Forgotten scandal: the UN’s Oil for Food Program

CBN News
May 13, 2004
The world’s obsession with the Iraqi prison abuse story has obscured what could be one of the most expensive scandals in the history of the world: the United Nations’ Oil for Food program. The UN is not eager to say how Saddam Hussein collected billions of dollars in illegal kickbacks from this scheme.

The Oil for Food program started eight years ago, as a U.N. plan to feed hungry Iraqis with Iraq’s own oil revenues. But it ended last year in a mire of alleged bribes, kickbacks and billions of dollars lost to Saddam Hussein.

The U.N.’s Secretary-General Kofi Annan responded to these charges by saying, “These are serious allegations, which we take seriously, and this is why we have put together a very serious group to investigate it.”

Benon Sevan ran the Oil for Food program for six years. He’s accused of using the program to buy oil below market value and sell it for millions of dollars in profit. Other UN officials are suspected of taking bribes from Saddam Hussein’s government. The UN Security Counsel voted last month to launch an investigation headed by former

U.S. Federal Reserve Chairman Paul Volcker. Volcker said, “I don’t know how far to go, how many records have been removed. Obviously we will try to investigate that, but I will try to find out what is there. Obviously there are people there who may be trying to hide things.”

But Volcker doesn’t have subpoena power, so he has to rely on voluntary cooperation. The U.S. Congress is also investigating the Oil for Food scandal, but the UN has sent several warnings to contractors telling them not to furnish information to Congress.

Claudia Rosett is a former member of the editorial board of the Wall Street Journal. She writes a bi-weekly column, “The Real World,” for the Wall Street Journal Europe and Pat Robertson recently interviewed Rosett to gain perspective on the Oil for Food scandal.

PAT ROBERTSON: Anyone who thinks it is wise to let the UN supervise Iraq, may want to read the work of our next guest. Claudia Rosett is a senior fellow for the Foundation for the Defense of Democracy, and a former member of the Wall Street Journal’s editorial board. In several articles, she’s helped to tear the cover off of the Oil for Food scandal. Claudia joins us now from Washington.

ROSETT: Good morning.

PAT ROBERTSON: Could you tell us how extensive this whole thing was? I read $65 billion, I read $100 billion. How much money was involved in it?

ROSETT: The amount that the UN actually supervised was $111 billion worth of business that Saddam had signed on to, including $65 billion in oil sales and $46 billion in relief contracts approved by the United Nations. So $111 billion is pretty much the figure to go with, I think.

PAT ROBERTSON: In your article, you said essentially that the UN took over operating the Iraqi economy. Nobody could buy or sell unless through their auspices, and they in turn delegated that to Saddam Hussein. Is that a fair statement of what you said?

ROSETT: I think that is a fair statement. They set out to basically supervise the entire – all the foreign exchange of Iraq. So, it wasn’t the entire economy, but it was enormous. In fact, they boasted toward the end that 60 percent of the population of Iraq depended on rations that were sort of doled out under Oil for Food, with the UN saying yes, this is good. They thought this was an achievement. And you look at this for a minute, and you have to ask, wait a minute, 60 percent of the population of Iraq depended on the rations of a totalitarian state. And the United Nations thought this was a good thing? See, the problem there being that the UN simply took it as a given that Saddam had rights to all of Iraq’s oil. They said the totalitarian deserve to take whatever he could and then apportion it out, with their help, to the people. The people themselves had no say whatsoever on this.

PAT ROBERTSON: This gentleman (Benon) Sevan. I understand he is a Cypriote. How much did he get? He was running the program. He was picking up quite a bit on the side himself, wasn’t he?

ROSETT: This is not proven. We do not know at this point. What we do know and what you can see, is that the program was horrendously mismanaged, and it’s not simply Mr. Sevan, it’s his boss, who is the Secretary-General Kofi Annan, who runs the UN, and who would be in charge, say, of the UN going back into Iraq. That is who actually operated – who was the boss of this program overall. On Mr. Sevan, I think we do need to wait and see, we do need to try to find out. The UN tells us to wait and see. But I think it is a good idea to try to find out, in whatever way is possible, to find out what happened. Because the UN is not cooperative on this score, at all, over many years. It keeps things secret.

PAT ROBERTSON: Basically, again, how did it work? Saddam was able to designate those suppliers who were going to sell to Iraq under the Oil for Food program, and they in turn were giving him kickbacks, in the billions of dollars? Again, I don’t want to oversimplify – is that what was happening?

ROSETT: Yes, that was what was happening. Part of the flaw in the design of this program was that the United Nations respected Saddam’s privacy more than the right of any public – the Iraqi, our own, the world public, to know what was going on. He was allowed, under UN confidentiality, to pick his own business partners, to set his own prices, basically. What he ended up doing, was picking some incredibly questionable business partners. You know, you have to ask why there were scores of companies allowed to buy oil from Saddam that were companies based in Switzerland, Liechtenstein, Cypress, Panama, places that are havens of financial secrecy. Shell companies, this kind of thing, not buyers for oil for home heating, and the UN just let this flow through. What you got was exactly what you described. Price fiddling that ended up with kickbacks to Saddam, from what should have been money that the UN was telling us was going to help the people of Iraq.

PAT ROBERTSON: I have seen a list where one of the members of the British Parliament who was a great Saddam booster, got some. One of the UN inspectors who came out very strongly for Saddam, his organization apparently got some allocations. What was the idea, they would sell oil at like 50 cents a barrel below world prices, and they then would, in turn, be able to trade that in for substantial sums of money? Is that how it worked?

ROSETT: A number of investigations are still trying to get to the bottom of that list. That is very likely how it worked. That was the mechanism, what you just described. Who actually got what and what the quid pro quo was, that still needs more answering. It would be helpful there, if the UN were actually willing to disclose to the public records that any normal, open democratic government would be obliged to disclose to people. But the UN does not.

PAT ROBERTSON: Was Kofi Annan’s son . . . he was working first as an employee, and then as a consultant for Cotechna, that received a letter from the UN telling them to keep quiet and not give any information. Again, I don’t want to overstate. Is that correct?

ROSETT: Yes. Let’s do the timing here. His son, Kofi Annan’s son, was working as a consultant for this firm during the period in which it was submitting its bid, back in 1998, for the contract that would get them the crucial job of inspecting or authenticating, as they call it, checking out all goods coming into Iraq to make sure that they actually were what was supposed to be shipped in. That was an important job, because the whole idea of sanctions was to contain Saddam. The timing of that was a potential conflict of interest that the UN and Kofi Annan did not declare at the time. That was the original connection. But at this point the UN last month sent out a series of letters, three that have made it public, telling contractors including Cotechna, reminding them, basically, of their contractual obligations not to talk about terms of their business with the UN. The UN has been arguing that they were just doing what they had the right to do. But why was it [unintelligible] that exactly at the moment that this investigation was taking shape but had not yet named Paul Volcker, at the point where an enormous number of very well-documented questions have been raised about misconduct involving this UN program… why did the UN at that moment send out these letters? Basically, the messages were to crucial contractors – you better watch out, or, you know, shut up. Don’t talk to people. Well, what was it that they would have to say?

PAT ROBERTSON: If this was an American official, there would be a cry in the press for his head.

ROSETT: Absolutely.

PAT ROBERTSON: Kofi Annan, he should resign, shouldn’t he? This is outrageous, what he’s allowed to happen.

ROSETT: If this were a private corporation, the boss would be, by now, gone, if not in court. If this were a democratic institution, there would be, first of all, far more disclosures. There would have been at every stage, and there certainly would be now. You would not see this incredible battening down of hatches, and it’s interesting, UN top officials have been appearing recently in front of the press, portraying themselves as victims of allegations. Well, this program, by the conservative estimates, the general accounting office, and there is plenty of documentation to support this, allowed Saddam to filch at least $10 billion dollars in the process, quite possibly sending money to terror networks abroad, very probably bribing high officials worldwide, and basically setting up a global network of finance, which allowed Saddam Hussein to send money pretty much to anyone he wanted to, with the United Nations saying ‘this is a great relief program,’ and they praised themselves at the end of it. Well, this is crazy! And the whole way that the United Nations works, it is a culture of privilege and secrecy, where they are now outraged that they would be questioned. I think it is reasonable in a democratizing world, especially one in which the UN would like to play some part, to suggest that they themselves adhere to standards that we require of ourselves, and that I think that are necessary to build free and open societies, including places like Iraq. They have a lot to clean up at home first.

PAT ROBERTSON: Claudia Rosett, thank you for the work you are doing. Keep it up. It is very, very helpful. And ladies and gentlemen, all this cry, you hear it from one of our presidential candidates, well, I’ll go to the UN, I will turn it over to the UN. It is corrupt, it is riddled with corruption, it is inefficient, bureaucratic, this is a scandal of major magnitude. The secretary general should resign and others who were involved in taking kickbacks should be prosecuted. It is a scandal of major proportions.

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