Oil-For-Food: Facts

House Energy and Commerce Subcommittee on Oversight and Investigations Hearing, "The United Nations Oil-for-Food Program: Saddam Hussein’s Use of Oil Allocations to Undermine Sanctions and the United Nations Security Council," 109th Cong., 1st sess., 16 May 2005

On May 16, 2005, the House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing on the UN Oil-for-Food program, focusing on the mismanagement of the program and attempts by international officials from Security Council Member States to profit from the program. Rep. Henry Waxman (D-CA) raised the issue of the U.S. Government’s own financial mismanagement of the Iraq reconstruction effort when the CPA was in power. He suggested that the Committee ought to investigate that issue in addition to the Oil-for-Food program.

Several inaccurate statements that were made in the course of the hearing are rebutted below. The first two statements were made by Rep. Barton (R-TX), who is the Chairman of the full Energy and Commerce Committee. The others were made by John Fawcett, a financial investigator with the New York law firm Kreindler & Kreindler LLP, who was one of three witnesses to testify before the Committee.

1. Rep. Barton (R-TX): “If the UN leadership had its way, this mess would have been swept under the rug.”

UN Secretary-General Kofi Annan took the allegations of the UN’s mismanagement of the Oil-for-Food Program seriously and appointed former Chairman of the U.S. Federal Reserve, Paul Volcker, to lead the Independent Inquiry Committee. The Committee has released several interim reports and plans to issue its final report in late-summer 2005. The Committee was promised and has received the full cooperation of the UN, including access to all staff and documents and a promise to waive the immunity of any staff against whom criminal charges are made. The Secretary-General has already suspended two employees based on the preliminary findings of the Committee.

When Mr. Volcker released the first interim report on February 3, 2005, he said that he was pleased with the UN’s cooperativeness. He wrote in the Wall Street Journal, “In making its findings, the Committee is consciously judging the United Nations against the highest standard of ethical behavior. Moreover, we believe that few institutions have freely subjected themselves to the intensity of scrutiny entailed in the Committee’s work.”

2. Rep. Barton: “In the end the oil-for-food program was a profound and dangerous failure.”
Mr. Fawcett: “I would point out one survey that was done in the last year, by the U.N., in which the amount of people that they claim are totally dependent upon their aid has dropped from 60 percent of Iraq to 25 percent, which means 35 percent of Iraq, 7 to 8 million people, are now far better off.”

Two authoritative U.S. sponsored reports – the Duelfer Report and GAO’s report – concluded that the Oil-for-Food Program was successful on two fronts: (1) improving the health and nutrition of Iraqis, according to the GAO (“the Oil for Food program appears to have helped the Iraqi people”) ; and, (2) preventing Saddam Hussein from acquiring WMD, according to Duelfer (“U.N. sanctions and intrusive Unscom inspections dampened the regime's ability to retain its W.M.D. expertise”).

A recent study of current living conditions in Iraq conducted by Norwegian researchers also contradicts Mr. Fawcett’s claim that Iraqis are 35% better off now than before the invasion, when the Oil-for-Food program was still in place. According to a May 13, 2005 story in the Financial Times, “the report cites figures from earlier surveys into child malnutrition, suggesting a major leap in 1991 when sanctions went into effect, then a drop after the oil-for-food programme was implemented in 1996, followed by relative stability between 2000 and 2004.” The findings indicate that the Oil-for-Food program was successful in alleviating a humanitarian crisis in Iraq.

3. Mr. Fawcett: “Knowing the nature both in cruelty and corruption of the regime they were dealing with, why would international officials allow such a system [OFFP] to come into place? … International officials also stood to gain financially.”

The international officials that were most involved in creating the Oil-for-Food program were U.S. and U.K. officials. At the time, sanctions were having such a deleterious effect on the Iraqi civilian population that public support for continued sanctions was eroding. The U.S. and the U.K. were compelled to find a way to address the humanitarian suffering while still maintaining sanctions. They proposed the Oil-for-Food program to Iraq in 1991, but Saddam Hussein refused to accept it unless he was given say over the businesses that were contracted – terms that were agreed upon in 1996. Following the end of the Gulf war in 1991, Saddam Hussein remained the leader of a sovereign state, and the UN Member States were compelled to treat him as such. Whatever the fundamental flaws of the program, UN staff were only tasked with executing the Oil-for-Food program and had no hand in its design. UN staff cannot be included in the accusation that international officials pursued financial gain in the design of OFFP.

4. Mr. Fawcett: “The whole program should have had transparency. There was none…In fact, when the Security Council was obstructive to the U.N., as they were…the U.N. could have gotten around that by just publishing documents and saying, this is wrong, this is wrong.”

Contrary to Mr. Fawcett’s statement, there was a high degree of transparency in the Oil-for-Food Program. Distribution plans for humanitarian goods were published on the UN Office of Iraq Programs’ website, as were details of the number of oil liftings that took place and the delivery of spare parts to maintain the oil infrastructure. This information was updated at the end of each 90 day phase of the program.

While the website gave information about the status of purchases, sales, and distribution of goods, it did not include the names of the contractors or audits of the contractors’ performance. The release of such information was proscribed by Security Council Resolution 986, which dictated the terms of the Oil-for-Food program, and specified that “nothing in this resolution should be construed as infringing the sovereignty or territorial integrity of Iraq.” As the leader of a sovereign nation, Saddam Hussein was able to establish contracts directly with buyers and sellers. Since the UN was not a party to these contracts, but merely supervised their execution, the UN was not entitled to release the names of the contractors to the public.

5. Mr. Fawcett: “…As we see from the Volcker Commission, it was the secretary-general himself that was manipulating the system”

Mr. Fawcett misrepresents the findings of the Volcker Commission, which found no evidence that Secretary-General Kofi Annan manipulated the procurement process within the Oil-for-Food Program. Paul Volcker’s statement following the release of the Committee’s March 29, 2005 report, which addressed questions of the Secretary-Generals culpability, said:
“With respect to Secretary-General Kofi Annan:

• There is no evidence that the selection of Cotecna in 1998 was subject to any affirmative or improper influence of the Secretary-General in the bidding or selection process. Based on the record and lack of evidence of impropriety, it is the finding of the Committee that Cotecna was awarded the contract in 1998 on the ground that it was the lowest bidder.
• Having weighed all the evidence and the credibility of the witnesses, the evidence is not reasonably sufficient to show that the Secretary-General knew in 1998 that Cotecna was bidding on the humanitarian inspection contract.”

6. Mr. Fawcett: “I also want to point out that for two years under this program, the oil overseers were a French expert and a Russian expert, and for one year, only the Russian was the oil overseer.”

The oil overseers were independent experts who advised the UN on the price appropriateness of contracts between Iraq and oil companies. Mr. Fawcett insinuates that during the period of time when there was only a French and a Russian oil overseer, these two individuals were probably complicit in corrupting the system. However, according to the rules of the 661 Committee, which oversaw the Oil-for-Food Program, two oil overseers were required to sign off on every contract, and no oil overseer was permitted to sign off on any contract of his own nation. In the event that a French or Russian contract came up under these circumstances, it would have been circulated to the entire 661 committee for approval.