Like Enron, Iraq’s former food-for-oil program was a scandal of massive proportions and minimal information. In this case, it was oil revenues rather than stock profits that fell into the hands of money-hungry leaders.
To understand the food-for-oil scandal, it is important to understand the events that led to Saddam Hussein lining his own pockets with oil profits intended for humanitarian supplies for the citizens of Iraq. The original need for such aid arose thanks to sanctions imposed by the United Nations.
After Iraq invaded Kuwait in 1990, the U.N. security council sanctioned Saddam and other Iraqi leaders in an effort to end regional carnage. Iraq was prohibited from importing any goods not expressly approved by the United Nations, and foreign companies were not allowed to do business with Iraq except in particular instances.
The idea behind the sanctions was that if Saddam had limited access to financial and trading opportunities from oil, he would not have the resources to continue Kurdish attacks, build an arsenal of potentially nuclear weapons, or support other countries vying for similarly dangerous projects.
However, as made clear by journalist and international editor Lindsey Hilsum in a 1996 News Hour interview, the Iraqi sanctions came under scrutiny less than five years after their inception: “Sanctions have hit Iraq hard. Children – now suffer third world diseases, and although medical supplies are exempted from sanctions, the Iraqis haven’t had the money to buy them.”
The sanctions had been effective; the problem was that when Saddam didn’t have enough money to both feed his nation and fund personal interests, he chose personal interests.
In order to make amends to all those injured by the sanctions, the United Nations came up with a reparative plan to once again help Iraq: the 1997 food-for-oil program. In the same interview as quoted above, Hilsum explained that food-for-oil would allow Hussein to “retain his country’s sovereignty,” while permitting U.N. officials to closely monitor Saddam’s oil profits in order to ensure proper use of the money.
Oil contracts would be negotiated through an Iraqi oil organization, and profits for Iraq would come in the form of letters of credit, to be distributed into an international bank. The United Nations would then use that Iraqi bank account to personally send food and medicine to northern Iraq (the Kurdish region, long oppressed under Hussein’s rule), while carefully monitoring the distribution of similar resources across the country.
On Oct. 27, 2005, an independent inquiry committee reported exactly how Saddam and his cronies managed to manipulate the food-for-oil program in order to make money for themselves while turning a blind eye to the still-suffering people of Iraq.
Saddam made money by imposing oil surcharges of about 30 cents per barrel. The surcharges eventually amounted to as much as $228 million in oil profits that never made it into a U.N. account. Hussein also imposed kickbacks, which forced oil buyers to pay Iraq more than a single, up-front sum. Again, the money made from kickbacks never reached the United Nations or humanitarian interests. More than 2,000 international companies agreed to the illegal surcharges and kickbacks in order to gain access to lucrative oil contracts with Iraq, and U.S. businesses were no exception. Saddam even used oil contracts as a bargaining chip to gain political support within the U.N. Security Council.
In the end, Saddam Hussein managed to generate $1.8 billion in personal revenue from the food-for-oil program, a fact that inexplicably escaped United Nations oversight. Food-for-oil audits never uncovered the reality of Saddam’s personal gains and former program head Benon Sevan was later found to have assisted a friend’s company in contracting with Iraq.
Not until the 2003 U.S. invasion of Iraq did the food-for-oil program come to a halt. U.N. sanctions had put 1.5 million Iraqi children under the age of five at risk for starvation and sickness, and the U.N. food-for-oil program allowed a known warmonger access to immense profits at the expense of an anguishing nation.
Although the United Nations was created to promote global harmony, Iraqi sanctions and the food-for-oil program reveal that U.N. leaders still value monetary interests above humanitarian ones. If the United Nations continually fails to do its job of carefully monitoring and analyzing the effectiveness of policies, reform will certainly be necessary. Some, such as those at the helm of the food-for-oil inquiry committee, might say that the time for a widescale reform of the United Nations is already here.
Food-for-oil proves U.N. needs a remodel
Daily Emerald
February 19, 2006
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