Oil-for-Food Programme
The Oil-for-Food Programme was established by the United Nations in 1995 to allow Iraq to sell oil on the world market in exchange for food, medicine, and other humanitarian needs for ordinary Iraqi citizens without allowing Iraq to boost its military capabilities.
The programme was introduced by United States President Bill Clinton's administration in 1995, as a response to arguments that ordinary Iraqi citizens were inordinately affected by the international economic sanctions aimed at the demilitarisation of Saddam Hussein's Iraq, imposed in the wake of the first Gulf War. The sanctions were discontinued on 21 November 2003 after the U.S. invasion of Iraq, and the humanitarian functions turned over to the Coalition Provisional Authority.
The programme was de facto terminated in 2003 and de jure terminated in 2010. Although the sanctions were effective, there were revelations of widespread corruption in the programme and abuse of its funds.
Background and design
The Oil-for-Food Programme was instituted to relieve the extended suffering of civilians as the result of the United Nations' imposition of comprehensive sanctions on Iraq following Iraq's invasion of Kuwait in August 1990. Security Council Resolution 706 of 15 August 1991 was introduced to allow the sale of Iraqi oil in exchange for food.Security Council Resolution 712 of 19 September 1991 confirmed that Iraq could sell up to US$1.6 billion in oil to fund an Oil-For-Food Programme. After an initial refusal, Iraq signed a memorandum of understanding in May 1996 for arrangements to be taken to implement that resolution.
The Oil-for-Food Programme started in December 1996, and the first shipments of food arrived in March 1997. Sixty percent of Iraq's twenty-six million people were solely dependent on rations from the oil-for-food plan.
The programme used an escrow system. Oil exported from Iraq was paid for by the recipient into an escrow account possessed until 2001 by BNP Paribas bank, rather than to the Iraqi government. The money was then apportioned to pay for war reparations to Kuwait, ongoing coalition and United Nations operations within Iraq. The remainder, the majority of the revenue, was available to the Iraqi government to purchase regulated items.
The Iraqi government was permitted to purchase only items that were not embargoed under the economic sanctions. Certain items, such as raw foodstuffs, were expedited for immediate shipment, but for many items, including pencils and folic acid, the process typically took six months. Items deemed to have potential application in chemical, biological or nuclear weapons development were banned regardless of their stated purpose.
Financial statistics
Over US$54 billion worth of Iraqi oil was sold on the world market. About US$46 billion of these funds intended to provide humanitarian aid to the Iraqi people. This included food and medicine, given the context of international economic sanctions. A considerable portion was spent on Gulf War reparations paid through a compensation fund. UN administrative and operational costs for the programme was US$1.2 billion; the cost of the weapons inspection programme was also paid from these funds. Internal audits have not been made public.End of the programme
Shortly before US-led Coalition forces launched an invasion of Iraq, UN Secretary-General Kofi Annan suspended the programme and evacuated more than 300 workers monitoring the distribution of supplies.On 28 March 2003, Annan, the United States, and Britain asked the UN Security Council to ensure that nearly US$10 billion in goods Iraq had ordered and that were already approved—including US$2.4 billion for food—could enter the country once conditions allowed. The resolution under discussion made clear that the chief responsibility for addressing humanitarian consequences of the war would fall to the United States and Britain if they took control of the country. Under the 1949 Fourth Geneva Convention these are the responsibilities of the occupying power.
On 22 May 2003, UN Security Council Resolution 1483 granted authority to the Coalition Provisional Authority to use Iraq's oil revenue. The programme's remaining funds, $10 billion, were transferred over a six-month winding-up period to the Development Fund for Iraq under the Coalition Provisional Authority's control; this represented 14% of the programme's total income over 5 years.
The programme was formally terminated on 21 November 2003 and its major functions were turned over to the Coalition Provisional Authority.
Corruption
The programme also suffered from widespread corruption and abuse. Throughout its existence, the programme was dogged by accusations that some of its profits were unlawfully diverted to the government of Iraq and to UN officials. These accusations were made in many countries, including the US and Norway.Until 2001, the money for the Oil-for-Food Programme went through BNP Paribas, whose main private share-holder is Iraqi-born Nadhmi Auchi, a man whose estimated worth is about $1 billion according to Forbes estimates, the 13th-richest man in Britain according to The Guardian. Auchi received a 15-month suspended sentence for his involvement in the Elf scandal, which the British newspaper called "the biggest fraud inquiry in Europe since the Second World War", saying "Elf became a private bank for its executives who spent £200 million on political favours, mistresses, jewellery, fine art, villas and apartments". Elf, an oil company, merged with TotalFina to become Total in 2003.
Misapplication of funding
According to information from Aqila al-Hashimi, who was senior bureaucrat with the Oil-for-Food Programme in Iraq, of the programme's total of $60 billion, "roughly 65% was actually applied to aid". Over 193 so-called electrical consultants each received $15,000 per month while the electricity only worked a few hours at a time.Benon Sevan of Cyprus, who headed the programme, defended it, claiming that it had only a 2.2% administrative cost and that it was subject to more than 100 internal and external audits. He blamed Security Council restrictions for making the situation difficult and said that 90 percent of Iraq's population relied on the programme for its monthly food basket. Sevan stonewalled efforts to review and investigate the programme. He ordered his staff to enforce a policy that complaints about illegal payoffs should be formally filed with the whistleblower's country, making them public and allowing Iraq to bar any whistleblowers. In 2000, Dileep Nair, the UN corruption watchdog, wanted to determine the programme's level of vulnerability. Sevan and UN Deputy Secretary-General Louise Frechette rejected any such investigation, claiming that it would be too expensive to be worthwhile. UN Chef de Cabinet Iqbal Riza ordered the shredding of years' worth of documents in his office concerning the programme. He said that they were from a working file that contained copies of documents received by his office, and were purged due to lack of space, and also that the originals were held elsewhere.
In response to these criticisms, and to evidence acquired after the 2003 invasion of Iraq, accusations were made that skimmed profits were being used to buy influence at the UN and with Kofi Annan himself. An investigation cleared Annan of any personal wrongdoing.
Adulterated foods
According to an interim report released on 3 February 2005 by former Federal Reserve chairman Paul Volcker's commission, much of the food aid supplied under the programme "was unfit for human consumption". The report concluded that Sevan had accepted nearly $150,000 in bribes over the course of the programme, and in 2005 he was suspended from his position at the United Nations as a result of the fraud investigation.''Al Mada'' list
One of the earliest allegations of wrongdoing in the programme surfaced on 25 January 2004, when al Mada, a daily newspaper in Iraq, published a list of individuals and organizations alleged to have received oil sales contracts via the UN's Oil-for-Food Programme. The list came from over 15,000 documents which were reportedly found in the state-owned Iraqi oil corporation, the Iraq National Oil Company, which had close links to the Iraqi Oil Ministry.Named in the list of beneficiaries were George Galloway, then a British Member of Parliament, and his charity, the Mariam Appeal; former French Interior Minister Charles Pasqua; Shaker al-Kaffaji, an Iraqi-American businessman; Indian Foreign Minister Natwar Singh, and Bheem Singh. Many prominent Russian firms and individuals were also included on the al Mada list. Even the Russian Orthodox Church was supposedly involved in illegal oil trading. The former assistant to the Vatican secretary of state, Reverend Jean-Marie Benjamin, is said to have received the rights to sell. George Galloway subsequently won two libel actions against the Christian Science Monitor and Daily Telegraph, which had reported the allegations.
The president of Oilexco Ltd, Arthur Millholland, whose name also appeared on the al Mada list, denied wrongdoing but confirmed that illegal surcharges were being paid to the Iraqi government by contractors. Few deny that in Iraq, like in many third-world countries, bribes and kickbacks were regularly paid to the leadership in order to get contracts; however, the al Mada list does not discuss bribes paid to Iraq – it discusses bribes paid to individuals to support Iraq.
Operation of the scheme
The scheme is alleged to have worked in this way: individuals and organizations sympathetic to the Iraqi regime, or those just easily bribed, were offered oil contracts through the Oil-for-Food Programme. These contracts for Iraqi oil could then be sold on the open world market and the seller was allowed to keep a transaction fee, said to be between $0.15 and $0.50/barrel of oil sold. The seller was then to refund the Iraqi government a certain percentage of the commission.Contracts to sell Iraq humanitarian goods through the Oil-for-Food Programme were given to companies and individuals based on their willingness to kick back a certain percentage of the contract profits to the Iraqi regime. Companies that sold commodities via the Oil-for-Food Programme were overcharging by up to 10%, with part of the overcharged amount being diverted into private bank accounts for Saddam Hussein and other regime officials and the other part being kept by the supplier.
The involvement of the UN itself in the scandal began in February 2004 after the name of Benon Sevan, executive director of the Oil-for-Food Programme, appeared on the Iraqi Oil Ministry's documents. Sevan received vouchers for at least 11,000,000 barrels of oil, worth some $3.5 million in profit. Sevan denied the charges.