More from the Wall Street Journal’s European Editorial Page Editor:
Saddam’s Global Payroll
By THERESE RAPHAEL
On Dec. 5, during a trip to Baghdad, Claude Hankes-Drielsma faxed an urgent letter to U.N. Secretary-General Kofi Annan. Mr. Hankes-Drielsma, the U.K. Chairman of Roland Berger Strategy Consultants, had recently been appointed to advise the Iraqi Governing Council. What he saw in Baghdad left him shocked. “As a result of my findings here, combined with earlier information,” he wrote, “I most strongly urge the U.N. to consider appointing an independent commission to review and investigate the ‘Oil for Food Programme.’ Failure to do so might bring into question the U.N.'s credibility and the public’s perception of it. . . . My belief is that serious transgressions have taken place and may still be taking place.”
Just how serious these transgressions were became clear late last month, when the Iraqi daily Al Mada published a partial list of names, compiled by Iraq’s oil ministry, of those whom Saddam Hussein rewarded with allocations of Iraqi oil. Mr. Hankes-Drielsma, who says he was among the first to see the list in early December, says it is based on numerous contracts and other detailed documents and was compiled at the request of the Iraqi Governing Council.
The list, a copy of which has been seen by the Journal’s editorial page, is in spreadsheet format and details (in Arabic) individuals, companies and organizations, grouped by country, who oil ministry and Governing Council officials believe received vouchers from the Iraqi regime for the purchase of oil under the oil-for-food program. Mr. Hankes-Drielsma said the recipients would have been given allocations at below-market prices and then been able to pocket the difference when a middleman sold the oil on to a refinery; 13 time periods are designated and with indications of how much crude, in millions of barrels, each recipient allegedly received.
The list reads like an official registry of Friends of Saddam across some 50 countries. It’s clear where his best, best friends were. There are 11 entries under France (totaling 150.8 million barrels of crude), 14 names under Syria (totaling 116.9 million barrels) and four pages detailing Russian recipients, with voucher allocations of over one billion barrels. Many of the names, transliterated phonetically from Arabic, are not well-known or are difficult to identify from the information given. Others stand out. There’s George Galloway, the Saddam-supporting British MP recently expelled from the Labour Party, who has always denied receiving any form of payment from Saddam. Other notables include Indonesian President Megawati Sukarnoputri (also listed separately as the “daughter of President Sukarno”), the PLO, the Popular Front for the Liberation of Palestine, the Russian Orthodox Church, the “director of the Russian President’s office” and former French Interior Minister Charles Pasqua. Some – including Mr. Pasqua, the Russian Church and Ms. Megawati – have denied receiving anything from Saddam. Patrick Maugein, a close friend of Jacques Chirac and head of Soco International oil company, says his dealings were all within “the framework of the oil-for-food program and there was nothing illegal about it.”
The list’s breadth, and the difficulty in reading and interpreting it, has slowed its exposure. There’s also the question of authentication. Mr. Hankes-Drielsma (who is not an Arabic speaker) is convinced it is authentic and will be followed by more detailed evidence as the Iraqi oil ministry and Governing Council conduct further investigations. “I’ve seen the documents that have satisfied me beyond any doubt that we’re dealing with a genuine situation,” he told me.
One of the most eye-catching names on the list is easy to miss as it’s the sole entry under a country one would not normally associate with Iraq – Panama. The entry says: “Mr. Sevan.” That’s the same name as that of the U.N. Assistant Secretary-General Benon V. Sevan, a Cyprus-born, New York-educated career U.N. officer who was tapped by Kofi Annan in October 1997 to run the oil-for-food program.
When I tried Mr. Sevan for comment, a U.N. spokesman wouldn’t put me through to him directly but offered to pass on emailed questions. In an email reply to questions about Mr. Sevan’s apparent inclusion on the list and interest in the Panama-based business that allegedly received the discounted oil, the spokesman quoted Kofi Annan’s statement Friday: “As far as I know, nobody in the Secretariat has committed any wrongdoing. If there is evidence, we would investigate it very seriously, and I want those who are making the charges to give the material they have to me so that we can follow up to determine if there has been any wrongdoing and I would take necessary action. So far statements are being made but we need to get facts.” The pro forma U.N. response certainly seems inadequate. Mr. Sevan should take the opportunity to defend himself against the inference that the presence of his name on this list could help explain how Saddam was able to get by with so much influence-buying around the world with little apparent objection from the U.N.
In the seven years that Oil-for-Food was operational, (it was shut down in November and its obligations are being wound up) Saddam was able to skim off funds for his personal use, while at the same time doing favors for those who supported the lifting of sanctions, supplied him with his vast arsenal of weapons, and opposed military action in Iraq. Indeed, it was clear from the outset that Saddam would be able to use the program to benefit his friends. The 1995 U.N. resolution setting out the program – Resolution 986 – bends over backwards to reassure Iraq that Oil-for-Food would not “infringe the sovereignty or territorial integrity” of Iraq. And to that end it gave Saddam power to decide on trading partners. “A contract for the purchase of petroleum and petroleum products will only be considered for approval if it has been endorsed by the Government of Iraq,” states the program’s procedures. Predictably, Saddam exploited the program for influence-buying and kickbacks, and filled his coffers by smuggling oil through Syria and elsewhere. With Oil-for-Food and smuggling, he was able to sustain his domestic power base and maintain a lavish lifestyle for his inner circle.
The system was ripe for abuse, in part because a divided Security Council gave Saddam far too much flexibility within the program. Oil-for-Food not only gave Iraq the power to decide with whom to deal, but also freedom to determine the official price of Iraqi oil, revenues from which went legally into the U.N.'s Oil-for-Food account. U.N. rules did not allow it to order Iraq to deal directly with end-users and bypass all those lucky middlemen who got deals from Saddam. Nor was the U.N. allowed to view contracts other than those between the oil ministry and the first purchaser, so it had no way of verifying that surcharges were being imposed by the middlemen on end-users. That enabled him to add surcharges to finance his own schemes while still making the final price competitive.
U.N. rules were ostensibly devised to prevent pricing abuses, but in one of the many indications of administrative failure, those safeguards appear not to have been enforced. In response, the U.S. and Britain tried often from 2001 to impose stricter financial standards, but Russia blocked changes. Then the U.S. and Britain instituted a system of retroactive pricing – delaying approval of the Iraqi selling price so that they could take account of the market price when giving their approval. This too met with grumbling from Friends of Saddam and while it reduced oil exports, it didn’t end the corruption.
Throughout most of the program’s life, Mr. Sevan’s office seemed to see no evil. When overwhelming evidence finally surfaced that Oil-for-Food had become a gravy-train for the Iraqi regime, U.N. officials acknowledged some of the abuses but refused any of the blame. Criticism is routinely portrayed as politically motivated. “The [program] has existed in a highly politicized environment from day one,” explains the U.N. Web site. “The scale of these operations has also made it a rather large target.” Its last line of defense was to punt to the Security Council, whose sanctions committee (authorized by the 1990 sanctions resolution and composed of Council members) was meant to oversee the program, receive reports and review audits.
The record of systemic abuse of the program lends credence to claims that the oil ministry list is genuine and should be investigated. The Iraqi Governing Council says it’s considering legal action against anyone found to have profited illegally from Oil-for-Food. The U.S. Treasury’s Bureau of Immigration and Customs Enforcement is investigating possible violations of U.S. law. But the U.N. has resisted calls for an independent investigation into abuses. Says Mr. Hankes-Drielsma: “I would urge the U.N. to take the high moral ground and instigate a truly independent investigation.”
To this end, he wrote a second letter to the U.N. secretariat on Feb. 1, this time addressed to Hans Correll, Under Secretary for Legal Affairs and Legal Counsel of the U.N., with a copy to British Foreign Secretary Jack Straw. He catalogs questions on areas “which need urgent investigation,” e.g. “Why did the U.N. approve oil contracts to non-end users?” His letter alleges that “not less than 10% was added to the value of all invoices to provide cash to Saddam . . . why was this not identified and prevented?” The letter also asks “What controls were in place to monitor BNP [the French bank] who handled the bulk of the LCs, the total value of which may have [been] in the region of $47 billion?”
In a June 2000 statement on Oil-for-Food, Mr. Sevan said, “As [Mr. Annan] put it recently, we, as international civil servants, take our marching orders from the Security Council.” It might have been more accurate to acknowledge the U.N. took its marching orders from Saddam.
Ms. Raphael is editorial page editor of The Wall Street Journal Europe.
Updated February 9, 2004