Oil for Palaces

Authored by Andrew Apostolou

Almost a year after the fall of Baghdad, everybody knows that Saddam Hussein stole billions from the Iraqi people. What is now emerging is that the United Nations was his partner in crime – aiding and abetting him during the eight-year Oil-for-Food program.

Initially an attempt to alleviate the hardship of U.N. sanctions on Iraqis, Oil-for-Food raises troubling questions not only about the United Nations' competence, but its role in propping up Saddam's tyrannical regime.

The program was theoretically designed to take Iraq's oil revenues out of Saddam's hands and use them for the benefit of the Iraqi people. The United Nations was to supervise the sale of Iraqi oil and then ensure that the oil money went for food and medicine, not tanks and mustard gas.

But Saddam – with U.N. compliance, if not connivance – subverted all of those aims. His grip on Iraq was tightened, not loosened, while his monstrous sons rolled in U.N.-provided riches.

Uday, the older son, even got U.N. funds for his Iraqi National Olympic Committee. U.N. Secretary-General Kofi Annan agreed on June 13, 2002 to hand over $20 million to build an Iraqi Olympic arena, part of Uday's absurd bid for the 2012 Olympics. A renowned rapist, Uday used to torture Iraqi athletes if they failed to win international competitions.

His father? Saddam built new palaces throughout the eight years of the program. Gen. Tommy Franks got it right when he reached Baghdad in April 2003: The Iraqi dictator's rule was an “Oil for Palace” program.

Although the United Nations supposedly kept an eye on the price at which Saddam sold Iraqi oil, in reality the Iraqi strongman set the prices and forced his customers to pay him kickbacks. The Iraqi regime then used this money to bribe and buy influence abroad.
 
One recipient of that largesse was Shakir al-Khafaji, a Detroit businessman who stumped up $400,000 for former U.N. arms inspector Scott Ritter to make “In Shifting Sands,” an anti-sanctions film. Meanwhile, back in Iraq, Saddam's secret police punished hundreds of thousands of Shi'a Iraqis by taking away their U.N. ration cards, forcing them into the very poverty from which the U.N. program was supposed to protect them.

Another group of Iraqis that never received their fair share of oil revenues, thanks to U.N. collaboration, was the Kurds. The oil revenues were supposed to be divided up in such a way as to protect Iraq's Kurds, whose regions Saddam had devastated with a genocidal campaign of village destruction and executions in the late '80s. Oil-for-Food theoretically guaranteed the Kurds their fair share of Iraq's national wealth – 13 percent of all Iraqi oil revenues – for the first time in their history.

Difficulties arose almost from the first day because of the way that Annan organized the program. Rejecting advice from experienced U.N. staff, he decided against having one U.N. agency oversee the whole scheme. Instead, Annan created an Oil-for-Food program office in New York to oversee the work of nine U.N. agencies which in turn dealt with the Iraqis, introducing a pointless and costly layer of bureaucracy.

Many of these U.N. agencies used their Middle East offices to implement Oil-for-Food. Staffed mostly with Sunni Arabs, they proved sympathetic to Saddam's Arab nationalism and uninterested in the welfare of Iraqis – especially Iraqi Kurds.

The Iraqi government was quick to exploit this bias for its own political ends. The Cairo office of the U.N.'s World Health Organization managed to stall the building of a new general hospital for the Kurdish city of Sulaimani, even though the funds were available in 1998.

Over the life of Oil-for-Food, the Kurds barely got half of the $8.4 billion allocated to them – they are still owed some $4 billion. Who owes it to them? Well, the United Nations was supposed to pay them, out of accounts entrusted to it. But the status of any funds remaining in those accounts is in dispute – and the U.N. is balking at efforts to clarify things. It won't even let anyone else examine its books.

Saddam didn't just use Oil-for-Food to give preferential treatment to Iraqis: He rewarded foreign friends, too. He favored Russian and French contractors, even insisting that all Iraqi oil earnings be paid into just one bank, BNP Paribas in Paris.

One of the largest shareholders in the bank as of 2000 was Nadhmi Auchi, an Iraqi Sunni who was involved in Saddam's 1959 assassination attempt on Iraq's then head of state, Brig. Gen. Abdul Karim Qassem.

Auchi was the sort of business partner that Saddam liked. Auchi was convicted in a French court in November 2003 of accepting illegal payments in a major corruption scandal at a French state-owned oil company. (He got a 15-month suspended prison sentence and a $2.4 million fine.)

After Saddam and his cronies, the main beneficiary of Oil-for-Food was the U.N. payroll. To make the program self-financing, the United Nations took its cut off the top – 2.2 percent of Iraqi oil sales for its administrative costs, plus 0.8 percent to pay for weapons inspections (in four of Oil-for-Food's eight years), allowing the United Nations to walk away with $1.9 billion of Iraqi oil money. U.N. staff employed by the Oil-for-Food program ballooned to 3,000, the largest single U.N. program in the world.

No wonder that when Kofi Annan met Saddam Hussein in February 1998, he said that the Iraqi dictator was a man that “I can do business with.”

Andrew Apostolou is director of research at the Foundation for the Defense of Democracies. He has just returned from Iraq.