The U.N. Oil for food scandal was proven and huge

Conventional Wisdom

The United Nations Oil-for-Food scandal was really no big deal. The media just used it to try and embarrass the United Nations.

Facts

In terms of the amounts of money involved, the scale of corruption, and the disservice to the beleaguered people of Iraq, the Oil-for-Food scandal was enormous. Many officials confessed to and/or were convicted of crimes.

      The United Nations Oil-for-Food Program began with the best of intentions. Under the U.N. sanctions of the early 1990's, the international community had agreed not to purchase Oil from Iraq until the government complied with the requirements of U.N. Security Council resolutions. The lack of oil revenue caused severe hardship for the people of Iraq, and the Oil-for-Food Program was designed to allow the government of Iraq to sell a certain portion of its oil under U.N. supervision to finance purchases of medical supplies and other humanitarian aids. The process was designed to provide revenue from oil, but prevent the Iraqi regime from using it to reconstitute its army and replenish Saddam's supplies of weapons of mass destruction.

      The sanctions could have been lifted at any time if Saddam had simply chosen to comply with U.N. Security Council resolutions. But he chose, instead, to show his contempt by ignoring the resolutions and manipulating the Oil-for-Food program to his own advantage. The program was established by the U.N. Security Council in April, 1995. According to the official U.N. website, $65 billion in revenues from Iraqi oil was dispersed for humanitarian purposes. Of the total, 72% was used for humanitarian aid, and the balance was used to pay reparations in Kuwait and surrounding countries. Approximately 3% was spent on operational costs by the U.N. and its inspection teams in Iraq. At least, that's what the official records stated.⁵⁷

      After the fall of Baghdad in 2003, papers surfaced in the files of the former government and its oil ministry indicating that the head of the U.N. Oil-for-Food program, Mr. Benon Sevan, may have taken as much as $1.2 million in bribes and illegal transfers for himself. After a period of denials and counter-claims, the U.N. eventually set up an internal commission to investigate the program, and selected former Federal Reserve Chairman Paul Volcker to lead the effort.

The Commission Report

      The Volcker Commission report, released on Oct. 27, 2005, revealed the following:

• Of 248 companies that purchased oil, 139 paid illicit "surcharges" which made their way to the Iraqi government. Many of these companies may not have known the payments were illicit. Of the 3,614 companies that sold humanitarian goods to Iraq, 2,253 paid "kickbacks." Again, some may not have understood fully what was going on.
• Illicit payments enriched Saddam and his government by $1.8 billion.
• Companies in France and Russia were explicitly chosen for allocations to reward their attempts to influence the global political process in favor of Saddam's government.
• Illicit payments were made to officials for their influence. Those officials were disproportionately French, but also included people in the U.S. and U.K. who were publicly opposed to the U.N. sanctions, such as the British MP George Galloway.
• Benon Sevan, the U.N. program leader, was found to have solicited kickbacks from the Iraqi government. While Sevan may have pocketed more than a million dollars, records revealed $160,000 of personal income for which he offered several contradictory explanations. He first claimed the money was from an elderly aunt in Cyprus, who died from a fall down an elevator shaft. During the investigation, Sevan took a lengthy vacation and then retirement, back to his native Cyprus. He remains under a U.S. federal indictment, but, according to the laws of Cyprus, cannot be extradited to stand trial.
• It was discovered that Alexander Yakovlev, the U.N. procurement officer tasked with choosing suppliers to coordinate shipments of humanitarian goods, ended up receiving more than $1 million in illicit funds and kickbacks from U.N. contractors outside the Oil-for-Food program. He pleaded guilty in a U.S. court to money laundering and illegal wire transfers and, after three years of court deliberations, is awaiting sentencing on convictions that could put him away for up to twenty years.

Follow the Money

The Volcker Report said that the government of Iraq especially favored individuals and companies based in France in its distribution of oil allocations. Records seized in Iraq showed that French companies contracted for $4.4 billion of oil from Iraq, second only to Russian companies, in spite of the fact that, unlike Russia, France has almost no oil industry to speak of. Iraq's preference for French companies even led some firms in other countries to disguise themselves as being French-based. Vitol S.A., a Switzerland-based company, purchased Iraq oil under the name "Vitol France" even though no such company had ever existed. 

       Documents reviewed by the House of Representatives committee chaired by Republican Norm Coleman showed that Saddam Hussein may have received more than $21 billion in illicit oil revenues from smuggling and illicit Oil-for-Food payments, which he used to buy friends and favors around the world.

The Volker Commission report found that the following people of influence had received illicit compensation in the form of oil vouchers from Saddam Hussein:

       Jean-Bernard Mérimée. In 2005, one of France's most distinguished diplomats, Jean-Bernard Mérimée, confessed to accepting oil allocations for 11 million barrels of oil from Saddam in 2002. In addition, $165,700 was deposited in offshore accounts in his name in Morocco. Mérimée, who holds the title "ambassador for life," carried out his illicit activity while serving as Special Advisor to the Secretary General of the United Nations, with the rank of Under-Secretary-General. He also served as president of the United Nations Security Council intermittently from 1991 to 1995 while he was France's permanent representative to the U.N.

       Georges Pasqua and Bernard Guillet. Georges Pasqua, a former interior minister and a close political ally of former President Jacques Chirac for the past 30 years, received allocations of 11 million barrels of oil during 1999 and 2000. Tables of Iraq's Oil Company (SOMO) labeled these allocations simply "France." The transactions were executed by Bernard Guillet on behalf of Mr. Pasqua. After denying that any such transactions occurred, bank records revealed deposits and withdrawals of $234,000 through a Swiss bank account to Mr. Guillet. Mr. Guillet was arrested in Paris in April 2005, in connection with the Oil-for-Food inquiry. He was released on bail and was subsequently elected to the French Senate, where he enjoys immunity from criminal prosecution.

       Claude Kaspereit, an associate of Marc Rich & Co. Claude Kaspereit, son of the French Member of Parliament Gabriel Kaspereit, was allocated over 9.5 million barrels of oil from Iraq. He used a France-based shell company. Marc Rich & Co. financed the deal and demanded that the identity of the company be kept secret. In June, 2000, Kaspereit chartered a flight to Iraq without U.N. authorization and in violation of the international embargo, solely to generate publicity against the sanctions. This act of defiance was welcomed by Saddam Hussein and was quickly rewarded with the enormous oil allocation.

       Serge Boidevaix, former Director of the French Department for North Africa and the Middle East--serving as the head of France's diplomatic service in the region and an officer of the French Ministry of Foreign Affairs--received more than 32 million barrels, as detailed in the Volcker Report. Gilles Munier, Secretary-General of the French-Iraqi Friendship Association, received a voucher allocation of 11.8 million barrels.

      Other noteworthy individuals implicated in the scandal include British Member of Parliament George Galloway, who was allocated "a total of over 18 million barrels of oil," either directly, "or in the name of one of his associates, Fawaz Abdullah Zureikat." According to official records, "Mr. Zureikat received commissions for handling the sale of approximately 11 million barrels that were allocated in Mr. Galloway's name." These oil allocations were specifically granted to fund Mr. Galloway's anti-sanctions activities. Iraqi officials identified Mr. Zureikat as acting on Mr. Galloway's behalf to conduct oil transactions in Baghdad.

       Roberto Formigioni, President of the Lombardy Region of Italy, was granted a total of over 27 million barrels of oil by the government of Iraq. Over 24.1 million barrels of this oil were lifted. Several Russian political parties and politicians received allocations of Iraqi oil as well, including the Communist Party of the Russian Federation (125.1 million barrels); Vladimir Zhirinovsky and the Liberal Democratic Party of Russia (73 million barrels); the Party of Peace and Unity (55.5 million barrels); and Alexander Voloshin, Chief of Staff to Russian President Vladimir Putin (4.3 million barrels).

       Several Americans were also implicated, tried, and sentenced in connection with the scandal, including Texas oilman David Chalmers and three associates, whose Bayoil Inc. refinery business had paid up to $1 million in illegal surcharges to the Iraqi government for the rights to purchase oil outside the limits of international sanctions. A complete listing of the individuals, companies, and governments found in Iraqi records to be complicit in receiving illicit oil vouchers can be found in a January, 2004, article in the British newspaper, The Independent. The list of vouchers totals 4.2 trillion barrels of oil.⁵⁸

      It is also worth noting that Jacques Chirac also had a longstanding relationship with Saddam Hussein dating back to 1974 when he, then French Premier, traveled to Iraq to meet Hussein, then Iraq's Vice President, to discuss the sale of nuclear reactors. In 1975 Chirac personally gave Hussein a tour of parts of France and a nuclear plant. Later, Chirac would say publicly that had a "close personal relationship with Saddam Hussein." ⁵⁹

Assessment

It is not difficult to imagine the thoughts of the high ranking French and U.N. officials listed above as the invasion was being debated at the U.N. in late 2002. They knew of course that incriminating documents would probably surface after an invasion, that their names and careers would be destroyed, and that jail time might follow. If, on the other hand, the invasion could be avoided, kickbacks and the purchase of new vacation homes might just continue. Without a doubt, their entreaties to Mr. Chirac--a close associate--and others of influence at the U.N. imploring them to resist the invasion, must have been quite emphatic and persuasive.

            Additionally, given the close relationship Mr. Chirac had with Saddam Hussein, and the significant value that relationship meant to France, it is easy to see why France would have decided, after voting for "serious consequences," to then change and promise to veto those consequences when it came time to follow through with implementation.

            Years after the invasion world headlines were all about how "Bush Lied," while the real corruption in the war decision--among those who resisted it from within the U.N., France and Russia--went virtually ignored. France and Russia rejected the final war declaration while their industrialists and politicians were receiving illegal contributions from Saddam Hussein. Meanwhile, the U.S. ended up being widely blamed for taking up a difficult cause in Iraq, while France and Russia were portrayed as having been wise for resisting it, even though it was probably corruption within their countries that tipped the scale against rather than in favor of supporting the effort. This unfair misconception was not widely corrected because doing so didn't fit the broad anti-American bias. It is a shame that the truth about such illegal and corrupt activity, along with a thoughtful analysis of its affects, went almost untold.

Conventional Wisdom

The U.S. went out of its way to make the French government look bad. The only reason was to deflect attention from our own mistakes.

Facts

At every stage of Saddam's deceptions, French and Russian companies were in it up to their eyeballs. For years the French sold high performance Dassault Mirage fighter aircraft to the Iraqi Air Force, and French engineers helped build and install power stations and nuclear research labs, including the Osiraq nuclear reactor destroyed by Israel bombers in 1981.

      No fewer than 46 Russian and 11 French names appear on the Iraqi Oil Ministry's list of individuals and governments receiving oil vouchers from Saddam. The Russian government is alleged to have received $1.36 billion in oil vouchers. Prior to the U.S. invasion and regime change in April 2003, French and Russian oil companies held oil contracts with the Iraqi government amounting to 40% of the entire oil wealth of the country.

When the Iraqi regime learned of attempts by companies to disguise themselves as French entities, Iraqi officials explicitly referred to France as a favored trading partner. There is no doubt that the U.N. relief effort in Iraq has been a global scandal. A monstrous dictator was able to turn the Oil-for-Food program into a cash cow for himself and his inner circle, leaving Iraqis further deprived as he bought influence abroad and acquired the arms and munitions that coalition forces discovered when they invaded Iraq. ... But Saddam's ability to reap billions for himself, his cronies, and those who proved useful to him abroad depended on individuals who were his counterparties.⁶⁰

Assessment

Saddam was within his right to favor French companies over American and British firms. Furthermore, it was his right to reward those who agreed with his policies. However, it seems highly likely that the outspoken resistance of countries like France and Russia to Resolution 1441, and the decision to remove Saddam from power, had more to do with individuals protecting their own financial interests in that country than with any concern for doing what was best for the world. And neither of those countries was within their rights in accepting massive kickbacks and payoffs while blocking the coalition's efforts at every turn.

"Oil-for-Food Facts" provides a general overview of the subject at www.oilforfoodfacts.org/history.aspx.

    Susan Schmidt, "Plame's Input Is Cited on Niger Mission: Report Disputes Wilson's Claims on Trip, Wife's Role," Washington Post, July 10, 2004. [http://www.washingtonpost.com/wp-dyn/articles/A39834-2004Jul9.html] (accessed July 11, 2007). For a better view of the animus in this case, an excellent analysis may be found in the book by Washington Examinerreporter Rowan Scarborough, Sabotage: America's Enemies within the CIA. Washington, DC: Regnery, 2007.

    United Nations: Office of the Iraq Programme, Oil-for-Food: http://www.un.org/Depts/oip/

    Anne Penketh, "Anti-war nations 'took bribes' before war began," The Independent (UK), Jan. 28, 2004.

   [http://www.independent.co.uk/news/world/middle-east/antiwar-nations-took-bribes-before-war-began-574699.html] (accessed Nov. 20, 2006).

    Source: New York Times, 1986, Referenced by the New Republic online.

    Therese Raphael, "The Oil-for-Food Scandal," Wall Street Journal, Mar. 11, 2004. [http://online.wsj.com/article/SB107896733191552156.html] (accessed Nov. 7, 2006).