A blog intended to promote thoughtful discussion about the UN.
Frequently Asked Questions about the Oil-for-Food Program
What was the Oil-for-Food
program?
Did the Oil-for-Food program
accomplish its mission?
Who was responsible for overseeing the Oil-for-Food program?
What is the nature of the allegations against the Oil-for-Food Program?
What is the relevance
of the Secretary-General’s son, Kojo Annan, to the IIC and Congressional
Oil-for-Food investigations?
Is it true that illegal
oil smuggling, not circumvention of OFFP was the main source of illicit revenue
for the Hussein regime during the UN sanctions period?
Was the UN responsible for monitoring illegal oil smuggling?
Did the UN raise concerns regarding discrepancies in the Oil-for-Food Program?
Why did the Secretary-General commission a high-level inquiry?
What authority has the panel been given?
What has the Volcker Committee revealed so far?
Are UN personnel, including senior officials, compelled to cooperate with the
panel?
Are the details of contracts a secret?
Has the Independent Inquiry Committee refused to cooperate with other investigations?
Has the UN been cooperating with U.S. Congressional committees?
What was the Oil-for-Food program?
The Oil-for-Food Program (OFFP) was a way of keeping sanctions in place while easing the human toll they were taking on Iraq’s civilian population. From December 10, 1996 until November 21, 2003 when the program was terminated, the Oil-for-Food Program (OFFP) allowed the Iraqi government to sell oil to pay for food, infrastructure, medicine and humanitarian goods. From 1997 to 2002, Iraq sold more than $67 billion in oil through Oil-for-Food and issued $38 billion in letters of credit to purchase commodities for the Iraqi people, according to the U.S. Government Accountability Office (GAO). The difference between these two amounts went toward Gulf War reparations to the Kuwaiti people, funding for weapons inspections in Iraq, and a small amount (2.2%) went toward the administrative costs of running the program (OFFP administration was always under budget and surplus funds were eventually reallocated for humanitarian purposes). Both the United States and the United Kingdom, as permanent members of the UN Security Council, voted for the creation of the program and for its expansion in 1998.
Did the Oil-for-Food program accomplish its mission?
Yes. The mission of the Oil-for-Food program was to address the humanitarian impact of sanctions on the Iraq’s citizens, while maintaining their efficacy, which kept the Hussein regime from acquiring weapons of mass destruction. Under the program, enough food was imported to feed all 27 million Iraqis and the average daily caloric intake of the people of Iraq was increased 83 percent, from 1,200 kilocalories to 2,200 kilocalories per person per day. In addition, malnutrition rates in 2002 in the central and southern part of the country were half those in 1996 among children under the age of five; in the three northern governorates, chronic malnutrition decreased 56 percent. The program also contributed to national vaccination campaigns that helped reduce child mortality and eradicated polio in Iraq since May 29, 2003.
Who was responsible for overseeing the Oil-for-Food program?
The UN Security Council oversaw the Oil-for-Food Program and the UN Secretariat’s Office of the Iraq Program (OIP) implemented the Council’s work on the ground in Iraq. Specifically, it was the role of the Security Council’s 661 Committee to monitor all contracts awarded under the Oil-for-Food Program. The U.S., through its Permanent Seat on the UN Security Council, had a representative on the 661 Committee, which gave them veto power over all contracts, during the entire duration of the Oil-for-Food Program.
What is the nature of the allegations against the Oil-for-Food Program?
It has been alleged that mismanagement of the Oil-for-Food Program allowed Saddam Hussein’s regime to embezzle millions of dollars through under-priced oil contracts and overcharging in contracts for some of the goods Iraq purchased under the program. According to a Government Accountability Office report, Saddam Hussein embezzled $4.4 billion through pricing irregularities. It is also estimated that Saddam acquired an additional $5.7 billion through illegal oil smuggling. However, the Oil-for-Food program had neither responsibility nor enforcement capacity for checking for unauthorized oil sales. That responsibility was assigned to UN Member States and, in the Gulf area, to the Multinational Interception Force (MIF) which was established when the sanctions regime was put in place in 1990.
What is the relevance of the Secretary-General’s son, Kojo Annan, to the IIC and Congressional Oil-for-Food investigations?
Kofi Annan’s son, Kojo Annan, is a former employee of Cotecna, one of the companies that contracted with the Oil-for-Food Program. Cotecna is a multinational company specializing in the examination of in-transit goods in international trade. Cotecna’s contract with the United Nations, signed on December 31, 1998, enlisted the company in the authentication of imported humanitarian goods as part of the Oil-for-Food Program.
The IIC investigated the possibility that Kojo Annan used his contacts to UN
officials, including his father, to secure the award of the inspections contract
for Cotecna. In its March 29, 2005 report, the IIC concluded that, “There
is no evidence that the selection of Cotecna in 1998 was subject to any affirmative
or improper influence of the Secretary-General in the bidding or selection process.
Based on the record and lack of evidence of impropriety, it is the finding of
the Committee that Cotecna was awarded the contract in 1998 on the ground that
it was the lowest bidder. The Committee also notes that, in keeping with the
normal United Nations policy and practice, the Secretary-General is not involved
in procurement decisions.” In their final report, the IIC reaffirms these
earlier findings.
According to Cotecna, the company did not inform any UN officials involved in
the procurement process of the company’s relationship with Kojo Annan.
CEO Robert Massey said that mentioning Kojo Annan’s name would have been,
“highly inappropriate and detrimental to our pursuit of the contract.”
According to the IIC, the Secretary-General first learned that Cotecna had been
the recipient of an Oil-for-Food contract through a press account on January
23, 1999. The Sunday Telegraph article pointed out Kojo Annan’s relationship
with Cotecna and implied a conflict of interest in the contract bidding process.
Upon learning of this, the Secretary-General conducted a brief inquiry into
the matter, but the IIC faults Kofi Annan and other members of the UN Secretariat
for not conducting a sufficiently thorough investigation of the matter. The
IIC also criticized Kojo Annan for not fully disclosing his ongoing financial
relationship with Cotecna to his father.
Details of Kojo Annan’s employment with Cotecna: Kojo
Annan was hired by Cotecna in September 1995, and, over his two years of employment,
he held positions of liaison officer and marketing manager in company’s
office in Lagos, Nigeria. His work focused on the company’s West African
operations. In December 1997, Kojo Annan resigned his employment with Cotecna,
but was retained as a consultant on a 10-month contract that expired on December
31, 1998. The terms of Kojo Annan’s consultancy stated that he would “provide
assistance to Cotecna in the research, development and designing of Pre-Shipment
Inspection services and contracts with different West African countries.”
Following Swiss law, Kojo Annan and Cotecna entered into a 5-year “non-competition”
agreement (1999-2004) upon the expiration of his consultancy. By this agreement,
Cotecna made payments to Kojo Annan in exchange for his promise not to work
for any of the company’s competitors. According to the Volcker Commission,
Kojo Annan was paid $178,187 in non-competition payments over five years. Robert
Massey, the CEO of Cotecna, says $154,000 were transferred to Kojo Annan as
part of the agreement. The final component of the IIC report, due out in a couple
of months, will address the possibility of additional payments by Cotecna, the
existence of which the company denies.
Is it true that illegal oil smuggling, not circumvention of OFFP was
the main source of illicit revenue for the Hussein regime during the UN sanctions
period?
Yes. According to the interim report released on February 3, 2005, illegal oil sales to Iraq's neighbors, referred to as "smuggling," was the largest source of illicit revenue for Saddam Hussein's regime during the sanctions period. This smuggling began long before the commencement of the OFFP. An IIC interim report states: "What does appear clear is that the major source of external financial resources to the Iraqi Regime resulted from sanctions violations outside the Programme's framework. These illicit sales, usually referred to as 'smuggling,' began years before the Program started. Exports of Iraqi oil to both Jordan and Turkey and imports from those countries generally took place within the terms of trade agreements ('protocols') negotiated with Iraq. The existence, but not necessarily the amounts, of sales and purchases under these protocols was brought to the attention of the 661 Committee…'" (View IIC Interim Report and view Comparison of Estimates of Illicit Iraqi Income During UN Sanctions)
In their final report, the IIC finds that Saddam Hussein’s regime derived
far more revenues from smuggling oil outside the OFFP than from its demands
for surcharges and kickbacks from companies that contracted within the Program:
“In gross terms, by far the largest source of illicit income to Iraq during
the period of the Program was from ‘trade protocols’ with its neighbors
and from clandestine smuggling with unofficial parties. The trade protocols
involved Iraq’s sale of oil in return for goods and for cash.” The
value of oil smuggled outside of the OFFP is estimated to be $10.99 billion,
as opposed to an estimated $1.8 billion of revenues that came from Hussein’s
specific manipulation of the OFFP.
Other sources, such as the Iraq Survey Group and the Government Accountability
Office also found that the Hussein regime obtained more illicit revenue from
oil smuggling that from any manipulation of OFFP (View
graphs of their findings).
Was the UN responsible for monitoring illegal oil smuggling?
No. The responsibility for preventing illegal oil trades did not belong to the UN. The UN Office of the Iraq Program (OIP), which administered OFFP, had neither the authority nor the resources to prevent smuggling. The task of policing oil smuggling fell to the Multinational Interception Force (MIF), led by the Fifth Fleet of the U.S. Navy. The coalition making up MIF was initiated following the inception of the sanctions in 1990. The objective remained the same throughout its existence -- to halt violations of United Nations Security Council Resolutions 661 and 665.
Did the UN raise concerns regarding discrepancies in the Oil-for-Food Program?
Yes, the UN’s OIP raised concerns about potential wrongdoing in the Oil-for-Food
program on multiple occasions.
• On November 17, 2000, UN oil overseers informed the 661 Committee that
formulas proposed for oil pricing for the month of December were considerably
under-priced and did not appear to represent "fair market value."
• In December, 2000, the Office of the Iraq Program referred various information
requests on surcharges and side-agreements to the 661 Committee, which then
directed oil overseers to advise buyers of Iraqi oil that they should not pay
any surcharges by fax. In early March, 2001, the Secretary-General informed
the Security Council of surcharge efforts in a report. That same month, the
U.S. circulated information about oil and humanitarian aid surcharges, including
recommendations to remedy the surcharges. As a result, the Security Council
instituted a "retroactive pricing" mechanism.
• Oil-for-Food administrators identified several hundred cases for potential
over-pricing between 2001 and 2002. In 70 cases, administrators reported the
overpricing concern to the 661 Committee. In these instances the experts were
not entirely convinced by the explanations provided by the suppliers.
(View examples of contracts
flagged by OIP over pricing concerns.)
Why did the Secretary-General commission a high-level inquiry?
The Secretary-General takes these allegations seriously. In response to them, he created the Independent Inquiry Committee (IIC), chaired by Paul Volcker, former Chairman of the U.S. Federal Reserve Bank, to thoroughly examine the allegations. The other members of this commission are South African Justice Richard Goldstone and Mark Pieth, a Swiss expert on international money-laundering and bribery. The panel members are independent of the UN and the terms of reference make clear that the panel will have unrestricted access to all relevant United Nations records and information, written or unwritten, and to interview all relevant UN officials and personnel, regardless of seniority.
What authority has the panel been given?
The Independent Inquiry Committee is looking into three broad areas where questions
have been raised relative to the Oil-for-Food program. The panel is tasked with:
• Investigating whether the procedures established by the UN for the administration
and management of the program were violated;
• Determining whether any United Nations officials, personnel, agents
or contractors engaged in any illicit or corrupt activities in the carrying
out of their respective roles in relation to the Program;
• Determining whether the accounts of the Program were in order and were
maintained in accordance with UN regulations and rules.
In addition, the inquiry panel has been authorized to engage professional investigators,
auditors, accountants, forensic experts, and similar personnel or firms to assist
it in carrying out its work. The Secretary-General has instructed all UN staff
to cooperate fully with the panel's investigation as a condition of employment,
so that while the inquiry lacks explicit subpoena power, access to important
information is still assured. The UN has never had the ability to subpoena witnesses,
because this is a function reserved to member states only; granting the UN or
the independent inquiry subpoena power would infringe on the sovereignty of
member states like the U.S.
What has the Volcker Committee revealed so far?
The Independent Inquiry Committee (IIC) examining the allegations against the
UN Oil-for-Food Program (OFFP) issued its final report on September 7, 2005.
This report, along with the Committee’s five interim reports, paints a
broad picture of the OFFP – both its successes and its failures. This
particular report focuses on the management and oversight of the OFFP, within
the greater context of the findings of the interim reports.
In their report, the IIC describes OFFP as “the largest, most complex,
and most ambitious humanitarian relief effort in the history of the United Nations
Organization.”
The findings of the final and interim include the following:
• The 2.2 percent account was not treated by the United Nations as a commission,
either by design or practice, but rather as a necessary pool of funds dedicated
to covering the significant administrative expenses associated with the Program.
• The IIC found that Saddam Hussein’s regime derived far more revenues
from smuggling oil outside the OFFP than from its demands for surcharges and
kickbacks from companies that contracted within the Program. The value of oil
smuggled outside of the OFFP is estimated to be $10.99 billion, as opposed to
an estimated $1.8 billion of revenues that came from Hussein’s specific
manipulation of the OFFP.
• The UN’s procurement system in 1996 was overridden by political
considerations. Rules were bypassed or improperly applied. Joseph Stephanides,
then Chief of the Sanctions Branch and Deputy Director of the Security Council
Affairs Division, was found to have actively participated in the pre-emption
of the competitive process.
• The UN’s audit function was hard-working, but inadequately staffed
and resourced.
• The former Director of the Office of the Iraq Program, Benon Sevan,
repeatedly solicited allocations of oil under the Program.
• The OFFP achieved important successes towards its two most notable ends:
depriving Saddam Hussein of WMDs and maintaining minimal standards of nutrition
and health in the face of a potential crisis.
• Much of the failure of the OFFP was caused less by personal vice than
by systemic inadequacies such as political differences that impeded decision-making
and tolerated large-scale smuggling, which directly subverted the sanctions
imposed by the Security Council.
• The Secretariat lacked adequate controls and auditing, which allowed
isolated instances of corruption among senior UN staff as well as those working
in the field.
• The UN requires stronger leadership from its executive, comprehensive
administrative reform, and more reliable controls and auditing.
• No reasonable evidence was found to conclude that the Secretary-General
knew that Cotecna, S.A. had submitted a bid on the humanitarian inspection contract
in 1998. The Committee also affirmed its prior findings that no evidence exists
that the Secretary-General influenced the procurement process in 1998 leading
to the selection of Cotecna.
At the time of the report’s release, major efforts had already been made
to increase the openness and transparency of the UN’s procurement process.
The UN is continuing to examine the system to make sure the rules in place are
sufficient to prevent further abuses.
Are UN personnel, including senior officials, compelled to cooperate with the panel?
The UN Secretary-General has required that all UN officials and personnel cooperate with the inquiry. The Secretary-General has confirmed publicly on several occasions that he would waive the immunity of any staff member who is found to have committed a crime, regardless of whether the staff member has functional or diplomatic immunity. As a result of the findings of the interim report filed in February 3, 2005, the Secretary-General suspended two UN officials responsible for administering the OFFP. Since then two former UN officials, Russian diplomats Alexander Yakolev and Joseph Stephanides, have been indicted in OFFP-related charges after the UN withdrew their diplomatic immunity. Another former UN official, Benon Sevan, who had been the chief of the UN’s Office of Iraq Program, has also lost his diplomatic immunity in anticipation of potential charges. The panel is also authorized to approach and seek the cooperation of Member States and their relevant authorities in order to obtain information.
Are the details of contracts a secret?
No. Oil-for-Food contracts were submitted to the UN for approval via the contractor’s national authority, and these authorities as well as every member of the UN Security Council (including the U.S.) had the power to approve or place a hold on any contract. On November 3, 2003, the UN provided the Coalition Provisional Authority with its entire database of contracts and information. In addition, thousands of contracts were copied to CD-ROM and transferred to Iraqi authorities and the CPA. On April 15, 2004, the Secretary-General reinforced the transparency of the UN’s information management when he said,
“Transparency is the only way to deal with allegations [like those surrounding the Oil-for-Food Program], and by far the best way to prevent corruption from happening in the first place. That, I believe, will be one of the main lessons we have to learn from this affair, whatever the outcome of the inquiry.”
Has the Independent Inquiry Committee refused to cooperate with other investigations?
No. Chairman Volcker remains committed to fully investigating every relevant
issue thoroughly and has publicly expressed his appreciation for the efforts
of other investigations. Chairman Volcker has pledged to share all documents
with other investigations and will do so if the inquiry determines that the
release of information is consistent with his investigation's requirements.
In a July 7, 2004 Op-Ed in The Wall Street Journal, Chairman Volcker wrote,
"To a point, [the existence of other investigations] is natural and constructive.
Governing authorities in Iraq will want to trace and recover lost funds. Prosecutors
in the U.S., and hopefully in other countries as well, will want to investigate
companies that may have been engaged in corrupt business practices violating
their laws. Clearly, there are opportunities -- indeed there is a necessity
-- for constructive cooperation between our committee investigators and those
authorities."
Soon after he agreed to chair the Independent Inquiry Committee, Chairman Volcker
identified the records kept in Iraq as well "the records of other investigations
that have and are taking place" as key sources of information for his investigation."
Additionally, when Chairman Volcker presented the panel's first status report
to Secretary-General Kofi Annan and members of the UN Security Council on August
9, 2004, Chairman Volcker said that his inquiry is cooperating with a major
investigation launched by Iraqi authorities so as to obtain the most accurate
information. Chairman Volcker also indicated that a spirit of cooperation characterizes
all investigations at this point, although not every avenue of cooperation has
yet been explored. As evidence of the IIC's commitment to cooperate with other
investigations into the matter, the Committee released copies of all UN internal
audits into OFFP to the public earlier this year.
Has the UN been cooperating with U.S. Congressional committees?
The UN is eager to get to the bottom of allegations of corruption surrounding
the Oil-for-Food Program. To emphasize this point, Secretary-General Kofi Annan’s
Chief of Staff, Mark Malloch Brown, met with Congressional representatives and
other officials in Washington on February 9, 2005 to discuss Oil-for-Food and
UN Reform. He said that the UN will be available to answer any questions that
remain after the Volcker Commission has finished its work.
Mr. Malloch Brown also discussed the UN's ongoing management and administrative
reforms in the areas of transparency, strengthening of audit practices, procurement
and whistleblower protection. After Mr. Malloch Brown’s visit, the UN
announced that the Oil-for-Food program’s chief auditor would be available
to provide briefings to congressmen, their colleagues, and investigative committees.