic jamming equipment,
and thousands of night vision goggles to the Iraqis in open
violation of U.N. sanctions. During Hussein's dictatorship, Russia
reportedly provided him with $14 billion worth of arms shipments.
Evidence has also come to light of
intimate political cooperation between Paris and Baghdad in the
period leading up to the U.S.-led war against Saddam Hussein.
Documents found in the wreckage of the Iraqi Foreign Ministry
reveal that "Paris shared with Baghdad the contents of private
transatlantic meetings and diplomatic traffic from Washington."
Officials in the French Foreign Office
reportedly shared information with their Iraqi counterparts on a
sensitive meeting between former French Foreign Minister Hubert
Vedrine and U.S. Secretary of State Colin Powell following the
terrorist attacks on September 11. Details of talks between French
President Jacques Chirac and President George W. Bush were also
reportedly passed on to the Iraqi Foreign Ministry by the French
ambassador in Baghdad.
A Security Council Investigation
the most powerful member of the U.N. Security Council, the United
States, together with its closest ally, the United Kingdom, should
call for a wide-ranging and in-depth independent investigation into
the way in which the U.N. handled the Oil-for-Food program.
investigation should be appointed by the Security Council but
should be completely independent of the United Nations and made up
of non-U.N. employees. Great care should be exercised by the United
States and Great Britain to prevent such an investigation from
being unduly influenced by other Security Council members who may
have a vested interest in protecting their own officials.
Security Council should appoint an international team of special
criminal investigators to head the inquiry. They should work
alongside a specialist team of auditors drawn from a leading
accounting firm without ties to the United Nations. The team of
special investigators should be drawn from the FBI, the U.S.
Department of Justice, the U.S. Securities and Exchange Commission,
and international bodies such as Interpol. Nations that are heavily
implicated in the Oil-for-Food scandal should be excluded from
Prosecution of U.N. Officials in Iraqi
After the handover of power in Iraq on
June 30, the Iraqi courts would be the appropriate venue for trying
and sentencing individuals found to have been implicated in
criminal wrongdoing by a Security Council-appointed investigation.
The United Nations should suspend--and, if they are convicted,
terminate the employment of--U.N. officials who are alleged to have
received kickbacks from the Saddam Hussein regime.
Those charged should be stripped of
diplomatic immunity and subject to extradition to Iraq, upon
request of the new Iraqi government. The Coalition Provisional
Authority should work closely with the Iraqi Governing Council to
prepare for possible trials. Anyone convicted should be stripped of
all U.N. pension rights.
addition, the United States should press other governments to
extradite their citizens who are guilty of criminal activity
related to the Oil-for-Food program so that they may face trial in
Reform the United Nations
Oil-for-Food scandal underlines the need for fundamental reform of
the United Nations.
The investigation into the Oil-for-Food fraud should prompt major
reform in how the U.N. is managed and how the United States funds
the U.N. A thorough external audit of the United Nations is needed.
The U.N. must provide accountability, transparency, and value for
Since the creation of the United Nations
in 1945, the United States has been the biggest contributor to the
U.N. The U.S. currently contributes 22 percent of the U.N.'s
regular budget. In contrast, France contributes 6.4 percent,
Britain 5.54 percent, China 1.53 percent, and Russia 1.2 percent.
Total U.S. contributions to the U.N. system in 2001 totaled $3.5
billion, including $612 million in assessed contributions to the
U.N. regular budget, $712 million toward U.N. peacekeeping, and
$2.2 billion in voluntary contributions.
United States should reconsider its level of U.N. funding and link
it directly to the pace of U.N. reform. The Bush Administration
should call upon other leading member states, such as France,
Russia, and China, to bear a larger share of the financial
What the U.S. Should Do
U.S. should push for action in 10 areas:
- A Security
Council resolution. In order to be effective, an
independent investigation should be appointed by the Security
Council. The U.S. and the U.K. should put forward a joint
resolution calling for an exhaustive independent investigation into
the Oil-for-Food scandal. France and Russia should be shamed into
supporting such a resolution. Washington and London should closely
coordinate their strategy at the U.N.
- No quid pro
quo. The Bush Administration will be under heavy pressure
from some Security Council members to back away from calling for a
more in-depth investigation in return for a new U.N. resolution
supporting U.S.-British plans for the handover of power in Iraq.
The United States must stand firm on the Oil-for-Food issue and
separate it from the debate on an Iraq resolution.
- Opening of U.N.
accounts. U.N. Oil-for-Food accounts should be opened to
full public scrutiny by private-sector auditors in order to uncover
possible financial and other irregularities. Individuals and
businesses that profited illegally from the Oil-for-Food program
should be held responsible.
- Investigation of
U.N. officials. Senior U.N. bureaucrats with
responsibility for running the Oil-for-Food program should be
investigated and held accountable for their actions. In particular,
the role played by Benon V. Sevan, executive director of the Office
of Iraq Programs, should be carefully scrutinized. All U.N.
officials implicated in criminal activity by special investigators
should be suspended, stripped of diplomatic immunity, subjected to
extradition, and have their employment terminated without pension
rights if they are convicted.
- Extradition to
Iraq. The United States should press the Security Council
to recommend waiving diplomatic immunity for certain crimes
involving the Oil-for-Food program. The U.S. should also encourage
individual governments to extradite to Iraq those of their citizens
who have committed crimes relating to the Oil-for-Food program, to
the same extent they would extradite citizens for any other serious
- The role of Kofi
Annan. A Security Council-appointed investigation into
Oil-for-Food should examine the Secretary General's role in
overseeing the program and his failure to halt the widespread
abuse. Annan must bear ultimate responsibility for the program's
massive failings. If he is found to have deliberately turned a
blind eye to the corruption and criminal activity, the United
States should call for his resignation.
reform. The congressional investigation into Oil-for-Food
should act as a catalyst for long-overdue reform of the U.N.
system. Future U.S. funding of the United Nations must be dependent
on substantial, not cosmetic, reform of the organization. Failure
to prosecute U.N. officials implicated in wrongdoing should also
result in reduced U.S. funding.
- Future sanctions
regimes. The mismanagement of the Oil-for-Food program
raises serious doubts about the U.N.'s ability to manage future
programs of a similar scale. The United Nations should never again
administer an international sanctions regime.
- A code of
conduct for U.N. officials. The Oil-for-Food scandal
reinforces the need for the Security Council to impose a code of
conduct on U.N. employees. The "anything goes" approach that is
pervasive across the U.N. system is unacceptable and should no
longer be tolerated.
- Limit the role
of the U.N. in Iraq. The huge scandal surrounding the
U.N.'s handling of the Oil-for-Food program clearly demonstrates
that the U.N. cannot be entrusted with a major management role in
Iraq. The United States was right to exclude the U.N. from a key
role in administering post-war Iraq--the U.N. was clearly incapable
of performing such a function. Handing political and military power
over to the U.N. in Iraq now would be a huge strategic error.
abuse of the Oil-for-Food program was the result of a staggering
management failure by the United Nations and has raised troubling
questions about the U.N.'s credibility and competence. The
Oil-for-Food debacle reinforces the need for sweeping reform of the
U.N. bureaucracy and the need for an annual external audit of its
Overall responsibility for one of the
biggest financial scandals of modern times should lie with U.N.
Secretary General Kofi Annan. The U.N.'s inability to manage the
Oil-for-Food program successfully is a spectacular failure of his
links between Saddam Hussein's regime and leading European
companies and politicians were extensive. The Pentagon was correct
to bar companies from countries that had opposed regime change in
Iraq, such as France and Russia, from bidding for U.S.-funded
contracts for the rebuilding of Iraq. Russian and French companies,
in particular, benefited from the exploitation of the Oil-for-Food
Oil-for-Food fiasco reinforces President Bush's point that the U.N.
is in danger of becoming an irrelevance on the world stage. The
United Nations continues to decline as a credible international
force and will go the way of the League of Nations unless it is
radically reformed and restructured.
U.N.'s reputation has been heavily scarred by its handling of the
Oil-for-Food program and its failure to support Saddam Hussein's
removal from power. The United Nations as an organization will have
to work extremely hard in the coming years to mend its battered
image and restore the faith of both the Iraqi and American peoples,
as well as that of the wider international community.
Ph.D., is Fellow in Anglo-American Security Policy
and James Phillips
is Research Fellow in Middle Eastern Studies in the Kathryn and
Shelby Cullom Davis Institute for International Studies at The
Heritage Foundation. The authors are grateful to Heritage Research
Fellow Brett Schaefer for his advice and recommendations.