HIGHLIGHTS
U.S.A. - Political affairs
Deal made with Saudis to Influence November Election
In an underplayed interview on 60 Minutes Sunday night, Bob Woodward revealed some shocking accounts within his new book, Plan of Attack. Woodward's book unveils the plans for the march to Baghdad, which secretly began long before President Bush admitted it to the public.
Most interesting was the revelation by Woodward that George W. Bush made a deal with Saudi Arabia to lower fuel prices before the coming November election. The lowered prices would give the appearance of a strong economy in contrast to the current, record high prices.
In addition to the above, the interview painted a picture of the president as a stubborn man influenced greatly by Dick Cheney and Donald Rumsfeld. His disdain for the intellectual "elite" is equaled by carelessness for how history will judge his actions. According to Woodward, when asked how history will judge his war, the president raised his arms, shrugged his shoulders and said, "History? We don't know. We'll all be dead."
Source; The Washington Post, April 2004
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Business – Global finance
Shell admits deceiving shareholders; Sacked chairman savaged in report
Shell was embroiled yesterday in Britain's biggest corporate scandal for almost 20 years after it admitted a three-year plan to deceive its shareholders.
The City reacted with astonishment after the crisis-stricken multinational released details from an internal report that exposed how the company had deliberately overstated its oil and gas reserves for several years.
Judy Boynton, the finance chief, became the third boardroom casualty of the furore that followed the shock 20 per cent downgrade in reserves three months ago. The Shell affair, the most damaging scandal in the UK since the Guinness debacle 18 years ago, has already led to the departure of the chairman, Sir Philip Watts, and the head of exploration and production, Walter van de Vijver.
The pair were savaged in the damning, independent report commissioned by Shell for appearing to know that reserves failed to meet market rules as far back as 2001. The report listed a bewildering array of e-mails sent between increasingly desperate executives. In one, Mr van de Vijver told Sir Philip last November: "I am sick and tired about lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/optimistic bookings.''
A month later, Mr van de Vijver, responding to an internal report that suggested Shell's position on the reserves was a violation of US securities law, wrote: "This is absolute dynamite, not at all what I expected and needs to be destroyed."
The prospect of criminal charges being brought against some Shell executives appeared increasingly likely last night.
The report was designed to get to the bottom of an affair that has rocked confidence in the stewardship of Shell since the disclosure that its reserves had been overstated.
It says Mr van de Vijver repeatedly e-mailed Sir Philip over a period of nearly two years to inform him of concerns over the group's reserves. The report, carried out by the US law firm Davis, Polk & Wardwell, paints a picture of Sir Philip resisting attempts by Mr van de Vijver to scale back the amount of oil and gas the company was telling the outside world it was discovering.
Sir Philip directed Mr van de Vijver to "leave no stone unturned" to hit targets.
The company again cut its reserves estimates in March, and yesterday - saying it was drawing a line under the matter - made further reductions.
The contents of the internal report will be a huge blow to Sir Philip, sacked by Shell along with Mr van de Vijver last month after the company's financial woes became public.
It is unclear whether they will receive any financial settlements, but Sir Philip was paid £1.8m in 2002, and has a pension worth £480,000 a year. Mr van de Vijver is reputed to have earned a salary in excess of more than £1m, and a generous pension.
Ms Boynton, the chief financial officer, was forced out after she failed to address the inaccurate nature of Shell's reserves reporting policy. A fourth person, joint chairman Lord Oxburgh, is expected to resign within the next few days.
Sir Philip and other senior directors are thought to have been named in lawsuits initiated by shareholders in America.
The company said yesterday it had been requested to publish only a summary of its report by the US regulatory authorities.
Attempts to contact Sir Philip at his Berkshire home yesterday were unsuccessful.
America's financial regulator - the Securities and Exchange Commission - and the Justice Department are investigating.
The bar on Shell publishing the full result of its investigation sparked speculation the US authorities did not want to scupper a potential criminal prosecution of Sir Philip, and possibly others, by releasing information that could prejudice the case.
Kenneth Vianale, a partner in Florida-based Vianale & Vianale, which has launched a shareholders' class action against Shell, said: "Shareholders would like to have full disclosure of the report. But if a company conducts an internal report which is then given to a third party, such as the SEC, lawyers' privilege is waived."
Source; © 2004 Independent Digital (UK) Ltd
Write; by Katherine Griffiths, Banking Correspondent
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FOCUS
Iraq – Human rights
Whose Human Rights is the Occupation Defending
The disaster that is the occupation of Iraq is much more than the war that plays nightly across U.S. television screens. The violence of grinding poverty, exacerbated by economic sanctions after the first Gulf War, has been deepened by the US invasion. Every day the economic policies of the occupying authorities create more hunger among Iraq's working people, transforming them into a pool of low-wage, semi-employed labor, desperate for jobs at almost any price.
While the effects of U.S. policy on daily life go largely unseen in the U.S. media, anyone walking the streets of Baghdad cannot miss them. Children sleep on the sidewalks. Buildings that once housed many of the city's four million residents, or the infrastructure that makes life in a modern city possible, remain burned-out ruins a year after the occupation started. Rubble fills the broad boulevards that were once the pride of a wealthy country, while the air turns gritty and brown as thousands of vehicles kick up the resulting dust. Sewage still pours into the Tigris River, and those who must depend on it for drinking or cooking continue to get sick.
The violence of poverty is not held to be a violation of human rights in the United States - just one manifestation of the great division in the world between the wealthy, industrialized north, and the developing south.
The US does not recognize that human rights include economic and social rights, in part because they are collective rights of groups, social classes, or even nations.
Therefore, the accusations made by the US against the regime of Saddam Hussein focus on his violation of the human rights of individuals - the assassination of the regime's enemies, and the prohibition on political activity by individuals who dissented from its policies. Most popular organizations in Iraq, whether on the left or the right, religious or secular, make the same accusations. But they don't confine the discussion of human rights within those limits. For them, the occupation and the social conditions it imposes are human rights abuses as well.
For the Bush administration and the Coalition Provisional Authority, limiting the discussion of human rights to those of individuals persecuted by the former regime provides a convenient distinction. It allows them to enforce in Iraq an economic model of their own choosing, with drastic effects on the lives of millions of people, and yet refuse to discuss these consequences as potential violations of their human rights. As a result of the occupation, U.S. contractors get rich from the billions of taxpayer dollars supposedly appropriated for Iraq's reconstruction. At the same time, the country's national wealth - factories, refineries, mines, docks, and other industrial facilities - are being readied for sale to foreign companies by the occupation bureaucracy, who treat democracy and the unrestrained free market as the same thing.
Iraqis have lost control of their own economy and country. This is far more than a symbolic loss. Yet symbols are an important element in the way in which any people react to this basic economic reality, and nothing could have been more symbolic than the way in which the occupation authorities have treated the legacy of Iraq's nationalist, progressive and anti-colonial past.
Since 1958, July 14 has been Iraq's national day. Last year, under the occupation, it was declared a "Saddam-era holiday," and its celebration banned. Instead, occupation authorities declared, the people of Iraq should celebrate the day of the fall of the Saddam Hussein regime, which is also the day the occupation began. While most Iraqis were glad to see Saddam go, prohibiting the celebration of national day is not just an insult, but a sign of the occupation's true intentions.
For progressive Iraqis, June 14 recalls their anti-colonial history. 1958 was the year nationalists and radicals threw out the monarchy imposed by the British after World War One. Over the next five years of relative freedom and democracy, Iraq began building a nationalized, planned economy, based on its oil wealth. Hundreds of factories were eventually built, making it the most industrialized country in the Middle East. The Iraqi government organized a national healthcare system, and treated education as a right. Women were represented in professions in percentages larger than any other Middle Eastern country. Even after that government was overthrown in 1963 (a coup in which the Central Intelligence Agency played an important role), those reforms were so popular that they were continued under the Baathist regime that took over.
A new deepwater port was constructed on the Persian Gulf, Umm Qasr, which became a lynchpin in that plan. From its piers Iraq began to ship the goods from those factories to buyers in other countries throughout the region. The port became a symbol of progress and independence.
Today Umm Qasr has become war booty. It was the first Iraqi enterprise to be turned over, not just to a private owner, but also to a foreign one. Even before US troops reached Baghdad, in Washington DC the Bush administration gave the concession for operating the port to Stevedoring Services of America, a politically- connected firm handling cargo around the world.
Privatizing Umm Qasr began the transformation of the Iraqi economy - from one based on nationalization and production for an internal, domestic market, to one based on ownership by transnational corporations, sending their profits out of the country. To Iraqis, instead of a symbol of national pride, Umm Qasr now represents a new era of foreign domination.
Following the revolution of 1958, a thousand longshore workers labored on Umm Qasr's docks. Even in the heady days of Arab nationalism, however, they still had no guarantees for their rights and jobs. At first, subcontracting companies were allowed to hire dockers in a daily shapeup.
Finally, workers rebelled. After winning recognition for their union, they demanded and won a hiring system under their control, and a daily guaranteed wage, whether or not there was a boat at the dock to load or unload.
Today, those achievements seem like a distant dream. Umm Qasr is an object lesson in the privatization of Iraq. Its fate will have a profound effect on the degree to which any future Iraqi government will be able to control the country's economy. By the same token, the jobs, the standard of living, and the labor rights of the port's dockworkers are a bellwether for the fate of hundreds of thousands of other workers in formerly state-owned enterprises throughout Iraq's economy.
The free trade ideologues of the Bush administration see the occupation of Iraq as a beachhead into the Middle East and south Asia. Their first objective is the transformation of the state-dominated economy of what was once one of the region's wealthiest countries. A free-market Iraq will then set new ground rules for the rest of the area, much as the North American Free Trade Agreement first helped to transform Mexico's economy, and then became a prototype for the Free Trade Area of the Americas.
On September 19, the CPA published Order No. 39, which permits 100% foreign ownership of businesses, except for the oil industry, and allows repatriation of profits. Order No. 37, issued the same day, suspended income and property taxes for the year, and imposes a 15% flat tax on individuals and corporations from 2004 onward. Rightwing ideologues haven't been able to get the US Congress to pass a flat tax proposal despite years of trying, but Iraq has become their playground.
Iraqi workers look at the prospect of privatization with dread. Dathar Al-Kashab, manager of Baghdad's Al Daura oil refinery, predicted that privatization would have an enormous effect. "A worker starting here today has a job for life, under the old system," he explains, "and there's no law which permits me to lay him off. But if I put on the hat of privatization, I'll have to fire 1500 [of the refinery's 3000] workers. In America when a company lays people off, there's unemployment insurance, and they won't die from hunger. If I dismiss employees now, I'm killing them and their families."
Unemployment in Iraq hovers around 70%, according to the country's new unions. There is no unemployment benefit or welfare system. There is a Union of the Unemployed, which has held marches and demonstrations demanding jobs and benefits. It's leader, Qasim Hadi, has been repeatedly arrested by the occupation troops. Meanwhile, the CPA set a new salary schedule for Iraqi workers in September - Order 30 on Reform of Salaries and Employment Conditions of State Employees. This lowered the bottom wage rate from $60 a month to $40, and eliminated all previous house, food, family, risk and location subsidies.
In 1987, Saddam Hussein issued a law declaring that workers in state-owned enterprises (which includes most Iraqi workers) had no right to organize unions or bargain. On the Umm Qasr docks and in factories and refineries throughout the country, unions were effectively banned. Today the US occupation authority is still enforcing that 1987 law. This is another gift to prospective new private owners of Iraqi enterprises. If workers there have no legal union, no right to bargain, and no contracts, then privatization and the huge job losses coming with it will face much less organized resistance.
On June 5 CPA head Paul Bremer put another weapon into the anti-union arsenal - Public Notice Number One, prohibiting "pronouncements and material that incite civil disorder, rioting or damage to property." The phrase can easily be interpreted to mean strikes or other organized labor protest. Anyone who violates the decree "will be subject to immediate detention by Coalition security forces and held as a security internee under the Fourth Geneva Convention of 1949" (in other words, as a prisoner of war.)
On December 6, US occupation forces then arrested eight members of the executive committee of the Iraqi Federation of Trade Unions, and took them into detention. Although they were released the following day, the organization was expelled from the building where they had their offices.
Jassim Mashkoul, director for internal communications for the IFTU, says "at the beginning, we thought our situation might be better after we got rid of Saddam Hussein. But it hasn't been." Many factory workers are less diplomatic. One worker at the state leather goods factory in Baghdad explained, "We must change this law that says we don't have to right to a union. If the law doesn't change, we'll change it anyway, like it or not. We are the people."
"Life has gotten much worse," said another, pointing emphatically into the air. "Everything is controlled by the coalition. We don't control anything."
Most of these specific CPA decrees are unarguably violations of international human rights standards. Conventions 87 and 98 of the International Labor Organization, guaranteeing freedom of association, makes the continued enforcement of the 1987 ban on unions illegal. Convention 135, preventing retaliation against workers for union activity, makes the arrests of union leaders, and their expulsion from their offices, illegal as well. The CPA refuses to comment on these violations.
Yet in an especially Orwellian moment, George Bush declared in his January State of the Union speech that US intervention in Iraq would promote the formation of free trade unions in the Middle East.
Denying union rights are not the only way in which the economic rights of Iraqi people have come into question. Protecting free universal health care and education, even if they were guaranteed only on paper for the last 20 years, is a critical human rights question to most workers. By pulling apart this system, and insisting on a free-market system in its place, the occupation is demonstrating clearly that these collective rights, held by Iraqis as a people, are not human rights as they define them.
But beyond the question of social benefits looms the even larger one of the nature of the Iraqi economy itself - who controls it, and who will benefit from it. When the port of Um Qasr was turned over to Stevedoring Services of America, it did not seem like a human rights question in the US. Contracting out public services for the enrichment of private businesses, while bitterly opposed by US public workers and those dependent on them, has only recently been defined in human rights terms.
In Iraq, where Um Qasr was the nation's pride and a source of its wealth for decades, its conversion into a business for the benefit of a Seattle firm and its stockholders was a fundamental human rights violation. By extension, so was the occupation itself, which enforced privatization at gunpoint.
Write; by LuisB, April 2004
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United Nations - Iraq
The Oil-for-Food Scam: What Did Kofi Annan Know, and When Did He Know It?
For years, the United Nations Oil-for-Food program was just one more blip on the multilateral landscape: a relief program for Iraq, a way to feed hungry children in a far-off land until the world had settled its quarrels with Saddam Hussein. Last May, after the fall of Saddam, the UN Security Council voted to lift sanctions on Iraq, end Oil-for-Food later in the year, and turn over any remaining business to the U.S.-led authority in Baghdad. On November 20, with some ceremony, UN Secretary-General Kofi Annan lauded the program's many accomplishments, praising in particular its long-serving executive director, Benon Sevan. The next day, Oil-for-Food came to an end.
But it has not ended. Suddenly, Oil-for-Food is with us again, this time splashed all over the news as the subject of scandal at the UN: bribes, kickbacks, fraud, smuggling; stories of graft involving tens of billions of dollars and countless barrels of oil, and implicating big business and high officials in dozens of countries; allegations that the head of the program himself was on the take. In February, having at first denied any wrongdoing, Sevan stopped giving interviews and was then reported to be on vacation, heading into retirement. By March, the U.S. Congress was preparing to hold hearings into Oil-for-Food. Kofi Annan, having denied any knowledge of misdeeds by UN staff, finally bowed to demands for an independent inquiry into the UN program, saying, "I don't think we need to have our reputation impugned."
The tale has been all very interesting, and all very complicated. For those who look yearningly to the UN for answers to the world's problems, it has provoked, perhaps, some introspection about the pardonable corruption that threatens even the most selfless undertakings. For those who believe the UN can do nothing right, Oil-for-Food, whatever it was about, is a delicious vindication that everyone and everything at the world organization is crooked, the institution a fiasco, and politicians who support it fit for recall at the next electoral opportunity.
The excitement may be justified, but a number of important facts and conclusions have gone missing. Oil-for-Food, run by the UN from 1996 to 2003, did, in fact, deliver some limited relief to Iraqis. It also evolved into not only the biggest but the most extravagant, hypocritical, and blatantly perverse relief program ever administered by the UN. But Oil-for-Food is not simply a saga of one UN program gone wrong. It is also the tale of a systematic failure on the part of what is grandly called the international community.
Oil-for-Food tainted almost everything it touched. It was such a kaleidoscope of corruption as to defy easy summary, let alone concentration on the main issues. But let us try.
Oil-for-Food had its beginnings in the UN sanctions imposed on Iraq following Saddam Hussein's August 1990 invasion of Kuwait. These prohibited UN member states from trading with Iraq until the regime had satisfactorily disarmed. Saddam refused to comply, and in the aftermath of the first Gulf war the sanctions remained in place. (Even under sanctions, Iraqis were theoretically allowed to import essential foods and medicines, but Saddam's repressive system prevented them from earning the necessary foreign exchange.) Reports fed by Saddam's regime soon began to surface that the sanctions were imposing severe suffering on ordinary Iraqis. The UN, then led by Secretary-General Javier Perez de Cuellar, broached the idea of allowing Iraq to sell oil in limited quantities, strictly to buy relief supplies.
At first, Saddam resisted this, too. But in the mid-1990's, perhaps because he was feeling the pinch, or quite likely because he had by then seen ways and built up the leverage to turn such a plan to his advantage, he finally agreed. On April 14, 1995, the UN (then under Boutros Boutros-Ghali) passed Resolution 986, authorizing as a "temporary measure" what become known as the Oil-for-Food program, and then spent months working out with Saddam the details of implementation.
From the start, the program was poorly designed. Saddam had blamed the fate of starving Iraqi children on the sanctions regime and specifically on the United States. Seeking to address these charges, the Clinton administration went looking for a compromise; with the Secretariat in the lead, the Security Council agreed to conditions on Oil-for-Food that were, to say the least, amenable to manipulation. Saddam, the author of the miseries of Iraq, was given the right to negotiate his own contracts to sell Iraqi oil and to choose his own foreign customers. He was also allowed to draw up the shopping lists of humanitarian supplies-the” distribution plans"- and to strike his own deals for these goods, picking his foreign suppliers. The UN also granted Saddam a say in the choice of the bank that would mainly handle the funds and issue the letters of credit to pay these suppliers; the designated institution was a French bank now known as BNP Paribas.1
To be sure, the UN reserved for itself the authority to reject Saddam's proposed contracts and his plans for distribution of goods inside Iraq; to control the program's bank accounts; and to ensure that Saddam's buying and selling were in compliance with the UN's humanitarian plan.
As spelled out in Resolution 986, oil was to be sold "at fair-market value," and the proceeds were to pay solely for goods and services that would be used "for equitable distribution of humanitarian relief to all segments of the Iraqi population throughout the country."
To all this, the UN added another twist. Unlike most of its relief programs, in which both the cost of the relief itself and UN overhead were paid for by contributions from member states, Oil-for-Food would in every respect be funded entirely out of Saddam's oil revenues. The UN Secretariat would collect a 2.2-percent commission on every barrel of Iraqi oil sold, plus 0.8 percent to pay for UN weapons inspections in Iraq.
If the aim of this provision was to make Saddam bear the cost of his own obstinacy, the effect was to create a situation in which the UN Secretariat was paid handsomely, on commission, by Saddam-to supervise Saddam. And the bigger Oil-for-Food got, the bigger the fees collected by Annan's office. Over the seven years of the program, oil sales ultimately totaled some $65 billion. On the spending side, the UN says $46 billion went for aid to Iraq, and $18.2 billion was paid out as compensation to victims of Saddam's 1990-91 occupation of Kuwait. As for commissions to the Secretariat, these ran to about $1.9 billion, of which $1.4 billion was earmarked for administrative overhead for the humanitarian program (the UN says it turned over $300 million of this to help pay for relief, but no public accounting has ever been given) and another $500 million or so for weapons inspections in Iraq. Discrepancies in these numbers can be chalked up to interest paid on some of the funds, exchange-rate fluctuations, or simply the murk in which most of the Oil-for-Food transactions remain shrouded to this day.
Whether Saddam should have enjoyed the right to dispose of all Iraqi oil was never questioned. In Iraq, oil was the province of a state monopoly, which Saddam in effect claimed for his own, and on that basis was the UN deal struck. The arrangement actually helped strengthen Saddam's chokehold at home. With sanctions effectively forbidding all other foreign commerce, Iraq's only legitimate trade was whatever flowed through Saddam's ministries under the supervision of the UN program. Thus the UN gave to Saddam the entire import-export franchise for Iraq, taking upon itself the responsibility for ensuring that he would use this arrangement to help Iraq's 26 million people. The success of the program depended wholly on the UN's integrity, competence, and willingness to prevent Saddam from subverting the setup to his own benefit.
This was perhaps an impossible brief. But the Secretariat eagerly shouldered the burden, accepting along with it the commissions that flowed straight from Iraq's oil spigots. Introduced as an ad-hoc deal, Oil-for-Food soon took on the marks of a more permanent arrangement. It was a project in which Annan had a direct hand from the beginning. As Under-Secretary General, he had led the first UN team to negotiate with Saddam over the terms of the sales under Oil-for-Food. The first shipment went out in December 1996; the following month, Annan succeeded Boutros-Ghali as Secretary-General.
Nine months later, in October 1997, Annan tapped Benon Sevan, an Armenian Cypriot and longtime UN official, to consolidate and run the various aspects of the Iraq relief operation under a newly established agency called the Office of the Iraq Program (but usually referred to simply as Oil-for-Food). Sevan served as executive director for the duration, reporting directly to Annan. The program was divided into roughly six-month phases; at the start of each phase, Sevan would report and Annan would recommend the program's continuation to the Security Council, signing off directly on Saddam's "distribution plans."
An issue that would later become important was how, precisely, the responsibilities for executing the program were parceled out between the Security Council-a committee of fifteen-member states-and the Secretariat, run by Annan. All of Saddam's proposed contracts flowed through the Security Council, which doubled as the Iraq "sanctions committee." But in practice, the fifteen member governments were mostly on the watch for so-called dual-use items: goods that might be used to make weapons.
As it turned out, only two of the five permanent, veto-wielding members appear to have done any overseeing at all. These were the UK and the U.S., both of which had almost no direct business with Saddam's Iraq. The UN representatives of the other three-France, Russia, and China-devoted their energies chiefly to urging expansion of the program and forwarding the paperwork submitted by the many contractors in their respective nations whom Saddam had selected as his buyers and suppliers. As for the ten rotating members of the Security Council, some-like Syria-were among Saddam's favored trading partners, while most of the others lacked the resources to keep track of the huge volume of business the program soon generated.
If final responsibility lay anywhere at all, it lay with the Secretariat. It was this body that fielded a substantial presence in Iraq (the U.S., apart from weapons inspectors ejected early on, had none), employing at the height of the program some 3,600 Iraqis plus 893 international staff working in Iraq for the nine UN agencies coordinated by the Oil-for-Food office; another 100 or so were employed back in New York. The Secretariat was the keeper of the contract records and the books, and controller of the bank accounts, with sole power to authorize the release of Saddam's earnings to pay for imports to Iraq. The Secretariat arranged for audits of the program, was the chief interlocutor with Saddam, got paid well for its pains, and disseminated to the public extremely long reports in which most of the critical details of the transactions were not included.
One of the first changes introduced by Sevan was greater secrecy. According to John Fawcett, the co-author of a 70-page report on Saddam's finances released in 2002 by the Washington-based Coalition for International Justice, the UN had been fairly open about the specifics of Saddam's contracts during the first year of the program.
From about 1998 on, however, it categorized the most germane details as "proprietary"-carefully guarding Saddam's privacy in his business deals. Thus, there was no disclosure of such basic information as the names of individual contractors or the price, quality, or quantity of goods involved in any given deal-all vital to judging the integrity of contracts.
Instead, the Office of the Iraq Program released long lists representing billions of dollars in business but noting only the date, country of origin, whether or not the contract had been approved for release of funding, and highly generic descriptions of goods. Typical of the level of detail were notations like "electric motor" from France, "adult milk" from Saudi Arabia, "detergent" from Russia, "cable" from China. Who in particular might be profiting, or at what price, was kept confidential. Nor did the UN disclose interest paid on the Oil-for-Food accounts at BNP Paribas or (possibly) other banks, which toward the end of the program held balances of more than $12 billion. Nor did it ever share with the public the details of how the $1.9 billion in commissions flowing from Saddam for aid and arms inspections (the latter were discontinued from late 1998 to late 2002) were spent by the UN Secretariat.
The year 1998, the first full year of the program under Sevan's directorship, is of special interest in this connection. For starters, if evidence cited in the Wall Street Journal turns out to be correct, this was the year in which Saddam's government may have begun covertly sending gifts of oil to Sevan himself by way of a Panamanian firm. It was also the year in which the UN terminated a contract with a UK-based firm, Lloyd's Register, for the crucial job of inspecting all Oil-for-Food shipments into Iraq, and replaced it with a Swiss-based firm, Cotecna Inspections, with ties to Kofi Annan's son Kojo. At the time, neither Cotecna nor the UN declared these ties as a possible conflict of interest, which they were.2
Also in 1998, at Sevan's urging, the UN expanded Oil-for-Food to allow Saddam to import not just food and medicine but oil-industry equipment, and at Annan's urging more than doubled the amount of oil Iraq was allowed to sell, raising the cap from roughly $4 billion to more than $10 billion per year. That same year, after much hindering and dickering, Saddam threw out the UN weapons inspectors-forbidding their return until the U.S. and Britain finally forced the issue four years later.
This brings us to 1999-2000, when, following Sevan's urging, the program expanded yet further; with more funds devoted to the oil sector, and with the weapons inspectors gone, the UN now removed the limits on sales. In 2000, Saddam enjoyed a blockbuster year. By this time he was not only selling vastly more oil but had institutionalized a system for pocketing cash on the side.
It worked like this. Saddam would sell at below-market prices to his handpicked customers-the Russians and the French were special favorites-and they could then sell the oil to third parties at a fat profit. Part of this profit they would keep, part they would kick back to Saddam as a "surcharge," paid into bank accounts outside the UN program, in violation of UN sanctions.
By means of this scam, Saddam's regime ultimately skimmed off for itself billions of dollars in proceeds that were supposed to have been spent on relief for the Iraqi people. When the scheme was reported in the international press-in November 2000, for example, Reuters carried a long dispatch about Saddam's demands for a 50-cent premium over official UN prices on every barrel of Iraqi oil-the UN haggled with Saddam but did not stop it.
Beyond that, Saddam had also begun smuggling out oil through Turkey, Jordan, and Syria. This was in flagrant defiance of UN sanctions and made a complete mockery of Oil-for-Food, whose whole point was to channel all of Saddam's trade. The smuggling, too, waswidely reported in the press-and shrugged off by the UN. In the same period, Saddam imposed his own version of sanctions on the U.S., demanding that Oil-for-Food funds be switched from dollars into euros. The UN complied, thereby making it even harder for observers to keep track of its largely secretive and confusing bookkeeping.
As Oil-for-Food grew in size and scope, the U.S. mission to the UN began putting a significant number of its relief contracts on hold for closer scrutiny. Both Sevan and Annan complained publicly and often about these delays, describing them as injurious to the people of Iraq and urging the Security Council to push the contracts through faster. What Sevan did not convey was that, by 2000, complaints had begun reaching him about Iraqi government demands for kickbacks from suppliers on the relief side. These (according to a recent report in the Financial Times) Sevan simply buried, telling complainants to submit formal documents to the Security Council through their countries' UN missions (something they had no incentive to do since Saddam would most likely have responded by scrapping the deals altogether).
By 2002, the sixth year of the program, it was no longer credible that the UN Secretariat could be clueless about Saddam's systematic violations and exploitation of the humanitarian purpose of
Oil-for-Food. On May 2, in a front-page story by Alix M. Freedman and Steve Stecklow, the Wall Street Journal documented in detail Saddam's illicit kickbacks on underpriced oil contracts, noting that "at least until recently, the UN has given Iraq surprising influence over the official price of its oil." In fact, against the resistance of Russia, France, China, and the UN Secretariat, the U.S. and Britain had been trying to put a halt to the kickbacks through an elaborate system to enforce fairer pricing-but with only limited success. Sevan, clearly aware of the scam, was quoted in the Journal article as saying he had "no mandate" to stop it.
Apparently, however, there was a near-boundless mandate for the Secretariat to expand the scope of the spending. A mere fortnight later, on May 14, 2002, the Security Council passed a resolution cutting itself out of the loop entirely on all Oil-for-Food contracts deemed humanitarian, and giving direct power of approval to the Secretary-General. Henceforth, the Security Council would confine its oversight to items of potential dual use, such as chemical spraying equipment, or forbidden goods like highly enriched uranium, nuclear-reactor components, and the like. Unimpeded responsibility for the "humanitarian" aspect of the program fell to Annan.
The next month, "humanitarian" became a broad category indeed. On June 2, Annan approved a newly expanded shopping list by Saddam that the Secretariat dubbed "Oil-for-Food Plus." This added ten new sectors to be funded by the program, including "labor and social affairs," "information," "justice," and "sports." Either the Secretary-General had failed to notice or he did not care that none of these had anything to do with the equitable distribution of relief. By contrast, they had everything to do with the running of Saddam's totalitarian state. "Labor," "information," and "justice" were the realms of Baathist party patronage, propaganda, censorship, secret police, rape rooms, and mass graves. As for sports, that was the favorite arena of Saddam's sadistic son Uday, already infamous for torturing Iraqi athletes.
Then came the autumn of 2002, when President Bush delivered his warning to Saddam to comply with sixteen previous UN resolutions to disarm, and the U.S. persuaded the Security Council to pass a seventeenth. Though there was by this time no dearth of damning information in the public domain, Oil-for-Food rolled on. On September 18, the Coalition for International Justice released its heavily researched report, Sources of Revenue for Saddam & Sons, documenting rampant corruption and smuggling under UN sanctions and Oil-for-Food, warning of an Iraqi shift from "informal, on-the-sly deals" to increasingly "brazen and formal government-to-government arrangements," and asking how, "given . . . the world's largest humanitarian program ever, can there remain shortages of basic medicines and foodstuffs" in Iraq? Four months later, with Saddam still defiant and war looking likely, Annan signed a letter to the Security Council in which, among other things, he approved the use of $20 million in Oil-for-Food funds to pay for an "Olympic sport city" and $50 million to equip Saddam's propaganda arm, the Ministry of Information.3
By then, of course, debate over Iraq was raging in the Security Council, and the U.S. and Britain were bitterly at odds with France and Russia. Annan weighed in publicly on the side of the latter, urging yet more time and tolerance. He did not mention his own interest as the boss of a massive relief program funded by Saddam. Neither did he mention that Saddam's commercial deals heavily favored French and Russian companies, though he had access to actual numbers about those deals that, thanks to UN secretiveness, the public did not.
On March 17, with the U.S.-led coalition poised to invade, Annan pulled his international staff out of Iraq. Three days later, as coalition forces rolled into Iraq, he expressed regret that war had come "despite the best efforts of the international community and the United Nations." Describing the UN as the keeper of international "legitimacy," he assured the Iraqi people that, as soon as possible, the UN would be back to do "whatever it can to bring them assistance and support."
Following the fall of Saddam's regime, the U.S.-led coalition decided that Iraq had experienced enough of UN-style "assistance and support," at least as far as Oil-for-Food was concerned. With Russia and France suddenly willing to go along, perhaps to avoid scrutiny of
Oil-for-Russia and Oil-for-France, the Security Council voted unanimously on May 22 that the program should be wound down. No more oil revenues were to flow in, but the UN Secretariat was to continue administering the remaining relief contracts until November, when any unfinished business would be turned over to the Coalition Provisional Authority (CPA) in Baghdad.
At that stage, Oil-for-Food had close to $13 billion in BNP Paribas's Iraq accounts, most of it set aside to pay for contracts already approved. During the summer and early fall, the New York office began tidying up loose ends, renegotiating, "prioritizing," and basically removing the graft elements from the remaining contracts before handover to the CPA. In these efforts, the UN got some prompting from the U.S. Defense Contract Management Agency (DCMA)-the agency that has been auditing Halliburton's recent activities in Iraq.
From the thousands of remaining contracts, the DCMA (together with the Defense Contract Audit Agency) culled a batch of 759 of the largest deals, valued altogether at $6.9 billion. The reviewers estimated that among these contracts, almost half were overpriced by about 21 percent, for a total of $656 million that Saddam's regime had overpaid. This was in all likelihood the kickback component, part of which the suppliers were meant to share illicitly with the regime. Dryly, the DCMA's report adds that, in the course of its researches, "Some items of questionable utility for the Iraqi people (e.g., Mercedes Benz touring sedans) were identified."
By the time the Oil-for-Food office was finished renegotiating its contracts, it had scrapped more than a quarter of them. Some of the reasons, listed in UN public documents, are intriguing. There was, for example, the Syrian supplier of "spare parts for rotating equipment" whom it was "not possible to contact"; the Lebanese vendor of "welding machines" who was "unwilling to accept the 10-percent deduction"-i.e., a price minus the bribe-plus-kickback; and the Jordanian seller of school furniture whose contract had to be dropped because "company does not exist and the person in charge moved to Egypt."
Then came the formal ceremonies to which I have already alluded. On November 19, Sevan's office put out a press release praising Oil-for-Food as "one of the most efficient of UN programs." On November 20, Annan chimed in with his own praise for Oil-for-Food, paying tribute to the staff and "particularly to its executive director, Benon Sevan." On November 21, almost seven years after setting up shop as a temporary and limited measure to bring food and medicine to hungry people in Iraq, the program shut down, handing the CPA a royal mess.
Sevan had assured the Security Council that, along with control of the more than $8 billion in funds and contracts still to be administered, the CPA would get "the entire Oil-for-Food database." In fact, the transfer was incomplete. Plenty of contract information was missing. So Byzantine were the BNP Paribas accounts that, rather than risk interrupting relief deliveries, the CPA simply left them under the management of the UN treasurer, who until almost a year after the fall of Saddam never got around to sending any current bank statements, let alone prior records.4
Meanwhile, however, the Iraqi Governing Council had itself begun to pore over records of the Saddam regime from various ministries, and former Baath officials were also starting to talk. On December 5, a British adviser to the Council, Claude Hankes-Drielsma, wrote from Baghdad to Annan, urging the UN to "take the moral high ground" and appoint an independent commission to investigate profiteering under Oil-for-Food.
Not a moment too soon: now the revelations were beginning to flow rapidly. On January 25 of this year, the Iraqi newspaper Al-Mada published a list, reportedly recovered from the Iraqi oil ministry, of some 270 individuals and entities in some 50 countries who were alleged to have received vouchers good for oil from Saddam Hussein. The list was an eye-opener. It included the former French Interior Minister Charles Pasqua, British MP George Galloway, Indonesian President Megawati Sukarnoputri, the Russian nationalist Vladimir Zhirinovsky, a large number of Russian oil companies, the Russian state, and the Russian Orthodox Church. It also included the family name of the head of the UN Oil-for-Food program: Sevan.
Those named in Al-Mada's list ignored, denied, or dismissed it on grounds that they had legitimately bought oil from Saddam. As for Sevan, he categorically repudiated the notion that he had ever received oil or oil money from the Iraqi regime, while Annan, in a statement more artfully hedged, said: "As far as I know, nobody in the Secretariat has committed any wrongdoing." A spokesman for the UN Secretariat repeated the by-now usual line that Oil-for-Food had been the most audited program at the UN-"audited to death" was the exact phrase-and in late February the Oil-for-Food office released a seven-page statement clearly aimed at deflecting blame for any graft involved with the program.
According to this official account, the Secretariat had no responsibility for confirming that contract-pricing was fair, or that suppliers were legitimate (that was the job of Saddam and the UN country missions); no responsibility for implementing the program (that too was the job of Saddam); no responsibility for either spotting or stopping corruption by Saddam via Oil-for-Food contracts (that was the job of the Security Council); and no awareness of unauthorized oil exports (though the office confirmed its knowledge of "media reports on alleged violations"). By the light of this clarification, indeed, it was hard to tell what the Oil-for-Food program was, in fact, responsible for, beyond controlling the opaque bank accounts, checking that the contracts-honest or not-were properly punctuated, watching Saddam do whatever he chose, and collecting a 2.2-percent commission on his oil.
And so we arrive at the denouement-at least so far. On February 29, the New York Times published a long news article based on "a trove of internal Iraqi government documents and financial records" unearthed by the Iraqi Governing Council. The article described oil traders lugging suitcases full of illicit cash to the ministries and cited stacks of evidence showing that, through Oil-for-Food, Saddam's regime had squirreled away billions for itself while ordinary Iraqis received expired medicines and substandard rations.
Still the UN hung tough. On March 3, Hankes-Drielsma notified Annan that Iraqi authorities had asked an auditing firm, KPMG International, and a law firm, Freshfields Bruckhaus Deringer, to prepare an independent report. In his letter, Hankes-Drielsma explained his reasoning:
Based on the facts as I know them at the present time, the UN failed in its responsibility to the Iraqi people and the international community at large. The UN should not be surprised that the Iraqi people question the UN's credibility at this time and any future role for the UN in Iraq. It will not come as a surprise if the Oil-for-Food program turns out to be one of the world's most disgraceful scams and an example of inadequate control, responsibility, and transparency, providing an opportune vehicle for Saddam Hussein to operate under the UN aegis to continue his reign of terror and oppression.
On March 10 came confirmation that Annan's son Kojo had held a consultancy with Cotecna right around the time the company won the UN job to inspect goods coming into Iraq. On March 11 came an article in the Wall Street Journal detailing further links between Saddam's oil largesse and Sevan. The following week came word that Congress would hold hearings on Oil-for-Food. And on March 19, having ignored, stonewalled, and denied, Annan finally conceded, "it is highly possible there has been quite a lot of wrongdoing," and called for an independent inquiry.
As the various audits, investigations, and hearings gear up to delve into the saga of UN involvement in Saddam's Iraq, we may learn even more about his worldwide net of corruption. With skill, we may locate some of the billions he is believed to have salted away under UN oversight. With luck, we may get to this money ahead of the terrorists with whom he consorted-if they have not gotten to it already. Already known, for example, is that two firms doing business with Saddam through Oil-for-Food were linked to financier Ahmed Idris Nasreddin, now on the UN's own watchlist of individuals "belonging to or associated with" al Qaeda.
But let us retain our focus. That Saddam Hussein was a monster and a corrupt monster is not news. That he would exploit, for massive personal gain, a humanitarian program meant to relieve the miseries of his countrymen is horrifying but hardly astonishing. Nevertheless, any investigation that confines itself to detailing the abundantly evident corruption of Saddam Hussein will have missed the point.
What lies at the core of this story is the United Nations, and how it came to pass that an institution charged with bringing peace and probity to the world should have offered itself up-willingly, even eagerly-as the vehicle for a festival of abuse and fraud.
To begin with, Oil-for-Food was an enormous venture in central planning, the biggest project of its kind launched in many a decade and one that utterly ignored the lessons about such systems learned at agonizing cost over the past century. The UN Secretariat, in its well-paid arrogance, set out to administer virtually the entire economy of Iraq. Under its eye, all legitimate trading privileges became the franchise of a tyrant who laid first claim to every barrel of oil and every dollar (or euro) of proceeds. How could Oil-for-Food not help consolidate Saddam's grip on power? Nevertheless, it was with this grand thief of Baghdad that the UN cut its humanitarian deal, chalking in a fat commission for the Secretariat.
Nor did anyone in the UN system so much as lift an eyebrow, even after questions began to be raised. Last November, before the Security Council of the United Nations, the organization's Secretary-General proclaimed it a splendid achievement that the UN had legitimized a scheme by which 60 percent of Iraq's population depended entirely on the rationing cards of a totalitarian state. This was an event that should have seized the vaunted international community with horror. Instead, from out of the mouth of the Angolan ambassador who that month was chairing the UN Security Council there issued only unctuous praise for "the exceptionally important role of the program in providing humanitarian assistance to the people of Iraq."
But all that is only prelude. The scope of UN dereliction is much broader, encompassing factors institutional, personal, and, finally, political.
It is true that Oil-for-Food managed to deliver to Iraqis some portion of what it promised. On sales totaling $65 billion, some $46 billion (by Annan's uncheck able reckoning) went for "humanitarian" spending. Of this amount, an official total of $15 billion worth of food and health supplies-the original rationale for the program-had been received by the time Saddam fell. The actual figure was no doubt considerably less if you factor in the kickbacks and spoiled goods; from the remainder came the equipment for Saddam's oil monopoly, the construction materials, the TV studio systems, the carpets and air conditioners for the ministries, and all the rest.
But at what cost? Are we supposed to conclude that, in order to deliver this amount of aid, the UN had to approve Saddam's more than $100 billion worth of largely crooked business, had to look the other way while he skimmed money, bought influence, built palaces, and stashed away billions on the side, at least some of which may now be funding terror in Iraq or beyond?
No, something was at work here other than passive acquiescence. At precisely what moment during the years of Oil-for-Food did the UN Secretariat cross the line from "supervising" Saddam to collaborating with him? With precisely what deed did it enter into collusion? Even setting aside such obvious questions as whether individual UN officials took bribes, did the complicity begin in 1998, when Saddam flexed his muscles by throwing out the weapons inspectors and when Oil-for-Food, instead of leaving along with them, raised the cap on his oil sales? Did it come in 1999, when, even as Saddam's theft was becoming apparent, the UN scrapped the oil-sales limits altogether? Or in 2000 and 2001, when Sevan dismissed complaints and reports about blatant kickbacks? Did it start in 2002, when Annan, empowered by Oil-for-Food Plus, signed his name to projects for furnishing Saddam with luxury cars, stadiums, and office equipment for his dictatorship? Or did the defining moment arrive in 2003, when Annan, ignoring the immense conflict posed by the fact that his own institution was officially on Saddam's payroll, lobbied alongside two of Saddam's other top clients, Russia and France, to preserve his regime? Certainly by the time Annan and Sevan, neck-deep in revelatory press reports and standing indignantly athwart their own secret records, continued to offer to the world their evasions and denials, the balance had definitively tipped.
Annan's studied bewilderment is itself an indictment not only of his person but of the system he heads. If anyone is going to take the fall for the Oil-for-Food scandal, Sevan seems the likeliest candidate. But it was the UN Secretary-General who compliantly condoned Saddam's ever-escalating schemes and conditions, and who lobbied to the last to preserve Saddam's totalitarian regime while the UN Secretariat was swimming in his cash.
Annan has been with the UN for 32 years. He moved up through its ranks; he knows it well. He was there at the creation of Oil-for-Food, he chose the director, he signed the distribution plans, he visited Saddam, he knew plenty about Iraq, and one might assume he read the newspapers. We are left to contemplate a UN system that has engendered a Secretary-General either so dishonest that he should be dismissed or so incompetent that he is truly dangerous-and should be dismissed.
The final perfidy, though, is not personal but political. The UN, in the name of its own lofty principles, and to its rich emolument, actively helped sustain and protect a tyrant whose brutality and repression were the cause of Iraqi deprivation in the first place. What can this mean? The answer may be simply that, along with its secrecy, its massed cadres of bureaucrats beholden to the favor of the man at the top, its almost complete lack of accountability, external oversight, or the most elementary checks and balances, the UN suffers from an endemic affinity with anti-Western despots, and will turn a blind eye to the devil himself in order to keep them in power. Certainly there is much in its history and its behavior to support this view.
Perhaps, then, the complicity was there all along, built in, and was merely reinforced year after year as the UN collected the commissions and processed the funds that transformed Oil-for-Food into the sleaziest program ever to fly the UN flag and the single largest item on every budget of all nine UN agencies involved, plus the Secretariat itself. That, in the end, may be the dirty secret at the center of the Oil-for-Food scandal.
And is this the same United Nations that, now, we are planning to entrust with bringing democracy to Iraq?
Claudia Rosett, who contributes a bi-weekly column on foreign affairs to the Wall Street Journal's online edition, OpinionJournal.com, is a senior fellow at the Foundation for the Defense of Democracies and an adjunct fellow of the Hudson Institute.
1 As of 2001, one of the largest shareholders in BNP was Iraqi-born Nadhmi Auchi, among Britain's richest citizens. In the 1980's Auchi had brokered business deals for Saddam; last year he was convicted in France of illicit profiteering as part of the huge Elf oil scandal. The UN says the Oil-for-Food contract was awarded to BNP on a strictly competitive basis.
2 According to a spokesman at the UN Secretary-General's office, Kojo Annan had been a trainee at Cotecna from December 1995 to February 1998, and two months later was back at work for the firm as a consultant; his consultancy, which lasted until December 1998, thus coincided with the period during which the UN would have been receiving and reviewing bids for the Oil-for-Food inspection job. Both Kojo and Kofi Annan have denied that Kojo's consulting work was in any way related to the UN.
3 This is especially significant in light of the role that would be played by Saddam's televised propaganda during the war. In the event, Saddam may have had to rely on equipment brought in earlier under Oil-for-Food from places like France and Jordan. He was unable to take delivery of TV studio equipment ordered from Russia and approved and funded by the Secretariat on February 7, 2003, just six weeks before the war. But that was not for want of Kofi Annan's approval.
4 Not only the occupation authority but the Iraqis themselves have failed to penetrate the UN wall of disdain, although it is their own money they wish to know about. The Iraqi Central Bank began requesting copies of the relevant BNP bank statements in July 2003.
Not until late March of this year, after I aired the matter in a piece in National Review Online, was there some halting sign of movement in the UN treasurer's office. Similar stonewalling-no accounting given, no access to statements-has met the repeated efforts of Kurds in northern Iraq to find out what happened to about $4 billion in separate allocations owed to them under Oil-for-Food.
Write; by Claudia Rosett and LuisB, April 2004
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posted by Diarium LuisB at
Tuesday, April 20, 2004
