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Oil for Food Scandal:The Security Council is to blame
Description: "UNSCAM," "Oil-for-Fraud" and "Scams 'R' Us" are just some of the epithets being used by critics to describe the scandal over the United Nations' Oil-for-Food program. The UN secretary general, Kofi Annan, has set up a high-level independent pane
Date: 11 May 2004
Author: Andrew Mack Director, Human Security Centre
Source: International Herald Tribune
"UNSCAM," "Oil-for-Fraud" and "Scams 'R' Us" are just some of the epithets being used by critics to describe the scandal over the United Nations' Oil-for-Food program.

The UN secretary general, Kofi Annan, has set up a high-level independent panel under the former Federal Reserve chairman, Paul Volcker, to determine just what happened to the missing funds.

There is now no doubt that the program was subject to massive fraud, perhaps amounting to a loss of more than $4 billion. What is much less clear is who - apart from Saddam Hussein - should be held responsible.

Oil-for-Food was the world's largest humanitarian aid program, and it was by and large successful. From 1996 to 2003 it delivered $31 billion worth of goods, mostly food and medicine, to 27 million Iraqis to alleviate their suffering under the UN Security Council's sanctions regime. This was the positive part.

To understand the downside of the program, it is necessary to make a small detour into history. After Iraq was driven out of Kuwait in the 1991 gulf war, the UN Security Council proposed the creation of an Oil-for-Food program to make sure that Iraq's oil money was used for basic needs, and not to rearm the Saddam regime. Iraq would be permitted to export oil, but the revenues would go into an escrow account and would be used to pay for food and medicines. The UN had total control over the account.

Saddam rejected the plan out of hand, arguing that giving the UN control over Iraq's oil revenues was an unacceptable infringement of Iraqi sovereignty. Neither side budged for five years while Iraq's infrastructure and welfare services crumbled and its people's suffering intensified.

By the mid-1990s, public criticism of the humanitarian costs of sanctions had become increasingly intense. Saddam finally signed on to the Oil-for-Food program in 1996, on condition that Iraq should determine who bought the oil and which firms supplied food and medicines. The United Nations, whose overriding priority was to get medicine and food flowing to the increasingly desperate Iraqi masses, agreed.

It was this arrangement that opened the door for under-the-table deals.

The scams had many variants, but the principle was simple. In selling their oil, the Iraqis would first negotiate a secret price with a compliant buyer. A lower "official" price would be paid into the Paris-based Oil-for-Food escrow account, with the buyer passing most of the difference on to Saddam. The same scam applied in reverse to imports. The U.S. General Accounting Office estimates that Saddam may have received more than $4 billion dollars through these scams. He probably got an additional $5 billion smuggling oil out through neighbouring countries.

Who was to blame? The Iraqi regime and its trading partners were clearly the main culprits. But obviously there should have been more oversight and greater accountability. The question is whether the UN Secretariat was reponsible, as critics charge, or the Security Council, which had ultimate responsibility for overseeing the program.

In fact, the Office of the Iraq Program in the UN Secretariat, in addition to submitting regular audits, did report problems on pricing to the Security Council. As a result, the system was changed to make price-padding more difficult.

The Secretariat also alerted the Security Council to pricing problems in the purchase of humanitarian goods, and there were a number of press reports about this. Yet not one of the 36,000 Oil-for-Food contracts was blocked by the Council because of suspect pricing.

The reality is that although the British and the Americans, the key players on the Council, knew that there were crooked deals, they had other priorities. They were focused on weapons of mass destruction, and they did not want to further upset two other major players, France and Russia.

Paris and Moscow, for their part, were bitterly opposed to the sanctions and had no interest in pushing investigations that could reveal deep involvement by their companies in the crooked deals.

Thus it was Security Council realpolitik that ensured that the Oil-for-Food scams were never seriously investigated, and it is here that primary responsibility for UN inaction must lie.

Andrew Mack is director of the Human Security Centre at the Liu Institute for Global Issues at the University of British Columbia. He was director of the strategic planning unit in the executive office of the UN secretary general from 1998 to 2001.

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