Cover Story

The UN's oily dealings

Oil-for-Food morphed into an "Oil-for-Palaces" program; now is as good a time as any to start over

Issue: "No man's land," May 10, 2003

Humanitarian agents well remember one of the first shipments to desperate Iraqis after the Gulf War: 235,000 pairs of Korean WarÐera wool serge trousers, size small.

"People were starving in the hills, and we sent in same-size, army-issue pants," recalls Stafford Clarry, among the first Americans to coordinate supplies under Operation Provide Comfort in 1992. "Some well-meaning soul thought the Kurds freezing in the wintry muddy mountains in 1991 would greatly appreciate them. But by the time they arrived winter was over and the Kurds were well on their way back home," he said.

Such embarrassments from the first Gulf War explain the worries driving coalition forces, humanitarian experts, and Iraqis themselves: No one wants to see a repeat of 1991-92.

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After U.S. forces pushed Saddam Hussein's troops out of Kuwait, Kurdish fighters in the north attacked disorganized Iraqi units, seizing control of several towns. American radio broadcasts encouraged them to rise up against their dictator. But instead of supporting the Kurds, then-President Bush called U.S. forces home.

Saddam's troops mobilized. They launched a counteroffensive against the Iraqi Kurds that included helicopter attacks with napalm and other chemical weapons. Within days over 1 million Kurds were forced to flee Iraq. They took shelterless refuge in the mountains bordering Turkey and Iran starting in late March 1991, as temperatures plunged and snow fell.

By the first week of April, 800 to 1,000 people were dying each day. On April 5, President Bush Sr. ordered U.S. soldiers in Europe back to the war zone, this time to rescue Iraqis. U.S. air forces out of the base at Incirlik, Turkey, airlifted lifesaving supplies-and warm clothes-to the Kurds, but not before many had perished or returned home.

Those nightmare scenarios were not repeated in the recent war. Preparations for up to 1 million refugees at the borders went largely unused. Medical supplies for up to half a million wounded Iraqis were not needed. Oil production vital to the country's future is largely unspoiled.

Now that a new day for Iraqis is here, U.S. officials want to dismantle the hefty log of United Nations sanctions against a now nonexistent regime, along with the Oil-for-Food Program Saddam Hussein signed onto with UN officials seven years ago. Under that program Iraq could export set quantities of oil and, under UN supervision, import humanitarian goods in exchange. But as the boats and swimming pools, the gold-crusted mirrors and gilt flush handles reveal, Oil-for-Food, in the words of Central Command Gen. Tommy Franks, morphed into an "Oil-for-Palaces" program.

Iraqis didn't need a war to teach them Oil-for-Food was a corrupt program. The Oil-for-Food Program "has two sour faces," Sadi Ahmed Pera, a Kurdish official, told WORLD. "First, it was an international political decision in 1996. Europe had its own interests and benefits. Peace movements used so-called suffering to project a conflict between poor Iraq and imperial America. The U.S. tried to find a solution by selling Iraqi oil to cover humanitarian needs. Second, it was local manipulation by Saddam."

Mr. Pera said Saddam used smuggled oil to manipulate Jordan, Syria, and Turkey to provide under-the-table commodities and to lobby for lifting sanctions once they became energy-dependent. Likewise, France, Germany, Russia, and others developed a dependency on fixed-price oil purchases via Oil-for-Food, as well as lucrative contracts struck for European brokers to ship spare parts for the oil industry and other commodities into Iraq (the United States had its own sanctions which prohibited those kinds of deals). UN Secretary General Kofi Annan, who oversees the program, has never questioned or refused Iraqi government import-export statements.

Documents from the UN Office of the Iraq Program, however, show growing discrepancies in oil revenue and spending. Since oil began to flow under the program, in December 1996, the UN raised $64 billion in revenue from the sale of Iraqi oil. Humanitarian imports, which began to arrive in Iraq in March 1997, total no more than $45 billion.

Oil-for-Food is maintained in five separate interest-bearing accounts, all deposited in unnamed commercial banks. The main humanitarian account should carry $38 billion, of which $24.5 billion in commodities has actually been delivered.

Rather than submit to repeated calls for audits, UN Office of the Iraq Program director Benon Sevan complains of "a cumulative oil revenue shortfall" that dates from a 2000-2002 slump in world oil prices. Supply contracts for the main humanitarian account, "worth some $4.5 billion, currently lack funds," an Office of the Iraq Program fact sheet states.

The purported shortfall did not stop Mr. Annan from approving 10 new "sectors" covered by Oil-for-Food at Baghdad's request last June. This included funding for a "Board of Youth and Sports," under which Iraq imported boats from France that more likely went to one of Saddam's sons than to Iraqi youth.

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