Oil for food/revision
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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] (http://www.un.org/Depts/oip/)
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The program design
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 the United Kingdom forces invaded Iraq, UN Secretary-General Kofi Annan suspended the program and evacuated more than 300 workers monitoring the distribution of supplies.
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 responsibility 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
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 exacerbate 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.
Complaints by Kurds
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.
GAO Investigation
After the 2003 Invasion of Iraq, and subsequent Coalition victory over the Iraqi army, the US General Accounting Office (GAO) was given the task of finalizing all Oil for Food related supply contracts with the now defunct regime as well as tracking down the personal fortunes of former regime members. During this task, the GAO found inconsistencies and evidence of widespread corruption within the program.
The GAO estimates that the Saddam Hussein regime generated $10.1 billion in illegal revenues by exploiting the Oil for Food program. This figure includes $5.7 billion from oil smuggling, and $4.4 billion in illicit surcharges on oil sales and after-sales charges on suppliers. The scale of the fraud was far more extensive than the GAO had previously estimated.
According to the GAO, the oil was smuggled by pipeline into Syria, by ship through the Persian Gulf, and by truck across the borders of Turkey and Jordan. Oil purchasers were charged a surcharge of up to 50 cents per oil barrel, with an added commission of 5 to 10 per cent of the commodity contract. A US Department of Defense study cited by the GAO evaluated 759 contracts administered through the Oil for Food program, and found that nearly half had been overpriced, by an average of 21 percent [2] (http://www.gao.gov/highlights/d04579thigh.pdf).
Although UN officials have pledged full cooperation with the GAO’s investigation, Joseph A. Christoff, director of international affairs and trade at the General Accounting Office, told a House hearing that U.N. auditors had refused to release the internal audits of the Oil For Food program [3] (http://washingtontimes.com/world/20040429-120918-1334r.htm).Benon Sevan, with support from Koffi Annan, has written letters to all former Oil for Food contractors asking them to consult Sevan before releasing any documents to GAO or US congressional inquiry panels. [4] (http://edition.cnn.com/2004/US/05/03/un.oil.for.food.letter/)
While attempting to determine the complexity of the Oil for Food program for an article in the New York Times, investigative journalist, Claudia Rosett of the Hudson Institute, discovered that the UN treated details such as the identities of Oil-for-Food contractors, the price, quantity and quality of goods involved in the relief deals, and the identities of the oil buyers and precise quantities they received as confidential. The bank statements, the interest paid, the transactions, were all secret as well. This all took place after Sevan began heading the program, set up by Kofi Annan's predecessor, Boutros Boutros-Ghali. Rosett testified to this under oath on April 21, 2004 before the House Subcommittee on National Security. [5] (http://reform.house.gov/UploadedFiles/Rosett%20Testimony--%20(cleaned%20up%20version).pdf)
UN Investigation
After initial opposition to an 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." [6] (http://webcast.un.org/ramgen/pressconference/so040319.rm?start=%2200:00:03%22) (audio clip, @5:56). Critics contend that since Paul Volcker has no subpoena power to requisition Oil for Food documents, the strength of his investigation lies on the individual willingness of UN officials to cooperate.
It was confirmed on April 16, 2004, that the following are to be members of the United Nations' independent panel of inquiry:
- Paul Volcker, former U.S. Federal Reserve System chairman;
- Mark Pieth of Switzerland, an expert on money-laundering in the Organization for Economic Cooperation and Development (OECD); and
- Richard Goldstone of South Africa, former Prosecutor of the International Criminal Tribunal for the former Yugoslavia (ICTY) and the International Criminal Tribunal for Rwanda (ICTR).
The members have asked for a Security Council resolution to aid their work.
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) (http://www.nytimes.com/2004/04/22/international/middleeast/22CND-NATI.html)
Investigations by Iraqi Governing Council and UN
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.
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.
Named in the list of beneficiaries were the British MP, George Galloway and his charity, the Mariam Fund, 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.
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.[7] (http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1079420292873)
Arthur Millholland, president of Oilexco Ltd, whose name also appeared on the Al Mada list denied any wrongdoing, but confirms the charges that illegal surcharges were being paid to the Iraqi government by contractors. [8] (http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20040423/ROIL23/TPBusiness/TopStories)
Operation of the alleged scheme
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 $.50, 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 supposedly overcharging by up to 10%, with part of the overcharged amount being diverted into private bank accounts for Saddam Hussein 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.
Ties to International Terrorism
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 [9] (http://www.forward.com/issues/2003/03.10.17/news4.terror.html).
See also
External links
- UN Office of the Iraq Programme Oil-for-Food (http://www.un.org/Depts/oip/background/index.html)
- UN news center: Allegations on oil-for-food will be probed ‘very seriously,’ Annan says (http://www.un.org/apps/news/story.asp?NewsID=10377&Cr=iraq&Cr1=oil)
- The U.N. Oil for Food scandal (http://www.washtimes.com/op-ed/20040321-101405-2593r.htm) - Washington Times
- Agriculture.com (http://www.agriculture.com)
- http://www.disinfopedia.org/wiki.phtml?title=Oil-for-Food_Program
- The Al Mada List (http://memri.org/bin/articles.cgi?Page=archives&Area=ia&ID=IA16404)
- Galloway accepts libel damages (http://news.bbc.co.uk/2/hi/uk_news/politics/3549679.stm)
- First 'Freedom Fries,' Now Oil-for-Food Lies; Op ed of French ambassador to the US in the LA Times (http://www.ambafrance-us.org/news/statmnts/2004/levitte_latimes040704.asp)