Global Policy Forum

By Joshua Holland

This is the first article of a two-part series
Part II: Iraq and Oil-for-Food: The Real Story

What could you buy with the proceeds of what the right calls 'the biggest corruption scandal in recorded history'? (Hint: not a Ferrari.)

Routine distortions, exaggerations and unreported context about the United Nations Oil-for-Food program (OFF) makes it arguably one of the worst-covered stories of our times. That's hardly an accident. The story confirms a cherished piece of the conservative worldview, namely that the U.N. is populated by corrupt, inept and hostile anti-American bureaucrats whose sole purpose is to constrain the United States from using its unrivalled -- but wholly benevolent -- power to influence world affairs.

Oil-for-Food has been used by critics of the U.N. not only to disparage the institution as a whole, as well as the idea of multilateral diplomacy, but also to explain away opposition to the U.S.-led war in Iraq as being motivated mostly by craven profit-seeking.

Sometimes it's offered as direct justification for the war in Iraq, such as when an editorial in Sun Myung Moon's Washington Times reported, "There are growing questions as to whether Saddam Hussein may have directed program revenues to terrorist organizations." Those "growing questions," as far as anyone can tell, were invented from whole cloth right there at the Washington Times.

But most importantly, OFF has been used as a way of changing the subject. We're supposed to focus on "corruption" at the U.N. and ignore both the actual corruption in the program -- almost all of which was between the regime of Saddam Hussein and international bankers, energy traders and other assorted hucksters, some connected to the Bush administration -- and the moral questions raised by a sanctions program that has been blamed for the deaths of as many as a million Iraqi children under the age of five. On all counts, the diversion has been a success. For progressives, the most instructive part of the story is how a "scandal" conceived and cultivated by a small group of writers within a small circle of conservative publications has been so thoroughly embraced by the mainstream media. While most of the right's claims about the U.N.'s supposed perfidy are readily debunked, the mainstream press repeats them uncritically.

Although the mainstream media reported that Saddam Hussein was skimming illicit revenues from OFF as early as 1997, it became a "scandal" when a newspaper in Iraq published a list of recipients of Iraqi oil consignments under the program. The list included vocal opponents of the 2003 invasion of Iraq.

The source of the list was somewhat dubious: the Baghdad paper credited close associates of Ahmed Chalabi, the former Iraqi exile who had been a driving force behind the U.S.-led invasion.

When the documents appeared on the scene, Chalabi -- who has twice been accused of forgery in the past -- was locked in a political catfight with U.N. envoy Lakhdar Brahimi. The lists -- supposedly from the oil ministry -- were not independently confirmed. Blogger Josh Marshall commented that Chalabi "apparently deemed [the documents] too important to let anyone outside his circle see [them]." According to Forbes, the issue of documentation was further muddied when the U.S. military and Iraqi police raided Chalabi's Baghdad home and, according to Chalabi, took documents related to OFF. Generally, the right's narrative has one insurmountable problem: the scandal that they want the mainstream media to report has very little in common with what actually transpired in the OFF program.

That's a big problem. Several independent investigations, including one by the U.S. Government Accountability Office and another by the CIA's Charles Duelfer, have churned out thousands of pages of reports on OFF. The most recent is the comprehensive $35 million probe conducted by an independent investigative committee headed by the well-respected former Fed Chairman Paul Volcker.

The Right's "Facts"

The OFF "scandal" is built on four easily documented and, in most cases, deliberate distortions. Once you understand how the story is spun, you'll see these "facts" repeated again and again; they're endemic to the reporting of OFF in the mainstream press as well as in the conservative media.

Distortion #1: Everything that went wrong with Iraq during the program's existence, regardless of who was responsible or where the problem occurred, is laid at the doorstep of the U.N. Secretariat (that is, the actual U.N. staff). Conversely, member states' (including the U.S. and U.K.) tolerance of -- and at times culpability in -- the Iraqi government's corrupt dealings is downplayed or simply not reported.

A recent Wall Street Journal editorial posited that OFF "is not about some isolated incidents of perceived or actual wrongdoing ... oil for food is a story about what the U.N. is." To understand why this is false -- and how this bait-and-switch works – you have to have a handle on all the actors in this story. There was the Secretariat in New York, there were the member countries -- including the 15 on the Security Council and especially the five veto-wielding permanent members on the Council -- there were nine different U.N. agencies and there were U.N. contractors. There was also the Iraqi government and a host of foreign companies to which it sold oil.

All of Saddam Hussein's illicit revenues under the U.S.-led sanctions regime -- the so-called OFF "corruption" -- came from three sources: unauthorized Iraqi oil sales to neighboring states, dubious "inland transportation" and "post-sales service" fees, and outright kickbacks ("surcharges"). None of those funds -- which are touted as evidence of an enormous U.N. "scandal" -- ever actually touched the hands of United Nations personnel.

Most important, the American and British governments were the key players behind the highly flawed design that allowed Hussein to choose his contractors, and they oversaw and signed off on every bloated contract, with every bogus charge and kickback. The right's U.N. scandal pimps take great pains to skirt that issue. They've created a U.N. scandal out of sanctions violations that didn't go through U.N. agencies, were widely reported at the time, and which the countries that have seats on the Security Council were in the best position to stop.

One person who is almost never quoted in OFF stories is Dennis Halliday, the Irish-American former U.N. Humanitarian Relief Coordinator. Despite his intimate knowledge of the program, he's rarely interviewed because he screws up the preferred narrative. As he told CNN:

The fact is, the scandal, if there is one, lies with the member states, not the Secretary. It's the member states who set up Oil-for-Food. They set up the conditions. They monitored. They ran the 661 Committee [which examined every sale]. They knew every damned contract.

French Ambassador Jean-David Levitte noted in the L.A. Times that the full contracts were only circulated to the United States and Britain, which had expressly asked to review them. American and British diplomats were concerned about "dual-use" materials that could be used to produce weapons, and they vetoed contracts on that basis. According to Joy Gordon, writing in The Nation:

Rarely mentioned ... in the press coverage, was the fundamental distinction between the policies established by the Secretariat and the U.N. agencies and the ... highly politicized Security Council. For example, the [Duelfer] report says that the bulk of the illicit transactions were "government-to-government agreements" between Iraq and a few other countries, for trade outside the OFF program.

As for the surcharges and kickbacks, Newt Gingrich gave the right's perspective in a Washington Times op-ed, claiming that the regime "collected more than $10 billion in illegal cash kickbacks while U.N. officials apparently turned a blind eye."

As I'll explain shortly, that number is exaggerated 40-fold. But even if it were accurate, the fact is that everyone turned a blind eye. The Volcker report notes that there were "company complaints and media reports of demands for kickbacks" dating back to 1997. But it "was not until the first half of 2001 that the [Security Council] addressed ... kickbacks; even then, discussion was limited to a few meetings." The report adds, "No action was taken."

And while Gingrich is entitled to his opinion, the U.N. actually had little or no control over those transactions. As U.S. Attorney David Kelly said in announcing an OFF-related indictment against a Texas oil company:

Recipients of allocations of oil had to pay a secret surcharge to the Iraqi government. These secret payments ... were not made to the United Nations-monitored bank account from which humanitarian goods could be purchased for the Iraqi people, instead these secret payments were illegal kickbacks made ... to front companies and bank accounts designated and controlled by the Iraqi regime.

Distortion #2: The amount of corruption and mismanagement found on the U.N.'s watch is so exaggerated as to be unrecognizable when compared to the facts.

A recent editorial in a regional Pennsylvania paper said, "An investigative report released by Paul Volcker this week details the $100 billion fraud that the oil-for-food program became." The editors called it "the biggest corruption scam in history."

They were echoing a Wall Street Journal editorial that called OFF, "the largest fraud ever recorded in history." On Fox News, Fred Barnes agreed, it definitely was the "biggest scandal in human history." The Washington Times' Thomas Kilgannon said, simply, "The Oil-for-Food corruption is immense."

To date, evidence has shown that one U.N. official in New York -- OFF Coordinator Benon Sevan -- took four bribes totaling $150,000. That's the value of the biggest, most awesome, mother-of-all-corruption-scandals in history.

In the course of investigating Sevan, another U.N. official -- Russian procurement officer Alexander Yakovlev, was found to have received bribes as well -- but not related to OFF -- bringing the total number of corrupt United Nations personnel to two. To recap, that's $150,000 and two staffers, neither named Kofi Annan.

A Russian diplomat to the U.N. -- not a staffer -- has also been indicted for money laundering, perhaps in cahoots with Yakovlev. Kofi Annan quickly revoked diplomatic immunity for both Russians, causing even U.N. hyper-critic John Bolton to "praise Annan 'for his personal and very prompt decision,'" according to MSNBC.

The most commonly reported figure in OFF stories is $10 billion, the total value of all of the Hussein government's revenues from all sources during the six years the program was in effect. That's a fairly straightforward bait and switch: the GAO report, the Duelfer Report and the Volcker Report all agree that the majority of that figure -- Volcker has it at 82% -- came from smuggling, which has nothing to do with the U.N.

In fact, the Volcker Committee makes clear that U.N. staff were in no position to do anything about it:

By the programme's design, inspectors were charged only with the inspection of oil and goods that were financed under the programme. They had no directions or mandate to inspect or report on cargo smuggled ... outside the programme.

Sometimes, as in Newt Gingrich's piece, the $10 billion dollar figure stands alone. At other times, as I've noted elsewhere, the $10 billion figure is in the lead paragraph, and the facts are buried in the "jump," in paragraph 17.

The real amount that the Iraqi government skimmed from the OFF program was: $229 million in oil surcharges added to the value of contracts, $1.06 billion in "after-sales service fees," and $527 million in "inland transportation fees." And, again, those funds didn't pass through U.N.-controlled accounts.

That's $1.8 billion dollars over six years, or $300 million per year. Now, let's put that in perspective: Saddam Hussein managed to skim about 1.8% of the total program transactions in kickbacks, which is held as proof of the U.N.'s incompetence and corruption. But compare that to the 1.7% "pilferage rate" that the American retail industry experiences every year, according to the National Retail Security Survey, and the U.N. doesn't come off looking quite so corrupt.

Or you can contrast the $1.8 billion (out of over $100 billion) that the Iraqis squeezed out of the program during six years with the $8.8 billion that the U.S.-led Coalition Provisional Authority lost in Iraq during just eight short months under U.S. occupation chief L. Paul Bremer (out of a total of $34 billion in reconstruction funds).

Half of that $34 billion, unlike the OFF money, was made up of U.S. taxpayer funds. But the Washington Times hasn't played up that scandalous bit of graft.

Distortion #3: The suggestion is made, defying the evidence, that "huge" profits influenced individuals and states to oppose the U.S.-led invasion of Iraq. War opponents are painted as being "soft on dictators" in exchange for big, big money.

In his Washington Times op-ed, New Gingrich marvels that Saddam Hussein "was able to bribe a global network of international power players and turn the Oil for Food program into a massive charade."

In the same paper, David R. Sands wrote:

Companies, politicians and pro-Saddam Hussein activists from countries that opposed the war in Iraq figure heavily in a list of about 270 recipients of suspected oil bribes from Iraq under the scandal-plagued United Nations Oil-for-Food program.

Despite the questionable bona-fides of that particular list -- that's the one that appeared in Ahmed Chalabi's circle -- this is the charge that has the most validity. The Volcker Report makes clear that Saddam Hussein did indeed favor companies with oil contracts from countries that supported his policy goals (while fully 36% of all Iraqi oil ended up in the United States, most of it went through foreign middlemen).

However, the kernel of truth doesn't support the charge that countries -- especially Russia and France -- opposed the invasion based on those favors. Rather, Saddam's regime steered contracts towards countries that supported him on issues like getting spare parts to repair oil infrastructure allowed under the program.

Ultimately, this claim is for each individual to judge based on the facts. Using a frequently cited estimate by The Times of London, sales under the program would represent something like six-tenths of one percent of Russian exports and one quarter of one percent of French exports. Contrast that with exports to the United States -- 6.1 percent and 7.8 percent respectively -- and it looks highly suspect.

And, of course, there's the hypocrisy of criticizing others when the United States, too, doled out contracts in Iraq only to countries that supported our policy objectives.

Distortion #4: The fact that OFF was a highly successful program, despite all of its flaws, is sometimes just not reported. More often, though, the implication is made that the opposite is true, that corruption kept the program from fulfilling its mandate to provide relief to desperate and malnourished Iraqis (and to keep WMD technology out of Iraq).

According to a recent Wall Street Journal editorial:

Even now we are told that "at least" Oil-for-Food fed the Iraqi people when they were on the edge of starvation, and this is accounted a U.N. success. That is false. Oil-for-Food offered a lifeline of cash and influence to a regime that was starving its people." A New York Daily News editorial put it more bluntly: "Unquestioned is that very little of this relief ever ended up in the bellies of Iraq's hungry children.

Those are examples of major American newspapers flat-out lying to their readers. Nobody with any knowledge of the OFF program disputes that it saved many, many Iraqi lives. According to U.N. impact studies, from 1996 to 2001 the average Iraqi's daily food intake increased from 1,200 to 2,200 calories per day. Malnutrition among Iraqi children was cut in half over the life of the program, as were deaths of children under five in the center and south of the country. During the same period, polio was eradicated in Iraq. In general, these findings are supported by the Volcker Committee, which released a report PDF] on the program's success in decreasing hunger and malnutrition, a report that won't be reported in the right's echo-chamber any time soon.

United Nations Communications Director Edward Mortimer wrote in the Wall Street Journal that "The Oil-for-Food programme was an effort to spare ordinary Iraqis some of the bitter hardships that their leaders had brought upon them. ... No doubt it could have been better designed, and better implemented, but in its basic mission, it succeeded." On this question, the facts are tough to spin: the GAO estimated that 93% of program funds went to the purposes for which they were intended, and the Volcker Report put that figure at 98%. The Iraqi elections in January used OFF lists, as no other census existed.

The Scandal Pimps

Soon after the unverified list of OFF recipients was published in Baghdad, a small group of American writers, all with a readily discernible conservative outlook, began to promote the scandal. They were led by Claudia Rosett, a former member of the Wall Street Journal editorial board who in the last year and a half penned 20 pieces in the National Review and on the Wall Street Journal editorial page (as well as for other publications, including The New York Times). Rosett is a fellow at the right-wing Hudson Institute and at the Foundation for Defense of Democracies -- called a "Neo-conservative" think-tank. She is also Fox News' "Oil-for-Food analyst."

Joining Rosett are David Sands (31 stories since April 2004), Betsy Pisik (31 articles since March 2004) in the Washington Times (with other staffers occasionally pitching in) and William Safire, syndicated in major papers across America. Chalabi confidant Judith Miller chipped in with 15 stories about OFF for The New York Times.

The most prolific OFF scandal pimp has been Niles Lathem writing in Rupert Murdoch's New York Post. Over the past 18 months, Lathem has written 141 items in The Post -- about 8 per month. In addition to slinging barbs at the U.N. for The Post, Lathem is listed as a columnist for David Horowitz's fringe right-wing website, Frontpagemag.com. Last year, I conducted a content analysis on an (almost) random sample of 60 American newspaper articles drawn from the LexisNexis database relating to this fake scandal. Of 38 talking-heads interviewed in the sample, 35 were Republican officials or right-wing think-tankers. Seventeen members of Congress were quoted: 15 Republican critics of the U.N. and two Democrats who agreed with them completely.

Of course the right turns that around 180 degrees and finds in it proof of their favorite conspiracy theory about liberal media bias. It is rarely explained why the supposedly liberal media would pass up a juicy scandal that might sell some papers, but that's beside the point.

Roger L. Simon, a right-wing blogger who fancies himself a modern-day I.F. Stone, griped in March that "The New York Times and the Washington Post ... do everything they can to mollify the controversy, thus keeping [Kofi] Annan in place." Another conservative blogger, Hugh Hewitt, argued in the Weekly Standard that Claudia Rosett deserved six Pulitzers for her "dogged pursuit of the oil-for-food-for-dictators scandals at the United Nations [that] pushed that story in all of its mind-numbing complexity into the media mainstream."

Actually, The New York Times has run 46 articles with "Oil for Food" in the headline since the "scandal" broke less than two years ago, while the Washington Post has published 26. Nonetheless, the argument about liberal bias might be compelling if the facts weren't so far off.

Unfortunately, there are consequences to the kind of spin we've seen around this story. Seeing a right-wing smear campaign against the U.N., progressives -- and Congressional Democrats -- have shown little appetite to investigate the OFF program. The unfortunate result is that there are half a dozen congressional investigations led by Republicans whose committees will focus primarily on the U.N.'s "systemic" problems, not on the corporations that paid dubious "surcharges" to the Iraqi regime.

There's no reason to shy away from the real OFF scandal: a scam linking greasy oil barons, multinational corporate raiders and money-laundering bankers to one of the most brutal dictators of recent memory. We'll never know the details of that scam if we don't start asking the hard questions. Failing that, the investigations will drag on, lead to nothing and eventually die. Then, only conservatives' "proof" of U.N. duplicity will remain.