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:

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.

Benon Sevan. Sevan, a Cypriot, ran the U.N. office in charge of monitoring the oil–for-food program. He is more directly accountable for its corruption than Annan. By many accounts, Sevan brushed off reports of corruption within the program as early as 2000. More damning, a CIA-commissioned report on Saddam's weapons and finances by former U.N. inspector Charles Duelfer charges that Sevan received vouchers for millions of barrels of Iraqi oil—which, if true, would explain his willingness to look the other way at wider corruption. But Sevan denies the allegations, and his defenders cite a few instances where he did flag reports of corruption for Security Council members but was largely ignored. Sevan's allies also say he is a humanitarian who was mainly concerned with sustaining a program that helped hungry people caught in a geopolitical struggle, not an auditor looking to pick fights over bookkeeping.

Defenders of Annan and Sevan. Pro-U.N. Westerners, such as the New York Times editorial board and the British journalist William Shawcross, argue that the United Nations as an organization wasn't responsible for policing the oil-for-food program. That was the job of member nations, particularly the Sanctions Committee, which included the United States. And the United States was most determined to maintain sanctions on Saddam Hussein. American officials, defenders insist, knew about corruption within the oil-for-food program but were willing to accept a little graft in order to maintain the sanctions that hampered Saddam's weapons development plans. Meanwhile, the United States more or less openly condoned Saddam's multibillion-dollar illegal oil trade with American allies such as Jordan, Turkey, and Egypt. "This was a bit of a special arrangement here," former U.N. Ambassador John Negroponte explained in an April Senate hearing, to avoid "unnecessarily and unfairly penaliz[ing] the people of Jordan [and other countries] from the negative economic consequences of sanctions on Iraq."

Bush, for his part, has two reasons not to alienate Annan. He surely wants as much U.N. support as possible for next month's elections in Iraq and beyond. Bush may also conclude that Annan is as good as it gets, since any replacement will almost surely be at least as hostile to U.S. policy and probably perhaps far more so.

U.N. haters. The oil-for-food scandal is a legitimate one, but recently it's been driven—and often distorted—by people who seem interested in undermining the United Nations' overall authority. Conservatives resent the share that the United States pays of the body's dues—22 percent, down from 25 percent—and fume when the body doesn't reflect American interests 100 percent. The scandal presents a chance for payback.

Everyone here deserves some blame for Saddam's outlandish thievery. But what was the ultimate damage? Negroponte has told the Senate that the program largely met its goal of "creating a system to address the humanitarian needs of the Iraqi civilian population, while maintaining strict sanctions enforcement of items that Saddam Hussein could use to rearm or reconstitute his WMD program." The program did save lives: Average daily calorie intake nearly doubled in Iraq from 1996 to 2002. And Saddam never reconstituted the nuclear weapons program that was the ostensible reason for last year's invasion. The greatest tragedy of the oil-for-food program may be that, for all its Byzantine corruption, we never realized just how effective it was.

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