Unlocking "the biggest scandal in human history."

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Dec. 17 2004 1:30 PM

The Oil-for-Food Scandal

What happened, and who's to blame.

Saddam Hussein
Saddam: Up to no good, as usual

Fox News's Fred Barnes calls it "the biggest scandal in human history." American soldiers may be dying in Iraq because of it, says Bill O'Reilly. It proves that the United Nations is a failed, incompetent institution—and that its leader, Kofi Annan, must be sacked, says many a Republican on Capitol Hill.

Conservatives everywhere are in high dudgeon over the U.N. oil-for-food scandal. And certainly, the tale of how Saddam Hussein evaded and exploited U.N. sanctions to reap more than $21 billion in illegal profits from 1990 to 2003 is tawdry and venal. But it's also not quite as simple as Fox News claims. The details are complicated, and pinning blame isn't easy. Here's a guide to the key players and their roles:

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Saddam Hussein. His defiance of America may have been stupid, but Saddam was brilliant at manipulating U.N. sanctions. After Saddam invaded Kuwait in 1990, the United Nations barred him from profiting from sales of his country's vast oil supplies. The ban was meant to keep him from rebuilding his military and pursuing a nuclear weapons program. But it also deprived the Iraqi economy of its main export, leading to hunger and deprivation among his people—a condition Saddam both exacerbated (by hoarding what wealth his country did possess) and publicized to win international sympathy. Support for the sanctions gradually eroded, and in 1996 the United Nations created the oil-for-food program, through which Iraq could resume oil sales to pay for humanitarian goods such as food and medicine.

Saddam exploited the renewed oil flow in three ways. First, he simply ignored the sanctions and illegally sold oil to Syria, Turkey, Jordan, and other countries, with no U.N. supervision. These sales furnished him with by far his biggest source of illicit income—about $13.6 billion, according to a Senate subcommittee investigation.

Second, Saddam and his minions used tricky pricing schemes, surcharges, and kickbacks to milk another $7 billion or more from oil buyers and sellers of humanitarian supplies. These schemes were possible because Saddam had successfully argued at the United Nations that as a sovereign nation, Iraq should be allowed to negotiate contracts directly. Legitimate Iraqi oil profits went to a U.N.-controlled escrow account, but kickbacks were secretly routed by complicit companies to hidden regime bank accounts. Saddam also received kickbacks from goods Iraq purchased with oil money.

Third, Saddam bribed foreign officials and others. He oversaw a list of people who were given vouchers to buy Iraqi oil at below-market price—essentially, multimillion-dollar buy-offs. Their apparent purpose was to win Saddam defenders in his fight to lift U.N. sanctions. Beneficiaries allegedly included oil company executives (mostly from Russia, China, and France); some prominent politicians (including Russia's notorious Vladimir Zhirinovsky, a French interior minister, and the president of Indonesia); and at least one journalist (a Syrian).

Kofi Annan. When the Ghanaian diplomat took over the United Nations in early 1997, Slate's David Plotz—responding to some helpful Annan diplomacy in Iraq—showed pleasant surprise at a secretary-general who "has begun to do the improbable: restore America's faith in the United Nations and the United Nations' faith in America." That didn't last long. Annan criticized the 1999 U.S. bombing in Kosovo, which was not conducted under U.N. auspices, called the U.S. invasion of Iraq "illegal," and most recently criticized last month's American assault on Fallujah.

Of course, in the oil-for-food case, conservatives and other Annan critics typically frame the issue as one of responsibility, not a long-standing beef with Annan. Writing in the Wall Street Journal earlier this month, Minnesota Sen. Norm Coleman, who is leading a Senate investigation into the scandal, argued that "the most extensive fraud in the history of the U.N. occurred on [Annan's] watch" and that Annan "must … be held accountable."

Annan hurt himself by responding slowly as new details about oil-for-food corruption emerged from Iraqi files that were discovered after the war and from regime officials who were captured. And he's put off Coleman and others by not granting Senate investigators full access to U.N. documents and personnel. But Annan has made efforts to get to the bottom of things. In April he appointed former U.S. Federal Reserve Chairman Paul Volcker to mount an internal U.N. investigation. Indeed, both President Bush and Britain's Prime Minister Tony Blair have signaled their support for Annan, as has the U.N. General Assembly, where earlier this month he received a long standing ovation.

Kojo Annan. Annan-bashing spiked after it surfaced that Cotecna, a Swiss trade inspection company that won a $4.8 million contract under the oil-for-food program, was making payments to Kofi's son, Kojo. Kojo worked for Cotecna from 1996 to 1998, the year the company was contracted to monitor oil-for-food shipments into Iraq. U.N. officials had previously said that payments to Kojo ended soon after he left Cotecna. But last month Kofi Annan, calling himself "very disappointed and surprised," admitted that Kojo received monthly payments of $2,500 until at least last February. No one has implicated Kofi Annan in the awarding of Cotecna's contract, however. Cotecna says Kojo had no role in its U.N. work and that the payments to him were part of an agreement to keep him from working for any of the company's competitors after he left his job.

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