Joy Gordon and George Lopez

Since last spring, neo-conservatives, critics of the United Nations, and a playable US media have maintained that the UN’s Oil-for-Food Program (1996-2003) had been fraught with corruption. Proclaiming this the scandal of the century, condemnation of the UN and a call for resignation of Kofi Annan began before the opening meeting of the Volcker Independent Inquiry Commission and the seven US Congressional committees that are holding hearings.

The interim report issued by the Volcker Commission on February 3 separates fact from fiction in at least three critical areas that have dominated the partisan debate thus far. First, the report discusses the 2.2 percent of the proceeds from Iraqi oil sales which covered the UN’s administrative costs. Volcker found that the UN did not treat the account as a “commission,” as has been alleged; it was not a profit-making enterprise in either design or practice. Rather, the commission found that the 2.2 percent account was a necessary and approved source to cover actual Oil-for-Food administrative expenses.

The funds were, in fact, deposited and there was no evidence of commingling. The commission found a few instances of inadvertent miscoding and one isolated instance where remuneration was not correctly allocated. Although the UN’s Internal Audit Division did not audit the program, its Board of Auditors routinely audited accounting and financial reporting processes. The commission acknowledged that the external audit reports were distributed to the Security Council and others. The total funds in this account for the seven years of the program’s operation came to $1.4 billion, and of these funds, the UN returned $372 million—over a quarter of the funds.

Secondly, regarding widespread corruption in the awarding of contracts and millions being swindled by Saddam, the interim report says nothing to support these claims. The report examines in detail the three contracts awarded in 1996 for inspection and banking services in the Oil-for-Food. The report provides documentation to support one case of actual corruption, involving Benon Sevan, administrator of the Oil-for-Food. The report strongly suggests that he profited from illegal oil allocations, in direct violation of UN policy, but it does not claim that others in the UN knew of his actions or that his superiors knowingly tolerated them. In a quite different case, another UN Oil-for-Food official influenced the awarding of two contracts in violation of UN procedures. Both officials were suspended by the UN on Monday.

The report concludes that the bidding process for these three 1996 contracts was flawed and highly politicized. Significantly, Volcker does not suggest that the companies hired to service Oil-For-Food failed to do their work, or to do it well. There is no suggestion that the UN’s contracting process resulted in some form of harm to the Iraq people, or that Saddam Hussein was enriched.

Thirdly, regarding corruption or incompetence under the personal leadership of Mr. Annan, all of the violations cited in the interim report took place in summer of 1996, when Boutros Boutros-Ghali served as Secretary-General. Certainly there is more to learn about the UN and Mr. Annan in the later years of Oil-for-Food, most especially regarding allegations about his son’s relationship with the program and his employer, the Swiss company, COTECNA. But on competence and corruption charges at the outset of Oil-for-Food, and at least for now Mr. Annan, is in the clear.

In its most notable finding, the Commission states clearly that the major sources of external monies garnered by the Iraqi regime came from sanctions violations that were outside, and mostly prior to, the Oil-for-Food program. Moreover, Iraq’s trade with Jordan and Turkey of questionable legality was continually permitted via the authorization of the members of the Iraq sanctions committee and the Security Council, with the explicit knowledge and approval of the United States. But here, the report fails to make the logical connections between these Security Council practices and the UN’s “failure to follow its own internal procedures” regarding contracting and auditing.

Mr. Volcker has separated throughout the report matters of the Oil-for-Food program which were within the purview of the UN Secretariat from those which were a function of the Security Council. In so doing he reminds us that UN member states - through the Council and the 661 sanctions committee – structured and managed many aspects of the Oil-for-Food program with various strategic and political considerations in mind. He recognizes how this often led the member states to take decisions outside of the Oil-for-food which countervailed the sanctions regime and permitted, it would seem, Saddam to garner illicit assets outside the eye of Oil-for-Food. But the full scope of that inquiry will be revealed in a future report. To Mr. Volcker’s credit he does not permit this reality of Security Council control to excuse impropriety and mismanagement of the program by individuals in the Secretariat.

At the same time, neither the Volcker group, nor others should reach a conclusion which lays blame for each and every infraction on the UN Secretariat. This would naively ignore the hard political reality that surrounded the entire Oil-for-Food venture, where the dominating political and procedural actor at every juncture was the Security Council. The Council’s determination was first to hold together a regional coalition of states who would continue to participate in denying Saddam Hussein military goods, and then to maintain the flow of humanitarian relief to the people of Iraq. That the entire sanctions process and the Oil-for-Food program were politicized and that the Security Council, and its individual members, made critical decisions that overrode the normal mandates of UN agencies, should surprise no one. Perhaps the final report will make this clear.

What lies ahead? This week, the House International Relations Committee began subcommittee hearings on the Volcker report. Amidst a highly charged atmosphere now amplified by the revelation of a major theft at the UN’s World Meteorlogical Organization, many in the US Congress are preparing to make the UN squirm and virtually beg for forgiveness, renewed trust, and the US annual dues. Unfortunately this demeaning approach will miss an opportunity which the on-going Volcker inquiry has generated.

Calls for reformation have been in the air at the UN before the Volcker commission began its work, and a new and needed climate of transparency within the organization now exists. The recommendations placed on the UN agenda by Volcker has created a momentum for renewal and reorganization of staff and structure that is unprecedented in the 60 year history of the organization. Congress must proactively join that momentum and constructively partner with the UN to change, where needed, the culture, structure and practice of this important organization.

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Joy Gordon is Professor of Philosophy at Fairfield University; George Lopez is Senior Fellow at the Kroc Institute at the University of Notre Dame. Each writes frequently about the UN and Iraq.

Appeared as: Mitos y realidades del ‘Petroleo per Alimentos’ La Opinion, February, 13, 2005.

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