Global Policy Forum

Secretary-General Kofi Annan said Wednesday the United Nations will use $30 million in revenue from the U.N. oil-for-food program for Iraq to help pay for the independent investigation of corruption allegations in the program. In a letter to the U.N. Security Council, he said money for the probe headed by former U.S. Federal Reserve chairman Paul Volcker would come from an account earmarked to pay U.N. administrative and operational costs for the embattled humanitarian program.

Volcker said in August he doesn't know how long the investigation would take, but estimated it would cost at least $30 million in the next year. The U.N. paid several million dollars in early investigation costs from its regular budget, to which all 191 U.N. member states contribute on a sliding scale of assessments. But U.N. associate spokesman Stephane Dujarric said the regular U.N. budget, now about $1.4 billion annually, is under strain and couldn't absorb the high cost of the inquiry.

Since voluntary contributions were unlikely to pay for the Volcker panel, Annan decided to tap the oil-for-food account for administrative and operational costs, which Dujarric said currently contains $300 million. The secretary-general said in the letter that he was informing Iraq's interim government of his decision to use money from the account to cover the panel's costs through the end of 2005.

The oil-for-food program, which began in December 1996 and ended in November 2003, was launched by the U.N. Security Council to help Iraqis cope with U.N. sanctions imposed after Iraq's 1990 invasion of Kuwait. Saddam Hussein's regime could sell unlimited quantities of oil provided the money went primarily to buy humanitarian goods and pay reparations to victims of the 1991 Gulf War. Saddam's government decided on the goods it wanted, who should provide them and who could buy Iraqi oil -but the Security Council committee overseeing sanctions monitored the contracts.

Under the program, 2.2% of oil revenue went to cover the program's administration and operations. Dujarric said that money is still needed to cover the administration of outstanding letters of credit, which expire in 2007, and liability in the Aug. 19, 2003 bombing of U.N. headquarters in Iraq in which 22 people were killed. Over the years, the U.N. has returned over $370 million in savings on administration of the program - $270 million to the humanitarian program in Iraq before last year's U.S.-led war and $100 million to the Development Fund for Iraq established afterward. "As our administrative costs are freed up we will continue to turn over money to the Development Fund for Iraq," Dujarric said.

Allegations of corruption in the oil-for-food program surfaced in January in the Iraqi newspaper Al-Mada, which published a list of about 270 former government officials, activists, journalists and U.N. officials from more than 46 countries suspected of profiting from Iraqi oil sales that were part of the U.N. program. Last week, a report by Charles Duelfer, the top U.S. arms inspector in Iraq, alleged the Iraqi government manipulated the U.N. program to acquire billions of dollars in illicit gains and to import illegal goods, including parts for missile systems. He also accused the former head of the program, Benon Sevan, of accepting bribes in the form of vouchers for Iraqi oil sales - an allegation he has denied. He also charged the program was rife with alleged kickbacks for European and Arab countries and officials.

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