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Allegations against the program and the UN's actions

It has been alleged that mismanagement of the Oil-for-Food Program allowed Saddam Hussein’s regime to embezzle millions of dollars through underpriced oil contracts and overcharging in contracts for some of the goods Iraq purchased under the program. There have also been allegations that one UN official illegally profited from the program.

According to a General Accounting Office report, Saddam Hussein embezzled $4.4 billion through pricing irregularities. It is also estimated that Saddam acquired an additional $5.7 billion through illegal oil smuggling. However, the Oil-for-Food program had neither responsibility nor enforcement capacity for checking for unauthorized oil sales. That responsibility was provided to UN Member States and, in the Gulf area, to the multinational Maritime Interception Force (MIF) which was established when the sanctions regime was put in place in 1990.

Oversight over Oil-for Food rested on the UN Security Council and the UN Secretariat’s Office of the Iraq Program (OIP). Specifically, it was the role of the Security Council’s 661 Committee to monitor all contracts awarded under the Oil-for-Food Program. The U.S. , through its Permanent Seat on the UN Security Council, had a representative on the 661 Committee during the entire duration of the Oil-for-Food Program. Regular program audits were undertaken by the UN’s Office of Internal Oversight and the program’s escrow account was audited every six months by external auditors.

The OIP raised concerns about potential wrongdoing in the Oil-for-Food program on multiple occasions. These are some instances:

  • On November 17, 2000 , UN oil overseers informed the 661 Committee (a committee of UN Security Council members tasked with overseeing the program) that formulas proposed for oil pricing for the month of December were considerably under-priced and did not appear to represent "fair market value."
  • In December, 2000, the Office of the Iraq Program referred various information requests on surcharges and side-agreements to the 661 Committee, which then directed oil overseers to advise buyers of Iraqi oil that they should not pay any surcharges by fax. In early March, 2001, the Secretary-General informed the Security Council of surcharge efforts in a report. That same month, the U.S. circulated information about oil and humanitarian aid surcharges, including recommendations to remedy the surcharges. As a result, the Security Council instituted a "retroactive pricing" mechanism.
  • Oil-for-Food administrators identified several hundred cases for potential over-pricing between 2001 and 2002. In 70 cases, administrators reported the overpricing concern to the 661 committee. In these instances the experts were not entirely convinced by the explanations provided by the suppliers.

As a result of the allegations, in April of 2004 the UN Secretary General created an independent committee chaired by Paul Volcker, former Chairman of the US Federal Reserve Bank, to thoroughly examine the allegations. The other members of this commission are South African Justice Richard Goldstone and Mark Pieth, a Swiss expert on international money-laundering and bribery. The panel members are independent of the UN and the terms of reference make clear that the panel will have unrestricted access to all relevant United Nations records and information, written or unwritten, and to interview all relevant UN officials and personnel, regardless of seniority. This mandate was endorsed by a unanimous Security Council Resolution.

What is the UN doing about the allegations?

As a result of the allegations, the UN Secretary-General created an independent committee chaired by Paul Volcker, former Chairman of the US Federal Reserve Bank, to thoroughly examine the allegations. The other members of this commission are South African Justice Richard Goldstone and Mark Pieth, a Swiss expert on international money-laundering and bribery. The panel members are independent of the UN and the terms of reference make clear that the panel will have unrestricted access to all relevant United Nations records and information, written or unwritten, and to interview all relevant UN officials and personnel, regardless of seniority. This mandate was endorsed by a unanimous Security Council Resolution.