The U.N.’s corruption of Iraq’s ‘Oil for Food’

The Seattle Times
May 10, 2004
The oil-for-food program for Iraq was the largest humanitarian-aid program ever undertaken by the United Nations. It appears it also provided the largest opportunity for corruption. Among those with their hand in the cookie jar was, it is alleged, the director of the program. That man, Benon Sevan, has denied personally cheating. As for others, he told one TV interviewer, “Even if 10 percent of the revenue was stolen, 90 percent got to the people it was intended for. Why does nobody report that?”

Ten percent of the revenue would be $6.7 billion. But the stories coming out of Baghdad, where investigators are going through the records of the Iraqi oil ministry, suggest that 10-percent corruption figure is too low.

Consider what the oil-for-food program was: a program to block a large and lucrative trade. Like a stream of water, trade tends to have a momentum of its own, and when blocked, finds other outlets.

In this case, the then-government of Iraq was denied the right to sell its oil on the world market and spend the money itself. It was supposed to sell its oil through the U.N. The U.N. was to deduct 2.2 percent as expenses, and then pay out the money for uses it approved. Officially, 72 percent of the revenue went for humanitarian purposes and 25 percent for war reparations from the first Gulf War.

Here is one way it apparently worked: Iraq would apply to buy something ostensibly for humanitarian purposes. Say it was a refrigerator to retard the spoilage of food. That might cost $500. Instead, the U.N. would be billed for $1,000.

Such scams had been done in every country that had currency controls. Politicians knew how to do them. Vendors knew.

Denied the ability to sell the oil directly, Saddam’s government extracted value from allocating it. It conducted supply deals with those it wanted to befriend: the Russian Communist Party; Indonesian leader Megawati Sukarnoputri; the Myanmar minister of forests; the Palestine Liberation Organization, and, according to documents, Benon Sevan of the U.N.

It shocks Americans that an official of the U.N. earning $186,000 a year might butter his bread on the side. This is an institution designed to do good things. But institutions are made up of people with their own interests. Without audits, without disclosure, without squaring up the cash register at the end of the day, people cheat. And when some people cheat and are not caught, other people cheat. That apparently was true at the U.N. as well.

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