 By Judy Aita October 28, 2005
These windfalls were due in part to the grievous failure of U.N. officials and member states properly to oversee the program, the Independent Inquiry Committee into the United Nations Oil-for-Food Program said October 27. At a press conference releasing the independent inquiry's final report, Committee Chairman Paul Volcker said that "by the year 2000, the imposition of kickbacks and surcharges by the Iraqi regime of Saddam Hussein brought about the emergence of front companies and international trading concerns prepared to engage in these illicit payments." "This irrevocably changed the nature of the program. It was at this point that the 'gatekeepers' of the program -- the secretariat, the Security Council and U.N. contractors -- failed most grievously in the responsibilities to monitor the integrity of the program," Volcker said. The Oil-for-Food Program originally was conceived as a temporary U.N.-supervised program under which Iraqi oil could be sold and the proceeds used to purchase humanitarian supplies for Iraqi civilians. However, the program was manipulated by Saddam Hussein, according to the committee. The problem was compounded by basic failures of the U.N. secretariat and the Security Council to define clearly the complex administrative responsibilities and council members' delays or failure to make crucial decisions. What stands out, Volcker said, "is the politicization of the process." "Saddam finally chose to favor those nations, companies, and individuals that he felt -- rightly or wrongly -- would assist his efforts to end the sanctions imposed at the end of the Gulf War," he said. "It is also true, as our earlier reports have emphasized, that political differences and pressures within the United Nations organization itself -- the Security Council, secretariat, and U.N. agencies -- frustrated appropriate and effective response to the manipulation and corruption of the program." "The corruption has many participants and was substantial but could not have been so pervasive if there had been more disciplined management by the U.N. and its agencies," Volcker said. REPORT "DEVASTATING," SAYS U.S. ENVOY TO UNITED NATIONS U.S. Ambassador John Bolton called the report "devastating." Bolton, who has been leading efforts for U.N. reform, said that "there are three clear lessons to be learned from the scandal: the management of the U.N. needs urgent, immediate reform; sanctions regimes need to be strengthened and improved; countries must pursue those people and companies who assisted in the corruption of the sanctions regime." In the United States, federal and local authorities already have indicted a number of people and companies that participated in illegal Oil-for-Food Program schemes, the ambassador added. "The U.S. believes it is the duty of law enforcement agencies in nations around the world to pursue people and companies in their countries that did the same. The best deterrent to future corrupt complicity in the circumvention of sanctions regimes is to prosecute vigorously those many people and entities that profited financially," Bolton said. REPORT LISTS CONTRACTORS, BENEFICIARIES, MONEY PAID The 623-page report details the manipulation of the program by Saddam Hussein's regime and gives examples of oil buyers, many of whom paid directly or indirectly illicit oil surcharges, and sellers of humanitarian goods, who also paid kickbacks through a variety of devices. It also reviews the work of Banque Nationale de Paris (BNP), the bank selected to hold and service the escrow account, and the performance of the inspection companies. Accompanying the report are eight tables identifying contractors, beneficiaries and money paid. Under the Oil-for-Food program Iraq sold $64.2 billion worth of oil to 248 companies. In turn 3,614 companies sold $34.5 billion worth of humanitarian goods to Iraq, the report said. The largest source of illicit income from the program came from "kickbacks" paid by companies that Iraq selected to receive contracts for humanitarian goods, the report said. The committee calculated that more than 2,200 companies from 66 nations paid the illicit kickbacks in the form of inland transportation fees, after-sales-service fees, or both. Those paying illicit surcharges on oil purchases came from or were registered in 40 nations. Three years into the program, Iraq began openly to demand illicit payments from its customers. Oil overseers passed their concerns to the U.N. secretariat and the Security Council, but little action was taken, the report said. Permanent missions to the United Nations, which were responsible for approving their national companies to do business with the program, took no action. BNP, which was in a position to have firsthand knowledge, also failed to inform the United Nations adequately, the committee said. IRAQI REGIME ALSO PROFITED FROM SMUGGLING, OIL SURCHARGES In addition, the committee pointed out, the Iraqi regime made an estimated $11 billion from smuggling, more than five times the amount received from kickbacks. Thousands of vehicles and trucks carried smuggled goods across the Iraqi border with limited, if any, inspection by nations involved or U.N. inspectors who were responsible only for inspecting oil and goods financed by the Oil-for-Food program, it said. Coastal Petroleum Company based in the United States was the first to purchase oil under the program. Other companies from Turkey, Russia, the United Kingdom and France followed suit, but as the program progressed, Iraqi leaders decided to deny American, British and Japanese companies direct oil allocations due to the opposition of those governments to lifting sanctions. Iraqi leaders then gave preferential treatment to France, Russia and China because those countries were permanent members of the Security Council and were perceived by Iraq to be more favorable to lifting the sanctions, the report said. By 2000, as the surcharges reached $0.50 per barrel, established buyers refused to pay the higher surcharge and oil sales increasingly took the form of contracts with front companies backed financially and technically by international trading companies willing to facilitate surcharge payments. Surcharges on oil contracts sometimes were paid in cash at Iraqi embassies abroad, including in Russia, Greece, Egypt, Switzerland, Italy, Malaysia, Turkey, Austria, Vietnam, Yemen and Syria. By far the largest portion of total surcharge payments more than $52 million -- went through the Iraqi Embassy in Moscow. One transaction described in the report concerns Ambassador Jean-Bernard Merimee, who was France's representative on the Security Council from 1991 to 1995 and a special adviser to Secretary-General Kofi Annan on European affairs from 1999 to 2002. Merimee asked for an oil allocation in 1998 after retiring from the French Foreign Ministry. He has admitted receiving an allocation, selling 2 million barrels of oil to Fenar Petroleum, and receiving more than $165,700. During the course of its 18-month investigation the committee interviewed more than 1,100 individuals in more than 20 countries and reviewed 12 million pages of documents. Other committee members in addition to Volcker, who is a former chairman of the U.S. Federal Reserve System, are Justice Richard Goldstone of South Africa, who was the first chief prosecutor of the U.N. International Criminal Tribunals for the former Yugoslavia and Rwanda, and Mark Pieth of Switzerland, a University of Basel professor of criminal law and criminology with expertise in international bribery and money laundering. They were assisted by a staff of experts from 28 nations. The Oil-for-Food Program was started in 1996 and ended in November 2003 when it was handed over to the Coalition Provisional Authority. The committee also issued a
report in September that covered administration of the Oil-for-Food
Program both in New York and Iraq, senior U.N. management, manipulation
by Iraq, negotiations and establishment of the program, the Security
Council, smuggling, the U.N. secretariat, performance of U.N.-related
agencies and a special report on the impact of the program on
the Iraqi people. Judy Aita is a United Nations Correspondent for the Washington File. Publish A Letter on SitNews Read Letters/Opinions Submit A Letter to the Editor
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