Oil for food
The Oil-for-food program was established in 1996 by the United Nations. Over $65 billion worth of Iraqi oil were sold on the world market. About $46 billion of these were used to provide for the humanitarian needs of Iraqi people such as food and medicine in the context of international economic sanctions. A considerable amount was spent for Gulf War reparations through a Compensation Fund (25 per cent since December 2000); UN administrative and operational costs for the programme (2.2 per cent) and costs for the weapons inspection program (0.8 per cent). The program was formally terminated on November 21, 2003 and its major functions were turned over to the Coalition Provisional Authority. [1]
The program worked via an escrow system. Oil exported from Iraq was paid for by the recipient directly into an escrow account, instead of having the money go to the Iraqi government. Of this money, part of went to reparations to Kuwait, and part of it went to help pay for ongoing coalition and United Nation operations with Iraq. The remaining money remained in the account. The Iraqi government was then permitted to request items that were not forbidden to it to be purchased from the account. Certain items, such as raw foodstuffs, were expedited, and shipped right away. Most items, including simple things like pencils and folic acid, were investigated in a process that typically took about six months before shipment was allowed. Items deemed to have any potential application in chemical, biological, and nuclear weapons, as well as long range delivery systems, were refused, regardless of what their intended purpose was.
It was instituted to relieve the extended suffering of civilians as the result of the extended comprehensive sanctions on Iraq from the UN, following Iraq's invasion of Kuwait in August 1990. After an initial refusal, Iraq signed a Memorandum of Understanding (MOU) in May 1996 for arrangements for the implementation of that resolution to be taken. The Oil-for-Food program started in October 1997, and the first shipments of food arrived in March 1998.
Some 60 percent of Iraq's 26 million people were solely dependent on rations from the oil-for-food plan. Supplies worth about $27 billion for humanitarian supplies and equipment have been delivered to Iraq.
Shortly before US and British forces invaded Iraq, UN Secretary-General Kofi Annan suspended the program and evacuated more than 300 workers monitoring the distribution of supplies.
Throughout its existence, the program has been dogged by accusations from conservative circles that its profits have been diverted to Iraq, the UN or even Kofi Annan himself. Liberal circles have likewise challenged the program on the opposite side of the spectrum, claiming that it was too harsh and did not permit Iraq to import the food and medicine necessary to prevent millions of easily preventable deaths.
Critics claim that the oil for food program is responsible, under the blockage of dual-use equipment, for keeping Iraq with a water purification and medical system destroyed by the initial sanctions. Supporters viewed it as a way to keep Saddam Hussein in check without resorting to war.
Claude Hankes-Drielsma, a British businessman and adviser to Iraq's Governing Council said that foreign companies sold food to Iraq under the program "that was unfit for human consumption. Peter van Walsum, the now retired Netherlands ambassador to the United Nations and chairman of the Iraq sanctions committee 1999-2000, speculated in a recent book that Iraq deliberately divided the security council by awarding contracts to France, Russia, and China but not to the United Kingdom and the United States. He also stated he encountered a number of cases in which he felt the lack of Iraqi cooperation was designed to excaberate the suffering of its own people. He also claimed that it was his opinion that the sanctions were not an effective deterrent.
On the other hand, Benon Sevan of Cyprus, who also headed the program, strongly defended the program, citing that it had only a 2.2% administrative cost, that it was subject to more than 100 audits (internal and external), and blamed restrictions from the Security Council for making the situation difficult. He also pointed out that 90% of Iraq's population relied on the program for its monthly food basket. Other former heads such as Hans von Sponeck have gone further, questioning whether the sanctions should exist at all. Von Sponeck, speaking in Berkley in late 2001, decried the proposed "Smart Sanctions", stating "What is proposed at this point in fact amounts to a tightening of the rope around the neck of the average Iraqi citizen"; claimed that the sanctions cause the death of 150 Iraqi children per day; and accused the US and Britain of arrogance toward Iraq, such as refusing to let it pay its UN and OPEC dues and blocking Iraqi attempts at negotiation.
The amount of money funneled out of the program, if any, is unknown, but initial estimates by the US General Accounting Office places it at around $10.1 billion. Other estimates place the level of graft at a low of around $5 billion.
Named in the list of beneficiaries were the British MP, George Galloway and his charity, the Mariam Fund. Galloway has twice previously been the subject of allegations about Iraqi funding based on documents found in Iraq: firstly in the Daily Telegraph in relation to documents found in the Iraqi Foreign Ministry, and secondly in the Christian Science Monitor in relation to documents given to them by a former Iraqi army General. The latter set of documents turned out to have been forged, and allowed Galloway to win damages and an apology in a libel suit against the Monitor. The Telegraph continues to defend its documents in a different ongoing libel suit brought by Mr. Galloway. [1] Galloway denies that his financial sponsors were getting oil cash from the UN program, but he accepts that he knew his supporters had links with the former Iraqi government, and regards that as an inevitable price to pay. [1]
The list also enumerates former French Interior Minister Charles Pasqua, and Shaker al-Kaffaji, an Iraqi-American businessman, who contributed $400,000 to produce a film by ex-UN inspector Scott Ritter discrediting the weapons searches. Many prominent Russian firms and individuals were also included in the Al-Mada allegations. Even the Russian Orthodox Church has been accused of illegal oil trading under the scheme.
In an interview with the Financial Times Khafaji admitted that he received and sold Iraqi oil contracts to Italtech, an Italian based oil trading company, which resold the oil to Houston-based Bayoil. Khafaji claims Ritter was unaware of this activity. Ritter said he did not know that Mr Khafaji was involved in the oil-for-food program, and denied receiving any money from the Iraqi government to help make his film. [1]
The scheme is alleged to have worked like this: individuals and organizations sympathetic to the Iraqi regime, or those just easily bribed were offered oil contracts through the Oil for Food program. These contracts for Iraqi oil could then be sold on the open world market and the seller was allowed to keep a transaction fee, said to be between $.15 and $.30, for every barrel of oil they sold. The seller was then to refund the Iraqi government a certain percentage of the commission.
Contracts to sell Iraq humanitarian goods through the Oil For Food program were alleged to have been given to companies and individuals based on their willingness to kickback a certain percentage of the contract profits to the Iraqi regime. Companies that sold commodities via the oil for food program were overcharging by up to 10%, with part of the overcharged amount being diverted into private bank accounts for Saddam Hussien and other regime officials and the other part being kept by the supplier.
According to the allegations, the involvement of the UN itself in the scandal began in February after the name of Benon Sevan, executive director of the Oil-for-Food program, appeared on the Iraqi Oil Ministry's documents. Sevan allegedly was given vouchers for at least 11 million barrels of oil, worth some $3.5 billion. Shortly after Sevan took charge of the program, set up by Kofi Annan's predecessor, Boutros Boutros-Ghali began confidentially treating information containing the names of specific contractors, quantities of goods, and prices paid.
The Kurds had complained since the start of the program that they were not being paid their fair share of the oil revenues. According to the guidelines set up by the Oil for Food program, the revenues were to be divided up in such a way as to protect Iraq's predominantly Kurdish regions. The allegations include claims that the Cairo office of the U.N.'s World Health Organization, run by an individual alleged to have received oil sales contracts, managed to stall the building of a new general hospital for the Kurdish city of Sulaimani, even though the funds for the project had been available since 1998.
Galp International Trading Corp, involved in the Oil for Food Program since its inception sold oil contracts to a shell company called ASAT Trust in Liechtenstein which had accounts in Bank Al Taqwa linked to a bank in the Bahamas. Shortly after September 11, 2001, ASAT Trust and Bank Al Taqwa were designated on the U.N.'s terror-watch list as entities "belonging to or affiliated with Al Qaeda."
Swiss based Delta Services also received oil contracts from Iraq in 2000 and 2001. Currently closed and under investigation, Delta Services was a subsidiary of a Saudi Arabian firm, Delta Oil, which had close financial ties with the Taliban in the late 1990s [1].
International accounting firm Klynveld Peat Marwick Goerdeler, KPMG, has been selected by the Iraqi Governing Council to investigate the al-Mada claims, along with Freshfield Bruckhaus Deringer. They are due to release its findings to the Iraqi Governing Council in May of 2004. The United Nations has launched a complete and independent audit of all Oil for Food records and transactions, and has also launched a probe with the UN's Office of Oversight Services into the al-Mada claims.
It was confirmed on April 16, 2004, that the following are to be members of the United Nations' independent panel of inquiry:
On April 22, 2004, the United Nations Security Council passed a unanimous resolution endorsing the Volcker inquiry into corruption in the United Nations Oil for food program for Iraq calling upon all 191 member states to cooperate. (NYT)
The program design
Aftermath
On March 28, Secretary-General Annan, the United States, and Britain asked the Security Council to ensure that nearly $10 billion in goods Iraq ordered and already approved, including $2.4 billion for food, can enter the country when conditions allow. Another $2.1 million could be voted for Iraqi civilians to cover other emergency needs. U.N. officials estimate they may have to help 350 thousand refugees for everything from tents to food.
The resolution into discussion makes clear that the chief esponsibility for addressing humanitarian consequences of the war would fall to the United States and Britain if they take control of the country. This refers to the 1949 Fourth Geneva Convention on the responsibilities of the occupying power. Support and Criticism
UN investigation
UN Secretary-General Kofi Annan stated on March 19th 2004, that a full investigation would be launched. In an official press interview, Annan said "[...] it is highly possible that there has been quite a lot of wrongdoing, but we need to investigate [...] and see who was responsible." [1] (audio clip, @5:56). Al Mada list
Additionally, on January 25, 2004, al Mada, a daily newspaper in Iraq, published a list of individuals and organizations who supposedly received oil sales contracts via the UN's Oil for Food program. The list came from documents which were reportedly found in the state-owned Iraqi oil corporation which has close links to the Iraqi Oil Ministry.Operation of the alleged scheme
Complaints by Kurds
Ties to International Terrorism
Investigations by Iraqi Governing Council and UN
The members have asked for a Security Council resolution to aid their work.See also
External links