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Putting Oil-for-Food in Perspective

JURIST Guest Columnist R. Dobie Langenkamp, Director of the National Energy-Environment Law and Policy Institute at the University of Tulsa School of Law, says that for all the bad publicity surrounding the now-defunct UN Oil-for-Food program, the overall humanitarian effort was a success and the extent of any wrongdoing relatively minor...


Detractors of the UN have had a field day in the press with the Oil-for-Food program with allegations of kickbacks, payoffs, influence peddling, nepotism and a corrupted Director — a Frenchman no less.

The recently published Volcker Report on the program is impressive in its breadth, depth and balance. It is a guide to improvement. It is not, however, much of a stick with which to beat the United Nations and Kofi Annan. After several years of lurid headlines the record of malfeasance is, frankly, underwhelming, if put in the proper perspective.

Here are the facts. In the period from 1997 until the invasion in 2003, Iraq sold oil worth $64 billion pursuant to the program. In that period the combined total of Saddam’s schemes -- kickbacks, illegal surcharges, overcharges for supplies, and undercharges for oil -- was 2.8% of the oil sales, about $1.8 billion Thus 97.2% of the money collected went for its intended purpose.

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The level of corruption would have been less had the UN not made an egregious error at the inception. For 5 years from 1990 Saddam obstinately refused to let the UN help feed Iraq’s children with this program hoping that the misery would drive the UN into lifting the sanctions. In 1996 he reluctantly agreed to the outlines of the program and negotiations regarding its structure began. Iraq insisted on retaining the power to select, not only the purchasers of the oil, but the vendors of the humanitarian goods. After 50 meetings in the fall of 1995 and the spring of 1996 the UN gave in on these two crucial points thereby dooming any hope of complete transparency. Saddam now was free to attempt to use the purchasing power and the sales power to attempt to enrich his friends and himself and to play international politics. That this blunder did not result in even greater problems can be attributed to a reasonably diligent UN.

The UN found itself confronted by a regime which was unparalled in its secrecy and deception. This is a regime that concealed from the entire world the fact that it did NOT have weapons of mass destruction. This is a society in which corruption and mendacity are so deeply imbedded that no program of this sort could be reasonably expected to attain complete transparency.

What about Kofi Annan’s son, Kojo, and the corrupt Frenchman, Benon Sevan, we have read about? Is this not rottenness at the core? The report finds no evidence that Kojo’s employer, Cotecna, a Swiss firm, ever received any special access to the Secretary General or other important decision makers for having employed him. Benon Sevan, the French Director of the Program is a different case. Here we have alleged payments in the amount of $168,000 (vociferously denied by Sevan) in the form of oil allocations which could then be traded at a profit. Although no specific action taken by Sevan in breach of his duties was uncovered, he was by virtue of his position as Director in a position to do many favors for the Iraqi’s and their friends. Volcker concludes that he “compromised his position by secretly soliciting and financially benefiting from oil allocations…” This stands as the only evidence of UN staff “corruption” in a $64 billion program. This was not for lack of trying on the Iraq’s part. Early in the program millions of dollars were transmitted to middle men and fixers with the objective of corrupting Boutros-Boutros Ghali and others without success.

This sanguine analysis, however, admittedly omits a significant problem - $8.3 billion of smuggled oil. This is Iraqi oil that was sold in excess of permitted amounts to unauthorized buyers. It did not consist of funds diverted from sales for humanitarian purposes as did the kickbacks and surcharges. It was occurring years before the program began and continued after the program commenced. Approximately one-half of the “smuggled” oil went to Jordan pursuant to a long-standing trade protocol. The US and the UN knew of this trade and acquiesced in it. The oil sanctions imposed in 1990 “leaked” about 200,000 barrels a day from the beginning and continued to do so after the program commenced.

It is important to distinguish this “illicit income” from corruption and mismanagement. If the smuggled oil had been totally interdicted it would not have increased the amount available for humanitarian purposes, but it would have decreased the funds available to Saddam. General Franks comment that it was an “Oil for Palaces Program” is not accurate. Most of Saddam's illicit cash came from the smuggled oil.

At an earlier time I proposed the establishment of an Iraqi Peoples Trust that would take a portion Iraq’s oil proceeds and distribute them directly to the people, similar to what is done in Alaska. This idea was considered impracticable because of the likelihood of corruption and inefficiency. “Do we even have a roll of the citizens? What’s to prevent phony names and duplicate payments”? And so on. As has been said before “The perfect is the enemy of the good.” It is important that Volker’s excellent and needed investigation not lead to the wrong conclusions. In an era where the effectiveness of governmental action is measured against private action, this program should be evaluated in the context of the commercial world. Would any private international company deem a 2.8% cost for “middlemen’ or “commission brokers” or “after sales service charges” an unacceptable result? One estimate is that in selling arms to Saudi Arabia less than 50% of the funds actually go to acquire the weapons the rest going to middlemen, consultants and others.

There is a bottom line here and Volcker stated it well: “ [I]t is clear to the Committee that the Programme achieved considerable successes, notably in maintaining minimal standards of nutrition and health… the successes of the Programme...should not be buried by the allegations of corruption that have enjoyed so much attention in the media and elsewhere.”

Before the program was instituted it has been estimated that over 500,000 Iraqi children had died from malnutrition and disease. As a result of this effort tens, if not hundreds of thousands, of children and others were saved. The success of this program must not be overlooked because of the inherent difficulties in dealing with a corrupt regime and flamboyant headlines.


R. Dobie Langenkamp is Professor of Law and Director of the National Energy-Environment Law and Policy Institute at the University of Tulsa School of Law

November 02, 2005


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