Oil-For-Food: Facts

Claudia Rosett

Claudia Rosett is a fellow at the Foundation for the Defense of Democracies and the Hudson Institute. She is a frequent critic of the United Nations on television and in the opinion pages of newspapers.

1. Appearing on Lou Dobbs on October 11, Ms. Rosett said: "We're talking about $11 billion, $10 billion to $11 billion estimated that was skimmed out."

In a column in the December 1 Wall Street Journal she wrote: "surprises have most recently (have) included at least $17 billion grafted out of a U.N. relief program for Iraq."

These statements are false. Rosett is wrong on her numbers and wrong on where the major responsibility for Hussein's illicit revenue lies.

Four separate sources have confirmed that illicit trade with Iraq 's neighbors and oil smuggling were responsible for far more of Hussein's illicit revenue than the Oil-for-Food Program (OFFP). Notably, revenue linked to OFFP comprises just a small percentage of the alleged $21 billion first cited by the Senate Subcommittee on Permanent Investigations chaired by Senator Norm Coleman (R-MN). This distinction is significant because all of these trade and smuggling activities were outside the purview of the UN, while the US , UK and other Security Council members were aware of many of these activities and did little to stop them. This is not just a dispute about numbers. Rosett is trying to place the full responsibility for Saddam's illicit revenue on the doorstep of the UN and its Secretary General Kofi Annan when, in fact, most of the money came through channels over which the UN had no oversight.

Of the $21 billion in illicit revenue reported by Sen. Coleman's Subcommittee on Permanent Investigations, only about $6.5 billion is attributable to potential abuses in the Oil-for-Food program. The largest share of the rest, $13.6 billion, was attributed to oil smuggling by subcommittee investigators (see chart).

Similarly, the Iraq Survey Group headed by Charles Duelfer reported that about three quarters or $8 billion of the nearly $11 billion in illicit revenue it discovered was attributable to trade agreement over which the UN did not have oversight. Their investigation attributed only $1.7 billion to the OFFP (see chart).

A third source, a Government Accountability Office (GAO) report, concluded Saddam Hussein likely embezzled $4.4 billion through pricing irregularities in connection with OFFP. However, GAO found the additional $5.7 billion was the result of illegal oil smuggling.

Finally, Paul Volcker said in a November 24 Charlie Rose interview: "Most of that 21 billion, most of that $10 billion, most of whatever the final number is was the smuggling, not the Oil-for-Food Program."

The responsibility for guarding against oil smuggling was clearly assigned to UN member states, and in the Gulf area, to the multinational Maritime Interception Force (MIF). Thus, it is wrong to charge or imply that the UN was responsible or "kept the details of this program secret," because the institution clearly did not have oversight responsibility for more than half of the illicit revenue Saddam is alleged to have acquired. In other words, once again, Ms. Rosett is wrong on her numbers and also wrong in laying the problem exclusively at the feet of the UN.

2. In the same October 11 Lou Dobbs interview, Rosett said the money was skimmed out of the OFFP "mostly because the United Nations kept all the details of this program secret."

This statement is incorrect. The UN tried on several occasions to raise concerns about problems with the way Hussein was using the Oil-for-Food Program.

In fact, UN oil overseers first alerted the Security Council's 661 Committee on November 17, 2000, that the oil pricing formulas proposed by Iraq for the month of December did not represent "fair market value" because the oil appeared to be considerably under-priced. In early March, 2001, the issue of oil surcharges was further reported by the Secretary General in his report to the Security Council. Also in March, the U.S. circulated information about both oil and humanitarian surcharges in the 661 Committee, and proposed measures to address the issue. Throughout 2001 and 2002, hundreds of contracts were queried by UN experts for potential over-pricing. At least 70 cases were reported to the 661 Committee and not a single case was placed on hold for pricing issues and most were ultimately approved. Though the U.S. and the UK held up 5,000 contracts over dual-use concerns, no contract that the OIP experts flagged for potential pricing irregularities was blocked by the 661 Committee.

3. In her Lou Dobbs interview Ms. Rosett said, "The [Volcker] investigation has been moving along at a rather slow pace from every side we've seen. Frankly, there has been nothing that would tell us where it stands, and I think there should be more transparency from them also."

Contrary to Ms. Rosett's claims, Paul Volcker has reported periodically to the public on the progress of his investigation.

• August 9, 2004. The Committee issued a three-month update report detailing the progress it has made on the inquiry.
• October 21, 2004. An update on the status of the inquiry.
• January 9, 2005. A briefing paper with observations on the UN internal audits of OFFP. All the audits were released by the IIC.
• February 3, 2005. An interim report detailing findings of the inquiry into the UN's procurement process and management of the program, including findings regarding allegations of wrongdoing by the UN officials in charge of the program.
• March 29, 2005. An interim report on the award of the humanitarian goods inspection contract to Cotecna Inspection S.A. focusing on any violation of established UN financial and procurement regulations, any conflict of interest on the part of the Secretary-General, and/or any improper intervention by persons other than the Secretary-General that might have taken place.

The IIC expects to complete its investigation by mid- to late-summer, 2005.

4. In a November 8 New York Sun op-ed, Rosett said: " This grand scam set the scene for war, and may be funding terrorists today" and adds "There are no more good times for the Iraqis and Coalition soldiers killed with weapons very likely bought with money grafted out of oil-for-food. There are no more good times for the Israelis murdered by Palestinian suicide bombers whose families got paid by Saddam under cover of oil-for-food."

She had previously made the assertion in the Journal Editorial Report program of November 19: "It went to buy weapons, which Saddam was doing. Conventional weapons, but those are killing people right now in Iraq very likely. It went to fund terrorists. We now know for sure the Palestinian suicide bombers, but there are many other troubling terror links in this U.N. program."

Appearing on Fox News on January 18, 2005, Rosset repeated the claim: "He used the money grafted out of this program " to buy conventional weapons, which are very likely some of the weapons now being used for murder in Iraq."

Rosett offers no credible evidence to back up her claim that money skimmed from the Oil-For-Food Program was used to fund terrorism, the Iraqi insurgency or any other terrible acts. Her claim is little more than her own opinion, apparently based on the reasoning that if it could have happened, it must have happened. The problem with unsubstantiated allegations like this is that they provoke anger, if not outrage, and tend to take on a life of their own even though they are not backed up by fact. Concerns such as these should be thoroughly investigated. But it is wrong to put forward such serious charges as fact when there is no credible evidence to support them.

5. In the aforementioned New York Sun op-ed Rosett also said: "And Mr. Annan was the man with the fat budget to oversee oil-for-food. During the life of the program, Mr. Annan's secretariat collected a 2.2% cut of all Saddam's oil sales, amounting to $1.4 billion to cover the U.N.'s own administrative costs in supervising relief under Saddam."

At OFFP's inception an account of 2.2% of oil sales under the program was set aside to cover the significant expenses associated with administering the largest humanitarian program in the UN's history. The IIC examined allegations that the account funds were misused. The IIC found that the "ESD 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 Programme."

The IIC added that "The budgets and actual expenditures were always significantly less than the amount of funds available, so much so, that $372 million, or twenty-seven percent of the total oil proceeds allocated to ESD and available for the United Nations to spend, was not used, but rather was transferred out of the account to be used directly for the benefit of the Iraqi people."

Moreover, Mr. Volcker remarked following the release of the report that, "I emphasize, we have not found systematic misuse of funds dedicated to the administration of the Oil-for-Food Programme. It was, in fact, careful budgeting, not all the funds budgeted were spent, and the accounting trail is adequate."

6. In the same Journal Editorial Report interview, Ms. Rosett said one of the ways the Hussein regime circumvented the Oil-For-Food Program was by smuggling "out billions worth of oil, which was all produced under what was supposed to be the supervision of this program."

The UN had neither the authority nor the resources to prevent smuggling. The task of policing oil smuggling fell to the Multinational Interception Force (MIF) - which was led by and predominantly made up of the Fifth Fleet of the U.S. Navy. The MIF was created following the imposition of sanctions in 1990 and was responsible for preventing smuggling from and into Iraq via the Gulf region.

7. Appearing on Fox News on January 16, 2005, Ms. Rosett, "This was a program in which the UN oversaw $111 billion worth of transactions that helped support and entrench and resurrect a dictator, Saddam Hussein."

This accounting of the Oil-for-Food Program (OFFP) is misleading. The $111 billion cited represents the sum of the total oil revenue through OFFP and the portion of that same revenue used to buy humanitarian goods. Though the receipt of income and the purchase of goods were separate transactions, Rosett gives a false impression of the size of the OFFP budget by conflating the figures. A total of $69.4 billion in income was generated through oil sales, interest and related activities under the OFFP.

8. In the same appearance on Fox News, Ms. Rosett said, "[Saddam] was on the ropes until this program came in" [The Duelfer Report found] that the Oil-for-Food program was precisely the vehicle through which Saddam was reconstituting his arsenal, his power.

The Oil-for-Food Program accomplished its humanitarian goals of preventing widespread hunger, reducing child mortality, and giving Iraqis access to electricity and clean water. At the same time, 0.8% of the program's funds went to UNMOVIC to finance weapons inspections, which were key to destroying weapons of mass destruction in the hands of the Iraqi regime and preventing it from developing new weapons programs. The success of this effort was confirmed last week, when the U.S. military terminated its search for weapons of mass destruction in Iraq.

Three independent investigations by the Senate Subcommittee on Permanent Investigations, the Iraq Survey Group (Duelfer Report) and the Government Accountability Office have found that the largest amount of illicit revenue accumulated by the Saddam Hussein regime during the twelve years of UN sanctions came from illegal oil smuggling with its neighbors, not from circumvention of OFFP. As was previously noted, he UN Office of the Iraq Program (OIP), which administered OFFP, had neither the authority nor the resources to prevent smuggling.