Global Policy Forum

Volcker Highlights Smuggling

New York Times
December 28, 2004

Paul A. Volcker, who is leading an investigation of suspected corruption in the United Nations oil-for-food program, said in an interview aimed at Arab audiences that most of the money illegally obtained by Saddam Hussein was from smuggling, which was known by the United Nations Security Council but not stopped. In the interview set for broadcast on Tuesday with Al Hurra, the United States government-backed television station tailored for the Arab world, Mr. Volcker questioned the reliability of reports that Mr. Hussein had diverted amounts ranging from $1.7 billion to $21 billion from the $60 billion oil-for-food program.

Mr. Volcker, a former United States Federal Reserve chairman, said there was a lot of confusion between money from smuggling and money obtained illegally under the now-defunct oil-for-food program, and he refused to give any estimates. "The big figures that you see in the press, which are sometimes labeled oil-for-food - the big figures are smuggling, which took place before the oil-for-food program started and it continued while the oil-for-food program was in place," he said, according to a transcript obtained Monday by The Associated Press.

The Security Council authorized the oil-for-food program to help Iraqis cope with United Nations sanctions imposed after Iraq invaded Kuwait. Begun in December 1996, it allowed the Iraqi government to sell oil provided the money went primarily to buy essential goods like food and medicine for Iraqi civilians and to pay reparations to victims of the Persian Gulf war in 1991. Mr. Hussein'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.

In a report in October, Charles Duelfer, the chief American arms inspector in Iraq, said Mr. Hussein was able to "subvert" the oil-for-food program to generate an estimated $1.7 billion in revenue outside United Nations control from 1997 to 2003. In addition, he said, Iraq brought in more than $8 billion in illicit oil deals with Jordan, Syria, Turkey and Egypt through smuggling or illegal pumping from 1991 to 2003, when the sanctions were in place. American Congressional investigators reported in November that Mr. Hussein had made more than $21.3 billion in illegal revenue - more than $13 billion from smuggling and about $7 billion by subverting the oil-for-food program.

Mr. Volcker said there were, without question, problems "in the oil-for-food area." "But when you look at those $10 billion figures, or $20 billion figures," he said, "most of those numbers are so-called smuggling, much of which was known and taken note of by the Security Council, but not stopped." Mr. Volcker refused to speculate on why the Council did not stop the smuggling, but indicated that the issue would probably be addressed in his reports. An initial report is expected in January and a final report in the summer, he said. He emphasized that his inquiry is focused on "what went wrong or right inside the U.N." in managing the oil-for-food program. But Mr. Volcker said the investigation could not avoid the question of smuggling, including why the Security Council did not move to stop it.

With serious allegations against the United Nations as an institution, and Congressional calls for Secretary General Kofi Annan's resignation over the oil-for-food allegations, Mr. Volcker said an investigation was needed "to clear the air."

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