[Vision2020] The Truth about Oil for Food

[Nick Gier]

THE SECURITY COUNCIL'S ROLE
Off Target
by James Traub

The New Republic
Post date: 02.10.05
Issue date: 02.21.05

In early 1995, American and British diplomats began to worry that the 
crippling sanctions the United Nations had imposed on Iraq five years 
earlier were becoming too unpopular to sustain. The sanctions were 
essential to keeping weapons inspectors in the country and preventing 
Saddam Hussein from importing war matériel; but they had also crippled the 
Iraqi economy, with GDP per capita dropping from $2,304 to $495 over the 
previous six years. Saddam had adroitly manipulated his people's suffering 
to undermine worldwide support for the sanctions regime. "There was a 
discussion about whether we could hold the sanctions in place," says a 
former official on President Clinton's National Security Council staff. 
"There was erosion for humanitarian reasons, and we were worried that Rolf 
Ekeus"--the head of unscom, the U.N. body searching Iraq for chemical and 
biological weapons--"would say he had accounted for everything. The French 
and the Russians wanted to find the quickest way out of sanctions so they 
could start selling to the Iraqis." Thus was born the Oil-for-Food 
Programme, under which Saddam was allowed to sell oil to buy food and 
medical supplies, and which, over the last few months, has become a ten-ton 
millstone around the U.N.'s neck.

Several central truths have been lost in the ruckus over Oil-for-Food. One 
is that the program was devised by the administrations of Bill Clinton and 
John Major, not by the United Nations--not, that is, by international civil 
servants. Another is that the compromises that allowed Saddam to exploit 
the program were baked in from the start. In 1991, the U.N. Security 
Council had passed a resolution permitting Iraq to sell limited amounts of 
oil in exchange for food and medicine. But Saddam had balked; the system 
was to be controlled by the United Nations, and he would not accept a 
program he could not manipulate. Four years later, with the humanitarian 
crisis deepening and the sanctions themselves threatened, American and 
British negotiators agreed to let Saddam control the distribution of goods 
within the country and choose who would buy Iraqi oil. It was plain that 
the dictator would use the deal to line his own pockets and to try to evade 
the sanctions. According to Sir Jeremy Greenstock, then an official in the 
British Foreign Office and later his country's ambassador to the United 
Nations, "It was realized that a certain amount of misbehavior was going to 
happen on the Iraqi side if they were going to accept this. But the Iraqi 
government had to agree, or it wouldn't work."

In other words, Oil-for-Food was a conscious act of diplomacy. And it was, 
on balance, a successful one: The program saved the sanctions, and the 
sanctions made possible the disarmament of Iraq. But it was also, 
inevitably, a mess; and the U.N.'s critics have seized upon the program as 
a mighty bludgeon with which to beat the institution silly. New York Times 
columnist William Safire melodramatically dubbed Oil-for-Food "the largest 
financial rip-off in history." Federal and state prosecutors, and House and 
Senate panels, are scrutinizing the program. And, last week, an 
investigative body appointed by U.N. Secretary-General Kofi Annan and 
headed by Paul Volcker, the former chairman of the Federal Reserve, issued 
an interim report on the program. Volcker concluded that Benon Sevan, the 
U.N. official who managed Oil-for-Food, abused his position to benefit an 
oil trader and quite possibly himself. Volcker has not yet finished 
investigating many other aspects of the program, including the alleged 
involvement of Annan's son, Kojo. Volcker's 219-page report, however, 
contains no evidence of systemic fraud or corruption; even Sevan, who 
appears to have acted alone, has only $160,000 of income for which he has 
not adequately accounted.

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But, if the institution the Volcker report describes is not fundamentally 
dishonest or out of control, as the right-wing lynch mob would have it, 
neither is it healthy. It is, if anything, an explicitly subservient body 
that has grown habituated to serving the interests and the whims of its 
member-states and understands all too well that all decisions are, at 
bottom, political. This is a pathology in which the members and the 
professionals of the Secretariat join equally and that undermines the 
organization's good efforts. Whether and to what extent it is curable is an 
open, and very important, question.



Sanctions are a popular tool of multilateral statecraft, but not because 
they work. They tend to be used, as Simon Chesterman, a professor of 
international law at New York University, says, "where there's enough 
political will to do more than denounce the situation, but not enough to 
actually do something about the situation." The Iraqi sanctions were the 
biggest, the most complex, and the longest-lasting ever implemented by the 
United Nations. The fact that they turned out to be porous and manipulable 
is thus much less surprising than the fact that they worked at all.

Iraq was placed under what are known as "comprehensive" sanctions--a total 
embargo on trade that aims, in effect, to starve an adversary into 
submission. The Oil-for-Food Programme was designed to cure, or at least 
mitigate, the inevitable consequences of such a drastic sanctions regime. 
In the Kurdish areas, where the United Nations controlled the flow of goods 
made possible by the program, health and nutrition returned largely to 
prewar levels. The effect was less ameliorative elsewhere in Iraq, because 
Saddam used his control over distribution to siphon off the supplies and 
thus preserve the propaganda weapon of mass suffering. Nevertheless, the 
threat of starvation and epidemic receded--as did the threat to the 
sanctions themselves, which had been sustained by a genuine global 
consensus on the dangers posed by Saddam's regime. The sanctions not only 
kept the inspectors rooting out Saddam's WMD programs--at least through 
1998, when Saddam kicked them out of the country--but also deprived him of 
the revenue he needed to rebuild his war machine and threaten his 
neighbors. Kenneth Pollack, the former Clinton administration official who 
helped convince many wavering Democrats to support the war by arguing that 
sanctions had given Iraq cover to reconstitute its WMD programs, now 
concedes that "the combination of inspections backed by powerful sanctions 
worked in disarming Iraq."

Among the unintended victims of the sanctions blunderbuss were Iraq's 
neighbors, several of whom were important U.S. allies. Iraq served as an 
indispensable source of cheap oil for Jordan, Turkey, and Syria. Throughout 
the '90s, starting well before the Oil-for-Food Programme was established, 
a continuous caravan of tankers illegally carried Iraqi oil across the 
country's borders. The United Nations could do nothing about this, and the 
United States made no attempt to stop the trade. "We were not going to 
address the Jordanian smuggling," says Pollack, who oversaw the 
Oil-for-Food Programme for the White House from 1999 to 2001. "In the case 
of Turkey, we tried a couple of times, but the Turks made a horrific stink. 
We weren't going to keep fighting, because we felt we had bigger fish to 
fry"--maintaining the inspections, the no-fly zones over northern and 
southern Iraq, and the sanctions themselves.

It is this illicit trade in oil, accepted and even protected by three 
successive U.S. administrations, that accounts for the enormous numbers 
associated with the Oil-for-Food "theft." This past November, Senator Norm 
Coleman, the Minnesota Republican who chairs the Senate subcommittee 
investigating the program, issued a set of calculations purporting to show 
that Saddam had stolen a stupefying $21.3 billion under the cover of the 
U.N. program. This was transparently disingenuous, since two-thirds of the 
total consisted of oil-smuggling over which, as Coleman must have known, 
the United Nations had no jurisdiction. Volcker's report is conclusive on 
this score: "[T]he major source of external financial resources to the 
Iraqi Regime resulted from sanctions violations outside the Programme's 
framework."

Nevertheless, even subtracting these very large sums, billions of dollars 
were stolen from the program, principally in the form of kickbacks on the 
goods Iraq purchased with its oil revenue. (The Volcker panel estimates 
this figure at $1.7 to $2.5 billion; the Coleman committee suggests a much 
splashier $7.5 billion.) The scam was perfectly straightforward: Iraqi 
officials instructed contractors delivering food, medicine, trucks, 
water-purification plants, and the like to add 10 percent to the actual 
price, and then to wire a payment equal to the extra sum to an account 
controlled by Iraq. How did the United Nations manage to miss this 
systematic cheating? The principal allegations have been that either U.N. 
officials, above all Benon Sevan (who ran the Office of the Iraq 
Programme), or Cotecna (the firm that was hired in late 1998 to inspect 
goods as they crossed the border) turned a blind eye, presumably in 
exchange for bribes. The Volcker panel will deal with these issues in a 
later report.

The Oil-for-Food Programme, which, over the years of its existence, 
monitored the sale of $64 billion in oil and the purchase of a 
corresponding amount of goods, was an enormous technical and financial 
exercise that, on the evidence of the Volcker report, occasionally 
overwhelmed the U.N.'s modest managerial capacity. Yet responsibility for 
the program lay not with Kofi Annan and his aides, but with the Security 
Council. The Council administers sanctions programs: Whenever it votes to 
impose such a punishment, it establishes a committee, consisting of 
representatives of the members, to administer the sanctions and then draws 
on the Secretariat for staff. Sevan periodically briefed Deputy 
Secretary-General Louise Frechette on Oil-for-Food, but he reported to the 
Council.

The Security Council members, who received the contracts from Sevan's 
office for approval, were well aware of Saddam's schemes, if not of their 
systematic nature. One ambassador of a current Council member-state says 
that "the committee was aware of the risk of abuse" and understood that 
many contracts contained "not just inappropriate stuff, but stuff which was 
incorrectly invoiced"--though he added that many of the contracts were so 
mind-numbingly long and detailed that it was often almost impossible to 
unravel the secret thread. Pollack says, "We did not know the number, and 
we could not be certain that this was going on. But everyone knew in his 
bones that this was the case; we had enough anecdotal reports about 
companies striking deals with the Iraqis."

Both Pollack and a British official say that they tried to block some 
particularly egregious examples of fraud. But the fact remains that neither 
the United States nor the United Kingdom ever officially vetoed a contract 
over concerns about fraudulent pricing. In fact, the U.N. Office of the 
Iraq Programme brought instances of suspicious pricing to the attention of 
the sanctions committee on 70 or so occasions; none of those contracts, 
however, were ultimately blocked. The U.N. professionals, in other words, 
were focusing on the merits, while the five permanent members of the 
Security Council were making political decisions according to their own 
priorities. A team of analysts at the State Department pored over every 
contract for signs of "dual-use" items that might have a hidden military 
purpose, often placing contracts on hold for months. The French, the 
Russians, and the Chinese, whether out of humanitarian or commercial or 
merely anti-American calculations, did everything to keep the pipeline full.

Officials from the major countries understood the game in all its 
complexity and cynicism. It was ugly, but it worked. And then, in 
retrospect, the whole contraption was reduced to ... Kofigate. Many 
diplomats were revolted by the brutal attack conservatives launched against 
the United Nations--though not, of course, revolted enough to say so in 
public. In early December 2004, at the monthly lunch Annan holds with the 
Security Council, Emyr Jones Parry, the British ambassador, shattered the 
ritual pieties by saying, "It is an abomination to blame the 
secretary-general and the Secretariat for something supposedly on the order 
of $20 billion when the sanctions committee was fully aware of what was 
happening, and the committee as a whole was unwilling to do anything about 
it." Jones Parry pointed out that, in 2001, when the British sponsored a 
resolution to put a stop to oil-smuggling, the Bush administration was 
quite content to let it die.



How did Oil-for-Food swell from a kind of sanctions prosthesis to a scandal 
of worldhistorical proportions? The steady drip of ugly 
revelations--Saddam's personally approved list of recipients of Iraqi oil 
vouchers, the kickback scheme, and, of course, the unspooling and 
deliciously circumstantial narrative of Kojo Annan--would certainly have 
gotten the United Nations in hot water. But the scandal was also a 
heaven-sent gift for conservatives. The unilateralist wing of the 
Republican Party has long fumed at the idea that the United States must 
seek "legitimacy" for its actions from the U.N. Security Council. For many 
of them, the U.N.'s failure to offer that precious good in the case of the 
war against Iraq constituted an irreparable breach, compounded when Kofi 
Annan declared the war "illegal" and then criticized the planned assault on 
Falluja two days before the U.S. presidential election. For conservatives, 
Oil-for-Food was the rope with which the United Nations was to hang itself.

It was this wish to marginalize the United Nations, or at least to reap the 
political benefit of U.N.-bashing, that explains the wild hyperbole over 
the numbers, the refusal to distinguish between the United Nations and its 
members, and, finally, the demands for Annan's head. The Kofi-must-go 
movement peaked in early December, when Coleman wrote an op-ed in The Wall 
Street Journal calling on Annan to resign. Coleman insisted that Annan was 
stonewalling the investigations, though he furnished no evidence that this 
was so. Senator Carl Levin, the committee's ranking Democrat, was so 
incensed that he appeared on CNN the following day to praise Annan's 
cooperation and to say that the subcommittee had received no evidence of 
impropriety on Annan's part.

Annan was especially vulnerable because of his feckless son. Much about the 
Kojo story does, in fact, invite suspicion: He worked as a consultant for 
Cotecna; his contract was first said to have ended in December 1998, the 
month Cotecna won the goods-inspection contract, and then turned out to 
have lasted another year; still later it was revealed that Kojo had been 
paid $2,500 a month for four more years as part of a "non-compete 
agreement"; and, finally, he billed Cotecna for $54,700 in expenses in 
1998, many of them run up at U.N. events. All this could mean ... what? 
"Did Kojo inform Sevan about the fees," William Safire wondered in 
November, "or know about any lucrative oil vouchers given by Saddam to 
Sevan?" Need we even ask? As Fox News commentator John Gibson blithely 
affirmed, "Annan's son was in on the scam."

And yet, in the avalanche of documents being leaked to the press, and in 
the whole corpus of information available to investigators, nothing has yet 
appeared to corroborate these speculations. Until recently, investigators 
for the Volcker panel believed that the Kojo story was all smoke and no 
fire. Now they appear to have found some evidence connecting Kojo to the 
Oil-for-Food Programme, as well as evidence casting doubt on Kofi Annan's 
claims that he knew next to nothing of his son's activities. It's not clear 
how serious any of this material will prove to be. The panel will produce a 
report on Kojo's activities several weeks from now.



The most fascinating--and, for the United Nations, perhaps the most 
discomfiting--passage in the Volcker report is its discussion of the 
selection in 1996 of a bank to hold Iraq's oil revenue in escrow and of 
firms to inspect the movement of oil and of goods. These were decisions 
made by the Secretariat, not by the Security Council, but the report's 
narrative shines a floodlight on the perverse relation between the two. The 
United Nations had a minutely detailed procurement policy designed to 
ensure a meritocratic choice of contractor. Accordingly, responsible 
officials solicited bids and drew up lists of the banks and inspection 
firms with the most experience, the best record, and the lowest cost. And, 
in each case, officials higher up the chain chose a less qualified firm. 
Why? In minutes of a meeting of the Iraq Steering Group from August 13, 
1996, Chinmaya Gharekhan, one of then-Secretary-General Boutros 
Boutros-Ghali's closest advisers, said, "Everything about implementation of 
986 [the Oil-for-Food resolution] was 'political,' and no aspect could be 
assessed purely on its merits. The Secretariat had come under terrible 
pressure from member-states; the selection of [oil] overseers, the bank, 
and the firm to supply oil inspection agents had all been political."

Reading these narratives, it is not always clear whether the Secretariat is 
reacting to pressure from members or has so thoroughly internalized this 
political dynamic that the pressure is superfluous. Boutros-Ghali appears 
to decide in advance that the escrow bank should be French--perhaps because 
the Iraqis won't accept an American or British one, nor the Americans a 
Swiss one--and instructs the French ambassador to draw up a list of 
interested French banks. Once Banque Nationale de Paris wins the contract, 
despite numerous demerits, members of the Steering Committee, which 
includes many of Boutros-Ghali's chief aides, conclude that it would be 
"unacceptable" to award the contract for goods inspection to a French firm 
as well, even though a French firm is the lowest bidder. Instead, they 
invoke a clause allowing merit considerations to be overruled by the 
"interests of the Organization," which they understand to mean keeping 
important members happy. They decide to award the contract to Lloyd's of 
London.

It is instructive to compare the behavior of Boutros-Ghali's top aides to 
that of Sevan. According to the Volcker report, Sevan repeatedly solicited 
Iraqi officials for allocations of oil on behalf of an Egyptian trader; in 
one case, the Iraqis granted the requests immediately after Sevan talked to 
them about his hopes to expand access to spare parts for their oil 
industry. This behavior is so shocking that many U.N. officials I know 
simply refused to believe it until the Volcker report appeared--a reaction 
that suggests that it is, in fact, aberrational. The deference to members 
and their political calculations, on the other hand, is an institutional 
reflex, not only in procurement matters but in personnel decisions and, 
ultimately, in the most fundamental matters.

At a press briefing after the Volcker panel released the interim report, 
Mark Malloch Brown, Annan's new chief of staff, was asked if the report 
should be read as "an indictment of United Nations culture." Malloch Brown 
was candid enough to concede that "the culture of political complicity" was 
a serious problem. Members, he said, should "back off and allow us to 
manage this organization." But will they back off? Can they? The United 
Nations is an instrument to be used by its members; it matters insofar as 
states are willing and able to use it to express their common will, which 
is to say, their political objectives. The Iraq sanctions committee was a 
perfect example of the organization's possibilities and its limitations: 
There was just barely enough common ground for the United States and the 
United Kingdom on the one hand, and France, Russia, and China on the other, 
to satisfy their conflicting political objectives without the process 
breaking down altogether. U.N. officials could do little more than watch 
and deal with the consequences.

Powerlessness breeds passivity; U.N. officials rail against their dependent 
status while at the same time taking refuge in it. If a peacekeeping 
operation goes wrong, for example, it's because the Security Council 
refused to give the troops a robust mandate. The members micromanage the 
budget, protect useless fiefdoms, and demand even low-level jobs for their 
citizens. It's all true, but it fosters a culture in which no one feels 
personally accountable.

Is it possible to foster a culture of accountability and professionalism in 
an organization that must be so acutely responsive to the wishes of its 
masters? Is it possible, for example, to fill jobs with the best candidates 
so long as the principle of "equitable national distribution" must be 
honored? If the answer is no, then we need to envision other kinds of 
organization. People who care about the United Nations will have to demand 
a change in culture, but also permit a change in culture. The members will, 
in fact, have to back off on managerial issues. The United States will have 
to stop trying to starve and intimidate the United Nations into submission. 
And the organization's managers will have to behave as if they had the kind 
of autonomy and authority they seek. If the Oil-for-Food scandal ultimately 
provokes these changes, the United Nations should be grateful for its enemies.


James Traub is writing a book on Kofi Annan and the United Nations.

"Modern physics has taught us that the nature of any system cannot be 
discovered by dividing it into its component parts and studying each part 
by itself. . . .We must keep our attention fixed on the whole and on the 
interconnection between the parts. The same is true of our intellectual 
life. It is impossible to make a clear cut between science, religion, and 
art. The whole is never equal simply to the sum of its various parts." 
--Max Planck

Nicholas F. Gier
Professor Emeritus, Department of Philosophy, University of Idaho
1037 Colt Rd., Moscow, ID 83843
http://users.adelphia.net/~nickgier/home.htm
208-882-9212/FAX 885-8950
President, Idaho Federation of Teachers, AFL-CIO
http://users.adelphia.net/~nickgier/ift.htm

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