Established in 1995 by U.N. Security Council Resolution 986
Permitted sale of Iraqi petroleum whose proceeds were supposed to pay for food and medical supplies for the Iraqi people
Allowed Saddam Hussein to skim an estimated $21 billion, which he used to bribe foreign politicians to oppose American policy and fund terrorist organizations
$74 million of the Oil-for-Food money stolen by Saddam went directly to fund Hamas
The United Nations Oil-For-Food program was created in 1995 by UN Security Council Resolution 986 to "provide for the humanitarian needs of the Iraqi people" while Iraq was still subject to economic sanctions for having disobeyed Security Council resolutions requiring its disarmament. The program was set up to provide food containing 2,400 calories for every person in Iraq. Soon after the first phase of the 2003 Iraq War was over, it was discovered that the program -- and the UN officials who ran it -- had allowed Saddam Hussein to skim more than $21 billion from its coffers, money which he then used to bribe Russian, French and other foreign politicians to oppose American policy, all the while depriving his own people of the food and medicine they needed.
Some of the stolen money was also used to fund international terrorism. For example, $74 million went directly to Hamas. According to a June 2003 investigative report by the Forward, aliberal New York-based newspaper, revenue from the program may also have found its way to al-Qaeda. A 2004 Fox News report, drawing on the extensive database of the Oil-For-Food program, supports this conclusion.
Under the Oil-For-Food plan, the UN Security Council allowed "the import of petroleum and petroleum products originating in Iraq, including financial and other essential transactions directly relating thereto, sufficient to produce a sum not exceeding a total of one billion United States dollars every ninety days." The resolution required that every transaction with Saddam's government be "transparent." Iraq's oil exports and the buyers' oil imports were all to be supervised and documented by the UN for later audit. Payments were made into an escrow account established by UN Secretary General Kofi Annan.
The UN was supposed to earn a fee of 2.2 percent of all oil sales made through this program, but investigations by journalist Claudia Rossett of the Hudson Institute show that UN officials took -- and allowed Hussein to take -- much more. In sworn testimony before the House Subcommittee on National Security, Rossett said, "Had the United Nations deliberately set out to design a program open to manipulation by Saddam Hussein's regime, it is hard to think how the UN could have improved upon the arrangement that was put in place."
The biggest financial undertaking the UN has ever handled, the Oil-For-Food program had glaring flaws in its design that virtually invited graft. Saddam was given the right to negotiate his own contracts to sell Iraqi oil and to choose his own foreign customers. He was also allowed to draw up the shopping lists of humanitarian supplies he needed, and to strike his own deals for those goods, picking his foreign suppliers. The UN further granted Saddam the authority to choose the bank that would handle the funds and issue the letters of credit to pay the suppliers; the designated institution was a French bank now known as BNP Paribas.
In October 1997, Annan appointed Benon Sevan to run Oil-For-Food, which Sevan did for the duration of the program. Sevan reported directly to Annan. Every six months, Sevan would make his report, and Annan would recommend the continuation of the program to the Security Council. Only two of the five permanent Security Council members -- the U.S. and the U.K. -- made any attempt at overseeing the program. The other three -- China, France, and Russia -- were Saddam's allies on the Council and consistently advocated the expansion of the program.
On March 8, 2004, Michael Soussan, a former Oil-For-Food program coordinator for the UN, wrote in the Wall Street Journal: "Were the UN employees supposed to oppose Security Council resolutions, lobby for a lifting of sanctions and whitewash the regime? That is what a majority of our Baghdad staff did. No one took action to redress their behavior. The small minority who sought to hold the regime accountable were overruled, sidelined, and sometimes branded spies by our own leadership. Meanwhile, the Saddam regime had infiltrated our mission in Iraq. All of the 4,233 local staff hired by the UN were required to report to Iraqi intelligence services. At our Baghdad headquarters, UN mission leaders saw no problem with assigning Iraqi staff to man our switchboard, fax machines, and photocopy room. Our 151 international observers were under siege, spied on by their employees, and sometimes threatened by Iraqi officials when they tried to communicate information to New York that was embarrassing to the regime. All of this severely curtailed the UN's ability to do its job."
Not only was the Oil-For-Food program infiltrated by Iraqi intelligence, but the food and medical supplies the Iraqis bought with UN money were sold at inflated prices so that Saddam could pocket the margin. Moreover, the food and medicine was frequently unfit for use. "Take the medical sector," Soussan stated. "The regime's decision to use kickback-friendly front companies to purchase drugs meant that hospitals often received medicines that were nearly expired or otherwise damaged from unscrupulous suppliers."
In 1998, the now notorious Swiss inspections firm Cotecna was awarded a contract by Kofi Anann to monitor Oil-For-Food and vet the imports that flowed into Iraq under the program. The deal was a lucrative one for Cotecna, reportedly worth millions of dollars. Findings now indicate, however, that the company failed to fulfill its contractual obligations, which prompted interested observers to ask why the company had been awarded a contract in the first place. As it turned out, among Cotecna's more prominent employees was Kojo Annan, son of the UN Secretary General. In all, Cotecna paid Annan over $300,000.
Other disclosures about Oil-For-Food have corroborated critics' claims that the program was ineptly administered. In February 2005, the U.S. Government Accountability Office (GAO), having conducted a detailed audit of the United Nations, identified 702 defects within the program—nearly one third of those involving contract management and oversight issues. According to the GAO's findings, the UN's attention to bookkeeping had been grossly negligent: Only two to six auditors were assigned to oversee Oil-For-Food, in violation of the UN's own operating procedure, which mandated at least 12 auditors to monitor every $1 billion spent on programs. These findings dovetailed with prior evidence of mismanagement and abuse of the Oil-For-Food program, as revealed by several reports carried out by UN auditors between 1996 and 2003.
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