The Oil-for-U.N.-Jobs Program

The United Nations. The same U.N. whose secretary-general, Kofi Annan, stands as one of the chief ditherers over removing Saddam. Here are the ingredients of a conflict of interest.

In connection with the six-year-old Oil-for-Food Program, the U.N. has had a hand in the sale of $57 billion worth of Iraqi oil. Iraq ships oil out to U.N.-approved buyers under the terms of the sanctions agreement. The U.N. vets the flow of "humanitarian" and other imports into Iraq.

The process is simple. Iraq contracts to import goods, and the U.N. gives the outside vendors cash from the oil sales. The U.N. has approved about $37 billion in humanitarian aid, plus funds for a number of other projects, such as oil industry upkeep. The money the U.N. hasn't yet paid out sits in U.N.-administered bank accounts -- totaling some $12 billion, according to the U.N. Controller's office. U.N. officials refuse to divulge much information about these accounts -- not even the countries in which they're held.

Measured in dollars, this is by far the U.N.'s largest program. The sums involved are large enough, and their handling has been perverse enough, for this program to deserve more attention than it has so far received.

Conceived as a way to deliver humanitarian aid despite sanctions against Iraq, Oil-for-Food has expanded and matured into an unholy union between Saddam and the U.N. By now, they are effectively partners in what might just as well be called the Oil-for-U.N.-Jobs program. Even with its weapons inspectors barred from the country, the U.N. has 10 agencies at work, employing 900 international staffers and 3,000 Iraqi nationals inside Iraq, plus 120 people in New York, just for the aid aspects of the program.

Combining Iraq's oil exports and aid imports, the U.N. oversees a flow of funds averaging at least $15 billion a year, more than five times the U.N.'s core annual budget. In other words, listening to Mr. Annan's views on Iraq makes about as much sense as once upon a time heeding Arthur Andersen's pronouncements on Enron.

Mr. Annan and his crew have winked at Iraq's gross violations of U.N. agreements, and not only on weapons inspections. The sanctions on Iraqi oil sales were meant to stop Saddam from diverting revenues to his own uses. But Saddam has been getting around the sanctions via surcharge-kickback deals and smuggling, to the tune of $3 billion a year, according to numbers in the dossier just released by Tony Blair.

Back in May, The Wall Street Journal's Alix Freedman and Steve Stecklow recounted how Iraq "has imposed illegal surcharges on every barrel of oil it has sold, using a maze of intermediaries to cover its tracks." Last week, the Washington-based Coalition for International Justice released a 70-page report, detailing Saddam's dodges and how this year alone, despite "smarter" U.N. sanctions, he will rake in billions for his "personal treasury." When President Bush on Sept. 12 addressed the U.N., he charged that Saddam has "subverted" Oil-for-Food, "working around the sanctions to buy missile technology and military materials."

So the remaining virtue of the U.N.'s Iraq program would have to be the humanitarian relief. Not quite. Under the Oil-for-Food deal, it is not the U.N. but Saddam who decides what is needed, who in Iraq gets what, and which countries he buys from. He must submit his proposals to the Security Council, which can reject them. But the bulk of his requests are approved. The U.N. disburses the cash from the "Iraq accounts" and monitors the delivery. The result is that U.N.-approved aid goes to reinforce Saddam's control over what is already a Soviet-league state-run economy.

Today, with private business largely smothered, the only significant source of foreign exchange is oil. All oil in Iraq belongs to the state. "The government of Iraq has the sole responsibility for allocating the money," says an official of the U.N.'s Oil-for-Food Program. "We cannot tell them, we only advise them."

Delving into these matters gets tough, because the U.N. shuns transparency. Given that billions from the Iraq program are now sitting in U.N. escrow accounts awaiting some combination of Saddam's planning and U.N. processing, one wonders which banks, and which of those countries now taking part in the Iraq debate, might be getting slices of Saddam's business. A few years ago, all Oil-for-Food funds were kept at a French bank, Banque Nationale de Paris. These days, the funds have been diversified among five or six banks, according to U.N. treasurer Suzanne Bishopric. The U.N. forbids her to disclose the names or locations of the banks, or details such as interest accrued.

"We don't like to make public where our money is," says Ms. Bishopric. Who audits the program? It's a strictly insider job: The U.N. secretariat, supplemented by a rotating set of member nations (currently the Philippines).

Neither does the U.N. disclose which countries get what amount of Saddam's trade. Oil industry experts say France and Russia -- both of which have resisted removing Saddam -- have led the pack, with billions in deals. Russia being a big oil producer itself, these purchases are not for home consumption, but for resale at a profit. An official in the U.N. controller's office says he is forbidden to disclose figures on Iraqi trade with individual countries. "If I did, I would get an earful from the countries' missions."

The U.N.'s Iraq program even let Saddam dictate in October 2000 that he no longer wanted the Oil-for-Food accounts to be held in the currency of the enemy, meaning U.S. dollars. Obediently, the U.N. switched all Iraq funds from that point on to euros, in effect helping Saddam impose his own version of sanctions on the U.S.

What helped breed this monstrosity of a program was a system that at its inception sounded worthy enough. To fund most of its operations, the U.N. has to assess its members, rattling the cup for funds. Not so with Iraq. Oil-for-Food aimed to make Saddam's government pay for all the evaluating and inspecting and directing meant to ensure that Saddam's oil gains would go for beneficial uses. So the U.N. plan allocates various percentages of the oil revenues to fund different parts of its Iraq program.

Today, that means 59% for Baghdad-controlled central and southern Iraq, 13% to the autonomous Kurdish north, 25% for Gulf War reparations and 0.8% for weapons inspections (what weapons inspections?). And -- oh yes -- 2.2% for U.N. administration of the program, $1.2 billion so far. That's enough that the U.N. secretariat, awash in Iraqi cash, has turned over a surplus $211 million for aid to Iraq.

That still leaves a cumulative $1 billion bankrolling administration of a program that by now, in effect, has the U.N. working, on commission, for Saddam.

Gee, I don't thonk there is a problem. First, I think Saddam simply has too much integrity to even think of offering a bribe to a representative of the UN. A, sencond, I think every UN employee, diplomat or representative has too much personal integrity to even consider taking a bribe, should one be offered. Similarly, I believe that Tommie the Commie wouldn't sell his bag lady wife it it would make Bush or the country look bad for any price, nor do I beleive that Willie ever had sex with that woman.

When it comes to integrity, UN types are right up there with Nigerians, Mexicans and Bangladeshis!

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