Tuesday, February 08, 2005

OIL and the US....

My apologies for no postings in the past 10 days --

work has overtaken me. I have a backlog of postings
to send out, but I'm only sending this one article now
to keep the blog/serve going.


1) This op-ed explains why much of the world yawned
when Volcker issued his report concerning UN
corruption during the oil for food program prior to


Fraud and corruption

Forget the UN. The US occupation regime helped itself
to $8.8 bn of mostly Iraqi money in just 14 months

George Monbiot
Tuesday February 8, 2005
The Guardian

The Republican senators who have devoted their careers
to mauling the United Nations are seldom accused of
shyness. But they went strangely quiet on Thursday.
Henry Hyde became Henry Jekyll. Norm Coleman's mustard
turned to honey. Convinced that the UN is a conspiracy
against the sovereignty of the United States, they had
been ready to launch the attack which would have
toppled the hated Kofi Annan and destroyed his
organisation. A report by Paul Volcker, the former
chairman of the US federal reserve, was meant to have
proved that, as a result of corruption within the UN's
oil-for-food programme, Saddam Hussein was able to
sustain his regime by diverting oil revenues into his
own hands. But Volcker came up with something else.
"The major source of external financial resources to
the Iraqi regime," he reported, "resulted from
sanctions violations outside the [oil-for-food]
programme's framework." These violations consisted of
"illicit sales" of oil by the Iraqi regime to Turkey
and Jordan. The members of the UN security council,
including the United States, knew about them but did
nothing. "United States law requires that assistance
programmes to countries in violation of UN sanctions
be ended unless continuation is determined to be in
the national interest. Such determinations were
provided by successive United States administrations."

The government of the US, in other words, though it
had been informed about a smuggling operation which
brought Saddam Hussein's regime some $4.6bn, decided
to let it continue. It did so because it deemed the
smuggling to be in its national interest, as it helped
friendly countries (Turkey and Jordan) evade the
sanctions on Iraq. The biggest source of illegal funds
to Saddam Hussein was approved not by officials of the
UN but by officials in the US. Strange to relate,
neither Mr Hyde nor Mr Coleman have yet been
bellyaching about it. But this isn't the half of it.

It is true that the UN's auditing should have been
better. Some of the oil-for-food money found its way
into Saddam Hussein's hands. One of its officials,
with the help of a British diplomat, helped to ensure
that a contract went to a British firm, rather than a
French one. The most serious case involves an official
called Benon Sevan, who is alleged to have channelled
Iraqi oil into a company he favoured, and who might
have received $160,000 in return. Kofi Annan, the UN
secretary general, has taken disciplinary action
against both men, and promised to strip them of
diplomatic immunity if they are charged. There could
scarcely be a starker contrast to the way the US has
handled the far graver allegations against its own

Four days before Volcker reported his findings about
Saddam Hussein, the US inspector general for Iraq
reconstruction published a report about the Coalition
Provisional Authority (CPA) - the US agency which
governed Iraq between April 2003 and June 2004. The
inspector general's job is to make sure that the money
the authority spent was properly accounted for. It
wasn't. In just 14 months, $8.8bn went absent without
leave. This is more than Mobutu Sese Seko managed to
steal in 32 years of looting Zaire. It is 55,000 times
as much as Mr Sevan is alleged to have been paid.

The authority, the inspector general found, was
"burdened by severe inefficiencies and poor
management". This is kind. Other investigations
suggest that it was also burdened by false accounting,
fraud and corruption.

Last week a British adviser to the Iraqi Governing
Council told the BBC's File on Four programme that
officials in the CPA were demanding bribes of up to
$300,000 in return for awarding contracts. Iraqi money
seized by US forces simply disappeared. Some $800m was
handed out to US commanders without being counted or
even weighed. A further $1.4bn was flown from Baghdad
to the Kurdish regional government in the town of
Irbil, and has not been seen since.

Contracts to US companies were awarded by the CPA
without any financial safeguards. They were issued
without competition, in the form of "cost-plus" deals.
This means that the companies were paid for the
expenses they incurred, plus a percentage of those
expenses in the form of profit. They had a powerful
incentive, in other words, to spend as much money as
possible. As a result, the authority appears to have
obtained appalling value for money. Auditors at the
Pentagon, for example, allege that, in the course of
just one contract, a subsidiary of Halliburton
overcharged it for imported fuel by $61m. This appears
to have been officially sanctioned. In November, the
New York Times obtained a letter from an officer in
the US Army Corps of Engineers insisting that she
would not "succumb to the political pressures from the
... US embassy to go against my integrity and pay a
higher price for fuel than necessary". She was
overruled by her superiors, who issued a memo
insisting that the prices the company was charging
were "fair and reasonable", and that it wouldn't be
asked to provide the figures required to justify them.

Other companies appear to have charged the authority
for work they never did, or to have paid
subcontractors to do it for them for a fraction of
what they were paid by the CPA. Yet, even when
confronted by cast-iron evidence of malfeasance, the
authority kept employing them. When the inspector
general recommended that the US army withhold payments
from companies which appear to have overcharged it, it
ignored him. No one has been charged or punished. The
US department of justice refuses to assist the
whistle-blowers who are taking these companies to

What makes all this so serious is that more than half
the money the CPA was giving away did not belong to
the US government but to the people of Iraq. Most of
it was generated by the coalition's sales of oil. If
you think the UN's oil-for-food programme was leaky,
take a look at the CPA's oil-for-reconstruction
scheme. Throughout the entire period of CPA rule,
there was no metering of the oil passing through
Iraq's pipelines, which means that there was no way of
telling how much of the country's wealth the authority
was extracting, or whether it was paying a fair price
for it. The CPA, according to the international
monitoring body charged with auditing it, was also
"unable to estimate the amount of petroleum ... that
was smuggled".

The authority was plainly breaching UN resolutions. As
Christian Aid points out, the CPA's distribution of
Iraq's money was supposed to have been subject to
international oversight from the beginning. But no
auditors were appointed until April 2004 - just two
months before the CPA's mandate ran out. Even then,
they had no power to hold it to account or even to ask
it to cooperate. But enough information leaked out to
suggest that $500m of Iraqi oil money might have been
"diverted" (a polite word for nicked) to help pay for
the military occupation.

I hope that Messrs Hyde and Coleman won't stop asking
whether Iraqi oil money has been properly spent. But
perhaps we shouldn't be surprised if their agreeable
silence persists.


This page is powered by Blogger. Isn't yours?