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Feb. 25, 2004


A New Job for Kay
Let him investigate the U.N. Oil-for-Food scam.

When David Kay recovers from his weapons hunt, there's another Iraq-related quest I'd like to send him on. It's time a top intelligence team went scavenging for the real numbers on the United Nations' Oil-for-Food Program--that gigantic setup through which the U.N. from 1996 through 2003 supervised more than $100 billion worth of Saddam Hussein's selling of oil and buying of goods.

And, no, I am not talking about anything as exotic as the list of alleged bribe-takers from Saddam Hussein, published Jan. 25 by the Iraqi newspaper Al-Mada, and now under investigation. I speak simply about the U.N.-supplied numbers on Oil-for-Food's operations. Over the past 18 months, I have periodically tried to get these figures to add up. I am starting to believe the words of an unusually forthright U.N. spokesman, who at one point told me, "They won't."

Basic integrity in bookkeeping seems little enough to ask of the U.N., where officials defending Oil-for-Food have been insisting that it wasn't their fault if Saddam was corrupt. They just did the job of meticulously recording the deals now beset by graft allegations, approving the contracts, and making sure the necessary funds went in and out of the U.N.-held escrow accounts. I'm sure there was some sort of logic to it. Though I have begun to wonder if maybe the same way the U.N. has its own arrangements for postal services and tax-exempt salaries, U.N. accounting has its own special system of arithmetic.

It all added up fairly neatly, of course, in the summary offered by Secretary-General Kofi Annan, when the U.N. turned over the remnants of Oil-for-Food to the Coalition Provisional Authority in November. Oil-for-Food, said Mr. Annan, had presided over $65 billion worth of Saddam's oil sales and in buying relief supplies had used "some $46 billion of Iraqi export earnings on behalf of the Iraqi people." (Keep your eye on those numbers.) In doing so, the U.N. secretariat had collected a 2.2% commission on the oil, which, even after a portion was refunded for relief operations, netted out to more than $1 billion for U.N. administrative overhead. The U.N. also collected a 0.8% commission to pay for weapons inspections in Iraq--including when Saddam shut them out between 1998 and 2002--which comes to another $520 million or so.

The keen observer will see that this adds up to payouts of just under $48 billion from Saddam's Oil-for-Food proceeds, which is about $17 billion less than what he took in. The difference is explained--near enough--by the $17.5 billion paid out of the same Oil-for-Food stream of Saddam's oil revenues but dispensed, under another part of the U.N. Iraq program, by the U.N. Compensation Commission to victims of Saddam's 1990 invasion of Kuwait. That gives us a grand total of $65 billion earned, and about $65 billion allocated for payments, all very tidy.

Except the U.N. Compensation Commission states on its Web site that oil sales under Oil-for-Food totaled not Mr. Annan's $65 billion, but "more than US$70 billion"--a $5 billion discrepancy in U.N. figures. A phone call to the UNCC, based in Geneva, doesn't clear up much. A spokesman there says the oil total comes from the U.N. in New York, and adds, helpfully, "Maybe it was an approximate figure, just rounded up."

OK, but in some quarters, if not at the U.N., $5 billion here or there is big money. Halliburton has been pilloried, and rightly so, over questions involving less than 1% of such amounts. One turns for explanation to the U.N. headquarters in New York, where a spokesman confirms that though the U.N. program ended last November, the former executive director of Oil-for-Food, Benon Sevan, is still on contract, still drawing a salary, but Mr. Sevan's secretary explains he is "not giving interviews anymore." The spokesman, also still on salary, answers all requests for clarification with "I don't know," and "You have the Web site."

All right. The Web site brings us a U.N. update issued Nov. 21, 2003, when the U.N. turned over the program to the CPA, which tells us that $31 billion worth of supplies and equipment had been delivered to Iraq, with another $8.2 billion in the pipeline. That comes to $39.2 billion. Again, even if you add in, say, $2 billion for U.N. commissions, that's still about $5 billion short of the $46 billion Mr. Annan says was used for supplies--which might make sense if the program at the end had been swimming in loose cash, except that Mr. Sevan was lamenting toward the end that there was not enough money to fund all the supply contracts he'd already approved.

Returning to the U.N. Web site, nothing there discloses the amount of interest paid during the course of the program on the Oil-for-Food escrow accounts. That should have been substantial, because these U.N.-managed Iraq accounts in the final phases of the program held balances of about $12 billion. Or so we've been told. I first got that number by phoning the U.N. back in September 2002. That was well before Mr. Sevan stopped giving interviews, and I spoke with Mr. Sevan himself. He told me the Oil-for-Food accounts at that point contained balances of about $20 billion. The next day, someone in his office revised that down to about $15 billion. Later that afternoon, someone in the U.N. controller's office revised that down to $9 billion. When I protested that these discrepancies were getting large, we ended up haggling over the phone for a while, and finally settled on an official total of about $12 billion in the Oil-for-Food accounts.

I'm still not sure what to believe, however, given that the U.N. treasurer, Suzanne Bishopric, assured me at the same time, in September 2002, and again in early 2003, that the accounts had been diversified among "five or six" banks, and to date we have still heard mention of only one--a French bank, BNP Paribas. So, in some fit of arithmetic absent-mindedness, did Ms. Bishopric lose track of the number of banks, confusing one with five or six?

It's a little hard to know whether oil sales were actually $65 billion or $70 billion, whether there were five or six banks or just one, whether at least that one bank, BNP, ever paid significant interest on balances that toward the end of the program totaled $20 billion or $15 billion or $9 billion or $12 billion, and whether humanitarian import contracts were funded to the tune of $39.2 billion or $46 billion. Mr. Annan assures us the program has been audited many times, even if it was done in confidence, in-house, backed up by member nations that may have had their own interests to consider, such as one of Saddam's favorite trading partners, France.

If you want to get fancy, you can factor in the allegations that Saddam underbilled for oil and overpaid for goods via the U.N. contracts, in order to piggyback bribes and kickbacks atop the Oil-for-Food program. If true, then the two things we can bank on are that Saddam took in more than the U.N. reported, and the goods the Iraqi people received were worth less.

Which brings us back to Mr. Kay, who in reference to Oil-for-Food noted recently that "a lot of people took part in what was clearly a scam." I start to wonder whether Mr. Kay, given full powers to investigate, might return to report that whatever the U.N. may be reporting, we still don't have a clue about the real numbers.

Ms. Rosett is a fellow at the Foundation for the Defense of Democracies and the Hudson Institute. Her column appears here and in The Wall Street Journal Europe on alternate Wednesdays.

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