Global Policy Forum

Chronology of the UN Financial Situation:



Winter-Spring, 1995: The UN regular budget gets off to a good start with major contributions in the early months, but soon begins to slip as many countries fail to make assessment payments. The United States, in spite of substantial arrears from 1994, pays only token sums in these early months, including just $37 million to the regular budget. Peacekeeping assessments also pile up. By June 30, the UN has a total of $2.7 billion in outstanding assessments and the US has jumped into first place with an outstanding debt of $1.2 billion (vs. $559 million for Russia). The regular budget is quickly running out of cash.

Winter, 1995: The US Congress cuts funds to UNIDO, a Vienna-based UN specialized agency that promotes industrial development in poor countries. The former US contribution of about $25 million had been approximately a quarter of the agency budget. The US contribution for 1995 is slashed to $8 million, amid rumors that the US will withdraw completely from the organization in 1996. Reports from Washington suggest that the US may also withdraw from other UN agencies and funds -- possibly the International Labour Organization (ILO) and the Food & Agriculture Organization (FAO). Earlier plans by the Clinton administration to re-join UNESCO are quietly scrapped.

Spring, 1995: The Council on Foreign Relations announces cancellation of an advertised book entitled An Agenda for Funds, devoted to financing the UN. The three authors, including Enid Schoettle, a top US intelligence official responsible for "Global and Multilateral Issues," were to have addressed "especially the thorny issue of targeted withholding by the United States to achieve UN reform." In response to questions, the Council offers no explanation of the cancellation, though some observers speculate that shifting strategies of the Clinton administration may have led to scuttling the book. In May, Douglas Bennett, Asst. Secretary of State for International Organizations, leaves the administration to become president of Wesleyan University and his post was not filled. Bennett is widely reported to be disillusioned with Clinton administration policy.

May 19, 1995: United Nations Development Programme Administrator James Gustave Speth writes an article for the International Herald Tribune calling on the rich countries of the OECD to stop cutting their multilateral development assistance. Criticizing the view that open markets and private investment will take care of global development problems, he points to the doubling of the gap between the riches and the poorest in the past thirty years. He goes on to say that "as we approach the turn of the century, the economic, environmental and political crises that many developing countries confront have taken on an urgency and a magnitude unparalleled in history. The list of countries in or near crisis is growing, spreading like a metastasized cancer."

June 22, 1995: The Secretary General, speaking to the GA Working Group on the Financial Situation, says: "It is my duty . . . to tell you that the financial crisis is deepening." He goes on to say that "The prospects for the coming months are quite bleak." He announces that payments due to troop-contributing countries will be halted, so that the organization can conserve cash for its regular operations. (UN officials point out that this step endangers troop-contributing countries' future participation in peacekeeping missions. It also reduces the likelihood that poor countries can afford to pay their regular contribution to the Organization, since government budgets run out of cash when the peacekeeping reimbursements do not come through.) The SG reminds the Group of various previous proposals and he says: "We must find some combination of measures that can improve this deplorable situation."

July 3, 1995: Senator Nancy Kassebaum (Republican) and Representative Lee Hamilton (Democrat) -- leading members of the US Congress who claim to be "friends of the UN" --publish a joint article in the Washington Post National Weekly Edition (p. 28) calling for "bold reform" of the UN which would radically reorganize and downsize the organization. They also sharply criticize UN world conferences.

August, 1995: In a letter to all governments, US Secretary of State Warren Christopher proposes a radical restructuring and downsizing of the United Nations. A ten-page document accompanying Christopher's letter spells out some of the US proposals, which include elimination of major UN programs and the merger of others, leading to a substantially smaller organization.

Mid-August, 1995: The UN regular budget runs out of cash, including $250 in two reserve funds. At this point, the UN begins borrowing from the peacekeeping fund. [USG Connor to Fifth Committee, 12 Sept, 1995]

August 31, 1995: By the end of August, the UN has $3.8 billion in outstanding assessments, a record, of which $2.9 billion for peacekeeping and $851.3 million for the regular budget. [Office of SG Spokesman, 14 September, 1995]. The US arrears have now ballooned to $1.8 billion. The ongoing budget impasse in Washington puts US fall payments to the UN increasingly in doubt.

September, 1995: The EU issues a presidential statement on the impending US reduction of its peacekeeping assessments from 31% to 25%, saying that "The EU considers that unilateral decisions adopted by any member state contradicting the fulfillment of its financial obligations with regard to the Organization are not acceptable."

September 11, 1995: SG Boutros-Ghali, in his annual report to the General Assembly, warns that the UN's finances are badly deteriorating and that development funds are drying up, saying that if the trends are not addressed "they can irreparably damage the United Nations as a mechanism for progress." He says that "Calls for ever greater United Nations effectiveness under conditions of financial penury make no sense."

September 12, 1995: USG Connor, in a speech to the Fifth Committee on September 12th, speaks of the "deplorable situation" of UN finances. "I know many of you are wondering what is so different from previous years, when we have always managed to scrape through," he says, going on to emphasize that "This year the situation is different, because the amounts involved are unprecedented," leading to a situation which is "particularly bleak." Connor points out that member states have approved UN budgets and activities for which they are refusing to pay. -- On the same day, the US Senate Appropriations Committee approves sharp cuts in the US budget to fund the UN (as part of deep cuts to the budgets of the State Department and other agencies). Secretary of State Warren Christopher warns that the appropriations level would cause the US to violate its obligations to the UN. Wendy Sherman, Asst. Secretary of State for Legislative Affairs says the cuts will embarrass the US around the world. "This will mean not only that we're the largest deadbeat donor, but we will owe $2 billion by the end of the year," she said [NY Times, September 13]

September 15, 1995 USG Connor announces immediate steps to conserve cash, spelled out in a four-page memo addressed to "all heads of departments and offices." The announced steps include a freeze on recruitment at all levels, severe limits on overtime and staff travel, deferral of allowances, suspension of new consultancies, non-renewal of all short-term professional appointments, a ban on office construction and on purchases of new furniture and equipment, a delay in payments to vendors, and monthly instead of semi-monthly payment of professional salaries. Connor announces that if the financial situation deteriorates further, the number of UN meetings will have to be reduced.

September 22, 1995: US representative Madeleine Albright gives a speech at the Foreign Press Center in which she calls for a "full overhaul" of the UN, if it is "to avoid the fate of the League of Nations," noting especially a need "to bring UN budgets under control" and eliminate waste in the Secretariat.

September 26, 1995: According to a New York Times report, USG Joseph Connor says that he is exploring a number of ideas, including a loan from the World Bank, to "lift from our shoulders the burden of debt." But U.S. diplomats say the Clinton administration will oppose the plan. [NY Times, September 28]. -- On the same day, Malcolm Rifkind, UK Foreign Secretary, speaking at the opening session of the UN General Assembly says (after remarks about UN reform): "But the UN system will never work if we do not fund it properly. The UN is on the verge of financial collapse." "Empty words will not pay bills," he continues, warning that the UK found "unacceptable" the borrowing from peacekeeping funds to pay for regular budget spending. Continuing, and with a sharp reference to the large US arrears, he goes on to propose: "Perhaps an appropriate policy could best be entitled: `no representation without taxation'!" [Full text]
-- On the same day, Earth Times newspaper headlines "Cutbacks Ordered at Secretariat."

September 27, 1995: Klaus Kinkel, German Foreign Minister, addressing the General Assembly, speaks of the "dramatic proportions" of the financial crisis, chastises "the arrears of wealthier members," and warns that "unless decisive action is taken very soon, whole areas of activity could grind to a halt." [German Mission press release]

September 28, 1995: Earth Times newspaper publishes an article headlined "Cutbacks Ordered at Secretariat" which reveals the contents of the four-page memorandum addressed to heads of departments and offices by Joseph Connor, Under Secretary General for Administration and Management that imposes harsh new conditions on all UN operations. According to the paper, Connor warned that "if our cash receipts fall below present expectation, more drastic measures will be proposed later this year."

Late September, 1995: Indonesian Foreign Minister Ali Alatas, speaking to the General Assembly, charges that the UN's economic and social policy work was increasingly being passed to the World Bank, the International Monetary Fund, the World Trade Organization and the G-7. "It even seems that the United Nations itself is being marginalized, since the decision-making on international economic and financial issues continues to shift to the Bretton Woods institutions, where participation of the developing countries is less equitable," he says.

Late September, 1995: The New York City Commission for the United Nations and the Consular Corps issues a report on the financial benefits of the UN to the New York City economy. According to the report, the direct annual spending of the United Nations, the specialized agencies and funds and diplomatic missions to the UN in New York City amounts to about $1.5 billion per year. With an economic multiplier effect, the total economic activity generated in the city amounts to an estimated $3.3 billion annually. This is considerably more than the United States government pays for its total UN assessments.

September 30, 1995: Outstanding UN assessments for all countries stand at $3.3 billion, down slightly from August's $3.7 billion, but again at a record level for the month.

October 1, 1995: As of this date, in accord with legislation passed by the Congress, the United States government claims it will pay henceforth a peacekeeping assessment of 25%, rather than approximately 31% as assessed by the UN. Various member states, including the European Union, reject this unilateral action and ask for a ruling by the UN Counsel's office as to the legality of the US stance.

October 3, 1995: Justice Richard Goldstone, Chief Prosecutor of the International Tribunal established to prosecute genocide and war crimes in Rwanda and former Yugoslavia announces that the work of both bodies is being seriously impaired by UN spending restrictions, due to the organization's financial crisis. "The criminal justice system cannot conduct itself if resources are turned on and off," Goldstone says.

October 4, 1995: Justice Richard Goldstone, chief prosecutor of the international human rights tribunals in the Hague is reported by the New York Times to have said that work of the two bodies is being "seriously impaired" by emergency UN budget measures. On the same day, the Secretary General speaks to the General Assembly Fifth (Budget) Committee, pointing out the substantial new mandates that the UN has to cover within its budget, in fields such as human rights, women's rights, and humanitarian relief, as well as the cost of new oversight services. He also points out the anomaly that the money owed by the UN to troop contributing countries includes debts to poor countries getting UN assistance. [Though the SG doesn't say so directly, it is clear that the UN is borrowing from some of its poorest members to cover non-payment by its richest member.] Speaking of the general financial crisis, the SG says that "This situation increasingly renders the efficient management of this Organization an impossible task. The very viability of the Organization may now be at risk."

October 10, 1995: A New York Times story reports that the Clinton Administration is tying UN payments to "reform" of the organization, in what some see as a bipartisan approach in Washington and many elsewhere in the world call "economic blackmail." UGG Connor reports that the US has just paid its last "installment" of funds authorized "a year ago" and the Times reports that an Administration official says: "we're determined to combine reform and financial issues and not pretend there is no linkage." UNDP head James Gustave Speth, a US appointee, is quoted in the New York Times as saying "The whole reform effort has become associated in the minds of many countries here with severe financial cuts in all UN budgets. Many governments see this as an effort to create a small `boutique' UN and not an institution that can help the world overcome the huge problems it faces."

October 12, 1995: In a statement to the GA Fifth (Budget) Committee, USG Connor reports that a number of states have made payments in the run-up to the 50th Anniversary celebrations, thus slightly relieving the UN's financial woes. But in Washington the highly-contested US budget process threatens to cut US contributions to the UN and to postpone the usual late-year payments. Connor announces that the UN will use some of the new cash to pay troop-contributing countries $150 million, the first payment since June.

October 13, 1995: Sir John Weston, Permanent Representative of the UK to the UN, concludes a speech at the 75th Anniversary dinner of the New York Branch of the English Speaking Union with reference to the UN financial crisis. His last line: "As Mark Twain put it, 'any jackass can kick a barn down, but it takes a carpenter to build one.'"

October 20, 1995: The Secretary General submits a report to the General Assembly on "Improving the Financial Situation of the United Nations." In his introduction he says: "I know that some may recall past warnings on this subject and, based on our success in weathering those storms, conclude that I am exaggerating the gravity of our current situation. I regret that I can not share such optimism."

October 24, 1995: The UN's Fiftieth Anniversary is celebrated in New York as more than a hundred heads of state and government gather. Over the next three days, during speeches, many refer to the UN's financial difficulties. -- On the same day in Washington, Representative Joe Scarborough of Florida introduces a bill to the US House of Representatives titled "The United Nations Withdrawel Act" which proposes to end US participation in the UN by the year 2000, on the grounds that the UN is an institution based on an objectionable "Wilsonian internationalism" and that it "no longer serves the national interest and it has become a bureaucratic nightmare."

October 25, 1995: Under Secretary General for Internal Oversight Services, Karl Theodor Paschke, gives a press briefing for journalists, based on his first report to the General Assembly. Paschke had assumed this newly-created post in November, 1994, with the charge that he root out waste and fraud. After scrutinizing UN budgets in excess of $1 billion, Pasche's office found waste of $16 million. A correspondent asks Pasche whether he finds the UN more wasteful than comparable organizations. Pasche says that in his investigations over the past eleven months he had "not found the UN to be a more corrupt organization nor one which had more fraud than any comparable public administration." He says that the financial crisis was a barrier to positive reforms and that a management training program could not be implemented because of a shortage of funds.

Late October, 1995: During the UN's Fiftieth Anniversary celebrations, a large number of high-level speakers refer to the critical financial situation and call for a solution. Some propose global fees or taxes. Swedish Prime Minister Ingvar Carlsson says that to solve the crisis "dependency on one large contributor must be reduced." In particular, there is criticism of the United States for its large arrearages. British Prime Minister John Major, picking up the language used earlier by his Foreign Secretary, states bluntly in his speech on the 23rd: "It is not sustainable for states to enjoy representation without taxation."

October 30, 1995:John Whitehead, Chairman of the United Nations Association-USA and former Chairman of Goldman, Sachs & Co. investment banking firm, writes a letter to UN Secretary General Boutros-Ghali, enclosing a check for $44, representing the per capital share of US arrears of his ten family members. Whitehead figures that the US owed $1.1 billion at the dime, which divided by the US population came to $4.40. "Our country seems not to realize that this is a treaty obligation," Whitehead wrote, "and that we have no right to reuse to pay up." The letter is made public and others follow Whitehead's lead. -- On the same day, the neo-conservative U.S. magazine of opinion, The New Republic, runs an article entitled "Twilight of the U.N." which states that the UN "should not be reformed" but "should be abandoned."

November 1995: Money magazine, a mass-circulation US periodical, runs an article in its November issues charging that UN employees are lavishly and unreasonably compensated. In Washington, the Clinton Administration and Congressional Republicans agree to link US payments to the UN to a program of reforms.

November 1995: During UN budget debates, the US argues for large-scale cutbacks, including reduction or even elimination of the Department of Public Information, with its UN Information Centers in many countries worldwide. The US, backed by some European countries, argues that many DPI functions should be privatized. The US also blocks a proposed pay-raise for UN employees, insisting that the UN can not afford the raise in its straitened financial condition.

November 10, 1995: In the Fifth Committee debate, many speakers call on the "major contributor" to pay its contribution to the regular budget, without conditions. Malaysia says that any unilateral decision to reduce UN assessments is "illegal and totally unacceptable." Australia says it "would not accept" a situation whereby "the largest contributor, by it failure to comply with the Charter, would destabilize the operation of the UN." And China charges that the major contributor has withheld large amounts of its dues to "force the Organization to reform according to its wish and to act at its beck and call." Russia, the country with the second-largest arrears, announces that in spite of economic difficulties it will pay its full arrears over a seven year period.

November 20, 1995: The Washington Post publishes an op ed piece by Council on Foreign Relations Senior Fellow Jessica Mathews, arguing for payment of US dues. Mathews says she thinks that the UN's financial crisis reflects two things that nations are worried about: the growing power of international institutions and the growing influence of non-governmental organizations. She sees both tendencies as positive and irreversible and mocks members of Congress that are trying to block further global conferences.

November 28, 1995: The Secretary General, in a document submitted to the General Assembly titled "Improving the Financial Situation of the United Nations," reports that in spite of recent donations at the time of the 50th Anniversary, "the crisis continues." He also says that "the magnitude of the current financial crisis, in particular the amount borrowed from peace keeping accounts for the regular budget, is unprecedented."

Late November, 1995: A number of people in the United States have started to send checks to the United Nations, taking the lead from the Whitehead initiative. The campaign develops spontaneously, with backing in some local chapters of UNA-USA. The national UNA-USA does not adopt this initiative. Rather, in the face of deep divisions within its Board, it circulates a mild petition expressing support for the UN.

December 4, 1995: The US announces it is withdrawing from UNIDO. According to reports in the Financial Times and elsewhere, there is speculation that the US will default on payment arrears it now owes the international organization.

December 5, 1995: At the behest of the European Union, UN Legal Counsel Hans Corell rules that the United States acted in violation of the UN charter by unilaterally reducing its contributions to the UN peacekeeping budget. Corell points out that under UN Charter Article 17, the General Assembly is responsible for setting the level of the peacekeeping assessments. Legal experts recall that in 1964, when the Soviet Union refused to pay for UN peacekeeping in the Congo, the US submitted a legal memorandum which said that failure to punish those defaulting on their UN debts "would tempt members to pick and choose, with impunity, from among their obligations to the United Nations, refusing to pay for items they dislike even though those items were authorized by the overwhelming vote of the members. . How could any organization function on such a fiscal quicksand?" The earlier US memo argued that failure to apply the Charter to a great power "simply because it is a great power, would undermine the constitutional integrity of the United Nations and could sharply affect the attitude towards the organization of those who have always been its strongest supporters."

December 7, 1995: UNA-USA releases a report of a poll of US public opinion on the UN, conducted in early December by the Werthlin Group. "U.N. performance ratings have risen to a historical high," says the release, noting that 54% say the UN is doing "a good job." An overwhelming proportion said that they would vote against representatives in Congress who slashed US funds for the UN. An earlier poll, conducted by the Chicago Council on Foreign Relations, concluded also that public support for the UN among ordinary US citizens is very strong.

December 8, 1995: A New York Times story on the front page of the "Business Day" section, describes the UN as "tottering on the brink of insolvency." The story, based on an interview with USG Joseph Connor, says that "while most people assume the United Nations will somehow limp along, as it has done for the last half century, Mr. Connor is not convinced . . . He speculated that 1996 could be a year of reckoning." "I've never seen anything so precariously balanced at this scale," he is quoted as saying. He speaks of the need to "bail the United Nations out of virtual bankruptcy." And he warns that funds available from early-year payments will be "barely enough to carry the organization through next spring."

December 12, 1995: The Republican Chairman of the US House of Representatives, Committee on Internatinal Affairs, along with the ranking Democrat, write a letter to various eminent personalities asking for their comments on UN reform. "Congress will soon face a major debate on the United Nations, and U.S. participation in that institution," the letter reads. "From our perspective, signficant reform is the only way to ensure the institution's survival into the next century."

December 18, 1995: Addressing reporters, the Secretary General says the UN cash crunch is so severe that he has proposed a Special Session of the General Assembly in 1996 to figure out ways to resolve the crisis. "We have daily problems because of this crisis," he says. -- In an issue dated on this day, The Nation magazine runs an editorial entitled "Debt of Shame," sharply critical of the US government

December 20, 1995: The Secretary General, in a report entitled "The Financial Situation of the United Nations," points out that 71% of the regular budget sums outstanding and 42% of peacekeeping sums outstanding are owed by "the major contributor"--the United States of America. But the SG also warns that many other states have also not paid. Only 91 states, less than half the members, have paid their full dues assessments and all but 20 of the remaining 94 states owe more than a full year's assessment. -- Under Secretary General Connor seeks to cut the civilian staff of the Department of Peacekeeping Operations as field operations wind down, but many countries object, citing the need to maintain a permanent UN capacity to respond to crises that may require peacekeeping forces.

December 21, 1995: The UN announces that an earlier plan to offer early retirement to employees as a way of reducing staff cannot be implemented due to lack of funds. The program, planned to cost about $45 million, is put on hold. -- On the same day, though the Geneal Assembly was originally scheduled to adjourn, business continues because of protracted work on the Fifth (Budget) Committee. After the Committee had agreed on a budget, the United States demanded an additional $200 million in cuts for the biennium, leading to furious debate and eventually a compromise that $100 million in further cuts would be sought by the Secretariat.

December 23, 1995 : The General Assembly adopts a budget after weeks of intense debate in the Assembly's Budget Committee. The United States calls for deep budget cuts, but the final budget, adopted by the GA, settles for a spending level of $1.3 billion for 1996, a cut of about $100 million from the no-growth budget adopted by the Secretary General. Administrative staff warn that budget cuts, at a time when the UN is being called on to take even more responsibilities, will have serious consequences for the effectiveness of the organization and delegates from Third World countries accuse the US of stripping away social and economic program areas which are especially important to poor countries. During the actual debate, US Ambassador David E. Birenbaum calls for further austerity measures, including extensive "outsourcing" of services. He says: "The budget is higher than we would have preferred and recommended. For that reason, we cannot fully support it." And he went on to say ominously: "The pace of reform must continue to accelerate." -- In the same debate, the UK narrrows the flexibility of the UN financial staff by stating that the Secretary General has not been given a "blank cheque to fund the deficits of one major contributor through enforce borrowing from peacekeeping accounts."

December 28, 1995: InterPress Service reports on research by the UN Association of the United States showing that US-based firms won $737 million in contracts from the UN in 1995--20% of UN contracts worldwide. The US had three times the level of contracts of the second supplier-country -- Italy.

December 31, 1995: The UN ends the year with an overall total of $2.3 billion in arrears, of which $1.2 billion is owed by the United States. The US owes more than 70% of the outstanding assessments for the regular budget and 53% of all arrears including peacekeeping and international tribunals. Borrowings from the peacekeeping budgets total $176 million and $19 million in checks are outstanding, putting the UN's General Fund at negative $195 millions.



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