Oil-for-Food Scandal:
Saddam's
Global Payroll
By THERESE RAPHAEL
THE WALL STREET JOURNAL February 9, 2004
On Dec.
5, during a trip to Baghdad,
Claude Hankes-Drielsma faxed an urgent letter to U.N.
Secretary-General Kofi Annan. Mr. Hankes-Drielsma, the
U.K. Chairman of Roland Berger Strategy Consultants,
had recently been appointed to advise the Iraqi
Governing Council. What he saw in Baghdad left him
shocked. "As a result of my findings here, combined
with earlier information," he wrote, "I most strongly
urge the U.N. to consider appointing an independent
commission to review and investigate the 'Oil for Food
Programme.' Failure to do so might bring into question
the U.N.'s credibility and the public's perception of
it. . . . My belief is that serious transgressions
have taken place and may still be taking place."
Just how
serious these transgressions were became clear late
last month, when the Iraqi daily Al Mada published a
partial list of names, compiled by
Iraq's oil ministry, of those whom
Saddam Hussein rewarded with allocations of Iraqi oil.
Mr. Hankes-Drielsma, who says he was among the first
to see the list in early December, says it is based on
numerous contracts and other detailed documents and
was compiled at the request of the Iraqi Governing
Council.
The list,
a copy of which has been seen by the Journal's
editorial page, is in spreadsheet format and details
(in Arabic) individuals, companies and organizations,
grouped by country, who oil ministry and Governing
Council officials believe received vouchers from the
Iraqi regime for the purchase of oil under the
oil-for-food program. Mr. Hankes-Drielsma said the
recipients would have been given allocations at
below-market prices and then been able to pocket the
difference when a middleman sold the oil on to a
refinery; 13 time periods are designated and with
indications of how much crude, in millions of barrels,
each recipient allegedly received.
The list
reads like an official registry of Friends of Saddam
across some 50 countries. It's clear where his best,
best friends were. There are 11 entries under
France (totaling 150.8 million barrels
of crude), 14 names under Syria (totaling 116.9
million barrels) and four pages detailing Russian
recipients, with voucher allocations of over one
billion barrels. Many of the names, transliterated
phonetically from Arabic, are not well-known or are
difficult to identify from the information given.
Others stand out. There's George Galloway, the
Saddam-supporting British MP recently expelled from
the Labour Party, who has always denied receiving any
form of payment from Saddam. Other notables include
Indonesian President Megawati Sukarnoputri (also
listed separately as the "daughter of President
Sukarno"), the PLO, the Popular Front for the
Liberation of Palestine, the Russian Orthodox Church,
the "director of the Russian President's office" and
former French Interior Minister Charles Pasqua. Some
-- including Mr. Pasqua, the Russian Church and Ms.
Megawati -- have denied receiving anything from
Saddam. Patrick Maugein, a close friend of Jacques
Chirac and head of Soco International oil company,
says his dealings were all within "the framework of
the oil-for-food program and there was nothing illegal
about it."
The
list's breadth, and the difficulty in reading and
interpreting it, has slowed its exposure. There's also
the question of authentication. Mr. Hankes-Drielsma
(who is not an Arabic speaker) is convinced it is
authentic and will be followed by more detailed
evidence as the Iraqi oil ministry and Governing
Council conduct further investigations. "I've seen the
documents that have satisfied me beyond any doubt that
we're dealing with a genuine situation," he told me.
One
of the most eye-catching names on the list is easy to
miss as it's the sole entry under a country one would
not normally associate with Iraq
-- Panama. The entry says: "Mr. Sevan." That's the
same name as that of the U.N. Assistant
Secretary-General Benon V. Sevan, a Cyprus-born, New
York-educated career U.N. officer who was tapped by
Kofi Annan in October 1997 to run the oil-for-food
program.
When I
tried Mr. Sevan for comment, a U.N. spokesman wouldn't
put me through to him directly but offered to pass on
emailed questions. In an email reply to questions
about Mr. Sevan's apparent inclusion on the list and
interest in the Panama-based business that allegedly
received the discounted oil, the spokesman quoted Kofi
Annan's statement Friday: "As far as I know, nobody in
the Secretariat has committed any wrongdoing. If there
is evidence, we would investigate it very seriously,
and I want those who are making the charges to give
the material they have to me so that we can follow up
to determine if there has been any wrongdoing and I
would take necessary action. So far statements are
being made but we need to get facts." The pro forma
U.N. response certainly seems inadequate. Mr. Sevan
should take the opportunity to defend himself against
the inference that the presence of his name on this
list could help explain how Saddam was able to get by
with so much influence-buying around the world with
little apparent objection from the U.N.
* * *
In the
seven years that Oil-for-Food was operational, (it was
shut down in November and its obligations are being
wound up) Saddam was able to skim off funds for his
personal use, while at the same time doing favors for
those who supported the lifting of sanctions, supplied
him with his vast arsenal of weapons, and opposed
military action in Iraq. Indeed, it was clear from the
outset that Saddam would be able to use the program to
benefit his friends. The 1995 U.N. resolution setting
out the program -- Resolution 986 -- bends over
backwards to reassure Iraq that Oil-for-Food would not
"infringe the sovereignty or territorial integrity" of
Iraq. And to that end it gave Saddam power to decide
on trading partners. "A contract for the purchase of
petroleum and petroleum products will only be
considered for approval if it has been endorsed by the
Government of Iraq," states the program's procedures.
Predictably, Saddam exploited the program for
influence-buying and kickbacks, and filled his coffers
by smuggling oil through Syria
and elsewhere. With Oil-for-Food and smuggling, he was
able to sustain his domestic power base and maintain a
lavish lifestyle for his inner circle.
The
system was ripe for abuse, in part because a divided
Security Council gave Saddam far too much flexibility
within the program. Oil-for-Food not only gave Iraq
the power to decide with whom to deal, but also
freedom to determine the official price of Iraqi oil,
revenues from which went legally into the U.N.'s
Oil-for-Food account. U.N. rules did not allow it to
order Iraq to deal directly with
end-users and bypass all those lucky middlemen who got
deals from Saddam. Nor was the U.N. allowed to view
contracts other than those between the oil ministry
and the first purchaser, so it had no way of verifying
that surcharges were being imposed by the middlemen on
end-users. That enabled him to add surcharges to
finance his own schemes while still making the final
price competitive.
U.N.
rules were ostensibly devised to prevent pricing
abuses, but in one of the many indications of
administrative failure, those safeguards appear not to
have been enforced. In response, the
U.S. and Britain tried often from 2001
to impose stricter financial standards, but Russia
blocked changes. Then the U.S. and Britain instituted
a system of retroactive pricing -- delaying approval
of the Iraqi selling price so that they could take
account of the market price when giving their
approval. This too met with grumbling from Friends of
Saddam and while it reduced oil exports, it didn't end
the corruption.
Throughout most of the program's life, Mr. Sevan's
office seemed to see no evil. When overwhelming
evidence finally surfaced that Oil-for-Food had become
a gravy-train for the Iraqi regime, U.N. officials
acknowledged some of the abuses but refused any of the
blame. Criticism is routinely portrayed as politically
motivated. "The [program] has existed in a highly
politicized environment from day one," explains the
U.N. Web site. "The scale of these operations has also
made it a rather large target." Its last line of
defense was to punt to the Security Council, whose
sanctions committee (authorized by the 1990 sanctions
resolution and composed of Council members) was meant
to oversee the program, receive reports and review
audits.
The
record of systemic abuse of the program lends credence
to claims that the oil ministry list is genuine and
should be investigated. The Iraqi Governing Council
says it's considering legal action against anyone
found to have profited illegally from Oil-for-Food.
The U.S. Treasury's Bureau of Immigration and Customs
Enforcement is investigating possible violations of
U.S. law. But the U.N. has
resisted calls for an independent investigation into
abuses. Says Mr. Hankes-Drielsma: "I would urge the
U.N. to take the high moral ground and instigate a
truly independent investigation."
To this
end, he wrote a second letter to the U.N. secretariat
on Feb. 1, this time addressed to Hans Correll, Under
Secretary for Legal Affairs and Legal Counsel of the
U.N., with a copy to British Foreign Secretary Jack
Straw. He catalogs questions on areas "which need
urgent investigation," e.g. "Why did the U.N. approve
oil contracts to non-end users?" His letter alleges
that "not less than 10% was added to the value of all
invoices to provide cash to Saddam . . . why was this
not identified and prevented?" The letter also asks
"What controls were in place to monitor BNP [the
French bank] who handled the bulk of the LCs, the
total value of which may have [been] in the region of
$47 billion?"
In a June
2000 statement on Oil-for-Food, Mr. Sevan said, "As
[Mr. Annan] put it recently, we, as international
civil servants, take our marching orders from the
Security Council." It might have been more accurate to
acknowledge the U.N. took its marching orders from
Saddam.
Ms. Raphael is editorial page editor of The Wall
Street Journal
Europe.
UN Oil-For-Food Chief Denies Bribes
“I should like to state that there is
absolutely no substance to the allegations made in a
local Iraqi newspaper, now appearing in some
international media, that I had received oil or oil
monies from the former Iraqi regime.
Those making the allegations should
come forward and provide the necessary documentary
evidence. They should submit their evidence to the
Under-Secretary-General, Office of the Internal
Oversight Services.”
Benon V. Sevan
10 February 2004
