Oil for Fraud

Wednesday, November 2, 2005

SO WIDE-RANGING, and so comprehensive, is the Volcker commission's final report on the U.N. oil-for-food program in Iraq that -- paradoxically -- there is a danger that its significance will be ignored: If thousands of companies are implicated in bribery and currying favor, then the sense that "everybody was doing it" might drown out the role of particular individuals and companies, and the consequences for the United Nations. At the same time, by focusing on oil-for-food corruption, the report necessarily ignores the fact that much of the sanctions-busting took place outside the U.N. program and was tolerated by the United States and its allies.

What the report does best is make clear that, from the Iraqi government's point of view, the purposes of the oil-for-food program were twofold: to collect money -- some $1.8 billion -- for Saddam Hussein's regime and to reward regime supporters. The report, presented by former Federal Reserve chairman Paul A. Volcker, names for the record several American-run oil companies that it says were apparently involved in the former activity, among them Bayoil, Taurus and Coastal Corp. Oscar S. Wyatt Jr., the former chairman of Coastal, was indicted last month for paying bribes to the Iraqi government. Marc Rich, the oil trader pardoned by President Bill Clinton in 2000, is described as a middleman, as is Ben Pollner, the chief executive of Taurus.

But most of those allegedly receiving rewards were not Americans. The preponderance of lucrative contracts went to French and Russian companies, on the grounds that their governments opposed the sanctions regime and favored Iraq in the U.N. Security Council. Individuals who campaigned on behalf of Saddam Hussein in the West are also said to have been rewarded. Prominent among them is George Galloway, the British politician who has made a career out of support for Baathist dictatorship, anti-Americanism and opposition to the war in Iraq. The Senate subcommittee on investigations, which Mr. Galloway treated with mocking disdain earlier this year, separately prepared a report on the British parliamentarian, alleging that both his personal "charity" and his wife apparently received payments from a Jordanian middleman doing business in Iraq on Mr. Galloway's behalf. Among the other pro-Saddam Hussein, anti-sanctions campaigners who allegedly received allocations of oil were a Syrian journalist, a French priest, the Russian communist party and a U.N. official who resigned his post to "protest" the sanctions regime. Despite the pile of documentary evidence, most of the accused deny the charges; the Russian government has dismissed the report, alleging it to be based on false documents. Because the United Nations itself is not able to prosecute or sanction them, their assertions of innocence may not be tested.

The conclusion of this exercise has to be that the United Nations should not, in the future, be allowed to run anything involving large financial transactions without better checks to prevent corruption; the oil-for-food program was badly designed from the start, with unclear lines of responsibility between the United States and other members of the Security Council on the one hand and U.N. officials on the other. The United Nations' recent management of its $1 billion tsunami relief appeal, with the help of the auditing firm PriceWaterhouseCoopers, shows that the organization is capable of doing better.

But the Volcker report also underlines the urgency of reforms to strengthen the competence of the U.N. secretariat, particularly of its internal overseers. U.N. Secretary General Kofi Annan has secured agreement in principle from the member states to get this done, but the reforms are being held up by countries that regard management renewal as a sinister plot devised by the supposedly unilateralist Bush administration. These obstructionists have their argument backward. Not reforming the United Nations is the best way to ensure that American policy will bypass it.


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