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THE UNITED NATIONS OIL-FOR-FOOD PROGRAM:

ISSUES OF ACCOUNTABILITY AND TRANSPARENCY

HEARING

BEFORE THE

COMMITTEE ON 

INTERNATIONAL RELATIONS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

APRIL 28, 2004

Serial No. 108–110

Printed for the use of the Committee on International Relations

(

Available via the World Wide Web: http://www.house.gov/international—relations 

(II)

COMMITTEE ON INTERNATIONAL RELATIONS 

HENRY J. HYDE, Illinois, Chairman 

JAMES A. LEACH, Iowa 

DOUG BEREUTER, Nebraska 

CHRISTOPHER H. SMITH, New Jersey, 

Vice Chairman 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

ILEANA ROS-LEHTINEN, Florida 

CASS BALLENGER, North Carolina 

DANA ROHRABACHER, California 

EDWARD R. ROYCE, California 

PETER T. KING, New York 

STEVE CHABOT, Ohio 

AMO HOUGHTON, New York 

JOHN M. MCHUGH, New York 

ROY BLUNT, Missouri 

THOMAS G. TANCREDO, Colorado 

RON PAUL, Texas 

NICK SMITH, Michigan 

JOSEPH R. PITTS, Pennsylvania 

JEFF FLAKE, Arizona 

JO ANN DAVIS, Virginia 

MARK GREEN, Wisconsin 

JERRY WELLER, Illinois 

MIKE PENCE, Indiana 

THADDEUS G. MCCOTTER, Michigan 

KATHERINE HARRIS, Florida 

TOM LANTOS, California 

HOWARD L. BERMAN, California 

GARY L. ACKERMAN, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

DONALD M. PAYNE, New Jersey 

ROBERT MENENDEZ, New Jersey 

SHERROD BROWN, Ohio 

BRAD SHERMAN, California 

ROBERT WEXLER, Florida 

ELIOT L. ENGEL, New York 

WILLIAM D. DELAHUNT, Massachusetts 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

JOSEPH CROWLEY, New York 

JOSEPH M. HOEFFEL, Pennsylvania 

EARL BLUMENAUER, Oregon 

SHELLEY BERKLEY, Nevada 

GRACE F. NAPOLITANO, California 

ADAM B. SCHIFF, California 

DIANE E. WATSON, California 

ADAM SMITH, Washington 

BETTY MCCOLLUM, Minnesota 

BEN CHANDLER, Kentucky 

THOMAS E. MOONEY, SR., Staff Director/General Counsel 

ROBERT R. KING, Democratic Staff Director 

JOCK SCHARFEN, Chief Counsel 

FRANK RECORD, Senior Professional Staff Member 

GREGG RICKMAN, Senior Professional Staff Member, Subcommittee on the Middle East and 

Central Asia 

LIBERTY DUNN, Staff Associate 

(III)

C O N T E N T S 

Page

WITNESSES 

Howar Ziad, Representative, Kurdistan Regional Government, United Nations 

Liaison Office ........................................................................................................ 10

Danielle Pletka, Vice President, Foreign and Defense Policy Studies, American Enterprise Institute ..................................................................................... 50

John G. Ruggie, Ph.D., Evron and Jeane Kirkpatrick Professor of International Affairs, and Director, Center for Business and Government, John 

F. Kennedy School of Government, Harvard University .................................. 55

Claudia Rosett, Senior Fellow, The Foundation for the Defense of Democracies ..................................................................................................................... 61

Michael Soussan, Former Program Coordinator, United Nations Oil-for-Food 

Program ................................................................................................................ 65

Joseph A. Christoff, Director, International Affairs and Trade, U.S. General 

Accounting Office ................................................................................................. 126

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Henry J. Hyde, a Representative in Congress from the State 

of Illinois, and Chairman, Committee on International Relations: Prepared 

statement .............................................................................................................. 3

Howar Ziad: Prepared statement ........................................................................... 11

Danielle Pletka: Prepared statement ..................................................................... 53

John G. Ruggie, Ph.D.: Prepared statement ......................................................... 57

Claudia Rosett: Prepared statement ...................................................................... 63

Michael Soussan: Prepared statement ................................................................... 68

The Honorable Mike Pence, a Representative in Congress from the State 

of Indiana: Article by Ms. Claudia Rosett entitled ‘‘Oil for Terror’’ from 

The Wall Street Journal, April 28, 2004 ............................................................ 90

Claudia Rosett: Material submitted for the record ............................................... 93

Joseph A. Christoff: Prepared statement ............................................................... 128

APPENDIX 

The Honorable Nick Smith, a Representative in Congress from the State 

of Michigan: Prepared statement ........................................................................ 169

The Honorable Ron Paul, a Representative in Congress from the State of 

Texas: Prepared statement .................................................................................. 170

(1)

THE UNITED NATIONS OIL-FOR-FOOD 

PROGRAM: ISSUES OF ACCOUNTABILITY 

AND TRANSPARENCY 

WEDNESDAY, APRIL 28, 2004

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON INTERNATIONAL RELATIONS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:30 a.m., in Room 

2172, Rayburn House Office Building, Hon. Henry J. Hyde (Chairman of the Committee) presiding. 

Chairman HYDE. The Committee will come to order. Many times 

the Chair has announcements to make, some of which are perfunctory, some of which are enormously substantive, and I have one of 

the latter kind to make. 

One of our Members who is not here today, and you will understand why, Dana Rohrabacher, at 6 o’clock p.m., April 27, his wife 

Rhonda gave birth to triplets, Annika, Christian and Tristen. So I 

don’t expect we will hear from Mr. Rohrabacher today, but in 

absentia we congratulate him and wish him, and especially his 

wife, well. 

All right. The Committee will come to order. Of the long list of 

Saddam Hussein’s crimes, the most relentless were those committed against the Iraqi people. A grim catalog of outrages range 

from mass killings at one extreme to the needless privation and 

steady grinding away of hope that formed the context of daily life. 

The elimination of his regime last year revealed a population rendered destitute by 2 decades of dictatorship and the results of the 

conflicts he initiated against neighboring countries. Unfortunately, 

efforts by the international community to counter the threat Saddam Hussein posed to his neighbors and others unavoidably added 

to the burden borne by the Iraqi people. In an effort to spare them, 

especially women and children, from the harshest effects of the embargo placed on the regime in the aftermath of Saddam’s invasion 

of Kuwait, the United Nations initiated a program in 1996 to provide the Iraqi people with food, medicine and other aid. The humanitarian relief was to be paid for by monitored sales of Iraqi oil. 

This undertaking came to be known as the Oil-for-Food Program 

and is credited correctly with saving the lives of millions. 

Unfortunately, numerous allegations have been made that this 

humanitarian program was undermined by systematic abuse, including graft and outright theft, that is estimated in the billions of 

dollars. The latest and most authoritative report is that released by 

the General Accounting Office. It estimates that between 1997 and 

2

2002, Saddam’s regime obtained over $10 billion in illegal revenues 

from the Oil-for-Food Program through illicit surcharges and commissions as well as smuggling. 

If these charges prove true, the most obvious victims are those 

Iraqis who failed to receive needed assistance. But the damage extends much further. The massive windfall resulting from this alleged organized theft allowed Saddam to maintain his grip on the 

country, line his pockets, and to make companies and countries 

dance to his tune with consequences we are still struggling to contain. 

But there is yet a deeper threat. Those who believe that the 

United Nations and its many programs play a vital role around the 

world, and I count myself among them, must also fear for the potential impact on the reputation and credibility of the U.N. as an 

institution. The institution’s work in other areas should not be 

needlessly impeded or placed in doubt by these still-emerging allegations. It is, therefore, incumbent upon those with responsibility 

for these programs, as well as those charged with investigating 

their failings, to ensure that the truth emerges however unpleasant 

that task or the results may be. 

Did U.N. officials responsible for administering the Oil-for-Food 

Program properly undertake their oversight and management responsibilities? Were some of the administrative provisions ignored 

or violated by Iraq with the knowledge of U.N. officials? Did the 

U.N. fail to undertake their responsibilities in overseeing the contracting process? Were program accounts for the administration of 

the program properly audited? Have they been made public? These 

and other important questions are the reasons for this and succeeding hearings on this subject. Our Committee’s hearing today 

will begin to unravel the allegations of corruption and fraud that, 

if true, significantly undermine the effectiveness of the Oil-for-Food 

Program. 

Last week U.N. Secretary General Kofi Annan named the highly 

respected Paul Volcker, former Chairman of the Federal Reserve, 

to lead an independent investigation of the program. In Iraq the Finance Ministry has begun its own inquiry with the help of international auditing firms in an attempt to locate stolen assets. I have 

high hopes that these and other investigations will soon distill 

truth from allegations of wrongdoing and will lead to remedial 

measures and reforms wherever needed. It is axiomatic that the 

success of these investigations requires that investigators have full 

and complete access to essential information and witnesses, wherever found. 

Given the U.N.’s expanding role in the establishment of a new 

government in Iraq, and in assisting that country’s reconstruction, 

it is imperative that the questions surrounding the Oil-for-Food 

Program be answered as fully and as soon as possible so that its 

efforts in that country, as well as in the many other vital programs 

it is responsible for around the world, are not compromised and yet 

more needless suffering emerge from the fading embers of 

Saddam’s regime. 

I now turn to my friend and colleague, Tom Lantos, the Ranking 

Democratic Member, for his opening remarks. 

[The prepared statement of Mr. Hyde follows:]

3

PREPARED STATEMENT OF THE HONORABLE HENRY J. HYDE, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF ILLINOIS, AND CHAIRMAN, COMMITTEE ON INTERNATIONAL RELATIONS

Publicity is one of the purifying elements of politics . . . Nothing checks all the bad 

practices of politics as public exposure.—Woodrow Wilson, 1913

Of the long list of Saddam Hussein’s crimes, the most relentless were those committed against the Iraqi people. The grim catalog of outrages range from mass 

killings at one extreme to the needless privation and steady grinding away of hope 

that formed the context of daily life. The elimination of his regime last year revealed 

a population rendered destitute by two decades of dictatorship and the results of the 

conflicts he initiated against neighboring countries. 

Unfortunately, efforts by the international community to counter the threat Saddam Hussein posed to his neighbors and others unavoidably added to the burden 

borne by the Iraqi people. In an effort to spare them, especially women and children, 

from the harshest effects of the embargo placed on the regime in the aftermath of 

Saddam’s invasion of Kuwait, the United Nations initiated a program in 1996 to 

provide the Iraqi people with food, medicine, and other aid. The humanitarian relief 

was to be paid for by monitored sales of Iraqi oil. This undertaking came to be 

known as the Oil-for-Food Program, and it is credited, correctly, with saving the 

lives of millions. 

Unfortunately, numerous allegations have been made that this humanitarian program was undermined by systematic abuse, including graft and outright theft, that 

is estimated in the billions of dollars. The latest and most authoritative report is 

that released by the General Accounting Office. It estimates that between 1997 and 

2002, Saddam’s regime obtained over $10 billion in illegal revenues from the Oilfor-Food Program through illicit surcharges and commissions as well as smuggling. 

If these charges prove true, the most obvious victims are those Iraqis who failed 

to receive needed assistance. But the damage extends much further. The massive 

windfall resulting from this alleged organized theft allowed Saddam to maintain his 

grip on the country, line his pockets, and to make companies—and countries—dance 

to his tune, with consequences we are still struggling to contain. 

But there is yet a deeper threat. Those who believe that the United Nations and 

its many programs play a vital role around the world—and I count myself among 

them—must also fear for the potential impact on the reputation and credibility of 

the United Nations as an institution. The institution’s work in other areas should 

not be needlessly impeded or placed in doubt by these still-emerging allegations. It 

is, therefore, incumbent upon those with responsibility for these programs, as well 

as those charged with investigating their failings, to ensure that the truth emerges, 

however unpleasant that task or the results may be. 

Did UN officials responsible for administering the Oil-for-Food Program properly 

undertake their oversight and management responsibilities? Were some of the administrative provisions ignored or violated by Iraq with the knowledge of UN officials? Did the UN fail to undertake their responsibilities in overseeing the contracting process? Were program accounts for the administration of the program 

properly audited? Have they been made public? These and other important questions are the reasons for this and succeeding hearings on this subject. 

Our Committee’s hearing today will begin to unravel the allegations of corruption 

and fraud that if true, significantly undermined the effectiveness of the Oil-for-Food 

Program. Last week, UN Secretary General Kofi Annan named the highly respected 

Paul Volcker, the former Chairman of the Federal Reserve, to lead an independent 

investigation of the program. In Iraq, the finance ministry has begun its own inquiry, with the help of international auditing firms, in an attempt to locate stolen 

assets. I have high hopes that these and other investigations will soon distill truth 

from allegations of wrongdoing and will lead to remedial measures and reforms 

wherever needed. It is axiomatic that the success of these investigations requires 

that investigators have full and complete access to essential information and witnesses, wherever found. 

Given the UN’s expanding role in the establishment of a new government in Iraq 

and in assisting that country’s reconstruction, it is imperative that the questions 

surrounding the Oil-for-Food Program be answered as fully and as soon as possible 

so that its efforts in that country, as well as in the many other vital programs it 

is responsible for around the world, are not comprised and yet more needless suffering emerge from the fading embers of Saddam’s regime. 

I now turn to my friend and colleague, Tom Lantos, the Ranking Democratic 

Member, for his opening remarks.

4

Mr. LANTOS. Thank you very much, Mr. Chairman. Let me thank 

you for calling this important hearing. 

Since the end of January, when an Iraqi newspaper alleged that 

a senior United Nations official had received bribes from Saddam 

Hussein, the U.N. has been the target of a series of allegations involving potential mismanagement, unethical behavior, and collusion with the despicable Saddam Hussein regime. The notion that 

such a high-level U.N. official could have been on Saddam’s payroll 

is sickening, if true, and it must be thoroughly investigated. If 

wrongdoing is found to have occurred, serious disciplinary action 

must be taken immediately. 

At the same time, Mr. Chairman, I must say that I am becoming 

increasingly concerned that certain U.N. critics have used the allegation in an Iraqi newspaper to discredit the United Nations when 

the case against the organization is far from clear. Mr. Chairman, 

any responsible inquiry regarding these charges must be fair and 

based on fact. Our preliminary research indicates that the United 

Nations is being blamed for Iraqi sanctions violations such as oil 

smuggling for which the United Nations had no responsibility of 

enforcement; that the United Nations took action to prevent some 

of the Oil-for-Food abuses of which it is being accused; and that 

much responsibility for the problems that beset the Oil-for-Food 

Program lies with the members of the Security Council, including 

our own government. 

We need to recognize that the Secretary General has moved to 

launch a credible independent investigation of the specific allegations leveled at its employees. We must first look at the scope of 

the problem. The press has repeatedly referred to a $10 billion 

U.N. scandal, blaming the U.N. for all of the illegal revenue that 

Saddam obtained by violating U.N. sanctions. Our Committee 

needs to be much more precise than that. According to the GAO, 

the largest portion of the 10 billion that Saddam was able to obtain 

in illegal payments came from the $5.7 billion worth of oil his people smuggled out of Iraq completely outside of the Oil-for-Food Program. 

The U.N. Secretariat clearly bears no responsibility for this portion of the scandal. Member states had the responsibility to observe 

the prohibition against allowing Saddam to sell oil outside the program. And the U.N. Secretariat had neither the authority nor the 

means to monitor or to enforce this requirement. 

It is important to note that these sales, such as those made to 

our friends and allies like Jordan and Turkey, often took place with 

United States knowledge or acquiescence. A significant portion of 

the illegal Iraqi sales were made to Syria, with the United States 

State Department offering little more than token protest. Despite 

President Assad’s promise to Secretary of State Powell in the earliest days of this Administration, Syria continued its massive illegal oil imports from Iraq, and the United States remained virtually 

silent as Assad violated with impunity his pledge to our Secretary 

of State. 

The second part of the so-called 10 billion scandal involves allegations that U.N. mismanagement was responsible for allowing 

Saddam to siphon off 4.4 billion in kickbacks on Oil-for-Food contracts. In investigating this charge, it appears that some U.N. offiVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6601 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
5

cials frequently raised concerns about possible Iraqi fraud in Oilfor-Food contracts starting as far back as 2001. We know that in 

March 2001, U.N. Secretary General Annan issued a report warning that Saddam had begun to implement a system of surcharges 

on sales of oil under the Oil-for-Food Program, which led to reforms 

of the program. Around the same time The New York Times reported that Iraqi officials had begun to demand kickbacks from 

companies seeking to sell humanitarian goods under the program. 

When these reports began to surface, we understand U.N. officials carefully scrutinized Iraqi contracts to determine if they were 

overpriced. We are told that these U.N. officials then held up hundreds of contracts by demanding that the missions which submitted 

them on behalf of their companies fully explain the apparent overcharges. In many cases the missions were unable or unwilling to 

defend the contracts, and those contracts were never approved. In 

cases where the missions did attempt to justify the overpricing, the 

U.N. forwarded them to the Sanctions Committee with notes expressing skepticism about prices. There were dozens of such cases. 

Nevertheless, the State Department never exercised its power as a 

Sanctions Committee member to block any of the overpriced contracts flagged by the U.N. or otherwise tried to halt Saddam’s kickback scheme. Other members of the Security Council, including 

France, Russia and China, also failed to act. 

By contrast, when the Coalition Provisional Authority took over 

administrative responsibility for Oil-for-Food in the fall of 2003, the 

Defense Contract Audit Agency had no trouble identifying contracts 

with overpriced items. In reviewing the active contracts, Mr. Chairman, the defense auditors found $656 million in potential overcharges, roughly 10 percent of the overall value of the contracts reviewed. 

Some of the revelations in the audit report simply boggle the 

mind. The State Department’s representatives in New York in February 2002 even approved the sale of a fleet of 300 Mercedes-Benz 

luxury automobiles for use by the Iraqi Government. Incredibly, 

three large, overpriced contracts also approved in 2002 belonged to 

Syrian entities. The defense auditors estimate the amount of overpricing in these contracts at a mind-boggling 44 percent. I simply 

don’t understand, Mr. Chairman, how the State Department could 

have approved any Syrian contracts whatsoever at a time when 

Syria was ostentatiously flouting the sanctions regime through its 

illegal oil imports and casually mocking our Secretary of State by 

ignoring its pledges to him. 

I fully understand that our highest priority as a Sanctions Committee member was to make sure that Iraq could not get its hands 

on illicit and dual-use items. But surely another important priority 

should have been to prevent the conclusion of overpriced contracts 

that invited kickbacks. We have learned that our government had 

60 dual-use experts in multiple agencies reviewing every contract 

that was submitted by the Security Council under Oil-for-Food, yet 

to our knowledge, not a single U.S. expert was tasked with investigating the contracts for possible overcharges. 

The final part of this alleged scandal is the one that the U.N. 

clearly has to answer for; the allegation that a U.N. official accepted bribes from Saddam. This allegation first surfaced at the end of 

6

January 2004. At that time an Iraqi newspaper published a list of 

270 names of individuals, including U.N. Oil-for-Food Administrator Benon Sevan, all of whom the newspaper alleged had received oil vouchers directly from Saddam Hussein. Mr. Chairman, 

these oil vouchers entitled the bearer to the right to buy Iraqi oil. 

They could be sold for a commission to middlemen, who then resold 

them at a profit to oil companies. The newspaper claimed that the 

list was derived from an Iraqi Government document. We do not 

know whether this document even exists and, even if it does, 

whether the information it contains is accurate. Therefore, it is 

critical, before anyone jumps to conclusions, that investigators be 

given access to this document at the earliest possible time. 

U.N. Secretary General Kofi Annan has recognized the seriousness of the bribery allegation and has worked to assemble an independent panel of unimpeachable integrity, headed by former Federal Reserve Chairman Paul Volcker, to thoroughly investigate the 

charges relating to the U.N.’s management of the Oil-for-Food Program. As we move forward together investigating the charges that 

have been leveled at the U.N. Secretariat, it will be critical for us 

to work together to get the facts. 

To summarize, Mr. Chairman, we know that the U.N. is not responsible for oil smuggling outside the Oil-for-Food Program. We 

know that the U.N. Secretariat took action to prevent some of the 

abuses within the program. What we still need to learn is the following: One, why our government and other Security Council members did not oppose more vigorously Saddam’s illicit oil sales and 

padded humanitarian contracts; second, whether governments 

sponsoring companies that submitted dirty contracts had knowledge that fraud was occurring; and third, if there is any truth to 

the bribery charge as leveled against the U.N. and its personnel. 

Mr. Chairman, that is a tall order, and it will put many of the 

world’s governments, including our own, under a microscope. 

I want to thank you again, Mr. Chairman, for calling this important hearing, and I pledge to continue to work closely with you and 

our Committee inquiry into every aspect of this most serious matter. 

Chairman HYDE. And thank you very much, Mr. Lantos. 

It is the Chair’s judgment that we will entertain two more statements, one from Mrs. Ileana Ros-Lehtinen, should she desire to 

make one, and I don’t see her here; the other from Mr. Ackerman, 

as Ranking Member of the Subcommittee, the appropriate Subcommittee. And then for the other Members, because we have two 

panels and because of the importance and complexity of the issues 

before us, I am not going to entertain other opening statements. 

But your statements will be made a part of the record at this point 

in the record, or whenever you wish to have them entered, and 

then we can get everybody perhaps an opportunity to question the 

witnesses, and we can hear the witnesses and not have the time 

shortened because of votes and that sort of thing. 

So with your patience and understanding, the Chair recognizes 

Mr. Ackerman. 

Mr. ACKERMAN. I thank you, Mr. Chairman, for holding a hearing related to Iraq. For a time it appeared that we might get 

through the entire year without any. However, I can’t help but note 

7

that these hearings continue a recent Committee tradition of Iraq 

hearings that are retrospective in nature. Clearly there is much 

that can and should be learned from the past, but I honestly think 

that the urgent circumstances we face in Iraq today require this 

Committee to focus on the present and the immediate future. 

I am pleased to learn, Mr. Chairman, that next week there will 

be a hearing Iraq focusing on the transition of sovereignty, and I 

thank you for that, but today we are to face the thicket of thorny 

questions surrounding the Oil-for-Food Program and the many allegations of corruption and mismanagement. Given the urgency of 

examining other truly critical related questions, one might think 

the object of this Committee was to ignore those weighty questions 

and devote our only hearing this year to discredit the U.N., thereby 

jeopardizing its role in any political transition in Iraq. I am certain, 

absolutely certain, that the Chairman has no such motive, since 

doing so would undercut the President’s most recent new plan for 

handling the political transition, giving the whole problem to the 

United Nations. 

I must say that I am perplexed by the Majority’s sudden interest 

in the Oil-for-Food Program and possible corruption therein. These 

allegations actually surfaced some 3 years ago, yet our friends in 

the Majority seemed little interested in them then. But now that 

our ever-reliable font of information on Iraq, Ahmed Chalabi, has 

brought them to our attention, I suppose they deserve a little closer 

scrutiny. I hope these allegations of impropriety are nearer to the 

truth than the allegations and intelligence information he has been 

providing us for $340,000 a month. While it doesn’t seem that 

much of his information regarding weapons of mass destruction has 

panned out, maybe we can do better here. Mr. Chalabi’s area of expertise is financial impropriety, having been indicted and convicted 

in Jordan of bank fraud. Maybe, Mr. Chairman it is really time to 

take him off the payroll. 

Mr. Chairman, before we totally trash the Oil-for-Food Program 

and the United Nations, perhaps we should review the good it actually did. Over the course of its operation, the program actually fed 

27 million Iraqis and decreased the malnutrition rate among Iraqi 

children by 50 percent. It contributed to a national vaccination program that helped reduce child mortality, and it eradicated polio in 

Iraq. It provided more dependable access to water and electricity, 

a feat which the CPA can’t quite seem to replicate, and it provided 

foodstuffs and medicine worth over $15 billion. 

Now to the allegations. The GAO says that Saddam skimmed 

over $10 billion from this program, but 5.7 billion, according to the 

GAO, was from smuggling and activity not directly related to the 

Oil-for-Food Program, but one which member states of the Sanctions Committee, including the United States, could have taken action against, but did not. So that leaves a balance of $4.4 billion 

of kickbacks, fees, surcharges and graft and corruption that 

Saddam’s regime gained from oil contracts. 

Okay. But by 2001, the Bush Administration was clearly aware 

of these, as were other members of the Security Council. But again, 

the member states did nothing to try to stop this. Is the U.N. actually to blame because of the lack of will of us and the other member states? I am sure my friends on the other side of the aisle 

8

would not suggest that we empower the Secretary General in such 

a way that he can compel us and other states to act. 

Obviously there are allegations against U.N. officials which must 

be taken seriously, as we all know. The Secretary General has appointed a commission, as pointed out by the Chairman, headed by 

Paul Volcker to look into these. 

I would point out, Mr. Chairman, that none, none, none of the 

money we are having a hearing about today is U.S. taxpayer 

money. None. For actual oversight of U.S. tax dollars, I suggest my 

colleagues visit the Web site of National Public Radio, since the 

Congress in general, and this Committee in particular, seem little 

interested in this role. There they could listen to a series of reports 

done last week called ‘‘The Spoils of War’’ that detail serious allegations of corruption and mismanagement of United States taxpayer dollars for the reconstruction of Iraq. 

Here are a few of the highlights: ‘‘Iraqi private companies routinely pay bribes to United States contractors to get reconstruction 

contracts.’’ ‘‘Iraqi Health Ministry officials sell hospital supplies on 

the black market.’’ ‘‘Translators working for the CPA promise to 

provide contracts to Iraqis and demand as much as 50 percent of 

the contract’s value in return.’’

I would ask unanimous consent to put the transcripts of the NPR 

programs into the record at this point. 

Chairman HYDE. Without objection. So ordered. 

[The information referred to was not submitted.] 

Mr. ACKERMAN. Thank you. 

And for those who are dubious of National Public Radio, the Associated Press reported the other day——

Chairman HYDE. The gentleman’s time has expired. 

Mr. ACKERMAN. If I could have just an additional 20 seconds, Mr. 

Chairman? 

Chairman HYDE. Without objection. 

Mr. ACKERMAN. The Associated Press reported the other day that 

United States contractors have received billions in reconstruction 

contracts for Iraq, having recently paid $300 million in fines for 

bid-rigging, fraud, delivery of faulty military parts and environmental damage. Now there is some crime, Mr. Chairman. 

If we are going to have hearings about corruption and mismanagement in Iraq, and I think we should, I respectfully suggest 

that we start with those misusing and wasting United States taxpayer money first. 

Thank you, Mr. Chairman. 

Chairman HYDE. The Chair will briefly respond by asserting as 

vigorously as it can that no one is interested in bashing the U.N. 

This should not be partisan. We are inquiring into allegations, and 

they are only allegations, of the fraudulent diversion of billions of 

dollars. It is true they are not directly United States money, but 

because the United States is investing billions of dollars in the reconstruction of Iraq, monies that ought to be going for that purpose 

that have been diverted to somebody’s pocket do deny efficacy to 

the funds the United States has appropriated, and so, however indirectly, we are involved. 

Notice of this sooner, I plead guilty. We have been pretty busy 

this year, and as soon as this matter came to my attention, we deVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6601 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
9

cided we would be derelict if we didn’t take a look at it. And I want 

to look at it, and we will go wherever the testimony leads us, no 

matter who is responsible, and I hope we can do it in a bipartisan 

way. 

Mr. ACKERMAN. Mr. Chairman. 

Chairman HYDE. Yes. 

Mr. ACKERMAN. Would you, please, if you would care to, tell us 

your view of whether or not this Committee should be holding 

hearings on the corruption, disappearance, misuse and abuse of 

U.S. taxpayer dollars and to follow that trail wherever it might go 

as well? 

Chairman HYDE. Absolutely. 

Mr. ACKERMAN. Thank you, Mr. Chairman. 

Chairman HYDE. Absolutely. All right. 

I would like to welcome Howar Ziad. Mr. Ziad is a Representative of the Kurdistan Regional Government in the U.N. Liaison Office of New York. He has extensive international business experience, including with International Computers, Ltd., Sloane Management Services and Lombarda Holdings. Mr. Ziad is a graduate 

of Baghdad College and completed a 2-year program at Oxford College of Technology. We welcome Mr. Ziad. 

Danielle Pletka is currently Vice President of Foreign and Defense Policy Studies at the American Enterprise Institute for Public 

Policy Research, and previously she served as a senior professional 

staff member for the Near East and South Asia with the U.S. Senate Committee on Foreign Relations. Ms. Pletka was also a Staff 

Writer for Insight Magazine and an Editorial Assistant at The Los 

Angeles Times and Reuters in Jerusalem. Ms. Pletka earned her 

B.A. from Smith College and her Master’s from Johns Hopkins 

University. And we welcome you, Ms. Pletka. 

Claudia Rosett writes a column, ‘‘The Real World,’’ on issues of 

tyranny and human rights, especially as these relate to the war on 

terror, for The Wall Street Journal. She has covered international 

affairs for the past 22 years from all over the world, contributing 

to such publications as The New York Times, Commentary, The 

American Spectator and The Weekly Standard, and makes frequent 

guest appearances on radio and TV. She received her B.A. from 

Yale University, her Master’s in English Literature from Columbia 

University, and her Master’s of Business Administration from the 

University of Chicago. Welcome, Ms. Rosett. 

John G. Ruggie joins us as the Evron and Jeane Kirkpatrick Professor of International Affairs and Director of the Center for Business and Government at Harvard University’s Kennedy School of 

Government. Previously he served as the Assistant Secretary General and Chief Adviser for strategic planning to United Nations 

Secretary General Kofi Annan. Prior to that position, he was both 

a Dean and Professor at Columbia University School of International and Public Affairs. Mr. Ruggie received his B.A. in politics 

and history from McMaster University in Canada, a Ph.D. in political science from the University of California, Berkeley, and a Doctor of Laws Honoris Causa from McMaster. Welcome, Mr. Ruggie. 

Michael Soussan is an editor of African Geopolitics, a bilingual 

quarterly journal on African affairs. He consults for universities, 

think tanks and private companies with an interest in Iraq. PreVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6601 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
10

viously he served as Program Coordinator for the United Nations 

Oil-for-Food Program. Mr. Soussan earned his Master’s in International Relations from the Institut d’Etudes Politiques and a B.A. 

from Brown University. Welcome, Mr. Soussan. 

We are honored to have you all appear before the Committee 

today, and, Mr. Ziad, we will start with you. Please proceed with 

a 5-minute summary, give or take the 5 minutes. And your full 

statement will be made a part of the record. Mr. Ziad. 

STATEMENT OF HOWAR ZIAD, REPRESENTATIVE, KURDISTAN 

REGIONAL GOVERNMENT, UNITED NATIONS LIAISON OFFICE 

Mr. ZIAD. I am making this presentation on behalf of Kurdistan 

Regional Government. Chairman Hyde, Ranking Member Lantos, 

Members of the Committee, before I begin my statement, I wish to 

thank Members of the Committee and the United States Congress 

on behalf of the people of Iraqi Kurdistan for having protected us 

from Saddam’s tyranny and for securing the liberation of all Iraq 

from his murderous rule. The Iraqi Kurds could not have survived 

without the American-operated northern no-fly zone, nor could Iraq 

have been liberated last year without the brave efforts of the men 

and women of the United States Armed Forces. We will remain 

grateful allies of the United States forever. 

I am grateful for the opportunity to address the scandal that lies 

at the core of the United Nations Oil-for-Food Program. This 

United States-supported program began in 1995 and was corrupted 

by the U.N. Secretariat, U.N. Office of the Iraq Program and 

Saddam’s regime. It is a scandal that must be exposed because it 

prolonged the suffering of the Iraqi people under Saddam, despite 

the fact that it was designed to relieve their suffering. 

The Oil-for-Food Program was set up by the U.N. Security Council Resolution 986 with the noble aim of providing food and medicine directly to Iraq while maintaining economic sanctions that 

were imposed upon Iraq in the wake of Saddam Hussein’s invasion 

of Kuwait. Under this scheme, the Iraqi oil was sold on international markets to raise revenue to purchase humanitarian goods 

only. Both the Clinton and Bush Administration supported the Oilfor-Food Program to alleviate the very real suffering of all Iraqis. 

In the end, few Iraqis gained much from the program. The 

Kurds, whose very survival was seen as an affront to Saddam’s regime, were the targets of discrimination by the officers of the 

United Nations program, who preferred pleasing and appeasing 

Saddam over ending malnutrition and treating the sick amongst 

the Kurds. 

The Oil-for-Food Program was based on the twin notions of first, 

international oversight of the oil sales and purchase and delivery 

of humanitarian goods with the proceeds; second, sharing among 

all Iraqis of the revenue. Iraqi Kurdistan was to receive 13 percent 

of the total revenues. Unfortunately, the people of Iraq did not receive anything near the amount that was their right. 

Let me offer just a few examples of what the United Nations 

promised and failed to deliver while misspending Oil-for-Food 

funds: A new general hospital for the city of Sulaimania, which has 

around 750,000 inhabitants. Funds for the Sulaimania General 

Hospital were allocated in 1998, but 6 years on, the hospital has 

11

yet to be built. The U.N. body responsible was the World Health 

Organization with specific authority for this project delegated to its 

East Mediterranean Regional Office in Cairo. 

Disposable surgical gloves for the maternity hospital in 

Sulaimania. During 2002, the hospital received no more than 2,000 

gloves per month when it needed 10,000. 

A diagnostic oncology facility for Iraqi Kurdistan. The lack of 

such facility prevented the proper treatment of cancer patients in 

Iraqi Kurdistan. 

Despite these problems, the Iraqi Kurdistan demonstrably used 

its meager share of Oil-for-Food goods more efficiently than the 

Iraqi regime. While Saddam’s regime, with the backing of 

UNICEF, claimed that infant mortality was rising in the 15 provinces under his control, in Iraqi Kurdistan infant mortality actually 

fell. 

The results of the United Nations’ mismanagement of the Oil-forFood Program were not confined to shaving a few dollars that 

ended in Saddam’s pockets or in the hands of U.N. officials. Rather, 

the amounts were in the billions of dollars, and the loss was borne 

disproportionately by the Kurds. 

Here are some of the best examples of the thievery perpetrated 

by Saddam and officials affiliated with the program: In 2002, the 

U.N., with the full approval of the Secretary General, allocated $20 

million to build an Olympic stadium for Uday Saddam Hussein. 

Chairman HYDE. Mr. Ziad, could you take 2 more minutes and 

complete your statement? 

Mr. ZIAD. Thank you, Mr. Chairman. 

During the period of the Oil-for-Food Program was in place, the 

Kurds should have received approximately 8.4 billion in humanitarian aid, representing 13 percent of the revenue generated by the 

program. Iraqi Kurdistan received goods worth only $4.4 billion. 

What we recommend is a full accounting of Oil-for-Food funds 

and purchases to be made under the auspices of a genuinely independent and external audit, immediate delivery to the Kurdistan 

Regional Government of approximately $1.6 billion in cash which 

was sitting in the Kurdish account maintained, but not disbursed, 

by the U.N. 

In conclusion, the people of Iraqi are hopeful that the U.N. will 

take appropriate action to make up for its scandalous behavior 

under the Oil-for-Food Program. 

I will cut some of the presentation to save you time, Mr. Chairman. That concludes my opening statement. I have submitted a 

longer statement for the record to the Committee that is available 

for review. Once again, thank you for the honor of testifying before 

you today. I am prepared to answer any questions you might have. 

Chairman HYDE. Thank you very much. 

[The prepared statement of Mr. Ziad follows:]

PREPARED STATEMENT OF HOWAR ZIAD, REPRESENTATIVE, KURDISTAN REGIONAL

GOVERNMENT, UNITED NATIONS LIAISON OFFICE

Mr Chairman, members of the Committee: 

I would like to make a brief statement and present the committee with a more 

detailed document, both of which I would like to request to be entered into the official record. 

12

1THE GREAT TERROR by JEFFREY GOLDBERG Issue of 2002–03–25 Posted 2002–03–25 

available at: http://newyorker.com/fact/content/?020325fa—FACT1 (last accessed April 25, 2004).

Allow me to begin my statement by thanking you for inviting me here today to 

talk to you. Please allow me to all thank you on behalf of the people of Iraqi 

Kurdistan for having protected us from Saddam’s tyranny and for then liberating 

our fellow Iraqis from his murderous rule. We could not have survived without the 

northern no-fly zone, nor could Iraq have been liberated last year without the bravery of the men and women in uniform of the United States armed forces. We are 

truly grateful and we are your allies and partners. 

Thank you also for the opportunity to present to you the scandal that lies at the 

core of the UN Oil for Food Program (OFF). To do so, I need to provide you with 

a little bit of context about how a plan, that the US government backed in 1995, 

was perverted by the UN Secretariat, the UN Office of the Iraq Program and 

Saddam’s regime. OFF was set up by UN Security Council Resolution 986 with the 

noble aim of protecting Iraqis from the folly of Saddam’s government. President 

Clinton’s administration supported OFF as a means of responding to complaints 

that Iraqis were suffering. At the heart of OFF were the twin notions of:

1. international oversight of Iraqi oil sales, spending of the resulting oil revenues and delivery of humanitarian goods; and

2. revenue sharing between Iraqis. There was a separate account for Iraqi 

Kurdistan which was 13% of the revenues.

OFF implicitly recognised that Iraqi Kurdistan had special needs and was beyond 

Saddam’s control. Iraqi Kurdistan had been devastated by:

• Over 30 years of ethnic cleansing during which Kurds were forcibly moved 

out of their homes and in many cases replaced by Arab colonists;

• The Anfal genocide of 1987–1988 during which an estimated 4,500 Kurdish 

villages and towns were destroyed and during which up to 182,000 persons 

were killed. Up to 1 million of the 4 million inhabitants of Iraqi Kurdistan 

were internally displaced;

• Repeated use of chemical weapons by the Iraqi regime against Kurdish civilians. The best known instance was the murder of around 5,000 civilians in 

Halabja on March 16, 1988. Chemical weapons were used against civilians in 

an estimated 200 locations;

• An estimated 16 million landmines had rendered large areas of Iraqi 

Kurdistan uninhabitable and continued to claim the lives of scores of civilians 

every year;

• In addition, Iraqi Kurdistan was under multiple embargoes. It was under UN 

sanctions, a boycott imposed by Saddam’s regime and intermittent embargoes 

imposed by the regional states.

As a result, Iraqi Kurdistan was allocated 13% of the value of goods from Iraqi 

oil revenues sold under OFF. The UN Security Council earmarked money for the 

Kurds to prevent Saddam’s regime discriminating against the Kurds. 

Despite the best efforts of the United States and the UK, the UN Secretariat immediately set up OFF in a manner that ensured that the process was cumbersome 

and bureaucratic. The structure of implementation of OFF was of the UN Secretariat’s making, not, as some UN officials have claimed, the responsibility of the Security Council. 

In addition, UN staff repeatedly showed a marked bias against the Kurds. For 

too many UN staff, the Kurds were to be treated with suspicion because they were 

enemies of Saddam’s regime and because they are the friends of the United States. 

The OIP appeased Saddam’s regime by excluding Americans and Britons and by hiring nationals from Arab countries. 

We noted these problems early on and in March 1999 we complained to the UN. 

We always found a sympathetic hearing from our friends in the United States and 

the UK, but the UN generally responded with contempt. Benon Sevan, the head of 

OIP, told Jeffrey Goldberg of The New Yorker in March 2002:

‘‘If they [i.e. the Kurds] had a theme song, it would be ‘Give Me, Give Me, 

Give Me,’ ’’ Sevan said.1

Let me give you a few examples of what we wanted the UN to give us:

• A new general hospital for the city of Sulaimani, which has around 750,000 

inhabitants. The current situation is that we have three small hospitals none 

of which is suitable for an urban center the size of Sulaimani, a city that also 

13

houses many of those who were ethnically cleansed by Saddam’s regime from 

Kirkuk during the years following 1991. Funds for the Sulaimani General 

Hospital were allocated in 1998, but six years on the hospital has yet to be 

built. The UN body responsible was the World Health Organization (WHO), 

with specific authority for this project delegated to its East Mediterranean 

Regional Office (EMRO). WHO–EMRO is headed by Dr Hussein AbdelRazzak Al Gezairy, the regional director who has been in his job since 1982;

• Disposable surgical gloves for the maternity hospital in Sulaimani. During 

2002 the hospital was receiving no more than 2,000 gloves per month when 

it needed 10,000;

• A diagnostic and oncology facility for Iraqi Kurdistan. The lack of any such 

facility prevented the proper treatment of cancer in Iraqi Kurdistan, another 

‘‘achievement’’ of WHO–EMRO;

• A program of demining. Instead, little money was allocated to demining and 

the problem of landmines continues to blight Iraqi Kurdistan. We estimate 

that no more than 10% of the mined that Saddam’s regime had laid in Iraqi 

Kurdistan were removed.

A key problem with OFF was that procurement was in the hands of the Iraqi regime, which meant that Baghdad was ordering humanitarian goods for the Kurdish 

13% account. The excuse used by OIP was that this created economies of scale. In 

reality, the result was:

• A poor quality procurement;

• A process that gave Saddam’s regime another opportunity corrupt the system;

• Ample opportunities for Saddam to use procurement as a political tool with 

which to punish Iraqi Kurdistan.

An example of the poor implementation of OFF came in early 2001. A shipment 

of wheat flour arrived at the Jordanian-Iraqi border. As per UN regulations, a sample was taken and sent to a laboratory in Jordan for quality control. In the meantime, as per UN regulations and in order not to interrupt the supply of food, the 

shipment was sent to Iraqi Kurdistan and was distributed to the population. Several 

weeks later, however, a laboratory report came back reporting excess levels of contamination. A junior UN official suggested that the UN immediately issue public announcements warning the population and telling them they would receive replacement rations. This official’s suggestion was overruled. 

Given the problems that we were having, UNOPS proposed to OIP that the UN 

agencies share its humanitarian project assessments and evaluations with the 

Kurdistan Regional Government. OIP specifically refused to allow this. 

Despite all these problems, Iraqi Kurdistan demonstrably used its meagre share 

of OFF goods more efficiently than the Iraqi regime. While Saddam’s regime, with 

the backing of UNICEF, claimed that infant mortality was rising in the 15 provinces 

under his control, in Iraqi Kurdistan infant mortality actually fell. 

OIP was quick to assist Saddam’s regime with goods paid for by the 59% account 

(which covered the 15 provinces under his control). The best known example of the 

absurd lengths to which OIP went in its appeasement of Saddam’s regime was its 

decision in 2002 to allocate, with the full approval of the Secretary-General, $20m 

towards building an Olympic Stadium for Uday Saddam Hussein, the sadistic elder 

son of the Iraqi dictator. That was the sad result of OFF, no hospitals for the Kurds, 

money for Uday. 

The delays in spending money allocated to the 13% account meant that so many 

vital goods never arrived that in the end we received just 7% of the value of humanitarian goods. Instead of preventing discrimination, a key aim of UN Security Council Resolution 986, OFF proved to be yet another act of discrimination against the 

Kurds.

• The total value of humanitarian goods to the Kurdish 13% account should 

have been around $8.4bn (13% of the $64.4bn of UN declared Iraqi oil sales);

• Iraqi Kurdistan, according to our calculations, received goods worth only 

around $4.4bn (6.8% of the $64.4bn of UN declared Iraqi oil sales);

• The UN Secretariat admitted in July 2003 that there was $1.6bn in cash of 

unspent 13% account money (2.5% of the $64.4bn of UN declared Iraqi oil 

sales, or close to one-fifth of the money owed to the Iraqi Kurds);

• Iraqi Kurdistan is therefore owed some $4bn in OFF humanitarian goods. 

Thus far, projects with a value of $750m (0.9% of the $64.4bn of UN declared 

Iraqi oil sales have been handed over to the Office of Project Coordination, 

14

2Office of the Iraq Programme Oil-for-Food, homepage http://www.un.org/Depts/oip/ (last 

accessed April 11, 2004). 3 Borad (sic) OF Youth and Sports M.O.U (phase 11), 13–05–00034 SECT(34) Project of construction of olympic sports city Including :Architecture works Civil works Electrical works Mechanical works All other requirements, available at http://www.un.org/Depts/oip/dp/dp11/13–

05.pdf (last accessed April 11, 2004). 4 ANNEX III [Original: English] Distribution plan for phase XII Submitted by the government 

of Iraq to the Secretary-General in accordance with the memorandum of understanding of 20 

May 1996 and Security Council resolution 1409 (2002) paragraph 237 ‘‘$20 million will be allocated for the construction of the Olympic stadium which include several electrical and mechanical works as well as sanitary installations. In addition, this amount will be utilized for the importation of equipment sets, air conditioning sets, communication networks and electronic computers.’’ Available at http://www.un.org/Depts/oip/dp/dp12/execsummary.pdf (last accessed April 

11, 2004) 

a body set up by the Kurdistan Regional Government and the Coalition Provisional Authority.

What should come next? We propose:

• A full and independent inquiry into OFF that is entirely separate from the 

UN. The current inquiry and its remit is inadequate to the task;

• All OFF funds and purchases must be fully accounted for under the auspices 

of a genuinely independent and external audit. A full statement of must be 

delivered by OIP for the Kurdish 13% account. We hope that you will fully 

support our request for what is rightfully ours;

• Iraqi Kurdistan should receive all withheld OFF funds, with interest, and be 

compensated for delayed good deliveries. It is not right that the US taxpayer 

be asked to take up the burden created by the incompetence and corruption 

that was rife in OFF. 

THE UN OIL FOR FOOD PROGRAM (OFF) AND THE IRAQI KURDS

1. How OFF was supposed to work 

To alleviate the effect of UN sanctions imposed in 1990, the UN and the Iraqi 

regime agreed OFF. A key official negotiating OFF was the then UN Under Secretary-General, Kofi Annan. OFF was set up by UN Security Council Resolution 

986, passed in 1995 (UNSCR 986/1995, appendix 1) which stipulated that Iraq only 

be sold oil was under UN supervision. Humanitarian goods were then to be supplied 

to the areas of Iraq under the Iraqi regime’s control and to the three northern 

governorates of Iraqi Kurdistan. 

The oil revenues were divided up into four streams:

• 59% for humanitarian goods to be delivered to the areas of Iraq under 

Saddam’s control;

• 13% for humanitarian goods to be delivered to Iraqi Kurdistan;

• 3% to cover UN administrative costs (of which 2.2% OFF and 0.8% arms inspections);

• 25% to be paid in compensation for the Iraqi invasion of Kuwait.

Implementation of OFF was regulated by the Memorandum of Understanding 

(MOU) between the UN and the Iraqi regime and the KRG (appendix 2). OFF was 

run by the UN Office of the Iraq Program (OIP), headed by Benon Sevan.2

Humanitarian goods were defined in the MOU paragraph 5 of Section II (appendix 2) as: ‘‘medicine, health supplies, foodstuffs and materials and supplies for essential civilian needs.’’ Although nothing like the full allocation of goods was ever 

delivered to Iraqi Kurdistan, the definition of humanitarian goods was stretched to 

include funding for ‘‘Project of construction of olympic sports city’’ (sic).3 The cost 

of the project was $20m.4 Sports in Iraq were under the control of Saddam Hussein’s older son, Uday. 

EXECUTIVE SUMMARY

Key concerns 

• The UN Oil-for-Food programme (OFF) failed to deliver the promised benefits to 

the citizens of Iraq. In particular the population of the three northern 

governorates of Iraqi Kurdistan (Dohuk, Suleimani and Irbil, henceforth Iraqi 

Kurdistan) never received their full allocation of OFF humanitarian goods;

• Iraqi Kurdistan was allocated 13% of the value of goods from Iraqi oil revenues 

sold under OFF. The total value of humanitarian goods to the Kurdish 13% acVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
15

5Office of the Iraq Programme Oil-for-Food, homepage http://www.un.org/Depts/oip/ (last 

accessed April 11, 2004). 6 Borad (sic) OF Youth and Sports M.O.U (phase 11), 13–05–00034 SECT(34) Project of construction of olympic sports city Including :Architecture works Civil works Electrical works Mechanical works All other requirements, available at http://www.un.org/Depts/oip/dp/dp11/13–

05.pdf (last accessed April 11, 2004). 

count should have been equal to $8.4bn. The international community earmarked 

money for the Kurds to safeguard against Saddam’s regime discriminating against 

the Kurds and in recognition of the disproportionate suffering of Iraqi Kurdistan 

during the years of Saddam’s rule;

• In practise, Iraqi Kurdistan received goods worth only around $4.4bn (6.8% of 

Iraqi oil revenues);

• Iraqi Kurdistan is therefore owed some $4bn in OFF goods;

• OFF often maintained large cash balances of up to $12bn. Interest earnings on 

these cash balances, and in particular on the value of goods owed to Iraqi 

Kurdistan, have not been accounted for;

• OFF failed to protect Iraqi Kurdistan against the kind of Arab nationalist discrimination against the Kurds that the Iraqi state had practiced for decades. Instead, OFF became a vehicle for discrimination by withholding humanitarian 

goods from the Kurds;

• Iraqi Kurdistan did not receive its full OFF allocation because of political manipulation by the Iraqi regime, with which the UN was complicit, UN inefficiencies 

and UN political bias;

• Iraqi Kurdistan demonstrably used its meagre share of OFF goods more efficiently 

than the Iraqi regime. 

Recommendations 

• Iraqi Kurdistan is now a recognised legal entity within the framework of the 

Transitional Administrative Law (TAL) and, along with the government of Iraq, 

may be in a position to take legal action to recover what it is owed from OFF.

• There must be a full and independent inquiry into OFF that is entirely separate 

from the UN

• All OFF funds and purchases must be fully accounted for under the auspices of 

a genuinely independent and external audit;

• Iraqi Kurdistan should receive all withheld OFF funds, with interest, and be compensated for delayed good deliveries. 

ANALYSIS

1. How OFF was supposed to work 

To alleviate the effect of UN sanctions imposed in 1990, the UN and the Iraqi 

regime agreed OFF. A key official negotiating OFF was the then UN Under Secretary-General, Kofi Annan. OFF was set up by UN Security Council Resolution 

986, passed in 1995 (UNSCR 986/1995, appendix 1) which stipulated that Iraq only 

be sold oil was under UN supervision. Humanitarian goods were then to be supplied 

to the areas of Iraq under the Iraqi regime’s control and to the three northern 

governorates of Iraqi Kurdistan. 

The oil revenues were divided up into four streams:

• 59% for humanitarian goods to be delivered to the areas of Iraq under 

Saddam’s control;

• 13% for humanitarian goods to be delivered to Iraqi Kurdistan;

• 3% to cover UN administrative costs (of which 2.2% OFF and 0.8% arms inspections);

• 25% to be paid in compensation for the Iraqi invasion of Kuwait.

Implementation of OFF was regulated by the Memorandum of Understanding 

(MOU) between the UN and the Iraqi regime and the KRG (appendix 2). OFF was 

run by the UN Office of the Iraq Program (OIP), headed by Benon Sevan.5

Humanitarian goods were defined in the MOU paragraph 5 of Section II (appendix 2) as: ‘‘medicine, health supplies, foodstuffs and materials and supplies for essential civilian needs.’’ Although nothing like the full allocation of goods was ever 

delivered to Iraqi Kurdistan, the definition of humanitarian goods was stretched to 

include funding for ‘‘Project of construction of olympic sports city’’ (sic).6 The cost 

16

7 ANNEX III [Original: English] Distribution plan for phase XII Submitted by the government 

of Iraq to the Secretary-General in accordance with the memorandum of understanding of 20 

May 1996 and Security Council resolution 1409 (2002) paragraph 237 ‘‘$20 million will be allocated for the construction of the Olympic stadium which include several electrical and mechanical works as well as sanitary installations. In addition, this amount will be utilized for the importation of equipment sets, air conditioning sets, communication networks and electronic computers.’’ Available at http://www.un.org/Depts/oip/dp/dp12/execsummary.pdf (last accessed April 

11, 2004) 

of the project was $20m.7 Sports in Iraq were under the control of Saddam Hussein’s older son, Uday. 

2. OFF and the KRG 

Iraqi Kurdistan is governed by the Kurdistan Regional Government (KRG) with 

two administrations. One administration is based in Irbil and is majority controlled 

by the Kurdistan Democratic Party (KDP). The other in Suleimani is majority controlled by the Patriotic Union of Kurdistan (PUK). Although each administration 

has its own ministries for social services, the two administrations integrated their 

operations for OFF. 

The KRG authorities have been providing comprehensive public services to their 

populations since 1992. These include healthcare, education, personal security and 

social services to approximately four million Iraqi citizens in Iraqi Kurdistan, a region the size of Vermont. 

Although the KRG authorities provided essential support services for the implementation of OFF projects, they never received their administrative costs associated 

with running these public services from OFF. Instead, the KRG was responsible for 

paying salaries of all schoolteachers, doctors, health care workers and public utility 

employees, as well as covering the costs of law enforcement duties. This was done 

by raising revenues through local duties and taxes. The burden on the KRG of administrative costs was higher than for the Iraqi regime because:

• the Iraqi regime imposed a blockade of Iraqi Kurdistan in violation of its undertakings. The MOU (MOU paragraph 5 in Section II, see appendix 2) had 

clearly stated that the Iraqi regime ‘‘throughout the country’’ would ‘‘effectively guarantee equitable distribution’’ of ‘‘medicine, health supplies, foodstuffs and materials and supplies for essential civilian needs.’’ Instead, there 

was intermittent withholding of petrol supplies (appendix 8)

• there were embargoes applied by regional states specifically against Iraqi 

Kurdistan;

• the KRG had incurred the additional costs of having to start their administrations from scratch after the Iraqi regime withdrew its administration from 

Iraqi Kurdistan in October 1991. 

3. How OFF withheld money to Iraqi Kurdistan 

The supposed 13% in revenues from OFF equalled only 6.8% because of Iraqi regime obstruction that the UN facilitated and abetted. The UN Security Council 

mandated that 13% of Iraqi oil revenues were to provide humanitarian goods for 

Iraqi Kurdistan. Due to Iraqi obstruction, aided and abetted by the UN, goods worth 

only 6.8% of revenues were delivered. 

The KRG realised early on that OFF was not working well and sent a memorandum to the UN in 1999 (appendix 3). 

The Iraqi regime held up spending in Iraqi Kurdistan and discriminated against 

the region by:

• delaying or impeding the flow of materials and technical experts to Iraqi 

Kurdistan;

• refusing to issue visas to UN staff and experts. Under the MOU staff working 

for OFF had ‘‘the right of unimpeded entry into and exit from Iraq’’ and that 

visas be issued ‘‘promptly and free of charge’’ (MOU paragraph 46 in Section 

VIII, see appendix 2). The Iraqi regime frequently violated this obligation, a 

violation that the UN failed to address;

• refusing to allow a power station to be built in Iraqi Kurdistan;

• preventing supplies of vital goods. For example, during 2002, the chief maternity hospital in Suleimani was receiving no more than 2,000 surgical gloves 

per month when 10,000 were required (see appendix 7);

• exploiting the mention in UNSCR 986/1995 and the 1995 Memorandum of 

Understanding of the UN’s support for ‘‘the sovereignty and territorial integrity of Iraq’’ to hold up spending Iraqi Kurdistan because of the alleged sepaVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
17

8Profile of Dr Hussein Abdel-Razzak Al Gezairy available at http://www.emro.who.int/rd/biography.htm (last accessed April 10, 2004). Dr Al Gezairy has been regional director since 1982. 9 Biography available at http://www.ceip.org/files/about/Staff.asp?r=171 (last accessed April 10, 

2004).

ratism of the Iraqi Kurds. In fact, the KRG never declared independence and 

continued to use Iraqi currency and regard themselves as part of Iraq;

• recruiting UN staff to help Iraqi intelligence. In one case a Tunisian working 

for the UN was caught with explosives in his car while in Iraqi Kurdistan. 

Iraqi intelligence sabotaged the work of those UN personnel and offices that 

they could not suborn. Iraqi intelligence appears to have been behind the 

murder in 1998 of Nicholas Speight, a New Zealander working for UNOPS 

on de-mining;

• failing to allow necessary equipment, such as large number of de-mining 

equipment,;

• refusing to provide UN with map/records of the mine fields and a continuous 

targeted campaign against the UN program in the region;

The UN participated in withholding spending from the 13% account for Iraqi 

Kurdistan through:

• the employment of poor quality staff, personnel who clearly lacked expertise 

in their respective fields and who undertook inferior and wasteful procurement policies (appendix 4);

• delaying implementation of the building of a hospital in Suleimani, a city of 

700,000 that still does not have a proper general hospital. Funds were allocated in 1998 but the hospital has yet to be built. The official responsible was 

Dr Hussein Abdel-Razzak Al Gezairy, the regional director of the World 

Health Organization (WHO) East Mediterranean Regional Office (EMRO).8

Foreign and Kurdish doctors protested about the behaviour of the UN with 

regard to hospitals in a letter in 2002 (appendices 3 and 5); 

• the absence of proper and adequate consultation with the local authorities;

• the lack of proper co-coordinating procedure by the various UN agencies 

among themselves;

• a poorly thought out the general concept and management of OFF from inception. Secretary-General Annan received a recommendation from UNOPS, the 

only self-financing UN agency which undertakes project-management services, to create one sole agency to run OFF. The sole agency recommended by 

UNOPS would have set policy, implemented the program and dealt with the 

Iraqi partners directly. Instead, the Secretary-General set up the Office of the 

Iraq Program (OIP) in New York and a coordinating office known as the UN 

Humanitarian Coordinator for Iraq (UNOCHI). UNOCHI reported to OIP. 

Also reporting to OIP, but working side by side to UNOCHI, were nine separate UN agencies, each of which in turn delegated the work to their Middle 

East regional offices which in turn dealt with the Iraqi partners;

• excessive bureaucracy that caused needless delays in carrying out already 

agreed projects;

• allowing the Iraqi regime to dictate hiring policies. There was a tacit agreement between OIP and the Iraqi regime that none of the foreign UN staff 

would be either British or American nationals. In addition, the OIP and UN 

agencies deliberately refused to employ any Kurd among its international 

staff, even though there are many well-known Kurds working within the UN 

system with valuable expertise on Iraq. The result was that a large number 

of staff from Arab countries, France and Russia ended up dominating the programme. Many of these staff members were openly hostile to the Iraqi Kurds. 

The actual programme heads of OFF ended up becoming lobbyists against the 

very sanction that the UN sought to enforce.

The UN gave itself a clear financial incentive to add bureaucracy to OFF through 

its very high 2.2% administrative fee. The size of the fee was entirely unjustified 

and has been widely condemned. One experienced oil executive, Edward C. Chow,9

a visiting scholar at the Carnegie Endowment for International Peace, a Washington 

D.C. think tank, stated on April 17, 2003 that: 

18

10 Carnegie Endowment for International Peace, ‘‘BRIEFING ON IRAQ’S FUTURE: WHAT 

NOW?’’ Transcript available at: 

http://www.ceip.org/files/events/2003–04–18-iraq-future-tscript.asp (last accessed April 10, 2004).

‘‘The U.N. Oil-for-Food Program currently takes an administrative cost margin of 21⁄2 percent. That is enormous. I mean, that is absolutely huge. . . . That 

is outrageous.’’ 10

Despite these obstacles, the KRG used the 6.8% goods that were handed over 

more efficiently than the 59% of oil revenues given to the Iraqi regime. For example, 

infant mortality in Iraqi Kurdistan dropped despite the UN sanctions, regional sanctions and the Kurdish civil war. 

OFF also undermined the economy of Iraqi Kurdistan and continued the Iraqi regime policy of destroying Kurdish agriculture. During the 1980s Iraq had imported 

large quantities of foreign wheat even though wheat could be grown at a far lower 

cost in Iraqi Kurdistan. OFF engaged in the blanket distribution of free food. This 

prevented the rehabilitation of Iraqi Kurdistan’s agricultural sector. Farmers had no 

local market in which to sell agricultural products, which forced down prices and 

kept unemployment higher than necessary. 

The end result of UN and Iraqi regime obstruction was that by the time of the 

Iraq war in March 2003, Iraqi Kurdistan was owed an estimated $4bn or 47.6% of 

the value of goods that should have been delivered to Iraqi Kurdistan. 

4. How the UN deliberately made OFF unaccountable 

The UN took immediate advantage of the impending hostilities in early 2003 to 

come up with a plan that would allow it to mingle monies in the 59% and 13% accounts. The logic of the plan was that the Iraq war would lead to a humanitarian 

catastrophe. The UN would therefore need immediate access to cash to provide humanitarian relief to Iraqis. The UN therefore planned to take unspent 13% account 

money and use it as it saw fit. The convenient result would be that full accounting 

for unspent 13% account money would became extremely difficult. 

The two Kurdish leaders, Massoud Barzani of the KDP and Jalal Talabani of the 

PUK, wrote to Mr Annan on February 10, 2003 to protest at plans to merge the 

13% and 59% accounts. They never received a reply to their letter (appendix 9). 

4.i. UNSCR 1472/2003

Kofi Annan then wrote to the UN Security Council in March 2003 proposing the 

very plan that the Kurdish leaders had decried a month earlier. The Security Council Resolution put this plan into effect with UNSCR 1472/2003, passed during Operation Iraqi Freedom on March 28, 2003 (appendix 10) which:

• authorized the UN Secretary General to assume responsibility for the implementation of the OFF program for forty-five days;

• allowed the UN Secretary General to move money between the 13% and 59% 

accounts;

• institutionalised the misuse of revenues destined for Iraqi Kurdistan. Existing 

unspent revenue, most of which came from the 13% account, could be spent 

as the UN Secretary General saw fit. Clause 4 (f) stated that the money could 

be spent: ‘‘irrespective of the phase in which such funds entered the escrow 

accounts or the phase to which those funds may have been allocated.’’ Clause 

4 (f) clearly related to unspent by Kurdish 13% account money as there was 

little unspent money in the 59% account;

• further diminished accountability. The transfer between the 13% and 59% accounts was to be ‘‘on an exceptional and reimbursable basis’’ but there was 

no appropriate stipulation given as to the manner and timing of the reimbursement.

The Iraq war proved to be brief. There were no large refugee movements, shortages of food or epidemics. The provision in UNSCR 1472/2003 to allow for the 13% 

and 59% accounts to be merged was therefore redundant. Despite this, the UN Secretariat sought permission to keep OFF going under the new rules. The KRG representation at the UN warned against any measures which would leave OFF unaccountable and which might make it difficult to trace 13% account money (appendix 

11). Again the UN paid no heed to the views of the KRG. 

During post-war negotiations on a new UNSCR to potentially lift sanctions, and 

so end the need for OFF, the UN Secretariat asked UN Security Council to prolong 

the life of OFF. OFF was temporarily suspended on March 17, 2003 when the UN 

pulled its staff out of Iraq. UNSCR 1472/2003 of March 28, 2003 kept OFF going 

19

11The Office of Project Coordination website is http://www.opc-krg.net/ (last accessed April 20, 

2004). 

for a further 45 days. Benon Sevan, the executive director of OIP, was forced to 

admit to a closed meeting of UN Security Council on April 22, 2003 that:

• 11 of these 45 days had been taken up with dealing with procedural matters;

• that just $454.6 million in contracts had been processed by OFF out of what 

he estimated was $10 billion in contracts

As OFF was to end on May 12, 2003, Mr Sevan sought and received permission 

for a three-week prolongation to OFF. The UN Security Council unanimously agreed 

to keep OFF going until June 3, 2003. 

4.ii. UNSCR 1483/2003

After some weeks of negotiation, during which countries which had opposed the 

liberation of Iraq and had criticized sanctions threatened to keep sanctions in place, 

the UN decided to lift most of the sanctions that had been imposed by UNSCR 661/

1990, with UNSCR 1483/2003 (appendix 12) on May 22, 2003 (there was a follow 

up resolution, UNSCR 1500/2003 available at appendix 13). 

At the recommendation of the UN Secretary-General, UNSCR 1483/2003 stipulated that:

• remaining funds of the 13% account allocated to Iraqi Kurdistan were to be 

put into the Development Fund for Iraq, DFI (clause 16 d) which the Coalition had set up to succeed OFF;

• OFF was to be closed down six months after the resolution on November 21, 

2003.

The issue of the unspent 13% account money was not addressed. 

4. iii. UN admission that it held $1.6 billion in Kurdish cash 

The extent to which the UN had failed Iraqi Kurdistan started to come into the 

open during the summer of 2003. In a joint article in The New York Times (‘‘What 

Iraq Needs Now’’ July 9, 2003), Massoud Barzani and Jalal Talabani stated that:

‘‘It is a scandal that $4 billion destined for the Kurds sits, unused, in a 

United Nations-controlled French bank account because of past obstruction by 

Saddam Hussein and the present incompetence of the United Nations bureaucracy.’’

In reply, Edward Mortimer, Director of Communications for the UN Secretary 

General in a letter dated July 11, 2003 ‘‘UN and Iraqi Kurds’’ (The New York Times

July 14, 2003) stated that:

‘‘In fact, as of May 22, when the Security Council adopted Resolution 1483, there was only $1.6 billion in uncommitted funds in the account for the Kurdish-controlled area.’’

The statement about the ‘‘$1.6 billion in uncommitted funds’’ (i.e. cash) was an 

admission that 19% of the money due to Iraqi Kurdistan had not been spent on humanitarian goods as was promised. 

4. iv. UNSCR 1511/2003 and OFF project handover 

UNSCR 1511/2003 of October 8, 2003 (appendix 14) gave recognition to the Iraqi 

Governing Council (IGC). UNSCR 1511/2003 stated in clause 4 that:

‘‘the Governing Council and its ministers are the principal bodies of the Iraqi 

interim administration, which, without prejudice to its further evolution, embodies the sovereignty of the State of Iraq during the transitional period until 

an internationally recognized, representative government is established and assumes the responsibilities of the Authority [Coalition Provisional Authority].’’

The recognition of the IGC meant that for the first time the Kurds ended up fully 

in charge of their OFF projects. When OFF was closed the UN handed over all OFF 

projects to the Coalition Provisional Authority (CPA), which then gave them to the 

IGC. All Iraqi Kurdistan 13% projects were given by the IGC to the KRG Office of 

Project Coordination (OPC) in Irbil.11 The total value of projects under OPC is just 

$750 million, of which not one penny had been allocated to de-mining. 

OPC is precisely the structure that OFF should have adopted from the beginning 

but did not. OPC is a professional, streamlined business-style framework that is 

independent of the KRG but that has the full support of the KRG and operates according to international norms of accountability and transparency. 

20

12 Claudia Rosett ‘‘Turtle Bay’s Carnival of Corruption: Digging deeper into the scandalous 

Oil-for-Food program’’, National Review Online, March 21, 2004,http://www.nationalreview.com/

comment/rosett200403212155.asp (last accessed April 12, 2004). 

Significantly, OPC is headed by Dr. Akram Jaff, a former Middle East Director 

of FAO (a UN agency). Dr. Jaff was never employed or consulted by OIP during the 

operation of OFF, despite his obvious expertise in the field of humanitarian affairs 

and, in particular, Iraqi Kurdistan. 

4.v. The lack of accounting 

The UN handover of OFF to CPA has been grossly inadequate. For example, not 

a simple bank statement has been given by the UN in New York to CPA or the 

IGC.12

With regard to the 13% Iraqi Kurdistan account, the situation is even more unsat- isfactory. Of the $4 billion that is likely owed to Iraqi Kurdistan:

• just $750 million in money committed to humanitarian goods and humanitarian projects has been given to OPC;

• the $1.6 billion in ‘‘uncommitted funds’’ (i.e. cash) has not been accounted;

• the balance of the likely $4 billion owed to Iraqi Kurdistan is $1.65 billion. 

This money remains unaccounted for;

• there is no explanation as to what has happened to interest earnings on any 

of the unused 13% account monies. 

APPENDICES

APPENDIX 1

UNITED NATIONS SECURITY COUNCIL RESOLUTION 986 (1995)

APRIL 14 1995

The Security Council, 

Recalling its previous relevant resolutions, 

Concerned by the serious nutritional and health situation of the Iraqi population, 

and by the risk of a further deterioration in this situation, 

Convinced of the need as a temporary measure to provide for the humanitarian 

needs of the Iraqi people until the fulfilment by Iraq of the relevant Security Council resolutions, including notably resolution 687 (1991) of 3 April 1991, allows the 

Council to take further action with regard to the prohibitions referred to in resolution 661 (1990) of 6 August 1990, in accordance with the provisions of those resolutions, 

Convinced also of the need for equitable distribution of humanitarian relief to all 

segments of the Iraqi population throughout the country, 

Reaffirming the commitment of all Member States to the sovereignty and territorial integrity of Iraq, 

Acting under Chapter VII of the Charter of the United Nations, 

1. Authorizes States, notwithstanding the provisions of paragraphs 3 (a), 3 (b) and 

4 of resolution 661 (1990) and subsequent relevant resolutions, to permit the import 

of petroleum and petroleum products originating in Iraq, including financial and 

other essential transactions directly relating thereto, sufficient to produce a sum not 

exceeding a total of one billion United States dollars every 90 days for the purposes 

set out in this resolution and subject to the following conditions: 

(a) Approval by the Committee established by resolution 661 (1990), in order to 

ensure the transparency of each transaction and its conformity with the other provisions of this resolution, after submission of an application by the State concerned, 

endorsed by the Government of Iraq, for each proposed purchase of Iraqi petroleum 

and petroleum products, including details of the purchase price at fair market value, 

the export route, the opening of a letter of credit payable to the escrow account to 

be established by the Secretary-General for the purposes of this resolution, and of 

any other directly related financial or other essential transaction; 

(b) Payment of the full amount of each purchase of Iraqi petroleum and petroleum 

products directly by the purchaser in the State concerned into the escrow account 

to be established by the Secretary-General for the purposes of this resolution; 

2. Authorizes Turkey, notwithstanding the provisions of paragraphs 3 (a), 3 (b) 

and 4 of resolution 661 (1990) and the provisions of paragraph 1 above, to permit 

the import of petroleum and petroleum products originating in Iraq sufficient, after 

the deduction of the percentage referred to in paragraph 8 (c) below for the Compensation Fund, to meet the pipeline tariff charges, verified as reasonable by the 

21

independent inspection agents referred to in paragraph 6 below, for the transport 

of Iraqi petroleum and petroleum products through the Kirkuk-Yumurtalik pipeline 

in Turkey authorized by paragraph 1 above; 

3. Decides that paragraphs 1 and 2 of this resolution shall come into force at 

00.01 Eastern Standard Time on the day after the President of the Council has informed the members of the Council that he has received the report from the Secretary-General requested in paragraph 13 below, and shall remain in force for an 

initial period of 180 days unless the Council takes other relevant action with regard 

to the provisions of resolution 661 (1990); 

4. Further decides to conduct a thorough review of all aspects of the implementation of this resolution 90 days after the entry into force of paragraph 1 above and 

again prior to the end of the initial 180 day period, on receipt of the reports referred 

to in paragraphs 11 and 12 below, and expresses its intention, prior to the end of 

the 180 day period, to consider favourably renewal of the provisions of this resolution, provided that the reports referred to in paragraphs 11 and 12 below indicate 

that those provisions are being satisfactorily implemented; 

5. Further decides that the remaining paragraphs of this resolution shall come 

into force forthwith; 

6. Directs the Committee established by resolution 661 (1990) to monitor the sale 

of petroleum and petroleum products to be exported by Iraq via the KirkukYumurtalik pipeline from Iraq to Turkey and from the Mina al-Bakr oil terminal, 

with the assistance of independent inspection agents appointed by the SecretaryGeneral, who will keep the Committee informed of the amount of petroleum and petroleum products exported from Iraq after the date of entry into force of paragraph 

1 of this resolution, and will verify that the purchase price of the petroleum and 

petroleum products is reasonable in the light of prevailing market conditions, and 

that, for the purposes of the arrangements set out in this resolution, the larger 

share of the petroleum and petroleum products is shipped via the KirkukYumurtalik pipeline and the remainder is exported from the Mina al-Bakr oil terminal; 

7. Requests the Secretary-General to establish an escrow account for the purposes 

of this resolution, to appoint independent and certified public accountants to audit 

it, and to keep the Government of Iraq fully informed; 

8. Decides that the funds in the escrow account shall be used to meet the humanitarian needs of the Iraqi population and for the following other purposes, and requests the Secretary-General to use the funds deposited in the escrow account: 

(a) To finance the export to Iraq, in accordance with the procedures of the Committee established by resolution 661 (1990), of medicine, health supplies, foodstuffs, 

and materials and supplies for essential civilian needs, as referred to in paragraph 

20 of resolution 687 (1991) provided that: 

(i) Each export of goods is at the request of the Government of Iraq; 

(ii) Iraq effectively guarantees their equitable distribution, on the basis of a plan 

submitted to and approved by the Secretary-General, including a description of the 

goods to be purchased; 

(iii) The Secretary-General receives authenticated confirmation that the exported 

goods concerned have arrived in Iraq; 

(b) To complement, in view of the exceptional circumstances prevailing in the 

three Governorates mentioned below, the distribution by the Government of Iraq of 

goods imported under this resolution, in order to ensure an equitable distribution 

of humanitarian relief to all segments of the Iraqi population throughout the country, by providing between 130 million and 150 million United States dollars every 

90 days to the United Nations Inter-Agency Humanitarian Programme operating 

within the sovereign territory of Iraq in the three northern Governorates of Dihouk, 

Arbil and Suleimaniyeh, except that if less than one billion United States dollars 

worth of petroleum or petroleum products is sold during any 90 day period, the Secretary-General may provide a proportionately smaller amount for this purpose; 

(c) To transfer to the Compensation Fund the same percentage of the funds deposited in the escrow account as that decided by the Council in paragraph 2 of resolution 705 (1991) of 15 August 1991; 

(d) To meet the costs to the United Nations of the independent inspection agents 

and the certified public accountants and the activities associated with implementation of this resolution; 

(e) To meet the current operating costs of the Special Commission, pending subsequent payment in full of the costs of carrying out the tasks authorized by section 

C of resolution 687 (1991); 

(f) To meet any reasonable expenses, other than expenses payable in Iraq, which 

are determined by the Committee established by resolution 661 (1990) to be directly 

related to the export by Iraq of petroleum and petroleum products permitted under 

22

paragraph 1 above or to the export to Iraq, and activities directly necessary therefor, 

of the parts and equipment permitted under paragraph 9 below; 

(g) To make available up to 10 million United States dollars every 90 days from 

the funds deposited in the escrow account for the payments envisaged under paragraph 6 of resolution 778 (1992) of 2 October 1992; 

9. Authorizes States to permit, notwithstanding the provisions of paragraph 3 (c) 

of resolution 661 (1990): 

(a) The export to Iraq of the parts and equipment which are essential for the safe 

operation of the Kirkuk-Yumurtalik pipeline system in Iraq, subject to the prior approval by the Committee established by resolution 661 (1990) of each export contract; 

(b) Activities directly necessary for the exports authorized under subparagraph (a) 

above, including financial transactions related thereto; 

10. Decides that, since the costs of the exports and activities authorized under 

paragraph 9 above are precluded by paragraph 4 of resolution 661 (1990) and by 

paragraph 11 of resolution 778 (1991) from being met from funds frozen in accordance with those provisions, the cost of such exports and activities may, until funds 

begin to be paid into the escrow account established for the purposes of this resolution, and following approval in each case by the Committee established by resolution 

661 (1990), exceptionally be financed by letters of credit, drawn against future oil 

sales the proceeds of which are to be deposited in the escrow account; 

11. Requests the Secretary-General to report to the Council 90 days after the date 

of entry into force of paragraph 1 above, and again prior to the end of the initial 

180 day period, on the basis of observation by United Nations personnel in Iraq, and 

on the basis of consultations with the Government of Iraq, on whether Iraq has ensured the equitable distribution of medicine, health supplies, foodstuffs, and materials and supplies for essential civilian needs, financed in accordance with paragraph 8 (a) above, including in his reports any observations he may have on the adequacy of the revenues to meet Iraq’s humanitarian needs, and on Iraq’s capacity to 

export sufficient quantities of petroleum and petroleum products to produce the sum 

referred to in paragraph 1 above; 

12. Requests the Committee established by resolution 661 (1990), in close coordination with the Secretary-General, to develop expedited procedures as necessary to 

implement the arrangements in paragraphs 1, 2, 6, 8, 9 and 10 of this resolution 

and to report to the Council 90 days after the date of entry into force of paragraph 

1 above and again prior to the end of the initial 180 day period on the implementation of those arrangements; 

13. Requests the Secretary-General to take the actions necessary to ensure the 

effective implementation of this resolution, authorizes him to enter into any necessary arrangements or agreements, and requests him to report to the Council when 

he has done so; 

14. Decides that petroleum and petroleum products subject to this resolution shall 

while under Iraqi title be immune from legal proceedings and not be subject to any 

form of attachment, garnishment or execution, and that all States shall take any 

steps that may be necessary under their respective domestic legal systems to assure 

this protection, and to ensure that the proceeds of the sale are not diverted from 

the purposes laid down in this resolution; 

15. Affirms that the escrow account established for the purposes of this resolution 

enjoys the privileges and immunities of the United Nations; 

16. Affirms that all persons appointed by the Secretary-General for the purpose 

of implementing this resolution enjoy privileges and immunities as experts on mission for the United Nations in accordance with the Convention on the Privileges and 

Immunities of the United Nations, and requires the Government of Iraq to allow 

them full freedom of movement and all necessary facilities for the discharge of their 

duties in the implementation of this resolution; 

17. Affirms that nothing in this resolution affects Iraq’s duty scrupulously to adhere to all of its obligations concerning servicing and repayment of its foreign debt, 

in accordance with the appropriate international mechanisms; 

18. Also affirms that nothing in this resolution should be construed as infringing 

the sovereignty or territorial integrity of Iraq; 

19. Decides to remain seized of the matter. 

23

APPENDIX 2

IMPLEMENTATION OF SECURITY COUNCIL RESOLUTION 986 (1995) AND THE

MEMORANDUM OF UNDERSTANDING

MEMORANDUM OF UNDERSTANDING BETWEEN THE SECRETARIAT OF THE UNITED NA- TIONS AND THE GOVERNMENT OF IRAQ ON THE IMPLEMENTATION OF SECURITY COUN- CIL RESOLUTION 986 (1995)

SECTION I

General provisions 

1. The purpose of this Memorandum of Understanding is to ensure the effective 

implementation of Security Council resolution 986 (1995) (hereinafter the Resolution). 

2. The Distribution Plan referred to in paragraph 8 (a) (ii) of the Resolution, 

which has to be approved by the Secretary-General of the United Nations, constitutes an important element in the implementation of the Resolution. 

3. Nothing in the present Memorandum should be construed as infringing upon 

the sovereignty or territorial integrity of Iraq. 

4. The provisions of the present Memorandum pertain strictly and exclusively to 

the implementation of the Resolution and, as such, in no way create a precedent. 

It is also understood that the arrangement provided for in the Memorandum is an 

exceptional and temporary measure. 

SECTION II

Distribution Plan 

5. The Government of Iraq undertakes to effectively guarantee equitable distribution to the Iraqi population throughout the country of medicine, health supplies, 

foodstuffs and materials and supplies for essential civilian needs (hereinafter humanitarian supplies) purchased with the proceeds of the sale of Iraqi petroleum and 

petroleum products. 

6. To this end, the Government of Iraq shall prepare a Distribution Plan describing in detail the procedures to be followed by the competent Iraqi authorities with 

a view to ensuring such distribution. The present distribution system of such supplies, the prevailing needs and humanitarian conditions in the various Governorates 

of Iraq shall be taken into consideration with due regard to the sovereignty of Iraq 

and the national unity of its population. The plan shall include a categorized list 

of the supplies and goods that Iraq intends to purchase and import for this purpose 

on a six-month basis. 

7. The part of the Distribution Plan related to the three northern Governorates 

of Arbil, Dihouk and Suleimaniyeh shall be prepared in accordance with Annex I, 

which constitutes an integral part of this Memorandum. 

8. The Distribution Plan shall be submitted to the Secretary-General of the 

United Nations for approval. If the Secretary-General is satisfied that the plan adequately ensures equitable distribution of humanitarian supplies to the Iraqi population throughout the country, he will so inform the Government of Iraq. 

9. It is understood by the Parties to this Memorandum that the Secretary-General 

will not be in a position to report as required in paragraph 13 of the Resolution unless the plan prepared by the Government of Iraq meets with his approval. 

10. Once the Secretary-General approves the plan, he will forward a copy of the 

categorized list of the supplies and goods, which constitutes a part of the plan, to 

the Security Council Committee established by resolution 661 (1990) concerning the 

situation between Iraq and Kuwait (hereinafter the 661 Committee) for information. 

11. After the plan becomes operational, each Party to the present Memorandum 

may suggest to the other for its consideration a modification to the plan if it believes 

that such adjustment would improve the equitable distribution of humanitarian supplies and their adequacy. 

SECTION III

Establishment of the escrow account and audit of that account 

12. The Secretary-General, after consultations with the Government of Iraq, will 

select a major international bank and establish there the escrow account described 

in paragraph 7 of the Resolution, to be known as ‘‘the United Nations Iraq Account’’ 

(hereinafter the ‘‘Iraq Account’’). The Secretary-General will negotiate the terms of 

this account with the bank and will keep the Government of Iraq fully informed of 

his actions in choosing the bank and opening the account. All transactions and deductions mandated by the Security Council under paragraph 8 of the Resolution 

24

shall be made from the ‘‘Iraq Account’’, which will be administered in accordance 

with the relevant Financial Regulations and Rules of the United Nations. 

13. The Iraqi authorities might designate a senior banking official to liaise with 

the Secretariat of the United Nations on all banking matters relating to the ‘‘Iraq 

Account’’. 

14. In accordance with the United Nations Financial Regulations, the ‘‘Iraq Account’’ will be audited by the Board of Auditors who are external independent public 

auditors. As provided for in the Regulations, the Board of Auditors will issue periodic reports on the audit of the financial statements relating to the account. Such 

reports will be submitted by the Board to the Secretary-General who will forward 

them to the 661 Committee and to the Government of Iraq. 

15. Nothing in this Memorandum shall be interpreted to create a liability on the 

part of the United Nations for any purchase made by the Government of Iraq or 

any agents acting on its behalf pursuant to the provisions of the Resolution. 

SECTION IV

Sale of petroleum and petroleum products originating in Iraq 

16. Petroleum and petroleum products originating in Iraq will be exported via the 

Kirkuk-Yumurtalik pipeline through Turkey and from the Mina al-Bakr oil terminal. The 661 Committee will monitor the exports through those outlets to ensure 

that they are consistent with the Resolution. Transportation costs in Turkey will be 

covered by an additional amount of oil, as foreseen in the Resolution and in accordance with procedures to be established by the 661 Committee. The arrangement between Iraq and Turkey concerning the tariffs and payment modalities for the use 

of Turkish oil installations has been provided to the 661 Committee. 

17. Each export of petroleum and petroleum products originating in Iraq shall be 

approved by the 661 Committee. 

18. Detailed provisions concerning the sale of Iraqi petroleum and petroleum products are contained in Annex II, which constitutes an integral part of this Memorandum. 

SECTION V

Procurement and confirmation procedures 

19. The purchase of medicine, health supplies, foodstuffs, and materials and supplies for essential civilian needs of the Iraqi population throughout the country, as 

referred to in paragraph 20 of resolution 687 (1991), will, subject to paragraph 20 

below, be carried out by the Government of Iraq, will follow normal commercial 

practice and be on the basis of the relevant resolutions of the Security Council and 

procedures of the 661 Committee. 

20. The purchase of humanitarian supplies for the three northern Governorates 

of Arbil, Dihouk and Suleimaniyeh, as provided for in the Distribution Plan, will 

be carried out in accordance with Annex I. 

21. The Government of Iraq will, except as provided for in paragraph 20, contract 

directly with suppliers to arrange the purchase of supplies, and will conclude the 

appropriate contractual arrangements. 

22. Each export of goods to Iraq shall be at the request of the Government of Iraq 

pursuant to paragraph 8 (a) of the Resolution. Accordingly, exporting States will 

submit all relevant documentation, including contracts, for all goods to be exported 

under the Resolution to the 661 Committee for appropriate action according to its 

procedures. It is understood that payment of the supplier from the ‘‘Iraq Account’’ 

can take place only for items purchased by Iraq that are included in the categorized 

list referred to in Section II of the present Memorandum. Should exceptional circumstances arise, applications for the export of additional items may be submitted 

to the 661 Committee for its consideration. 

23. As noted above, the 661 Committee will take action on applications for the 

export of goods to Iraq in accordance with its existing procedures subject to future 

modifications under paragraph 12 of the Resolution. The 661 Committee will inform 

the Government of Iraq, requesting States, and the Secretary-General of the actions 

taken on the requests submitted. 

24. After the 661 Committee has taken action on the applications for export in 

accordance with its procedures, the Central Bank of Iraq will request the bank holding the ‘‘Iraq Account’’ to open irrevocable letters of credit in favour of the beneficiaries. Such requests shall be referred by the bank holding the ‘‘Iraq Account’’ to 

the United Nations Secretariat for approval of the opening of the letter of credit by 

the latter bank, allowing payment from the ‘‘Iraq Account’’ upon presentation of 

credit-conform documents. The letter of credit will require as condition of payment, 

inter alia, the submission to the bank holding the ‘‘Iraq Account’’ of the documents 

25

to be determined by the procedures established by the 661 Committee, including the 

confirmations by the agents referred to in paragraph 25 below. The United Nations, 

after consultations with the Government of Iraq, shall determine the clause to be 

inserted in all purchase orders, contracts and letters of credit regarding payment 

terms from the ‘‘Iraq Account’’. All charges incurred in Iraq are to be borne by the 

applicant, whereas all charges outside Iraq are for the account of the beneficiary. 

25. The arrival of goods in Iraq purchased under the plan will be confirmed by 

independent inspection agents to be appointed by the Secretary-General. No payments can be made until the independent inspection agents provide the SecretaryGeneral with authenticated confirmation that the exported goods concerned have arrived in Iraq. 

26. The independent inspection agents may be stationed at relevant Iraqi entry 

points, customs areas or other locations where the functions set out in paragraph 

27 of this Section can be performed. The number and location of the stationing 

points for the agents will be designated by the United Nations after consultations 

with the Government of Iraq. 

27. The independent inspection agents will confirm delivery to Iraq of shipments. 

They will compare the appropriate documentation, such as bills of lading, other 

shipping documents or cargo manifests, and the documents issued by the 661 Committee, against goods actually arriving in Iraq. They will also have the authority 

to perform duties necessary for such confirmation, including: quantity inspection by 

weight or count, quality inspection including visual inspection, sampling, and, when 

necessary, laboratory testing. 

28. The inspection agents will report all irregularities to the Secretary-General 

and to the 661 Committee. If the problem is related to normal commercial practice 

(e.g., some shortlanded goods), the 661 Committee and the Government of Iraq are 

informed, but normal commercial resolution practices (e.g., claims) go forth. If the 

matter is of serious concern, the independent inspection agents will hold the shipment in question pending guidance from the 661 Committee. 

29. As regards the export to Iraq of parts and equipment which are essential for 

the safe operation of the Kirkuk-Yumurtalik pipeline system in Iraq, the requests 

will be submitted to the 661 Committee by the national Government of the supplier. 

Such requests will be considered for approval by the Committee in accordance with 

its procedures. 

30. If the 661 Committee has approved a request in accordance with paragraph 

29, the provisions of paragraph 24 shall apply. However, since the supplier can expect payment against future oil sales, as stated in paragraph 10 of the Resolution, 

the proceeds of which are to be deposited in the ‘‘Iraq Account’’, the bank holding 

the ‘‘Iraq Account’’ will issue an irrevocable letter of credit stipulating that payment 

can only be effected when at the time of drawing the ‘‘Iraq Account’’ has sufficient 

disposable funds and the United Nations Secretariat approves the payment. 

31. The requirement of authenticated confirmation of arrival provided for in this 

Section shall apply also to the parts and equipment mentioned in paragraph 29. 

SECTION VI

Distribution of humanitarian supplies purchased under the Distribution Plan 

32. The distribution of humanitarian supplies shall be undertaken by the Government of Iraq in accordance with the Distribution Plan referred to in Section II of 

the present Memorandum. The Government of Iraq will keep the United Nations 

observation personnel informed about the implementation of the plan and the activities that the Government is undertaking. 

33. The distribution of humanitarian supplies in the three northern Governorates 

of Arbil, Dihouk and Suleimaniyeh shall be undertaken by the United Nations 

Inter-Agency Humanitarian Programme on behalf of the Government of Iraq under 

the Distribution Plan with due regard to the sovereignty and territorial integrity of 

Iraq in accordance with Annex I. 

SECTION VII

Observation of the equitable distribution of humanitarian supplies and determination of their adequacy 

GENERAL PROVISIONS

34. The United Nations observation process will be conducted by United Nations 

personnel in Iraq under the overall authority of the Department of Humanitarian 

Affairs at United Nations Headquarters in New York in accordance with the proviVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
26

sions described below. Such observation shall apply to the distribution of humanitarian supplies financed in accordance with the procedures set out in the Resolution. 

35. The objectives of the United Nations observation process shall be: 

(a) to confirm whether the equitable distribution of humanitarian supplies to the 

Iraqi population throughout the country has been ensured; 

(b) to ensure the effectiveness of the operation and determine the adequacy of the 

available resources to meet Iraq’s humanitarian needs. 

OBSERVATION PROCEDURES

36. In observing the equitable distribution and its adequacy, United Nations personnel will use, inter alia, the following procedures. 

Food items 

37. The observation of the equitability of food distribution will be based on information obtained from local markets throughout Iraq, the Iraqi Ministry of Trade, 

the information available to the United Nations and its specialized agencies on food 

imports, and on sample surveys conducted by United Nations personnel. The observation will also include the quantity and prices of food items imported under the 

Resolution. 

38. To provide regular updated observation of the most pressing needs, a survey 

undertaken by United Nations agencies in cooperation with the appropriate Iraqi 

ministries will serve as a baseline for the continuing observation of nutritional status of the population of Iraq. This information will take account of public health 

data generated by the Ministry of Health (MOH) and the relevant United Nations 

agencies. 

Medical supplies and equipment 

39. Observation regarding distribution of medical supplies and equipment will 

focus on the existing distribution and storage system and will involve visits to hospitals, clinics as well as medical and pharmaceutical facilities where such supplies 

and equipment are stored. Such observation will also be guided by health statistics 

data from MOH and surveys by relevant United Nations agencies. 

Water/sanitation supplies and equipment 

40. Observation of distribution of water/sanitation supplies and equipment will 

focus on the determination that they are used for their intended purposes. Confirmation will be carried out by collecting data on the incidence of water-borne diseases and by water quality control checks by visits to water and sanitation facilities 

by representatives of relevant United Nations agencies. In this regard the United 

Nations will rely on all relevant indicators. 

Other materials and supplies 

41. With reference to materials and supplies which do not fall within the three 

areas indicated above, in particular, those needed for the rehabilitation of infrastructures essential to meet humanitarian needs, observation will focus on confirmation that such materials and supplies are delivered to the predefined destinations 

in accordance with the Distribution Plan and that they are used for their intended 

purposes, and on the determination of whether these materials and supplies are 

adequate or necessary to meet essential needs of the Iraqi population. 

COORDINATION AND COOPERATION

42. The United Nations observation activities will be coordinated by the Department of Humanitarian Affairs at United Nations Headquarters in New York. Observation will be undertaken by United Nations personnel. The exact number of such 

personnel will be determined by the United Nations taking into account the practical requirements. The Government of Iraq will be consulted in this regard. 

43. The Iraqi authorities will provide to United Nations personnel the assistance 

required to facilitate the performance of their functions. United Nations personnel 

will coordinate with the Iraqi competent authorities. 

44. In view of the importance of the functions which United Nations personnel 

will perform in accordance with the provisions of this Section of the Memorandum, 

such personnel shall have, in connection with the performance of their functions, 

unrestricted freedom of movement, access to documentary material which they find 

relevant having discussed the matter with the Iraqi authorities concerned, and the 

possibility to make such contacts as they find essential. 

27

SECTION VIII

Privileges and Immunities 

45. In order to facilitate the successful implementation of the Resolution the following provisions concerning privileges and immunities shall apply: 

(a) officials of the United Nations and of any of the Specialized Agencies performing functions in connection with the implementation of the Resolution shall 

enjoy the privileges and immunities applicable to them under Articles V and VII of 

the Convention on the Privileges and Immunities of the United Nations, or Articles 

VI and VIII of the Convention on the Privileges and Immunities of the Specialized 

Agencies to which Iraq is a party; 

(b) independent inspection agents, technical experts and other specialists appointed by the Secretary-General of the United Nations or by heads of the Specialized Agencies concerned and performing functions in connection with the implementation of the Resolution, whose names will be communicated to the Government of 

Iraq, shall enjoy the privileges and immunities accorded to experts on mission for 

the United Nations or for the Specialized Agency under Article VI of the Convention 

on the Privileges and Immunities of the United Nations or the relevant Annexes of 

the Convention on the Privileges and Immunities of the Specialized Agencies respectively; 

(c) persons performing contractual services for the United Nations in connection 

with the implementation of the Resolution, whose names will be communicated to 

the Government of Iraq, shall enjoy the privileges and immunities referred to in 

sub-paragraph (b) above concerning experts on mission appointed by the United Nations. 

46. In addition, officials, experts and other personnel referred to in paragraph 45 

above shall have the right of unimpeded entry into and exit from Iraq and shall be 

issued visas by the Iraqi authorities promptly and free of charge. 

47. It is further understood that the United Nations and its Specialized Agencies 

shall enjoy freedom of entry into and exit from Iraq without delay or hindrance of 

supplies, equipment and means of surface transport required for the implementation 

of the Resolution and that the Government of Iraq agrees to allow them to, temporarily, import such equipment free of customs or other duties. 

48. Any issue relating to privileges and immunities, including safety and protection of the United Nations and its personnel, not covered by the provisions of this 

Section shall be governed by paragraph 16 of the Resolution. 

SECTION IX

Consultations 

49. The Secretariat of the United Nations and the Government of Iraq shall, if 

necessary, hold consultations on how to achieve the most effective implementation 

of the present Memorandum. 

SECTION X

Final clauses 

50. The present Memorandum shall enter into force following signature, on the 

day when paragraphs 1 and 2 of the Resolution become operational and shall remain in force until the expiration of the 180 day period referred to in paragraph 

3 of the Resolution. 

51. Pending its entry into force, the Memorandum shall be given by the United 

Nations and the Government of Iraq provisional effect.

SIGNED this 20th day of May 1996 at New York in two originals in English.

For the United Nations

(Signed) Hans CORELL 

Under-Secretary-General 

The Legal Counsel

For the Government of Iraq

(Signed) Abdul Amir AL–ANBARI 

Ambassador Plenipotentiary 

Head of the Delegation of Iraq 

ANNEX I

1. In order to ensure the effective implementation of paragraph 8 (b) of the Resolution, the following arrangements shall apply in respect of the Iraqi Governorates 

28

of Arbil, Dihouk and Suleimaniyeh. These arrangements shall be implemented with 

due regard to the sovereignty and territorial integrity of Iraq, and to the principle 

of equitable distribution of humanitarian supplies throughout the country. 

2. The United Nations Inter-Agency Humanitarian Programme shall collect and 

analyze pertinent information on humanitarian needs in the three northern 

Governorates. On the basis of that information, the Programme will determine the 

humanitarian requirements of the three northern Governorates for discussion with 

the Government of Iraq and subsequent incorporation in the Distribution Plan. In 

preparing estimates of food needs, the Programme will take into consideration all 

relevant circumstances, both within the three northern Governorates and in the rest 

of the country, in order to ensure equitable distribution. Specific rehabilitation 

needs in the three northern Governorates shall receive the necessary attention. 

3. Within a week following the approval of the Distribution Plan by the SecretaryGeneral, the Programme and the Government of Iraq will hold discussions to enable 

the Programme to determine how the procurement of humanitarian supplies for the 

three northern Governorates can be undertaken most efficiently. These discussions 

should be guided by the following considerations. The bulk purchase by the Government of Iraq of standard food commodities and medicine may be the most cost-effective means of procurement. Other materials and supplies for essential civilian 

needs, specifically required for the three northern Governorates, may be more suitably procured through the United Nations system in view of technical aspects related to their proper use. 

4. To the extent that purchases and deliveries are made by the Government of 

Iraq in response to the written communication of the Programme, an amount corresponding to the cost of the delivered goods will be deducted from the amount allocated to the Programme from the ‘‘Iraq Account’’. 

5. Humanitarian supplies destined for distribution in the three northern 

Governorates shall be delivered by the Programme to warehouses located within 

these Governorates. Such supplies can also be delivered by the Government of Iraq 

or the Programme, as appropriate, to warehouses in Kirkuk and Mosul. The warehouses shall be managed by the Programme. The Government of Iraq shall ensure 

the prompt customs and administrative clearances to enable the safe and quick 

transit of such supplies to the three northern Governorates. 

6. The Programme shall be responsible in the three northern Governorates for the 

storage, handling, internal transportation, distribution and confirmation of equitable 

distribution of humanitarian supplies. The Programme will keep the Government of 

Iraq informed on the implementation of distribution. 

7. Whenever possible and cost-effective, the Programme shall use appropriate 

local distribution mechanisms which are comparable to those existing in the rest of 

Iraq in order to effectively reach the population. Recipients under this arrangement 

will pay a fee for internal transportation, handling, and distribution as in the rest 

of the country. The Programme shall ensure that the special needs of internally displaced persons, refugees, hospital in-patients and other vulnerable groups in need 

of supplementary food are appropriately met, and will keep the Government of Iraq 

informed. 

8. The Programme will observe that humanitarian supplies are used for their intended purposes, through visits to sites and by collecting relevant data. The Programme will report to the Department of Humanitarian Affairs at United Nations 

Headquarters in New York and the Government of Iraq any violation observed by 

the Programme. 

ANNEX II

1. The State concerned or, if the 661 Committee so decides, the national petroleum purchaser authorized by the 661 Committee, shall submit to the Committee 

for handling and approval the application, including the relevant contractual documents covering the sales of such petroleum and petroleum products, for the proposed purchase of Iraqi petroleum and petroleum products, endorsed by the Government of Iraq or the Iraqi State Oil Marketing Organization (hereinafter SOMO) on 

behalf of the Government. Such endorsement could be done by sending a copy of 

the contract to the 661 Committee. The application shall include details of the purchase price at fair market value, the export route, opening of a letter of credit payable to the ‘‘Iraq Account’’, and other necessary information required by the Committee. The sales of petroleum and petroleum products shall be covered by contractual documents. A copy of these documents shall be included in the information provided to the 661 Committee together with the application for forwarding to the independent inspection agents described in paragraph 4 of this Annex. The contractual 

documents should contain the following information: quantity and quality of petroVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
29

leum and petroleum products, duration of contract, credit and payment terms and 

pricing mechanism. The pricing mechanism for petroleum should include the following points: marker crude oil and type of quotations to be used, adjustments for 

transportation and quality, and pricing dates. 

2. Irrevocable confirmed letters of credit will be opened by the oil purchaser’s 

bank with the irrevocable undertaking that the proceeds of the letter of credit will 

be paid directly to the ‘‘Iraq Account’’. For this purpose, the following clauses will 

have to be inserted in each letter of credit: 

‘‘— Provided all terms and conditions of this letter of credit are complied with, 

proceeds of this letter of credit will be irrevocably paid into the ‘‘Iraq Account’’ with 

. . . Bank.’’

‘‘— All charges within Iraq are for the beneficiary’s account, whereas all charges 

outside Iraq are to be borne by the purchaser.’’

3. All such letters of credit will have to be directed by the purchaser’s bank to 

the bank holding the ‘‘Iraq Account’’ with the request that the latter adds its confirmation and forwards it to the Central Bank of Iraq for the purpose of advising 

SOMO. 

4. The sale of petroleum and petroleum products originating in Iraq will be monitored by United Nations independent oil experts appointed by the Secretary-General of the United Nations to assist the 661 Committee. The monitoring of oil exports will be carried out by independent inspection agents at the loading facilities 

at Ceyhan and Mina al-Bakr and, if the 661 Committee so decides, at the pipeline 

metering station at the Iraq-Turkey border, and would include quality and quantity 

verification. They would authorize the loading, after they receive the information 

from the United Nations oil experts that the relevant contract has been approved, 

and report to the United Nations. 

5. The United Nations will receive monthly reports from SOMO on the actual volume and type of petroleum products exported under the relevant sales contracts. 

6. The United Nations Secretariat and SOMO shall maintain continuing contact 

and in particular United Nations oil experts shall meet routinely with SOMO representatives to review market conditions and oil sales. 

Letter dated 20 May 1996 from the Head of delegation of Iraq addressed to the Legal 

Counsel 

In reference to the memorandum of understanding signed today and as I advised 

you during the discussion that a letter would be sent to you concerning the position 

of Iraq as to the cost of production and transportation of oil inside Iraq, I state 

below Iraq’s position, which I request that you include in the official record of our 

discussion: 

The Iraqi delegation explained during the discussion that the cost of production 

and transportation of petroleum excluding expenses in local currency, is currently 

estimated at US$ 2.00 per barrel. Such cost had to be deducted from the sale price 

or recovered through the production and export of extra quantity of petroleum and 

petroleum products. In either case the amount referred to above would be deposited 

in the ‘‘Iraq account’’ to be utilized for the import of spare parts and other items 

necessary for the maintenance and sustaining of production and transportation operations as is the established practice in the oil industry, otherwise production and 

transportation operations would be hindered and eventually come to a halt. 

Nevertheless, and in order to facilitate the conclusion of this memorandum of understanding, the Iraqi delegation agreed not to insist on the acceptance of its position by the United Nations Secretariat delegation at this stage and agreed to have 

it included in a separate letter addressed to the Head of the delegation of the United 

Nations Secretariat for consideration in any future discussion. 

Although the matter is not discussed, the Iraqi delegation wishes to state that a 

third outlet for Iraqi petroleum export could be via the Syrian Arab Republic.

(SIGNED) AMBASSADOR A. AMIR ANBARI 

HEAD OF THE DELEGATION OF IRAQ

APPENDIX 3

OIL-FOR-FOOD PROGRAM IN NORTHERN GOVERNATES SUPPORTING DOCUMENT FOR THE

JOINT MEMORANDUM ON BEHALF OF THE KURDISTAN REGIONAL GOVERNMENT (PUK

& KDP) PRESENTED TO THE IRAQ REVIEW PANEL—MARCH 15, 1999

The Kurds and the KRG authority in the region of Iraqi Kurdistan were not consulted in the drafting of the original UNSC resolution 986 and the MOU that regulates its implementation. However the UN Security Council must have found in the 

30

devastated condition of Iraqi Kurdistan and the great need for rehabilitation of the 

region—compelling reasons to set the region’s share of SCR 986 revenues at 13–

15%. Regrettably, a decision by the UN has arbitrarily chosen the lower limit. We 

believe a fair and sensible review of the various aspects of 986 must take into consideration the totality of reasons, conditions, and rationale that led to the establishment of the program, and the distinction made with regard to UN’s own implementation in the three northern governorates as separate from GOI’s control in the rest 

of the country. 

The amount of 986 revenue targeted for the various phases of the program are 

not being realized for the full and effective implementation of the requirements of 

those phases. In the enhanced (Phase IV) program, no more than half of the projected amount has been realized. Phase V is not expected to fair any better. 

The time and funding necessary for the resettlement of nearly hundreds of thousands of internally displaced people (due to the destruction of some 4,500 villages 

and to forcible transfer of the population as part of GOI’s policy of ethnic cleansing) 

can hardly be met by the allocations under the existing phases of the program. 

The financial requirements for the rehabilitation of the electricity sector, which 

in its present state has serious adverse affects on water and sanitation as well as 

on essential services in the region, need to go far beyond the presently projected allocations for that sector under UNSC resolution 986 program. 

It is being argued that resolution of some of the problems in the 986 program require changes in the MOU and decisions by the Security Council. As there is great 

pressure on the United Nations Office of the Iraq Program to make the 986 implementation program work, there should also be the willingness to make the necessary changes in that system. Consequently, a review of the program should effect 

changes that will: 

— allow the UN the capacity to buy local crops from Kurdish farmers and alleviate the apparent disincentive to agriculture resulting from the food distribution program; 

— enable WFP to deliver the region’s share of flour in the food basket as wheat 

to be milled in the region’s established mills that conform to Iraqi standards; 

— allow for the transfer of the responsibility for the procurement of medicine, 

medical supplies and equipment and their distribution to a system or agency different from the existing one. 

The United Nations direct handling and implementation of the program in the 

three northern governorates is not only in full agreement with the intent of SCR 

986 and the MOU, but it also means that the United Nations, in close consultation 

with the region’s authorities is the source of all decisions and assessments. However, in the face of this there is increasing tendency by the GOI to force decisions 

from Baghdad with the aim of bringing the program under its direct control. 

A joint FAO/WFP mission that was to investigate the issue of disincentive to agriculture resulting from the food distribution program has been barred from entering 

the region. 

The delivery of some 140 vehicles (pickups, four wheel drives, etc.) ordered by 

UNICEF and intended for the northern governorates under UNSC resolution 986, 

has been hampered under the pretext of customs regulations and number plate registration procedures that are being introduced for the first time. An estimated 21 

million anti-personnel mines, that on a daily basis threaten civilian lives, have been 

planted throughout the Kurdish territory. 

When compared to the resources needed for an effective de-mining operation, 

present efforts at de-mining under 986 seem truly insignificant. Additionally, Baghdad has not only withheld the appropriate location maps from the relevant UN 

agencies, but it also continues to raise objections to present efforts at de-mining. 

Under the provisions of the MOU, Iraq has been entrusted with the procurement 

of bulk food and medical supplies for the whole of Iraq. Due to the slow pace of distribution of medical supplies (and consequent accumulation of such supplies in GOI 

warehouses); the slow contracting procedures by Kimadia (the Iraqi state company 

for drug imports); and WHO’s lack of ability or willingness to challenge forced decisions by the GOI, the 986 food and medicine sector suffers continued problems and 

shortcomings. 

WHO denies having responsibility for the quality or usability of medicines and 

medical equipment procured by the GOI. When evidence of quality control is asked 

for it is not given. The agency does not have much of a presence in the region and 

those who are in charge claim not to have the necessary control or decision-making 

authority. 

Within the 986 health care and medicine sector, some of the medicines procured 

by the GOI are given to public clinics, pharmacies and other groups in the private 

sector. Similar private health facilities in are not covered by this arrangement. The 

31

result, on top of the exclusion itself, is that medicines are smuggled into the region 

and sold on the black market. In such a situation it is nearly impossible to hold 

anyone responsible for the sale or distribution of expired or unsuitable medicine. 

The program recommended, in January 1998, an increase in the caloric value of 

the food baskets and the addition of full cream adult milk and weaning cereal. 

These supplements did not arrive in sufficient quantities to permit distribution. In 

fact, it was only a year later in January 1999 that stocks were sufficient to permit 

their distribution in the food basket for the first time. High-protein biscuits for pregnant women and therapeutic milk for malnourished children under five years of age 

were provided for in the enhanced distribution plan. Considerable delay occurred in 

the signing of contracts by the Iraqi Ministry of Health pertaining to the provision 

of these items. 

It should also be noted that in addition to a less efficient food ration delivery in 

the north, there are no arrangements for the stockpiling of food items in the northern governorates to which food is transferred on a daily basis. There is little doubt 

that due to this dependence on GOI’s procurement of food items, repeated staff relocations and periodic mounting tensions can and do adversely affect the food distribution program in the north. 

KRG authorities have had to divert much-needed funds from their own projects 

to purchase medicine that is supposed to have been supplied by the WHO under 

the program. 

Low oil prices and limitations on Iraq’s ability to pump oil are often given as reasons for the lower rate of funds made available for the program. Subsequently, as 

the latest report by the UN Secretary General shows, delays in the submission of 

and holds placed on applications are also reasons for the inability to utilize funds 

apportioned to the oil spare parts sector under Phase IV. The supposedly adverse 

affect of the slow rate of reimbursement from ESC (13%) account to the ESB (53%) 

account is, when compared to the above reasons, but a small factor in the shortfall 

of oil revenues for the program’s implementation. 

APPENDIX 4

Kurdistan Regional Government 

Council of Ministers 

Ministry of Health

Private Bureau

Date: September 3, 2001

Number:

TO: Mr. Tun Myat,Chief Coordinator, OIP, Iraq 

Cc: Mr. John Almstrom, Coordinator, North, Erbil 

Cc: Dr. Badraddin Fehri 

Cc: HE Dr. Barham Salih, Prime Minister

Subject: A Critical Health Situation.

Dear Mr. Myat, 

I am writing as a matter of urgency on the status of our health services in our 

region, which has reached a critical stage needing immediate attention. 

For the past 6 months we have been awaiting such simple matters as ‘‘Sticker 

Numbers’’ to start the following essential projects:

 Heart Rehabilitation Center 

 X-Ray Center 

 Addition of an Emergency Section at the Education Hospital 

 Extension and renovation of Chemchamal Hospital

The region is still suffering from deficiency and total lack of essential drugs and 

medical supplies, that have nearly paralyzed the work of our hospitals. Such shortages have had catastrophic consequences on the patients requiring emergency treatments. Examples of such essential requirements are lack of surgical gloves, sutures, 

Anti D Ampule for Rh negative, And drugs for cancer, after kidney transplants, 

drugs given to chronic patients, as those needed for hypertension, heart disease, and 

other essential drugs that are constantly needed in the course of treating of a variety of illnesses. We have been obliged, during the course of the last 9 months, and 

due to our emergency needs, to obtain such drugs from the local markets, from a 

number of sources, at exorbitant prices, and with inherent dangers, as we had no 

other alternatives. 

32

We wish to emphasize that the situation has reached a point that requires immediate attention. We have continuously emphasized the urgent need of specific drugs 

and material referred to above in a number of meetings with yourself and with Dr. 

Popal. I am sorry to say that in spite of promises, the situation has remained unchanged. 

We are amazed at the chronic lack of drugs, referred to as life-saving drugs, 

among all other drugs that are being supplied to us, as if such drugs have been 

hand-picked. We find no logic or satisfying statements from your offices here, in 

Erbil, or even from Baghdad. We request that such queries be relayed to Geneva 

or to New York immediately in order to soon get logical answers and solutions. 

In a jointly held sectoral meeting, in Sulaimania, on May 15th, in your presence, 

Dr. Popal, and our colleagues from Erbil, promises were made to address the chronic 

shortages of essential medicines, and other problems related to health sector. Unfortunately, nothing has changed. 

Further, our people are asking us as whatever happened to the fate of the 400-

Bed Hospital for which sufficient funds have been allocated since Phase VII of the 

Distribution Plan. 

We believe that, with amply available funds, there is no excuse in delaying the 

delivery of our essential health needs. Our people will not forgive those responsible 

for such delays. People cannot be blamed if they were to hold the WHO responsible 

for the needless deaths of our citizens who die due to lack of medicine and inadequate hospitals. WHO’s delaying tactics, inefficiency, and irresponsibility can not 

be tolerated any longer. 

I hope you take very seriously the content of this letter and please find us answers to our questions.

Sincerely, 

DR. YADGAR R. HESHMET

MINISTER OF HEALTH

APPENDIX 5

KURDISTAN REGIONAL GOVERNEMNT MINISTRY OF HUMANITARIAN AFFAIRS SULAIMANI

Memorandum on the Implementation of UN Oil for Food Program In Iraqi 

Kurdistan 

According to the Security Council Resolution 986 (1995) and the Memorandum of 

Understanding (MOU), 1996, together with a special Annex, the United Nations 

Secretariat is entrusted to implement the responsibilities of providing humanitarian 

assistance and rehabilitation of the three governorates of Dihok, Arbil and 

Sulaimani, which constitute the Iraq Kurdistan region. Hence, 13% of the revenues 

were to be allocated to the Kurdistan region. It is worth remembering that the reason the UN was chosen for this task was that Iraqi Government could not be trusted to carry out the humanitarian and rehabilitation program in Kurdistan region, 

given the political background of devastation it had inflicted on the region during 

the previous decade. 

The UN program has benefited the region enormously. It has led to marked improvement in the citizens’ welfare and health standards according to all statistical 

indicators. The contrast with the way the program has been handled in the rest of 

Iraq is glaring in all aspects. However, after five years of experience since the program started, it is appropriate to review the overall performance of the UN Agencies 

in the implementation process, with the view of identifying the shortcomings in the 

practical application and overall management of the program. We recognize the difficult environment in Iraq under which the UN Agencies operate in Kurdistan region. The goal of this exercise is to offer constructive criticism to improve the performance of the biggest civilian economic project undertaken by the UN ever. We 

call upon the UN Secretariat and the Security Council members to address the 

issues raised in this memorandum on a priority basis as they are matters of immediate relevance to the security and well being of the citizens of Kurdistan region. 

We are willing and prepared to discuss the issues with all the parties involved in 

order to achieve the full benefit from this unique program. 

Iraqi Tactics 

The first issue of concern is the Iraqi Government’s continuous and shrill attempts to thwart attempts to attend to the immediate needs of the region. These, 

especially in the last year, have affected the implementation process negatively to 

a great extent. Contrary to the letter and spirit of the MOU, the Iraqi regime has 

not allowed the UN to fulfill the responsibilities entrusted to it by the Security 

33

Council. The Iraqi measures have ranged from intimidation of UN staff, proven 

cases of Iraqi intelligence attempts of sabotage against UN personnel and offices in 

the region, denying and delaying UN requests for visas its staff and experts and 

other personnel performing contracted services for the UN in Iraqi Kurdistan; failure to allow necessary equipment, such as large number of demining equipment, including mechanical mini-flails for the demining program, to be released at the border; refusal to provide UN with map/records of the mine fields and a continuous targeted campaign against the UN program in the region to the extent of the Iraqi delegate denouncing the UN in the Security Council debate for looking after of welfare 

of dogs used in the demining program! The regime has the audacity to accuse the 

UN of failure to implement the program effectively, while continuously trying to 

deny the UN the essential tools to implement the program. Unfortunately, this 

trend toward undermining the integrity of the UN program has been escalating recently without any counter measures by the Security Council. The Iraqi tactic is to 

force the acquiescence of the UN staff in this process so that it becomes yet another 

political and economic tool in the hands of the regime to intimidate the region. The 

Security Council should use the leverage of the approval procedure for Iraqi applications for their needs to make sure they do not obstruct the humanitarian and rehabilitation efforts in Kurdistan region. 

In addition, the Iraqi regime has escalated its campaign of ethnic cleansing in 

areas of Kurdistan still under its control i.e. Kirkuk, Khanaqin, Makhmoor and 

Sheikhan causing the forced displacement of thousands of Kurdish, Turkoman and 

Assyrian families from their homes. Thus, the arrival of the internal refugees has 

increased the economic and social burden of the regional authorities. 

UN Implementation Process 

Many of the problems relating to proper execution of the UN program are connected with the modality of implementation: absence of proper and adequate consultation with the local authorities, the lack of proper co-coordinating procedure by 

the various UN agencies among themselves and with the general concept and management of the program, excessive bureaucratization causing procrastination in carrying out already agreed projects, prevalence of poor quality staff who clearly lack 

expertise in their respective fields and inferior and wasteful procurement policies; 

all of which will considerably undermine the integrity of the overall program, if not 

checked soon. Among those agencies mentioned in particular are the World Health 

Organization (WHO) and Food and Agriculture Organization (FAO) whose performances need attention and improvement. The program needs a unified project management system under one authority, with lines of consultation with specialized 

agencies and local authorities. 

Procurement 

In the last six months there has been a serious deficiency and lack of essential 

drugs and medical supplies, which have nearly paralyzed the work of hospitals and 

clinics. Shortages in emergency treatment supplies, surgical gloves, cancer drugs, 

hypertension and heart drugs have been communicated to the Chief Coordinator of 

Office of Iraq Program and the Headquarters in New York without any response. 

The proposed hospital project in Sulaimani is a case study on lack of proper planning, management direction, clarity of decision-making, coordination and oversight, 

and concern for the immediate and future humanitarian needs of the community. 

In addition to procurement delays, there have been many cases of wasteful procurement practices, due mainly to the mismanagement and lack of competent staff 

that make these important decisions. For example, the FAO procured 100,000 tons 

of feed at a price of @240 per ton that arrived at the height of the lush spring season, which was a total waste. Twenty-five chain tractors were procured which were 

completely unsuitable for agricultural production (Not a single implement accompanied them). Eight vehicles were quarantined in a warehouse last year in 

Sulaimani for eight months pending vehicle registration procedure. 

Recurring Costs 

According to UN figures there are 3.6 million citizens of Kurdistan region who are 

being provided with humanitarian and rehabilitation needs. In this regard it is important to bear in mind that the Iraqi Government unilaterally decided in 1992 to 

abdicate its financial and administrative responsibilities in the Kurdistan region. 

Furthermore, it imposed its own economic embargo on the region as a policy of intimidation. Therefore the regional authorities, for the last ten years, had the responsibility to undertake all those budgetary and public service duties abandoned by 

Baghdad. That includes not only providing security and law and order, but all other 

civic functions such as education, health, environment and justice. It has been extremely difficult to fund these services. The UN program is mandated to provide huVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
34

manitarian needs of the region. Yet it does not fund the basic activities such as education. We have, within our administration area, 75,000 students and 15,000 teachers to cater for. There are three universities in the whole region. The teachers desperately need assistance in updating their skills and training them in proper methods of induction, computer literacy and curriculum instruction. Kindergarten and 

primary level schools for children in particular need this assistance. 

A specific proposal to train teachers and health worker has been languishing in 

the bureaucratic corridors of OIP for many months now. We need an immediate 

plan of action on this essential project. 

Rehabilitation 

The Kurdistan region was subjected to a decade of destruction and genocide prior 

to the Gulf war. It is estimated that the Iraqi Army destroyed more than 250,000 

people perished 4000 villages during the Anfal campaign in the 1980’s. The impact 

of this destruction on the infrastructure and the living communities, especially the 

rural life, was devastating. Therefore, the task of rehabilitating the infrastructure 

is essential to provide for the humanitarian needs of the community. The provision 

of water, sanitation, sewage, electricity and housing is essential in rehabilitating the 

normal community life. The UN program in this respect seriously lags far behind. 

There is no focused plan to address the infrastructure needs of the region. Efforts 

in this regard are ad hoc, perfunctory and lost in the bureaucratic haze of the UN 

system. 

Examples of the neglect of infrastructure rehabilitation are: the region desperately needs cement for the rehabilitation projects. The existing cement factory 

in Tasluja can produce 5000–6000 tons of cement a day if overhauled. Currently it 

can only produce 500 tons a day. Again we are waiting for a decision from OIP on 

this vital issue. 

The electricity needs of the region are not catered for. The three 29 MW generating plants are unable to run 24 hours a day, the way public utilities should normally run. 

Summary 

We consider the UN Oil for Food program as a unique opportunity for the UN 

to demonstrate that it can make a huge difference in the lives of citizens, especially 

those who have been subjected to oppression. The UN and the Security Council 

member should address the shortcomings of the program as an urgent matter. We 

again reach out to state that we are ready to play our part in instituting reforms 

in the implementation process to make sure full benefit is achieved.

October 22, 2001

APPENDIX 6

‘‘H.E. Dr Neel Mani 

Director, 

Department of the Iraq Programme 

World Health Organisation, 

Avenue Appia 20, 

Geneva 27

Switzerland.

Your Reference: IRP–E17/180/2, IRQ (A) 147

Our Ref: The Arbil Cancer Hospital Plan

Your Excellency, 

As you kindly suggested, I traveled to ‘‘northern Iraq’’ hoping to discuss the plan 

with the local WHO staff and the Kurdistan Regional Government. I am writing to 

inform you of the results of my trip to Northern Iraq and meetings with Dr Popal, 

and the local WHO staff in Erbil concerning the Cancer Hospital plan which we 

spent a year preparing. 

I am sorry to tell you that I was far from being encouraged to continue our efforts 

as a result of the totally negative attitudes I met with from all concerned at WHO. 

I shall try to summarise the reasons as follows: 

1—Dr Popal did not actually attend the meeting which he himself arranged for 

me. The meeting was to be with himself and the WHO ‘‘feasibility’’ team as well 

as the KRG Minister for Health. 

2—Those I met with were unable to understand the need for the project and were 

using a variety of political arguments against even considering it. They had not 

been informed of the plan before my arrival but even so they were highly opposed 

35

to consider it on the basis of claims which Mr Siddiqi said were in the MOU but 

when challenged he admitted not having read the MOU or the SCR986. None of the 

others had done so either. 

3—Not even the WHO representative, Dr Sheherezad, who was also in the building at the time, attended either of the two meetings. 

4—A team member by the name of Khalid Al-Dik seemed to think I should have 

gone to the South of Iraq to look after the people there and was vehemently against 

the plan. 

5—After one week or so to allow the WHO team to read the plan we held another 

meeting during which Eng Adham Ismail was present. This gentleman expressed 

gratitude for our ‘‘great’’ work and described the plan as ‘‘the best he had ever come 

across’’. He repeated this several times during and, at the end of, the meeting. The 

minutes of both meetings were misrepresentation and concocted to suit the decision 

they had arrived at even before reading the plan. There was a great deal of economy 

with the truth and Mr Ismail’s comments were completely left out. 

6—The Minutes of both meetings conclude with ‘‘No commitments on the part of 

WHO whatever were given’’. This quite unnecessary and rather emphatic negative 

statement could only have been made to send a message to ‘‘someone’’ that all is 

well and there will never be any scope for a positive reply and we find it rather 

offensive in the light of the atrocious health conditions we found on the ground. 

7—The reasons for being so negative were explained by Mr Siddiqi and Mr Aldik and if true then the message is clear: We cannot do anything of real value or 

efficacy so any effort to alleviate the suffering of the Kurds WHO or anyone else 

is quite useless. Keep out!! 

8—Even so the new obstacles Mr Siddiqi, the team leader, was placing in the way 

of WHO support were: 

A—Lack of sufficient survey and statistics indicating the level of cancer incidences 

B—The claim that a 200 bed hospital was too big and a smaller number of beds 

should be aimed at. 

These claims were both unfounded since we had actually included whatever statistics we had available from the Ministry of Health. Furthermore there were the 

statistics which the team members had included in a paper submitted in a hurry 

by Mr Al-Dik to the Minister of Health Dr Jamal urging him to consider it instead 

of our plan before my arrival. He had obtained the figures from the local authorities 

and included them in his paper and depended on them in his arguments. Those statistics indicated that we had already undersized the hospital considerably. 

At any rate, it should be expected that WHO had and has a duty to carry out 

accurate surveys to find out not the extent of the spread of cancer but all other 

major diseases and they had not done any. Therefore, WHO could hardly blame us 

for not having the data. Furthermore, it is a known fact that the rate of cancer 

among any population is at least 5 (five) percent and 10 (ten) percent in most cases. 

Therefore, we should plan for at least 5 x 3.6 million/100 or 180,000 incidences 

among the population of the three northern governorates. 

A 200 bed hospital would not cover more than 0.0005% of that population which 

means either the WHO Staff in Erbil are completely unaware of the prevalent 

incidences of cancer worldwide or they were deliberately creating obstacles against 

the project. My own very strong feeling was that they had been instructed by the 

Iraqi regime which had been precluded from deciding on such matters not to allow 

any worthwhile project to be carried out in Kurdistan. 

Given that enormous salaries are paid to WHO and other UN staff in Northern 

Iraq, I found a terrible lack of things to show for it. After six years of the oil for 

food programme and a great deal of money in banks in France have been allocated 

for the Kurds, the sewerage system is almost non-existent. Erbil is a stinking filthy 

place. Surveys are not being done to identify disease. The existing rotting hospitals 

are lacking in medicine, instrumentation, trained nurses and doctors and funds. 

There no statistics to indicate child mortality, or mortality in general. I visited and 

videoed entire hospitals and interviewed personnel and doctors and I found the majority of medicines unavailable or expired. I have full interviews with medical staff 

which affirm this. Laboratories are inadequately supplied with expired chemicals 

which are totally useless, the wrong chemicals, or wrong instruments which they 

have to wait very long periods for. Disposable tools and tubes are being washed several times to carry out the most basic tests. Generally WHO is blamed for all these 

shortcomings and the main reason seems to be the pro-Iraqi staff hired by the 

organisation. Everywhere I went whether in Erbil, Suleimania or Dihok the story 

was the same. Everyone seems to blame WHO and there is ample evidence that this 

may be true. 

Since the UN and WHO is particular are there to implement resolution 986 and 

look after the population of the three northern governorates, the charge is that they 

36

have both failed. The main reason is allowing the Saddam regime, the reason for 

the suffering and backwardness of the health service in Kurdistan to have a final 

say in the recruitment of international civil servants mandated by law to serve the 

community there and to veto anything he does not want for the Kurds to benefit 

from and that includes absolutely everything. 

At a time when there is over $7 billion unspent Kurdish funds and WHO staff 

get huge salaries this may be a great injustice against the Kurds no less in magnitude to the repeated Genocidal acts committed against them by the people your 

organisation seems very keen to keep happy. 

During the last meeting I held with the WHO team we agreed that the Ministry 

of Health would write to them indicating their agreement to carry out a quick survey and that the WHO Office would soon carry the survey out. The Minister wrote 

the letter in my presence the same day and it was delivered by hand the next day. 

So far WHO Erbil have not replied. In the minutes of the two meetings Dr Siddiqi 

and Dr Sheherezad both claim that the ‘‘local authorities’’ had not written officially 

to ask for the project to be implemented. This is quite false and I have evidence 

that the Ministry had twice written to them indicating their full support for the hospital, once in Arabic and again in English. 

I hope you will be able to provide a reasonable plan of action urgently for there 

are many thousands of people dying whose welfare has been entrusted to your 

organisation. 

We remain, sir, truly yours, 

DR F R HILMI

FOR THE ARBIL CANCER HOSPITAL PROJECT TEAM

DR N PLOWMAN, 

MA, MD, FRCP, FRCR 

HEAD OF DEPARTMENT (CLINICAL ONCOLOGY) 

ST BARTHOLOMEWS HOSPITAL & THE HOSPITAL FOR SICK CHILDREN (LONDON) 

EMAIL: POSTMASTER@PNPLOWMAN.DEMON.CO.UK

DR F HILMI, B..SC., M.SC. PH.D (SYSTEMS SCIENCE) 

FORMER DEPUTY MINISTER OF TRANSPORT & COMMUNICATIONS IN IRAQI

KURDISTAN, M.D. ALTERNATIVE DATA LIMITED

EMAIL: FEREYDUN@AOL.COM

Copies to: 

The Secretary General of the UN, Mr Kofi Annan 

Mr Nechirwan Barzani, KRG Prime Minister, Erbil 

Dr Jamal Abudlhamid, Minister of Health, Erbil 

Ms Nasreen Barwari, Minister of Reconstruction, Erbil 

Mr Barham Salih, KRG Prime Minister Slemani 

Dr Yadgar, Minister of Health, KRG Slemani 

Mr Sadi Pire, Foreign Relations, PUK, Slemani’’

APPENDIX 7

UN DEAL LEAVES IRAQ KURDS AT BAGHDAD’S MERCY BY GUY DINMORE IN NORTHERN

IRAQ AND CAROLA HOYOS, UNITED NATIONS CORRESPONDENT, FINANCIAL TIMES PUBLISHED: JULY 6 2002 5:00 ∆ LAST UPDATED: JULY 8 2002

In theory, the Kurds of northern Iraq have never had it so good, effectively independent from Baghdad and guaranteed a substantial slice of the country’s oil income under the United Nations oil-for-food programme. 

The reality is rather different. 

Zhiyan Ahmad Abdullah fights a daily battle with shortages of basic supplies as 

director of the main maternity hospital in Sulaimani, one of the two regional capitals controlled by rival Kurdish factions. 

‘‘We have many, many problems,’’ she says in despair, having to cope with nearly 

30 deliveries a day. ‘‘Each month we get 1,000 pairs of gloves, at best 2,000. But 

we need 10,000, so we have to re-use them.’’

The same shortages apply to drugs for delivery, blood-bags and blood-testing 

equipment. 

Prostaglandin, used for abortions, has never been supplied, forcing doctors to use 

more dangerous methods for terminating pregnancies. 

‘‘Really, the WHO is to blame,’’ says Dr Abdullah, referring to the World Health 

Organisation, which is responsible for delivering medical aid under the oil-for-food 

programme. 

37

‘‘This programme serves the rest of Iraq more than Kurdistan. A lot of money goes 

to serving those who work in the UN. For example, a local UN employee earns 

about $600 [λ390] a month. My salary is $80 and my nurses get only $10.’’.. 

The Baghdad government led by President Saddam Hussein is allowed to purchase supplies and implement distribution directly, but because the Kurdish north 

has no international recognition it has to acquire aid through Kimadia, the official 

Baghdad procurement agency, and rely on the UN for distribution. 

This, as regional Kurdish officials argue, leaves the north at the mercy of Baghdad and what they call the inefficiency and even corruption within the dozen or so 

UN agencies involved in Iraq. 

A commonly voiced complaint is that the WHO programme is dominated by Arabs 

who have little sympathy for the Kurds and rely on Baghdad. 

One official in the Kurdish region, which effectively broke away from Baghdad in 

1991 and is partly protected by a US-imposed no-fly zone, estimated that only 37 

per cent of the oil income allocated for the north had been spent on humanitarian 

goods and services. Infrastructure projects, such as water, electricity and a $400m 

hospital, have been blocked by Baghdad. 

‘‘Baghdad vetoes many projects, and the UN does not defend us,’’ says Sami 

Abdul-Rahman, deputy prime minister in the Kurdish regional government based 

in Arbil, calling the UN agencies ‘‘bureaucratic, biased and cumbersome’’ . . . 

WHO blames the sanctions regime for some of the problems. ‘‘The process is 

known to be laborious because of the lengthy procurement procedures imposed by 

the sanctions regime,’’ it says. 

APPENDIX 8

Iraq government cuts petrol supplies to Kurds

Date: 13 January 2003

Source: Reuters

SULAYMANIYAH, Kurdistan-Iraq, 12/1 2003 (Reuters)—Iraq’s government has 

cut off petrol supplies to the breakaway Kurdish-run north of the country, Kurdish 

officials said, sending prices soaring and ordinary Kurds rushing to stock up on fuel. 

The officials said they did not know why the fuel supplies, brought across the 

front lines between Iraqi government troops and the Kurdish north in tankers, car 

fuel tanks and gerry cans, had been shut off for a second day on Sunday. 

But the move comes amid U.S. preparations for a possible war in Iraq over Baghdad’s alleged weapons of mass destruction, with thousands of American troops being 

despatched to the Gulf. 

The apparent embargo points up the fragility of the Kurds’ de facto autonomy 

from Baghdad won when U.S. and British planes began enforcing a no-fly zone over 

the area in 1991 after Iraqi troops put down an uprising against President Saddam 

Hussein. 

Aside from a small oilfield in the east of the area and a converted refinery near 

the city of Sulaymaniyah which once refined sugar, north Iraq’s three million Kurds 

rely almost entirely on supplies brought from the government-held region. 

Pump prices had more than quadrupled on Sunday compared with before the 

blockade, some petrol stations closed down altogether for lack of fuel while long 

queues formed at others as drivers sought to fill up while they could. 

One Kurdish official in the city of Sulaymaniyah, in the east of the rugged enclave, said petrol had been cut off before due to wrangling over prices with Baghdad. 

Iraqi Kurds would join other opposition groups in running the country under U.S. 

scenarios for a post-Saddam Iraq should a U.S.-led invasion topple the present government. 

The Kurds played a leading role in mustering opposition parties in a conference 

in London last month and are due to host a further meeting of leaders opposed to 

Saddam near the eastern city of Arbil later this month. 

APPENDIX 9

IRAQI KURDISTAN REGION

February 10, 2003

His Excellency Kofi Annan 

General Secretary 

United Nations 

38

One United Nations Plaza 

New York, New York 1007

U.S.A.

Excellency: 

Re: Diversion of Funds in the 13% Account

We have received definite information that some people at the United Nations are 

planning to use funds deposited to the Oil-for-Food Programme 13% Account for the 

three governorates of Erbil, Duhok and Sulaimaniyah for the anticipated emergency 

situation in Iraq. We understand that there are plans to divert these funds, which 

currently total approximately US $2 billion, away from their intended purpose of 

providing for the relief and rehabilitation of the three northern governorates. 

Funds deposited in the 13% Account are specifically earmarked for humanitarian 

programs and projects in Iraqi Kurdistan. All these funds have been allocated for 

approved projects outlined in the thirteen Distribution Plans approved by the Government of Iraq and the Security Council. Hundreds of approved projects have funds 

allocated; however, they have not been implemented. 

Because of the very slow project implementation rate, the 13% Account still maintains a very large cash balance. This situation has occurred mainly because of the 

many methods of obstruction used by the GOI, including not providing visas for experts and professionals required for the implementation of projects in the north or 

using pressure and influence on UN Agencies to delay project implementation. 

Other reasons for the slow implementation rate include the bureaucracy of the UN 

Agencies that has made the process of implementation of projects very slow and the 

extremely time-consuming decision making process. Also many projects are delayed 

due to hold from the 661 Committee. 

Badly needed humanitarian projects, such as building houses for IDPs, schools 

and hospitals or water and sanitation networks, should not have funds diverted for 

other purposes. Every single cent of the funds of the 13% Account is needed for the 

provision of food and medicines for the local population as well as the rehabilitation 

of this region. The projects were carefully chosen between the Regional authorities 

and the UN Agencies for these purposes. Although there are many examples of the 

benefits of the Oil-for-Food program in Iraqi Kurdistan, still about 20 per cent of 

households survive on less than US $200 a year and 40 per cent of households on 

less than US $300 a year, which means that 50 per cent of the population remains 

totally dependent on the monthly food basket ( per survey conducted by SCF in 

2001). 

A large number of projects are designed t rehabilitate the three northern 

governorates, which were devastated during three decades of war and destruction 

by the Government of Iraq. The destruction of Iraqi Kurdistan is very well documented. Over 4,500 villages and towns out of a total of around 5,000 villages and 

towns were completely destroyed during 1970s and 1980s. An estimated 200, 000 

people disappeared during successive campaigns of genocide against the people of 

the region by the Government of Iraq, including about 2,000 during the infamous 

Anfal campaigns of 1987–1988. In Halabja over 5,000 people in a chemical weapons 

attack in March 1988—although this is just one of the scores of villages that were 

attacked with chemical weapons by the Government of Iraq. Ethnic cleansing continues on a daily basis thus constantly increasing the demands on the local authorities to provide shelter and other public services for these very vulnerable families 

and individuals. Figures from UNCHS-Habitat show that about 23 per cent of the 

region’s population are still IDPs. 

We have feared that these funds might be diverted before they could be used and 

have sought assurances on several occasions that this would not be the case. We 

believed that the funds would continue to be held in the account for the use that 

they were intended and would not be diverted for other purposes. 

Now we have learned that there is a move afoot to try to grab these funds from 

the victims of this repressive regime and use them for other purposes. This is like 

adding salt to the wound and deprives the citizens of this region of their legitimate 

rights to the financial resources allocated to them, their property, and their land. 

We believe that it is unconscionable fro the UN to consider diverting funds from the 

13% Account under the pretext of an anticipated emergency cover which we have 

no control. 

Since we have no representative at the United Nations, we are asking you to take 

immediate action to stop any attempts to divert these funds from the humanitarian 

purposes for which they were intended with or without the benefit of a Security 

Council resolution.. 

You have played a vital role in making sure that our people received a fair share 

of the resources of this program and we are putting our trust in you trust in you 

39

now to protect the funds allocated by the international community through resolutions of the Security Council and by the Memorandum for Understanding negotiated 

by the United Nations and the Government of Iraq. 

Sincerely, 

MASSOUD BARZANI

PRESIDENT

KURDISTAN DEMOCRATIC PARTY

JALAL TALABANI

GENERAL SECRETARY

PATRIOTIC UNION OF KURDISTAN

APPENDIX 10

UNITED NATIONS SECURITY COUNCIL RESOLUTION 1472 (2003)

March 28, 2003

THE SECURITY COUNCIL

NOTING that under the provisions of Article 55 of the Fourth Geneva Convention 

(Geneva Convention Relative to the Protection of Civilian Persons in Time of War 

of August 12, 1949), to the fullest extent of the means available to it, the Occupying 

Power has the duty of ensuring the food and medical supplies of the population; it 

should, in particular, bring in the necessary foodstuffs, medical stores and other articles if the resources of the occupied territory are inadequate; 

CONVINCED of the urgent need to continue to provide humanitarian relief to the 

people of Iraq throughout the country on an equitable basis, and of the need to extend such humanitarian relief measures to the people of Iraq who leave the country 

as a result of hostilities; 

RECALLING its previous relevant resolutions, and in particular resolutions 661 

(1990) of 6 August 1990, 986 (1995) of 14 April 1995, 1409 (2002) of 14 May 2002, 

and 1454 (2002) of 30 December 2002, as they provide humanitarian relief to the 

people of Iraq; 

NOTING the decision made by the Secretary-General on 17 March 2003 to withdraw all United Nations and international staff tasked with the implementation of 

the ‘‘Oil-for-Food’’ Program (hereinafter ‘‘the Program’’) established under resolution 

986 (1995); 

STRESSING the necessity to make every effort to sustain the operation of the 

present national food basket distribution network; 

STRESSING also the need for consideration of a further reassessment of the Program during and after the emergency phase; 

REAFFIRMING the respect for the right of the people of Iraq to determine their 

own political future and to control their own natural resources; 

REAFFIRMING the commitment of all Member States to the sovereignty and territorial integrity of Iraq; 

ACTING UNDER CHAPTER VII OF THE CHARTER OF THE UNITED NATIONS, 

1. REQUESTS all parties concerned to strictly abide by their obligations under 

international law, in particular the Geneva Conventions and the Hague Regulations, 

including those relating to the essential civilian needs of the people of Iraq, both 

inside and outside Iraq; 

2. CALLS ON the international community also to provide immediate humanitarian assistance to the people of Iraq, both inside and outside Iraq in consultation 

with relevant states, and in particular to respond immediately to any future humanitarian appeal of the United Nations, and supports the activities of the International 

Committee of the Red Cross and of other international humanitarian organizations; 

3. RECOGNIZES that additionally, in view of the exceptional circumstances prevailing currently in Iraq, on an interim and exceptional basis, technical and temporary adjustments should be made to the Program so as to ensure the implementation of the approved funded and non-funded contracts concluded by the Government 

of Iraq for the humanitarian relief of the people of Iraq, including to meet the needs 

of refugees and internally displaced persons, in accordance with this resolution; 

4. AUTHORIZES the Secretary-General and representatives designated by him to 

undertake as an urgent first step, and with the necessary coordination, the following 

measures: 

a) TO ESTABLISH alternative locations, both inside and outside Iraq, in consultation with the respective governments, for the delivery, inspection and authenticated 

40

confirmation of humanitarian supplies and equipment provided under the Program, 

as well as to redirect shipments of goods to those locations, as necessary; 

b) TO REVIEW, as a matter of urgency, the approved funded and non-funded contracts concluded by the Government of Iraq to determine the relative priorities of 

the need for adequate medicine, health supplies, foodstuffs and other materials and 

supplies for essential civilian needs represented in these contracts which can be 

shipped within the period of this mandate, to proceed with these contracts in accordance with such priorities; 

c) TO CONTACT suppliers of these contracts to determine the precise location of 

contracted goods and, when necessary, to require suppliers to delay, accelerate or 

divert shipments; 

d) TO NEGOTIATE and agree on necessary adjustments in the terms or conditions of these contracts and their respective letters of credit and to implement the 

measures referred to in 4 (a), (b) and (c), notwithstanding distribution plans approved under the Program; 

e) TO NEGOTIATE AND EXECUTE new contracts for essential medical items 

under the Program and to authorize issuance of the relevant letters of credit, notwithstanding approved distribution plans, provided that such items can not be delivered in execution of contracts pursuant to 4 (b) and subject to the approval of the 

Committee established pursuant to resolution 661 (1990); 

f) TO TRANSFER unencumbered funds between the accounts created pursuant to 

paragraphs 8 (a) and 8 (b) of resolution 986 (1995) on an exceptional and reimbursable basis as necessary to ensure the delivery of essential humanitarian supplies to 

the people of Iraq and to use the funds in the escrow accounts referred to in paragraphs 8 (a) and (b) of resolution 986 (1995) to implement the Program as provided 

for in this resolution, irrespective of the phase in which such funds entered the escrow accounts or the phase to which those funds may have been allocated; 

g) TO USE, subject to procedures to be decided by the Committee established by 

resolution 661 (1990) prior to the end of the period set out in 10 below and based 

on recommendations provided by the Office of the Iraq Program, funds deposited in 

the accounts created pursuant to paragraphs 8 (a) and (b) of resolution 986 (1995), 

as necessary and appropriate, to compensate suppliers and shippers for agreed additional shipping, transportation and storage costs incurred as a result of diverting 

and delaying shipments as directed by him according to the provisions of 4 (a), (b) 

and (c) in order to perform his functions set out in 4 (d); 

h) TO MEET additional operational and administrative costs resulting from the 

implementation of the temporarily modified Program by the funds in the escrow account established pursuant to paragraph 8 (d) of resolution 986 (1995) in the same 

manner as costs arising from those activities set forth in paragraph 8(d) of resolution 986 (1995) in order to perform his functions set out in (d); 

i) TO USE funds deposited in the escrow accounts established pursuant to paragraphs 8 (a) and 8 (b) of resolution 986 (1995) for the purchase of locally produced 

goods and to meet the local cost for essential civilian needs which have been funded 

in accordance with the provisions of resolution 986 (1995) and related resolutions, 

including, where appropriate, the costs of milling, transportation and other costs 

necessary to facilitate the delivery of essential humanitarian supplies to the people 

of Iraq; 

5. EXPRESSES its readiness as a second step to authorize the Secretary-General 

to perform additional functions, with the necessary coordination, as soon as the situation permits as activities of the Program in Iraq resume; 

6. EXPRESSES FURTHER its readiness to consider making additional funds 

available, including from the account created pursuant to paragraph 8 (c) of resolution 986 (1995), on an exceptional and reimbursable basis, to meet further the humanitarian needs of the people of Iraq. 

7. DECIDES that, notwithstanding the provisions of resolution 661 (1990) and 

resolution 687 (1991) and for the duration of the present resolution, all applications 

outside the Oil-For-Food Program submitted by the United Nations agencies, programs and funds, other international organizations and non-governmental organizations (NGOs) for distribution or use in Iraq of emergency humanitarian supplies and 

equipment, other than medicines, health supplies and food stuffs, shall be reviewed 

by the Committee established pursuant to resolution 661 (1990), under a 24-hour 

no-objection procedure; 

8. URGES all parties concerned, consistent with the Geneva Conventions and the 

Hague Regulations, to allow full and unimpeded access by international humanitarian organizations to all people of Iraq in need of assistance and to make available 

all necessary facilities for their operations and to promote the safety, security and 

freedom of movement of United Nations and associated personnel and their assets 

as well as personnel of humanitarian organizations in Iraq in meeting such needs; 

41

9. DIRECTS the Committee established pursuant to resolution 661 (1990) to monitor closely the implementation of the provisions in paragraph 4 above and, in that 

regard, requests the Secretary-General to update the Committee on the measures 

as they are being taken and, to consult with the Committee on prioritization of contracts for shipments of goods, other than foodstuffs, medicines, health and water 

sanitation related supplies; 

10. DECIDES that the provisions contained in 4 of this resolution shall remain 

in force for a period of 45 days following the date of adoption of this resolution and 

may be subject to further renewal by the Council; 

11. REQUESTS the Secretary-General to take all measures required for the implementation of the present resolution and to report to the Security Council prior 

to the termination of the period defined in 10; 

12. DECIDES to remain seized of the matter. 

APPENDIX 11

Kurdistan Regional Government 

UN Liaison Office 

Tel: (212) 581 9525 Email: KurdistanUN@msn.com

Press Statement: May 16, 2003 New York 

UN OIL-FOR-FOOD PROGRAM: IRAQI KURDS ASK FOR REFORM AND ACCOUNTABILITY

Thanks to the resolute and courageous leadership of President George W. Bush 

and Prime Minister Tony Blair, Iraq has now been completely liberated. As a result, 

on April 16, 2003, President George W. Bush called on the UN to lift economic sanctions against Iraq. The draft US-sponsored UN Security Council Resolution 

(UNSCR) would replace UN oversight of Iraq’s oil revenues with an internationally 

supervised Iraqi Assistance Fund (IAF). 

The leadership of Iraqi Kurdistan welcomes this proposal. We believe that the 

principle of international control of Iraqi oil revenues and supervision of the spending of these revenues in a transparent and accountable manner should be preserved 

to prevent the corruption and human rights violations that plague oil-dependent, 

Middle Eastern countries. 

While welcoming the US proposals, we are concerned that they fail to address the 

issue of billions of unspent dollars in UN controlled accounts, nominally allocated 

to three Iraqi Kurdish provinces. Thanks to obstruction by Saddam’s regime, 

unspent money for the Iraqi Kurds totals in excess of $2.5bn and could even be double that figure. Under UN Security Council resolution (UNSCR) 986, 13% of Iraqi 

oil revenues are reserved for three Kurdish provinces. These provinces are desperately poor. The unspent funds are needed to cope with the ongoing reconstruction 

following the genocidal Anfal campaign of 1987–88. The Kurdish provinces contain 

around 800,000 internally displaced persons, roughly a quarter of the total population, and victims of ethnic cleansing by the Iraqi regime that continued until late 

March 2003. Basic infrastructure available elsewhere in Iraq still needs to be built 

for the Kurds. 

The US-sponsored draft fails to specify that the IAF will operate on the same 

basis as UNSCR 986, with a separate account for the Kurdish provinces. The international community recognized the right of Iraqi Kurds to their legitimate share of 

Iraqi oil revenues with UNSCR 986. It would be a strange and retrograde step for 

a US-sponsored resolution to roll back the rights of Iraq’s most brutalized citizens. 

Under UNSCR 1472, the UN Secretary-General can divert unspent funds from 

the Kurdish 13% account for short-term humanitarian relief. UNSCR 1472 specified 

that the diversion of funds would be on an ‘‘exceptional and reimbursable basis’’. 

The Iraqi Kurds do not object to providing relief to their fellow Iraqis from the 13% 

account—quite the contrary. Regrettably, the US-sponsored draft resolution does not 

affirm the crucial principle that such monies should only be used exceptionally and 

should be reimbursed. Again, it would be odd if a resolution sponsored by the liberators of Iraq were to leave their main Iraqi allies, the Kurds, worse off. 

BACKGROUND

UN SCR 986 ‘‘Oil for Food’’ program 

Iraqi oil is sold under UN control. The proceeds are then broken down and used 

in the following manner:

• 72% of Iraqi oil export proceeds fund the humanitarian program and is broken down into 59% for the contracting and supplies of equipment by the then 

42

government for 15 central and southern mainly Arab-inhabited provinces. The 

remaining 13% is allocated to three northern, mostly Kurdish, provinces;

• the balance of proceeds is spent as follows: 25% percent for the Compensation 

Fund for Gulf War reparation payments (the U.N. Compensation Commission); 2.5% for U.N. administrative and operational costs of the Oil-for Food 

program; 0.8% for the weapons inspection costs. 

Why is so much money for the Kurds unspent? 

The UN allowed Saddam’s regime to hold up as the building and equipping of hospitals, water and sanitation projects, agricultural development, educational services, 

provision of electricity and the removal of landmines. Saddam’s regime refused to 

grant entry visas to qualified staff and declined import permits for necessary equipment. 

The Iraqi regime, with tacit UN approval, engaged in a campaign to exclude 

qualified staff from the US and UK . Additionally, not a single Kurd was employed 

as member of the international staff of the Oil-for-Food program Instead, with the 

staff was deliberately selected from Arab states, to be used as couriers for information to the Iraqi secret police. These workers also impeded UN projects. In July 

2001, Kurdish police caught a Tunisian national working for the UN with explosives 

in his car. The man was handed over to the UN. 

Mismanagement and incompetence also held up projects The Kurdish city of 

Sulaimani, with a population of over 600,000, is still waiting for a 400-bed hospital 

to be built five years after funds were allocated for it. 

Kurdish success with Oil-for-Food 

The Kurdish provinces are an example of the program’s success when a cooperative local partner is available, in contrast to the way the Saddam regime manipulated Oil-for-Food to its own benefit. Despite being poorer, the Kurdish provinces experienced a dramatic decline in the child mortality rate, while in Saddam’s Iraq it 

was claimed that the infant mortality rate increased dramatically. 

The failure of the Oil-for-Food program outside of the Kurdish areas was a consequence of a deliberate program of subversion by Saddam Hussein. Saddam and 

his sons siphoned off significant funds from the Oil-for-Food program. As General 

Tommy Franks remarked when in Baghdad, it was more of an ‘‘oil for palace’’ program. 

Any reformed UN Oil-for-Food program or the IAF program should examine the 

Kurdish experience. 

Allocating 13% to the three Kurdish provinces was an act of justice 

The decision to specifically allocate revenues to the three Kurdish provinces a just 

and innovative method of revenue sharing among the citizens of Iraq, designed to 

provide the humanitarian and reconstruction needs of the Kurdish region, which 

had been subjected to decades of political and economic discrimination as well as 

a brutal campaign of genocide, the infamous Anfal of 1987–1988 and close to 40 

years of ethnic cleansing. 

UN indifference 

The Iraqi Kurds have made repeated representations to the UN about the management of the Oil-for-Food program. On February 10, 2003 Iraqi Kurdish leaders, 

Jalal Talabani and Massoud Barzani, wrote to UN Secretary-General Kofi Annan 

to discuss UN plans to allow the unspent cash allocated to the Iraqi Kurds to be 

used for short-term humanitarian relief resulting from the approaching allied invasion of Iraq. We regret that the UN failed to respond to the Iraqi Kurdish leaders’ 

letter.

New York May 16, 2003

For further information contact:

Howar Ziad 

Kurdistan Regional Government 

UN Liaison Office, Tel: 212-581-9525, E-mail: KurdistanUN@msn.com 

Postal address: PO Box 231224 New York NY 10023

APPENDIX 12

UNITED NATIONS SECURITY COUNCIL RESOLUTION 1483 (2003)

May 22, 2003

43

The Security Council: 

Recalling all its previous relevant resolutions; 

Reaffirming the sovereignty and territorial integrity of Iraq; 

Reaffirming also the importance of the disarmament of Iraqi weapons of mass destruction and of eventual confirmation of the disarmament of Iraq; 

Stressing the right of the Iraqi people freely to determine their own political future and control their own natural resources, welcoming the commitment of all parties concerned to support the creation of an environment in which they may do so 

as soon as possible, and expressing resolve that the day when Iraqis govern themselves must come quickly; 

Encouraging efforts by the people of Iraq to form a representative government 

based on the rule of law that affords equal rights and justice to all Iraqi citizens 

without regard to ethnicity, religion, or gender, and, in this connection, recalls resolution 1325 (2000) of 31 October 2000; 

Welcoming the first steps of the Iraqi people in this regard, and noting in this 

connection the 15 April 2003 Nasiriya statement and the 28 April 2003 Baghdad 

statement; 

Resolved that the United Nations should play a vital role in humanitarian relief, 

the reconstruction of Iraq, and the restoration and establishment of national and 

local institutions for representative governance; 

Noting the statement of 12 April 2003 by the Ministers of Finance and Central 

Bank Governors of the Group of Seven Industrialised Nations in which the members 

recognised the need for a multilateral effort to help rebuild and develop Iraq and 

for the need for assistance from the International Monetary Fund and the World 

Bank in these efforts; 

Welcoming also the resumption of humanitarian assistance and the continuing efforts of the secretary general and the specialised agencies to provide food and medicine to the people of Iraq; 

Welcoming the appointment by the secretary general of his special adviser on 

Iraq; 

Affirming the need for accountability for crimes and atrocities committed by the 

previous Iraqi regime; 

Stressing the need for respect for the archaeological, historical, cultural, and religious heritage of Iraq, and for the continued protection of archaeological, historical, 

cultural, and religious sites, museums, libraries, and monuments; 

Noting the letter of 8 May 2003 from the Permanent Representatives of the 

United States of America and the United Kingdom of Great Britain and Northern 

Ireland to the President of the Security Council (S/2003/538) and recognising the 

specific authorities, responsibilities, and obligations under applicable international 

law of these states as occupying powers under unified command (the ‘‘Authority’’); 

Noting further that other states that are not occupying powers are working now 

or in the future may work under the Authority; 

Welcoming further the willingness of member states to contribute to stability and 

security in Iraq by contributing personnel, equipment, and other resources under 

the Authority; 

Concerned that many Kuwaitis and Third-State Nationals still are not accounted 

for since 2 August 1990; 

Determining that the situation in Iraq, although improved, continues to constitute 

a threat to international peace and security; 

Acting under Chapter VII of the Charter of the United Nations, 

1. Appeals to Member States and concerned organisations to assist the people of 

Iraq in their efforts to reform their institutions and rebuild their country, and to 

contribute to conditions of stability and security in Iraq in accordance with this resolution; 

2. Calls upon all member states in a position to do so to respond immediately to 

the humanitarian appeals of the United Nations and other international 

organisations for Iraq and to help meet the humanitarian and other needs of the 

Iraqi people by providing food, medical supplies, and resources necessary for reconstruction and rehabilitation of Iraq’s economic infrastructure; 

3. Appeals to member states to deny safe haven to those members of the previous 

Iraqi regime who are alleged to be responsible for crimes and atrocities and to support actions to bring them to justice; 

4. Calls upon the Authority, consistent with the Charter of the United Nations 

and other relevant international law, to promote the welfare of the Iraqi people 

through the effective administration of the territory, including in particular working 

towards the restoration of conditions of security and stability and the creation of 

conditions in which the Iraqi people can freely determine their own political future; 

44

5. Calls upon all concerned to comply fully with their obligations under international law including in particular the Geneva Conventions of 1949 and the Hague 

Regulations of 1907; 

6. Calls upon the Authority and relevant organisations and individuals to continue efforts to locate, identify, and repatriate all Kuwaiti and Third-State Nationals 

or the remains of those present in Iraq on or after 2 August 1990, as well as the 

Kuwaiti archives, that the previous Iraqi regime failed to undertake, and, in this 

regard, directs the high-level co-ordinator, in consultation with the International 

Committee of the Red Cross and the Tripartite Commission and with the appropriate support of the people of Iraq and in co-ordination with the Authority, to take 

steps to fulfil his mandate with respect to the fate of Kuwaiti and Third-State National missing persons and property; 

7. Decides that all member states shall take appropriate steps to facilitate the safe 

return to Iraqi institutions, of Iraqi cultural property and other items of archaeological, historical, cultural, rare scientific, and religious importance illegally removed from the Iraq National Museum, the National Library, and other locations 

in Iraq since the adoption of resolution 661 (1990) of 2 August 1990, including by 

establishing a prohibition on trade in or transfer of such items and items with respect to which reasonable suspicion exists that they have been illegally removed, 

and calls upon the United Nations Educational, Scientific, and Cultural Organization, Interpol, and other international organisations, as appropriate, to assist in the 

implementation of this paragraph; 

8. Requests the secretary general to appoint a Special Representative for Iraq 

whose independent responsibilities shall involve reporting regularly to the Council 

on his activities under this resolution, co-ordinating activities of the United Nations 

in post-conflict processes in Iraq, co-ordinating among United Nations and international agencies engaged in humanitarian assistance and reconstruction activities 

in Iraq, and, in co-ordination with the Authority, assisting the people of Iraq 

through: 

(a) co-ordinating humanitarian and reconstruction assistance by United Nations 

agencies and between United Nations agencies and non-governmental organisations; 

(b) promoting the safe, orderly, and voluntary return of refugees and displaced 

persons; 

(c) working intensively with the Authority, the people of Iraq, and others concerned to advance efforts to restore and establish national and local institutions for 

representative governance, including by working together to facilitate a process 

leading to an internationally recognised, representative government of Iraq; 

(d) facilitating the reconstruction of key infrastructure, in co-operation with other 

international organisations; 

(e) promoting economic reconstruction and the conditions for sustainable development, including through co-ordination with national and regional organisations, as 

appropriate, civil society, donors and the international financial institutions; 

(f) encouraging international efforts to contribute to basic civilian administration 

functions; 

(g) promoting the protection of human rights; 

(h) encouraging international efforts to rebuild the capacity of the Iraqi civilian 

police force; and 

(i) encouraging international efforts to promote legal and judicial reform. 

9. Supports the formation, by the people of Iraq with the help of the Authority 

and working with the special representative, of an Iraqi interim administration as 

a transitional administration run by Iraqis, until an internationally recognised, representative government is established by the people of Iraq and assumes the responsibilities of the Authority; 

10. Decides that , with the exception of prohibitions related to the sale or supply 

to Iraq of arms and related materiel other than those arms and related materiel required by the Authority to serve the purposes of this and other related resolutions, 

all prohibitions related to trade with Iraq and the provision of financial or economic 

resources to Iraq established by resolution 661 (1990) and subsequent relevant resolutions, including resolution 778 (1992) of 2 October 1992, shall no longer apply; 

11. Reaffirms that Iraq must meet its disarmament obligations, encourages the 

United Kingdom of Great Britain and Northern Ireland and the United States of 

America to keep the Council informed of their activities in this regard, and underlines the intention of the Council to revisit the mandates of the United Nations 

Monitoring and Verification Commission and the International Atomic Energy Agency as set forth in resolutions 687 (1991) of 3 April 1991, 1284 (1999) of 17 December 

1999, and 1441 (2002) of 8 November 2002; 

12. Notes the establishment of a Development Fund for Iraq to be held by the 

Central Bank of Iraq and to be audited by independent public accountants approved 

45

by the International Advisory and Monitoring Board of the Development Fund for 

Iraq and looks forward to the early meeting of that International Advisory and Monitoring Board, whose members shall include duly qualified representatives of the 

secretary general, of the managing director of the International Monetary Fund, of 

the director-general of the Arab Fund for Social and Economic Development, and of 

the president of the World Bank; 

13. Notes further that the funds in the Development Fund for Iraq shall be disbursed at the direction of the Authority, in consultation with the Iraqi interim administration, for the purposes set out in paragraph 14 below; 

14. Underlines that the Development Fund for Iraq shall be used in a transparent 

manner to meet the humanitarian needs of the Iraqi people, for the economic reconstruction and repair of Iraq’s infrastructure, for the continued disarmament of Iraq, 

and for the costs of Iraqi civilian administration, and for other purposes benefiting 

the people of Iraq; 

15. Calls upon the international financial institutions to assist the people of Iraq 

in the reconstruction and development of their economy and to facilitate assistance 

by the broader donor community, and welcomes the readiness of creditors, including 

those of the Paris Club, to seek a solution to Iraq’s sovereign debt problems; 

16. Requests also that the secretary general, in co-ordination with the Authority, 

continue the exercise of his responsibilities under Security Council resolution 1472 

(2003) of 28 March 2003 and 1476 (2003) of 24 April 2003, for a period of six months 

following the adoption of this resolution, and terminate within this time period, in 

the most cost effective manner, the ongoing operations of the oil-for-food programme 

(the ‘‘programme’’), both at headquarters level and in the field, transferring responsibility for the administration of any remaining activity under the programme to the 

Authority, including by taking the following necessary measures: 

(a) to facilitate as soon as possible the shipment and authenticated delivery of priority civilian goods as identified by the secretary general and representatives designated by him, in co-ordination with the Authority and the Iraqi interim administration, under approved and funded contracts previously concluded by the previous 

Government of Iraq, for the humanitarian relief of the people of Iraq, including, as 

necessary, negotiating adjustments in the terms or conditions of these contracts and 

respective letters of credit as set forth in paragraph 4 (d) of resolution 1472 (2003); 

(b) to review, in light of changed circumstances, in co-ordination with the Authority and the Iraqi interim administration, the relative utility of each approved and 

funded contract with a view to determining whether such contracts contain items 

required to meet the needs of the people of Iraq both now and during reconstruction, 

and to postpone action on those contracts determined to be of questionable utility 

and the respective letters of credit until an internationally recognised, representative government of Iraq is in a position to make its own determination as to whether 

such contracts shall be fulfilled; 

(c) to provide the Security Council within 21 days following the adoption of this 

resolution, for the Security Council’s review and consideration, an estimated operating budget based on funds already set aside in the account established pursuant 

to paragraph 8 (d) of resolution 986 (1995) of 14 April 1995, identifying: 

(i) all known and projected costs to the United Nations required to ensure the continued functioning of the activities associated with implementation of the present 

resolution, including operating and administrative expenses associated with the relevant United Nations agencies and programs responsible for the implementation of 

the programme both at headquarters and in the field; 

(ii) all known and projected costs associated with termination of the programme; 

(iii) all known and projected costs associated with restoring Government of Iraq 

funds that were provided by member states to the secretary general as requested 

in paragraph 1 of resolution 778 (1992) of 2 October 1992; and 

(iv) all known and projected costs associated with the special representative and 

the qualified representative of the secretary general identified to serve on the International Advisory and Monitoring Board, for the six-month time period defined 

above, following which these costs shall be borne by the United Nations; 

(d) to consolidate into a single fund the accounts established pursuant to paragraphs 8 (a) and 8 (b) of resolution 986 (1995); 

(e) to fulfil all remaining obligations related to the termination of the programme, 

including negotiating in the most cost-effective manner, any necessary settlement 

payments, which shall be made from the escrow accounts established pursuant to 

paragraphs 8(a) and 8 (b) of resolution 986 (1995), with those parties that previously 

have entered into contractual obligations with the secretary general under the programme, and to determine, in co-ordination with the Authority and the Iraqi interim administration, the future status of contracts undertaken by the United NaVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
46

tions and related United Nations agencies under the accounts established pursuant 

to paragraphs 8 (b) and 8 (d) of resolution 986 (1995); 

(f) to provide the Security Council, 30 days prior to the termination of the programme, with a comprehensive strategy developed in close co-ordination with the 

Authority and the Iraqi interim administration that would lead to the delivery of 

all relevant documentation and the transfer of all operational responsibility of the 

programme to the Authority; 

17. Requests further that the secretary general transfer as soon as possible to the 

Development Fund for Iraq $1bn from unencumbered funds in the accounts established pursuant to paragraphs 8 (a) and 8 (b) of resolution 986 (1995), restore Government of Iraq funds that were provided by member states to the secretary general 

as request in paragraph 1 of resolution 778 (1992), and decides that, after deducting 

all relevant United Nations expenses associated with the shipment of authorised 

contracts, and costs to the programme outlined in paragraph 16 (c) above, including 

residual obligations, all surplus funds in the escrow accounts established pursuant 

to paragraphs 8 (a), 8 (b), 8 (d), and 8 (f) of resolution 986 (1995) shall be transferred at the earliest possible time to the Development Fund for Iraq; 

18. Decides to terminate effective on the adoption of this resolution the functions 

related to the observation and monitoring activities undertaken by the secretary 

general under the programme, including the monitoring of the export of petroleum 

and petroleum products from Iraq; 

19. Decides to terminate the Committee established pursuant to paragraph 6 of 

resolution 661 (1990) at the conclusion of the six months period called for in paragraph 16 above and further decides that the Committee shall identify individuals 

and entities referred to in paragraph 23 below; 

20. Decides that all export sales of petroleum, petroleum products, and natural 

gas from Iraq following the date of the adoption of this resolution shall be made 

consistent with prevailing international market best practices, to be audited by 

independent public accountants reporting to the International Advisory and Monitoring Board referred to in paragraph 12 above in order to ensure transparency, and 

decides further that, except as provided in paragraph 21 below, all proceeds from 

such sales shall be deposited into the Development Fund for Iraq, until such time 

as an internationally recognised, representative government of Iraq is properly constituted; 

21. Decides further that 5% of the proceeds referred to in paragraph 20 above 

shall be deposited into the Compensation Fund established in accordance with resolution 687 (1991) of 3 April 1991 and subsequent relevant resolutions and that, unless an internationally recognised, representative government of Iraq and the Governing Council of the United Nations Compensation Commission, in the exercise of 

its authority over methods of ensuring that payments are made into the Compensation Fund, decide otherwise, this requirement shall be binding on a properly constituted, internationally recognised, representative government of Iraq and any successor thereto; 

22. Noting the relevance of the establishment of an internationally recognised, 

representative government of Iraq and the desirability of prompt completion of the 

restructuring of Iraq’s debt as referred to in paragraph 15 above, further decides 

that, until December 31 2007, unless the Council decides otherwise, petroleum, petroleum products, and natural gas originating in Iraq shall be immune, until title 

passes to the initial purchaser from legal proceedings against them and not be subject to any form of attachment, garnishment, or execution, and that all states shall 

take any steps that may be necessary under their respective domestic legal systems 

to assure this protection, and that proceeds and obligations arising from sales thereof, as well as the Development Fund for Iraq, shall enjoy privileges and immunities 

equivalent to those enjoyed by the United Nations except that the above-mentioned 

privileges and immunities will not apply with respect to any legal proceeding in 

which recourse to such proceeds or obligations is necessary to satisfy liability for 

damages assessed in connection with an ecological accident, including an oil spill, 

that occurs after the date of adoption of this resolution; 

23. Decides that all member states in which there are: 

(1) funds or other financial assets or economic resources of the previous Government of Iraq or its state bodies, corporations, or agencies, located outside Iraq as 

of the date of this resolution, or 

(2) funds or other financial assets or economic resources that have been removed 

from Iraq, or acquired, by Saddam Hussein or other senior officials of the former 

Iraqi regime and their immediate family members, including entities owned or controlled, directly or indirectly, by them or by persons acting on their behalf or at their 

direction, 

47

shall freeze without delay those funds or other financial assets or economic resources and, unless these funds or other financial assets or economic resources are 

themselves the subject of a prior judicial, administrative, or arbitral lien or judgement, immediately shall cause their transfer to the Development Fund for Iraq, it 

being understood that, unless otherwise addressed, claims made by private individuals or non-government entities on those transferred funds or other financial assets 

may be presented to the internationally recognised, representative government of 

Iraq; and decides further that all such funds or other financial assets or economic 

resources shall enjoy the same privileges, immunities, and protections as provided 

under paragraph 22; 

24. Requests the secretary general to report to the Council at regular intervals on 

the work of the special representative with respect to the implementation of this 

resolution and on the work of the International Advisory and Monitoring Board and 

encourages the United Kingdom of Great Britain and Northern Ireland and the 

United States of America to inform the Council at regular intervals of their efforts 

under this resolution; 

25. Decides to review the implementation of this resolution within 12 months of 

adoption and to consider further steps that might be necessary; 

26. Calls upon member states and international and regional organisations to contribute to the implementation of this resolution; 

27. Decides to remain seized of this matter. 

APPENDIX 13

UN SECURITY COUNCIL RESOLUTION 1500 (2003)

AUGUST 14, 2003

The Security Council,

Recalling all its previous relevant resolutions, in particular Resolution 1483 

(2003) of 22 May 2003, 

Reaffirming the sovereignty and territorial integrity of Iraq, 

Reaffirming also the vital role for the United Nations in Iraq which was set out 

in relevant paragraphs of Resolution 1483, 

Having considered the report of the Secretary-General of 15 July 2003 (S/2003/

715), 

1. Welcomes the establishment of the broadly representative Governing Council 

of Iraq on 13 July 2003, as an important step towards the formation by the people 

of Iraq of an internationally recognized, representative government that will exercise the sovereignty of Iraq; 

2. Decides to establish the United Nations Assistance Mission for Iraq to support 

the Secretary-General in the fulfillment of his mandate under Resolution 1483 in 

accordance with the structure and responsibilities set out in his report of 15 July 

2003, for an initial period of twelve months; 

3. Decides to remain seized of this matter. 

APPENDIX 14

UNITED NATIONS SECURITY COUNCIL RESOLUTION 1511 (2003)

OCTOBER 8, 2003

The Security Council, 

REAFFIRMING its previous resolutions on Iraq, including resolution 1483 (2003) 

of 22 May 2003 and 1500 (2003) of 14 August 2003, and on threats to peace and 

security caused by terrorist acts, including resolution 1373 (2001) of 28 September 

2001, and other relevant resolutions, 

UNDERSCORING that the sovereignty of Iraq resides in the State of Iraq, reaffirming the right of the Iraqi people freely to determine their own political future 

and control their own natural resources, 

REITERATING its resolve that the day when Iraqis govern themselves must come 

quickly, and 

RECOGNIZING the importance of international support, particularly that of 

countries in the region, Iraq’s neighbors, and regional organizations, in taking forward this process expeditiously, 

RECOGNIZING that international support for restoration of conditions of stability 

and security is essential to the well-being of the people of Iraq as well as to the 

ability of all concerned to carry out their work on behalf of the people of Iraq, and 

welcoming Member State contributions in this regard under resolution 1483 (2003), 

48

WELCOMING the decision of the Governing Council of Iraq to form a preparatory 

constitutional committee to prepare for a constitutional conference that will draft a 

constitution to embody the aspirations of the Iraqi people, and 

URGING it to complete this process quickly, 

AFFIRMING that the terrorist bombings of the Embassy of Jordan on 7 August 

2003, of the United Nations headquarters in Baghdad on 19 August 2003, of the 

Imam Ali Mosque in Najaf on 29 August 2003, and of the Embassy of Turkey on 

14 October 2003, and the murder of a Spanish diplomat on 9 October 2003 are attacks on the people of Iraq, the United Nations, and the international community, 

and 

DEPLORING the assassination of Dr. Akila al-Hashimi, who died on 25 September 2003, as an attack directed against the future of Iraq, 

In that context, RECALLING and REAFFIRMING the statement of its President 

of 20 August 2003 (S/PRST /2003/13) and resolution 1502 (2003) of 26 August 2003, 

DETERMINING that the situation in Iraq, although improved, continues to constitute a threat to international peace and security, 

ACTING UNDER CHAPTER VII OF THE CHARTER OF THE UNITED NATIONS, 

1. REAFFIRMS the sovereignty and territorial integrity of Iraq, and UNDERSCORES, in that context, the temporary nature of the exercise by the Coalition Provisional Authority (Authority) of the specific responsibilities, authorities, and obligations under applicable international law recognized and set forth in resolution 1483 

(2003), which will cease when an internationally recognized, representative government established by the people of Iraq Is sworn in and assumes the responsibilities 

of the Authority, inter alia through steps envisaged in paragraphs four through 

seven and ten below; 

2. WELCOMES the positive response of the international community, in fora such 

as the Arab League, the Organization of the Islamic Conference, the United Nations 

General Assembly, and the United Nations Educational, Scientific and Cultural Organization, to the establishment of the broadly representative Governing Council as 

an important step towards an internationally recognized, representative government; 

3. SUPPORTS the Governing Council’s efforts to mobilize the people of Iraq, including by the appointment of a cabinet of ministers and a preparatory constitutional committee to lead a process in which the Iraqi people will progressively take; 

4. DETERMINES that the Governing Council and its ministers are the principal 

bodies of the Iraqi interim administration, which, without prejudice to its further 

evolution, embodies the sovereignty of the State of Iraq during the transitional period until an internationally recognized, representative government is established 

and assumes the responsibilities of the Authority; 

5. AFFIRMS that the administration of Iraq will be progressively undertaken by 

the evolving structures of the Iraqi interim administration; 

6. CALLS UPON the Authority, in this context, to return governing responsibilities and authorities to the people of Iraq as soon as practicable and requests the 

Authority, in cooperation as appropriate with the Governing Council and the Secretary-General, to report to the Council on the progress being made; 

7. INVITES the Governing Council to provide to the Security Council, for its review, no later than 15 December 2003, in cooperation with the Authority and, as 

circumstances permit, the Special Representative of the Secretary-General, a timetable and a program for the drafting of a new constitution for Iraq and for the holding of democratic elections under that constitution; 

8. RESOLVES that the United Nations, acting through the Secretary-General, his 

Special Representative, and the United Nations Assistance Mission in Iraq, should 

strengthen its vital role in Iraq, including by providing humanitarian relief, promoting the economic reconstruction of and conditions for sustainable development 

in Iraq, and advancing efforts to restore and establish national and local institutions 

for representative government: 

9. REQUESTS that, as circumstances permit, the Secretary-General pursue the 

course of action outlined in paragraphs 98 and 99 of the report of the SecretaryGeneral of 17 July 2003 (S/2003/715); 

10. TAKES NOTE of the intention of the Governing Council to hold a constitutional conference and, recognizing that the convening of the conference will be a 

milestone in the movement to the full exercise of sovereignty, calls for its preparation through national dialogue and consensus-building as soon as practicable and requests the Special Representative of the Secretary-General, at the time of the convening of the conference, or, as circumstances permit, to lend the unique expertise 

of the United Nations to the Iraqi people in this process of political transition, including the establishment of electoral processes; 

49

11. REQUESTS the Secretary-General to ensure that the resources of the United 

Nations and associated organizations are available, if requested by the Iraqi Governing Council and, as circumstances permit, to assist in furtherance of the program 

provided by the Governing Council in paragraph 7 above and encourages other organizations with expertise in this area to support the Iraqi Governing Council, if requested; 

12. REQUESTS the Secretary-General to report to the Security Council on his responsibilities under this resolution and the development and implementation of a 

timetable and program under paragraph 7 above; 

13. DETERMINES that the provision of security and stability is essential to the 

successful completion of the political process as outlined in paragraph 7 above and 

to the ability of the United Nations to contribute effectively to that process and the 

implementation of resolution 1483 (2003), and AUTHORIZES a multinational force 

under unified command to take all necessary measures to contribute to the maintenance of security and stability in Iraq, including for the purpose of ensuring necessary conditions for the implementation of the timetable and program as well as 

to contribute to the security of the United Nations Assistance Mission for Iraq, the 

Governing Council of Iraq and other institutions of the Iraqi interim administration, 

and key humanitarian and economic infrastructure; 

14. URGES Member States to contribute assistance under this United Nations 

mandate, including military forces, to the multinational force referred to in paragraph 13 above; 

15. DECIDES that the Council shall review the requirements and mission of the 

multinational force referred to in paragraph 13 above not later than one year from 

the date of this resolution, and that in any case the mandate of the force shall expire upon the completion of the political process as described in paragraphs 4 

through 7 and 10 above, and EXPRESSES readiness to consider on that occasion 

any future need for the continuation of the multinational force, taking into account 

the views of an internationally recognized, representative government of Iraq; 

16. EMPHASIZES the importance of establishing effective Iraqi police and security forces in maintaining law, order, and security and combating terrorism consistent with paragraph 4 of resolution 1483 (2003), and calls upon Member States 

and international and regional organizations to contribute to the training and equipping of Iraqi police and security forces; 

17. EXPRESSES deep sympathy and condolences for the personal losses suffered 

by the Iraqi people and by the United Nations and the families of those United Nations personnel and other innocent victims who were killed or injured in these tragic 

attacks; 

18. UNEQUIVOCALLY CONDEMNS the terrorist bombings of the Embassy of 

Jordan on 7 August 2003, of the United Nations headquarters in Baghdad on 19 

August 2003, and of the Imam Ali Mosque in Najaf on 29 August 2003, and of the 

Embassy of Turkey on 14 October 2003, the murder of a Spanish diplomat on 9 October 2003, and the assassination of Dr. Akila al-Hashimi, who died on 25 September 2003, and EMPHASIZES that those responsible must be brought to justice; 

19. CALLS UPON Member States to prevent the transit of terrorists to Iraq, arms 

for terrorists, and financing that would support terrorists, and emphasizes the importance of strengthening the cooperation of the countries of the region, particularly 

neighbors of Iraq, in this regard; 

20. APPEALS to Member States and the international financial institutions to 

strengthen their efforts to assist the people of Iraq in the reconstruction and development of their economy, and urges those institutions to take immediate steps to 

provide their full range of loans and other financial assistance to Iraq, working with 

the Governing Council and appropriate Iraqi ministries; 

21. URGES Member States and international and regional organizations to support the Iraq reconstruction effort initiated at the 24 June 2003 United Nations 

Technical Consultations, including through substantial pledges at the 23–24 October 

2003 International Donors Conference in Madrid; 

22. CALLS UPON Member States and concerned organizations to help meet the 

needs of the Iraqi people by providing resources necessary for the rehabilitation and 

reconstruction of Iraq’s economic infrastructure; 

23. EMPHASIZES that the International Advisory and Monitoring Board (IAMB) 

referred to in paragraph 12 of resolution 1483 (2003) should be established as a priority, and reiterates that the Development Fund for Iraq shall be used in a transparent manner as set out in paragraph 14 of resolution1483 (2003); 

24. REMINDS all Member States of their obligations under paragraphs 19 and 

23 of resolution 1483 (2003) in particular the obligation to immediately cause the 

transfer of funds, other financial assets and economic resources to the Development 

Fund for Iraq for the benefit of the Iraqi people; 

50

25. REQUESTS that the United States, on behalf of the multinational force as 

outlined in paragraph 13 above, report to the Security Council on the efforts and 

progress of this force as appropriate and not less than every six months; 

26. DECIDES to remain seized of the matter.

Chairman HYDE. Ms. Pletka, you are next. 

STATEMENT OF DANIELLE PLETKA, VICE PRESIDENT, FOREIGN AND DEFENSE POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE 

Ms. PLETKA. Thank you, Mr. Chairman. Sorry. Technology gets 

the best of us. 

Mr. Chairman, distinguished Members, thank you very much for 

inviting me to be here today. At first glance the Oil-for-Food scandal at the United Nations appears a story of bureaucratic shenanigans, graft and mismanagement. In fact, its implications are far 

wider. As the United States prepares to hand responsibility for 

Iraq to the United Nations, the U.N.’s administration of the Oil-forFood Program brings into question the efficacy and integrity of the 

institution and its abilities to function credibly in Iraq. As we rely 

more and more on global bodies like the U.N., the ability of those 

bodies to enforce their members’ will, to rely on their personnel and 

to operate transparently are matters that concern all responsible 

nations. 

Since the publication of the alleged kickback list from the United 

Nations Oil-for-Food Program for Iraq, there has been a good deal 

of debate about the program. The temptation in the face of growing 

evidence of official corruption is to assign blame, pledge to root out 

this sort of malfeasance in the future and move on. Secretary General Annan has already asserted that any problems were the fault 

of the members of the Security Council. Others pinpoint Benon 

Sevan, the Director of the Office of the Iraq Program and an alleged recipient of a kickback voucher from Saddam. 

In individual cases pay-offs can explain in part why the program 

had so many failings. After all, if it is true that Benon Sevan was 

being bribed by Saddam Hussein, then we can more easily understand why it was impossible to engage the Office of the Iraq Program in any systematic effort to effectively implement sanctions. 

Similarly, it should come as no surprise that if companies could get 

contracts through bribes, and without fear of punishment, they 

would do so. But generally speaking, there is plenty of blame to go 

around. 

Originally the program was conceived to address the fact that 

the United Nations’ sanctions on Iraq were inflicting suffering on 

the Iraqi people rather than on Saddam Hussein. The first resolution to suggest such a program, U.N. Security Council Resolution 

706 in 1991, envisioned the U.N. Secretary General himself in control of contracting and revenues. Saddam Hussein was cut out of 

the whole process. But Saddam correctly judged that if he held out, 

a better deal would come along, and in 1995, with U.N. Security 

Council Resolution 986, it did. 

The very nature of the U.N. Security Council 986 resolution invited corruption. Saddam Hussein’s own government was responsible for developing distribution lists, deciding needs, contracting 

with suppliers and delivering goods to the end users in much of 

51

Iraq. There was no requirement that Saddam find the best goods 

or the cheapest supplier. No surprise then that Saddam used the 

contracting process to reward friendly countries and punish enemies. Nor is it any surprise that many of the companies involved 

were willing to pay surcharges for lucrative contracts often to ship 

shoddy and unneeded goods into Iraq. For example, I gather a Department of Defense audit found that two-thirds of all Egypt contracts were deemed overpriced by an average of not 10. But 23 percent, and of the 124 Russian contracts that they investigated, 51 

were found to have illegal surcharges. Imagine. These were not 

contracts in violation of sanctions, but allowed within the sanctions 

regime. Billions in business was also taking place outside the sanctions regime, benefiting Saddam Hussein directly. In many cases 

the United Nations was fully aware of those violations, but did almost nothing to stop them despite United States efforts. 

Meanwhile, throughout the course of the 1990s, beginning as 

early as 1991, everyone from Kofi Annan to the Foreign Ministers 

and Presidents of Russia, China and France, not to speak of 

Saddam’s friends in the Arab League, were all condemning the inhumanity of the sanctions regime. But even the loose system under 

U.N. Security Council Resolution 986 and its follow-on resolution, 

1153, weren’t good enough for Saddam and his allies. By 1999, he 

was allowed to sell an unlimited amount of oil, buy an unlimited 

amount of nonmilitary goods, and contract for exploration in existing oil fields. 

If the Oil-for-Food Program itself was a problem, the regulation 

of so-called dual-use goods was even worse. Under the terms of the 

original resolution regulating the importation of such goods, U.N. 

Security Council Resolution 1051, there were meant to be weapons 

inspectors ensuring imports weren’t diverted, but there were only 

150 inspectors on the ground checking up on the program, and 

after 1998 there were none. In theory, the U.N. people were doing 

the job, but they didn’t have the time, the expertise or the willingness to hire more personnel despite the fact that they were receiving fully 3 percent of Oil-for-Food revenues for their own costs. 

Nor did the United Nations Secretariat or the Office of the Iraq 

Program express particular concern. Their main focus at the time 

and the object of constant protest to the United States and to any 

member of the press who would listen was the more than $1 billion 

in holds, objections to particular contracts, that the United States 

and Britain had on goods going into Iraq. 

Chairman HYDE. Ms. Pletka, can you summarize it in 2 more 

minutes? 

Ms. PLETKA. I can summarize it in 2 more minutes. Yes, sir. I 

am sorry. 

Chairman HYDE. Thank you. 

Ms. PLETKA. These are the facts. For the most part those of us 

who paid attention to Iraq and to the sanctions were well aware 

of them in the early 1990s. Corruption, smuggling and sanctions 

violations were common knowledge. For the U.N. Secretary General to assert that they weren’t aware of the problem is absurd. 

But Saddam is gone now and the sanctions regime is finished. Why 

do we care? 

52

There are some obvious answers. The criminal behavior such as 

taking bribes, accepting vouchers and the like must be ferreted out. 

As Claudia Rosett has ably documented, there is almost no accountability within the United Nations. OIP officials have protested 

they did diligent oversight, and they underwent up to 100 audits, 

but GAO has not seen the audits and testified that, ‘‘it is unclear 

how OIP performed its oversight function.’’

Mr. Chairman, you have to file a financial disclosure form as 

most every one of your colleagues and many of your staff. The purpose is to reveal conflicts of interest or suspicious sources of income. And lying about that is subject to criminal penalty. A similar 

accountability system within the United Nations only applies to the 

rank of Assistant Secretary General and above, and it is not entirely clear what the punishment is if you violate or lie on those 

forms. Benon Sevan, who is alleged to have received an oil voucher 

from Saddam’s government, hasn’t even been suspended from his 

paid position and intends to resign without ever having been suspended. In such a bureaucracy, only a person’s innate honor and 

honesty is a guarantor against corruption. 

But there is a more serious issue at hand as well. Setting aside 

the question of corruption, even if the program had been squeaky 

clean, it is clear that those administering the Iraq sanctions were 

not fully committed to their success. And why should they have 

been? They don’t work for the United States. There are five permanent members of the Security Council, and at least three of them 

did not support sanctions against Iraq. The leaders of France, 

China and Russia had all made clear that the time for sanctions—

the time had come for sanctions to end. Indeed Syria, which sat on 

the Security Council during the height of the debate over Iraq, was 

the number one violator of U.N. sanctions on Iraq. Why should 

U.N. employees enforce with any enthusiasm a system that is not 

supported by the majority of the members of the United Nations? 

For those who contend that we must always proceed on the basis 

of multilateralism and that the Untied Nations should be the default instrument of American foreign policy, this is a real dilemma. 

Many of us conclude instead the U.N. should be used when possible, but when consensus is unachievable or so dilutes our goals 

as to be useless to our purpose, then we must move on alone. 

But it is fashionable in many quarters to reject that kind of 

thinking as ‘‘unilateralism and as illegitimate absent the U.N. good 

housekeeping seal of approval.’’ Those who argue that need to explain why the corruption and mismanagement we are finding in 

the Oil-for-Food Program will not be characteristic of other such 

programs in the future. If the Council is divided, and cannot agree 

to enforce the resolution it agrees upon, it should come as no surprise that the staff of the United Nations, from the Secretary General on down, don’t feel it incumbent upon them to carry out U.N. 

resolutions to the letter. And if they can take bribes without fear 

of punishment in order to subvert those resolutions, the problem of 

enforcement is graver still. If the U.N. is intended to be an arm of 

our foreign policy, then Iraq sanctions are indeed an objection lesson. 

Thank you very much. 

Chairman HYDE. Thank you, Ms. Pletka. 

53

[The prepared statement of Ms. Pletka follows:]

PREPARED STATEMENT OF DANIELLE PLETKA, VICE PRESIDENT, FOREIGN AND

DEFENSE POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE

Mr. Chairman, distinguished members, thank you for inviting me to be here 

today. 

At first glance, the oil for food scandal at the United Nations appears a mundane 

story of bureaucratic shenanigans, graft and mismanagement. In fact, its implications are far wider. As the United States prepares to hand responsibility for Iraq 

to the United Nations, the UN’s administration of the oil for food program brings 

into question the efficacy and integrity of the institution and its ability to function 

credibly in Iraq. As we rely more and more on global bodies like the UN, the ability 

of those bodies to enforce their members’ will, to rely on their personnel and to operate transparently are matters that concern all responsible nations. 

Since the publication of the alleged kickback list from the United Nations oil for 

food program for Iraq there has been a good deal of debate about the program. Playing out their own version of Casablanca, officials from the United Nations have declared themselves ‘‘shocked’’ that the oil for food program was a tangled web of, at 

best, incompetence, at worst, bribery, deceit, corruption. 

The temptation in the face of growing evidence of official corruption is to assign 

blame, pledge to root out this sort of malfeasance in the future and move on. Secretary General Annan has already asserted that any problems were the fault of the 

members of the Security Council. Others pinpoint Benon Sevan, the director of the 

Office of the Iraq Program at the United Nations, and an alleged recipient of a kickback voucher from Saddam. In this political season, still others have asserted, variously, that the Clinton or Bush Administrations are to blame for the scandalous 

behavior at the UN. 

In individual cases, payoffs can explain in part why the program had so many 

failings. After all, if it is true that Benon Sevan was being bribed by Saddam Hussein, then we can more easily understand why it was impossible to engage the Office of Iraq Program in any systematic effort to effectively implement sanctions. 

Similarly, it should come as no surprise that if companies could get contracts 

through bribes and without fear of punishment, they would do so. 

But generally speaking, there is plenty of blame to go around, because the failings 

of the oil for food program can be traced directly back to the failings of international 

institutions in general and consensus-based multilateralism in particular. 

Originally, the program was conceived to address the fact that United Nations 

sanctions on Iraq were inflicting suffering on the Iraqi people rather than on Saddam Hussein. The first resolution to suggest such a program, UNSCR 706 in 1991, 

envisioned the UN Secretary General in control of contracting and revenues; Saddam Hussein was cut out of the whole process. But Saddam correctly judged that 

if he held out, a better deal would come along; and in 1995 with UNSCR 986, it 

did. 

The environment surrounding passage of 986 was typical at the UN. The crisis 

had passed, as had the pressure for decisive action, and the loose nature of the controls outlined in the resolution reflect that. The compromise contained in 986 gave 

rise to two classes of victim: first, the Iraqi people, who remained at the mercy of 

this dictator; and second, the rest of the world, which was relying on the effective 

administration of sanctions to contain the Iraqi threat. 

The very nature of UNSCR 986 invited corruption. Saddam Hussein’s own government was responsible for developing distribution lists, deciding needs, contracting 

with suppliers and delivering goods to the end users in much of Iraq. There was 

no requirement that Saddam find the best goods or the cheapest supplier. No surprise then that Saddam used the contracting process to reward friendly countries 

and punish enemies. Nor is it any surprise that many of the companies involved 

were willing to pay surcharges for lucrative contracts, often to ship shoddy and 

unneeded goods into Iraq. For example, I gather that a Department of Defense audit 

found that two thirds of all Egypt’s contracts were deemed overpriced by an average 

of 23 percent, and of the 124 Russian contracts investigated, 51 were found to have 

illegal surcharges. 

Imagine, these were not contracts in violation of sanctions, but allowed within the 

sanctions regime. Billions in business was also taking place outside the sanctions 

regime, benefiting Saddam Hussein directly. In many cases the United Nations was 

fully aware of those violations, but did almost nothing to stop them. 

Meanwhile, throughout the course of the 1990s beginning as early as 1991, everyone from Kofi Annan to the Foreign Ministers of Russia, China and France, not to 

speak of Saddam’s friends inside the Arab League, were all condemning the inhuVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00057 Fmt 6633 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
54

manity of the sanctions regime. Each loosening of the sanctions (and they were officially loosened roughly every two years) came in response to enormous international 

pressure. 

Denis Halliday, the UN administrator of the oil-for-food program, resigned in 

1998 to protest the sanctions. Halliday said, ‘‘We are in the process of destroying 

an entire country’’ and labeled the sanctions as ‘‘nothing less than genocide.’’

But even the loose system under UNSCR 986 and its follow-on resolution 1153 

weren’t good enough for Saddam or his allies. By 1999 he was allowed to sell an 

unlimited amount of oil, buy an unlimited amount of non-military goods and contract for exploration in existing oil fields; he was building palaces, importing fleets 

of luxury cars and, best of all, there were no weapons inspectors inside Iraq. 

If the oil for food program was a problem, the regulation of so-called dual use 

goods was even worse. Under the terms of the original resolution regulating the importation of such goods, UNSCR 1051, there were meant to be weapons inspectors 

insuring that imports weren’t diverted. There were just 150 inspectors on the 

ground checking up on the oil for food program; and after 1998, there was no one 

inspecting dual use. In theory, the UN people were doing the job, but in practice 

they didn’t have the time, the expertise or the willingness to hire more personnel. 

All this while they receiving fully three percent of the OFF revenues for their own 

costs. 

Nor did the United Nations secretariat or the Office of the Iraq Program express 

particular concern. OIP officials who met with US government and congressional 

groups were hostile and angry, furious over any insinuations that the program could 

be improved in any way. Their main focus and the object of constant protest to the 

United Nations and to any member of the press who would listen was the more than 

$1 billion in holds—objections to particular contracts—the United States and Great 

Britain had on goods going into Iraq. 

These are the facts; for the most part, those of us who paid attention to Iraq and 

to the sanctions were well aware of them beginning in the early 1990s. Corruption, 

smuggling and sanctions violations were common knowledge. For the United Nations Secretary General or his spokesmen to assert that they weren’t aware of the 

problems is absurd. But Saddam is now gone and the sanctions regime is over. So 

why do we care? 

There are some obvious answers to that question: Criminal behavior such as taking bribes and accepting ‘‘vouchers’’ should be ferreted out and prosecuted. As Claudia Rosett has ably documented, there is almost no accountability within the United 

Nations. OIP officials have protested they did diligent oversight and underwent up 

to 100 audits. But GAO has not seen the audits and has testified that ‘‘it is unclear 

how [OIP] performed this function.’’

Mr. Chairman, you must file an annual financial disclosure, as must every one 

of your colleagues and many of your staff. The purpose is to reveal any potential 

conflicts of interest or suspicious sources of income. Lying about that income (including bribes and kickbacks)—or just lying about your assets—is subject to criminal 

penalty. A similar accountability system within the United Nations applies only to 

the rank of assistant secretary general and above. Indeed, it is not entirely clear 

what the penalty is within the United Nations if you are actually caught taking 

bribes. 

Benon Sevan, who is alleged to have received an oil voucher from Saddam’s government, has not even been suspended from his paid position. In such a bureaucracy, only a person’s innate honesty is a guarantor against corruption. That’s not 

much of a way to run a ship. 

But there is a more serious issue at hand here. Set aside for a moment the question of corruption. Even if the program had been squeaky clean, it is clear that those 

administering the Iraq sanctions were not committed to their success. Why should 

they have been? They don’t work for the United States. There are five permanent 

members of the Security Council, and at least three of them did not support sanctions against Iraq. 

The leaders of France, China and Russia had all made clear that the time had 

come for sanctions to end, despite the fact that Saddam Hussein had not complied 

with the terms of the original cease fire resolution following his ouster from Kuwait. 

Indeed, Syria, which sat on the Security Council during the height of the debate 

over Iraq, was the #1 violator of UN sanctions on Iraq. Why should UN employees 

enforce with any enthusiasm a system that is not supported by the majority of the 

members of the United Nations? 

For those who contend that we must always proceed on the basis of 

multilateralism and that the United Nations should be the default instrument of 

American foreign policy, this is a real dilemma. Many of us conclude instead that 

the United Nations should be used when possible, but when consensus in that body 

55

is unachievable, or so dilutes our goals so as to be useless to our purpose, then we 

must move on alone. 

It is fashionable in many quarters to reject this kind of thinking as 

‘‘unilateralism’’ and as per se ‘‘illegitimate’’ absent the UN’s good housekeeping seal 

of approval. Those who argue this, however, need to explain why the corruption and 

mismanagement we are finding in the OFF program will not be characteristic of 

other multilateral responses to similar problems in the future. 

The history of the United Nations’ dealings with Iraq is a story of international 

bickering, disagreement, and lowest common denominator solutions. In almost every 

instance where the Security Council was able to act, it was because of a crisis. Within weeks of the crisis passing, the unanimity of the Council disappeared. 

If the Council is divided, and cannot agree to enforce the very resolutions it 

agrees upon, it should come as no surprise that the staff of the United Nations, from 

the Secretary General on down, do not feel it incumbent upon them to carry out 

UN resolutions to the letter of the law. And if they can take bribes without fear 

of punishment in order to subvert those resolutions, the problem of enforcement is 

graver still. 

If the UN is intended to be an arm of our foreign policy, then Iraq sanctions are 

an object lesson. There must be drastic reform.

Chairman HYDE. Professor or Dr. Ruggie, please. 

STATEMENT OF JOHN G. RUGGIE, PH.D., EVRON AND JEANE 

KIRKPATRICK PROFESSOR OF INTERNATIONAL AFFAIRS, 

AND DIRECTOR, CENTER FOR BUSINESS AND GOVERNMENT, 

JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD 

UNIVERSITY 

Mr. RUGGIE. Thank you very much, Mr. Chairman. It is a great 

honor for me to be here. I would just like to touch on a few of the 

main points of my testimony. I have left with you a larger prepared 

statement. 

Let me begin by saying at the outset that I would be deeply saddened if even one U.N. official were found guilty of wrongdoing in 

the Oil-for-Food Program. The Volcker panel will make appropriate 

investigations and recommendations to Kofi Annan, and I would 

expect, sir, that the Secretary General, if it turns out that someone 

is implicated, would waive all diplomatic immunities and permit 

any such individual to be tried in a court of law and suffer whatever punishment is meted out. 

I am very troubled by the question that are you addressing, Mr. 

Chairman, about how this could have happened. The critics of the 

U.N. have made this into largely a morality tale of evil bureaucrats 

on the take, and we will see what the Volcker panel turns up in 

that connection. I would hope, sir, that we could take a broader 

look at the tough choices that governments, including the United 

States Government, faced and had to make throughout this process. 

Let’s recall, to begin with, that in 1991, at the end of the war, 

we left Saddam Hussein in place as the authoritarian leader of a 

society that we regarded until the war as a sovereign entity. The 

rest of the world, therefore, was obliged to treat Saddam Hussein 

as the leader of a sovereign nation. 

A lot of things followed from that right from the beginning, including the question of how did he get to pick the contractors that 

were involved. The answer is very simple. He accepted no other 

proposition. He was perfectly happy to see his people suffer and die 

and blame us for their suffering and dying. And we, the United 

States, the United Kingdom and other countries, would have taken 

56

the hit not only in terms of the moral cost of that, but also in terms 

of international public opinion. 

We started the problem by the way we ended the war in 1991. 

My first point. 

My second point in the mid-1990s it became clear that Saddam 

Hussein was smuggling oil out of Iraq. He was building up his own 

coffers. Sanctions were beginning to be questioned at the same 

time we knew that they were necessary. The humanitarian costs by 

that time became unbearable. Sir, they didn’t become unbearable 

for Saddam. They became unbearable for us. We, the outside world, 

were put in a position of having to persuade Saddam Hussein to 

allow us to feed his people. And he, as I said, determined essentially the basic conditions under which we were allowed to do that. 

That is my second point. 

My third point has to do with the Oil-for-Food Program and what 

it was and wasn’t responsible for. Congressman Lantos has already 

said that the Oil-for-Food Program had nothing do with oil smuggling. The United States set up a maritime force in the Persian 

Gulf that was supposed to interdict the flow of oil out through the 

Gulf. And I remember at the time, sir, watching the evening news 

and seeing trucks roll into Turkey and into Jordan laden down 

with oil. So I assume it wasn’t a secret to the United States Government if it was on ABC News. 

There is a lesson to be learned here, Mr. Chairman. I believe 

that the United States, the United Kingdom and others ignored 

those oil exports for the simple reason that the sanctions, as sanctions invariably do, had the biggest impact on the neighboring 

countries. We weren’t prepared to compensate for the economic 

losses that they suffered. Some of them are our close allies, including in the struggle against Saddam, and so as a matter of strategic 

policy choice I would guess we decided to look the other way. 

My next point concerns who was doing what on the 661 Committee. Mr. Chairman, there were something like 30,000 contracts 

approved over the life of the 661 Committee. As best as I can determine, and I certainly haven’t gone through all 36,000 contracts, but 

as best as I can determine, not a single member of the 661 Committee ever held up a single contract based on pricing issues. Several thousand were held up for potential dual-use technology problems; not a single one for pricing issues. The U.S. and the UK were 

the ones that were holding up contracts. 

Never one, to the best of my knowledge, on pricing issues. Why? 

Did we not know? Were we stupid? Were we complicitous? My 

sense is that, again, we made a policy choice. The sanctions regime 

was fraying. Some of the contracts were going to other members of 

the committee. We needed to hold the sanctions together to make 

sure that Saddam did not get the capability to reconstitute his 

weapons of mass destruction, and that was the price that we were 

willing to pay is my guess. 

Chairman HYDE. Doctor, can you summarize in 2 more minutes? 

Mr. RUGGIE. I can, sir. I can. No problem. 

What did the U.N. staff do about these things? Congressman 

Lantos has already alluded to this as well. It was the U.N. oil overseers who first alerted the 661 Committee to the oil pricing scam 

on the basis of which the U.S. and the U.K. then changed the sysVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6601 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
57

tem. The price padding was harder to detect for a variety of technical reasons, but, again, dozens of contracts were held up by the 

Secretariat pending further analysis of pricing issues. 

Congressman Hyde, the inference that I draw from this was that 

the United States paid a price in order to get a job done. The job 

was to contain Saddam Hussein and to make sure he didn’t reconstitute his weapons of mass destruction, and to alleviate as much 

as possible the humanitarian costs of the sanctions. That may not 

have been the wisest policy choice, but that is the policy choice that 

two American Administrations made. 

Finally, Mr. Chairman, if I may, at the end a comment from the 

heart. I am truly distressed, sir, by the cavalier manner in which 

the day-to-day contributions of humanitarian aid workers around 

the world are discounted, dismissed and even vilified by people who 

in some cases rarely venture beyond talk show green rooms and 

Washington think tanks. Over the past 10 years, the United Nations has lost more civilian members in conflict zones than it has 

peacekeepers. I lost good friends in Baghdad last August when the 

U.N. headquarters were blown up. They didn’t have to be there, 

sir, but they wanted to help. 

They are unsung humanitarian heroes, and I would like the 

record to show that I remembered them this morning. Thank you. 

Chairman HYDE. Thank you, Dr. Ruggie. 

[The prepared statement of Mr. Ruggie follows:]

PREPARED STATEMENT OF JOHN G. RUGGIE, PH.D., EVRON AND JEANE KIRKPATRICK

PROFESSOR OF INTERNATIONAL AFFAIRS, AND DIRECTOR, CENTER FOR BUSINESS

AND GOVERNMENT, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY

Chairman Hyde and distinguished members of the Committee: I am honored to 

be here today to discuss with you important issues concerning the United Nations 

oil-for-food program. 

Allow me to introduce myself: Currently, I am the Evron and Jeane Kirkpatrick 

Professor of International Affairs, and the Frank and Denie Weil Director of the 

Center for Business and Government, at Harvard University’s Kennedy School of 

Government. From 1997–2001, I served as Assistant Secretary-General and senior 

adviser for strategic planning to UN Secretary General Kofi Annan. I had no responsibility for the oil-for-food program, but UN–US relations fell into my portfolio. 

Although I have returned to full-time academic life, I continue to advise the Secretary General on an initiative called the Global Compact, which engages the private sector in the promotion of UN principles in the areas of human rights, labor 

standards and environmental sustainability. I am here today in my personal capacity as an American citizen and a professional student of international politics. 

Let me state at the outset that I would be sickened if even one of my former colleagues at the UN were found guilty of wrong-doing in the oil-for-food program. But 

if that were to be the case, I expect that the Secretary-General would waive all diplomatic immunities and permit any such individual to be prosecuted in a court of 

law. As you know, an independent inquiry headed by Paul Volcker is now in place; 

the other members are the highly respected Justice Richard Goldstone of South Africa, and Swiss law professor Mark Pieth, an internationally recognized expert on 

money laundering. Their mandate includes investigating not only possible individual 

malfeasance but also whether there were improprieties in the administration and 

management of the program overall. The panel has been endorsed by a unanimous 

Security Council resolution, and the Secretary General has pledged to open every 

file, and make available every official, it needs to fulfill its mandate. Kofi Annan 

has demonstrated his commitment to transparency and integrity in very difficult situations before, including the inquiries into Rwanda, Srebrenica and the security 

failures at Baghdad headquarters. So I agree fully with Ambassador Negroponte’s 

assessment at the Senate Foreign Relations Committee hearings on this subject on 

April 7, 2004, when he said: ‘‘I believe that the fundamental motivation of the Secretary-General is to have maximum transparency.’’

58

Mr. Chairman, Members of the Committee: 

Like you, I am deeply troubled by the question ‘‘how could this have happened’’—

where ‘‘this’’ refers to Saddam Hussein’s smuggling, surcharges, bribes and kickbacks, part of it under the nose of the oil-for-food program. UN critics have claimed 

that individual greed and bureaucratic interests in the United Nations were responsible—some of them out of sheer eagerness to score points against the UN and to 

render it an illegitimate and irrelevant instrument of American foreign policy in the 

economic and political reconstruction of Iraq. 

But even if charges against individuals were proven to be true—and it is important to remind ourselves that, so far, none have been—that story would remain partial and skewed. In the interest of maximizing the lessons learned, I want to suggest 

that this one episode of the world’s relations with Saddam Hussein, like so many 

others, illustrates the deeper reality that the United States and the United Nations 

often found themselves forced to choose the lesser of evils in trying to get the job 

done in Iraq. I will frame my answer to the ‘‘how could this have happened’’ question around ten core facts.

1. The 1991 Gulf war left Saddam in power as the authoritarian master of a 

sovereign state, and that is how the rest of the world, including the United 

Nations, was obliged to deal with him thereafter.

2. The world community, led by the United States, did impose a disarmament 

and sanctions regime on Saddam, designed to destroy his weapons of mass 

destruction and deny him the capability to reconstitute, or the resources to 

purchase, such weapons in the future. There were efforts from the start to 

include a humanitarian component in the sanctions to offset their adverse 

effects on the Iraqi people, but Saddam rejected it as an intrusion into Iraqi 

sovereignty. In any case, no one in 1991 anticipated that sanctions would 

have to remain in place as long as they did.

3. By the mid 1990s Saddam was still in power; by then he was smuggling 

substantial quantities of oil out of the country; and he was still suspected 

of developing weapons of mass destruction. So sanctions remained necessary. But the human costs they imposed on the Iraqi people became unbearable—not for Saddam, who couldn’t have cared less, but for the international community. So we—the outside world—persuaded him to allow us 

to feed his people and to provide them with necessary medicines and other 

humanitarian goods, funded through the supervised sale of Iraqi oil. That’s 

how the oil-for-food program came into existence. One of the questions that 

has been asked repeatedly of late is: why was Saddam allowed to pick and 

choose with whom to contract these sales and purchases? The answer is obvious: Saddam did not accept any other terms. He was fully prepared to let 

innocent Iraqis suffer, blame the consequences on the sanctions, and have 

us take the hit in international public opinion.

At this point I need to take a minute to describe the overall structure of the oilfor-food program. Imagine, for starters, that this Committee—the House Committee 

on International Relations—was assigned responsibility for supervising the current 

reconstruction of Iraq, and that you had to approve every contract with Bechtel, 

Halliburton or any other firm providing goods and services there. And imagine further that you designated a unit in one of the departments of government—say a 

group of civilians in the Pentagon—to prepare the paperwork for you, as well as to 

monitor and for some parts of the country actually to execute the program in Iraq. 

That’s how the oil-for-food program was set up: the Security Council exercised oversight, and the Office of the Iraq Program supported the Council’s work and was responsible for its implementation on the ground. Now I’ll get back to my narrative.

4. The oil-for-food program had no responsibility for preventing Saddam from 

smuggling oil out of the country. The United States set up a special maritime force in the Persian Gulf for that purpose, but according to the GAO 

it interdicted only about 25 percent of the outflow. And I remember watching clips on the evening news at the time showing trucks weighed down 

with Iraqi oil rolling into Jordan and Turkey; it was also public knowledge 

that oil was pipelined into Syria. Perhaps the United States thought the 

quantities involved weren’t large enough to worry about. Or perhaps we realized that the Iraq sanctions had hit Iraq’s neighbors particularly hard—

as sanctions invariably do. And because some of them were our close allies, 

including in the struggle against Saddam, we may simply have chosen to 

ignore that illicit trade. Whatever the case, here’s the important point for 

the oil-for-food program: the recent GAO report states that Iraq gained 

$10.1 billion from illegal oil revenues and kickbacks, but $5.7 billion of 

59

that—well over half—actually came from smuggling, which was entirely unrelated to the UN’s responsibilities. Needless to say, the remaining $4.4 billion is still a lot of money, and it is directly associated with the oil-for-food 

program. So let’s look more closely at that.

5. The Security Council had oversight for the oil-for-food program—a committee of the whole called the 661 committee, after the number of the resolution that authorized the sanctions in the first place. It approved roughly 

36,000 contracts over the life span of the program. Every member had the 

right to hold up contracts if they detected irregularities, and the US and 

Britain were by far the most vigilant among them. Yet, as best as I can 

determine, of those 36,000 contracts not one—not a single solitary one—was 

ever held up by any member on the grounds of pricing. Several thousand 

were held up because of dual-use technology concerns. What does this suggest about US and British motives, as permanent members of that committee? Stupidity? Complicity? Or competing priorities? I strongly suspect 

it was the last. Support for the sanctions was eroding fast. Saddam’s allocation of contracts significantly favored companies in some of the countries 

that were also represented on the committee. So it seems reasonable to 

infer that the US and Britain held their noses and overlooked pricing irregularities in order to keep the sanctions regime in place and to put all their 

efforts into preventing dangerous technologies from getting into Saddam’s 

hands. Besides, we need to bear in mind today that the magnitude of the 

skimming problem was not known to anyone at the time; it has become 

clear only as files have been opened in Baghdad.

6. What did the UN staff do about these things? Time—and the Volcker inquiry—may tell that they didn’t do enough, or worse. But fairness requires 

us also to acknowledge that it was UN oil overseers who first alerted the 

661 committee to Saddam’s oil-pricing scam, in which he undercharged 

some buyers, who then made excess profits on resale and shared the proceeds with Saddam. The US and Britain then persuaded the committee to 

change the rules of the oil pricing game, significantly limiting if not completely eliminating the problem.

7. Detecting price padding in Iraq’s purchase of goods in many cases was 

harder because obvious benchmarks were lacking, or because the goods 

were custom made. I understand that the Secretariat as a rule of thumb 

allowed a small margin of variation, roughly 10 percent, based on some 

comparative shopping. Saddam may well have learned to game the situation because he kept most surcharges within this band. Nevertheless, I am 

told that the Secretariat on numerous occasions delayed contracts for further investigation and alerted the 661 committee to unresolved pricing concerns in Iraq’s purchase of humanitarian goods. But, as I noted earlier, the 

committee seems to have held up no contracts on these grounds.

8. Related to this point, the issue of transparency and accountability—or the 

alleged lack of it—at the UN has been raised repeatedly in the recent oilfor-food debates. The UN is an organization of governments; they make the 

rules, and the Secretariat is held accountable to them. In addition to having 

to approve all oil-for-food contracts, every member of the 661 committee received and reviewed the program’s regular external financial audits. (I have 

appended a summary financial statement of the oil-for-food program, provided to me by the UN, to the text of this testimony.)

Mr. Chairman, distinguished Representatives: 

The inference that I draw from these facts is that the overriding policy priorities 

were the maintenance of sanctions on Saddam Hussein in order to deny him weapons of mass destruction, together with limiting the adverse humanitarian impact of 

those sanctions on the Iraqi people. Other issues, including pricing scams and kickbacks, the full magnitude of which would have been difficult if not impossible to 

know at the time, seem to have been considered of lesser importance. Were these 

the wrong priorities? Could the same aims have been achieved through cleaner 

means? I’m not sure that I’m smart enough or wise enough to answer those questions, and I do know that we don’t have time enough to settle them today. Nevertheless, in concluding, I would like to stress two final points that have been largely 

overlooked in the frenzy of charges against the United Nations and some of its officials:

9. From everything we now know, it would appear that Saddam’s weapons of 

mass destruction were eliminated, and that he was prevented from rebuildVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
60

ing them successfully. Intellectual honesty requires us to acknowledge that 

UN weapons inspections and sanctions contributed to that outcome.

10. In addition, however ill conceived the design of the oil-for-food program may 

have been, and whatever its management failures may turn out to be, it, 

too, served the purposes that were asked of it. According to the official 

records:

• Enough food was imported to feed all 27 million Iraqis, and their average 

daily caloric intake increased by 83 percent. Malnutrition rates among 

children under the age of five in the center/south in 2002 were half those 

of 1996; in the three northern governorates—the Kurdish region—chronic 

malnutrition decreased 56 percent.

• The program substantially improved health services by expanding surgical and laboratory capacity, reducing communicable diseases, ensuring 

the importation of vaccines that eliminated polio from the country, and 

helping to reduce child mortality.

• Oil-for-food contributed significantly to demining, an increase in agricultural production and helped prevent further degradation of the country’s 

public services. Clean water and more reliable electricity were provided 

for millions of Iraqis and the infrastructure and functioning for the country’s housing, transportation and education systems were improved.

• And the evidence suggests that the oil-for-food program worked better in 

every respect in the northern governorates—or the Kurdish region—because the UN was directly responsible and did not have to work through 

Iraqi government agencies. Northern Iraq is more prosperous and stable 

today as result.

America is discovering in Iraq today that we don’t have a surplus of policy instruments to deal with the proliferating and escalating challenges that confront us 

there. In fact, the reverse is true. If we are going to learn lessons from past experience they need to include not only what we did wrong, but also what we got right. 

But we absolutely cannot afford to allow whatever did go wrong to be used as a pretext for undermining the legitimacy and utility of the United Nations to the people 

of Iraq—and to ourselves. 

Thank you. 

APPENDIX I—PROCEEDS FROM SALE OF IRAQI OIL AUTHORIZED BY THE SECURITY

COUNCIL

(FROM INCEPTION TO DECEMBER 31, 2003)

• Proceeds from the sale of oil as authorized by Security Council Resolutions 986 

(1995) and subsequent resolutions amounted to $64.2 billion.

• In accordance with Security Council decisions,

— $42.7 billion was allocated to the humanitarian activities,

— $18 billion was allocated to the Compensation Commission,

— $0.5 billion to the United Nations Special Commission (UNSCOM) and its 

successor, the United Nations Monitoring, Verification and Inspection Commission (UNMOVIC),

— $0.6 billion for repayment to Member states who advanced funds for humanitarian purchases pending the start of oil sales.

— $1.1 billion for the operational and administrative expenses associated with 

the implementation of resolution 986

— $1.3 billion for transportation costs of oil.

• The total available for humanitarian activities amounted to $47.9 billion, as follows:

— Allocated from oil sales 42.7

— Interest earned 2.9

— Gain on currency exchange 2.3

• A total of $39.7 billion has been spent. This amount includes $7.7 billion set aside 

for contracts to be delivered after 31 December.

— $8.1 billion has been transferred to the Development Fund for Iraq.

61

— An unencumbered balance of about $400 million remains. Once the UN has 

completed an assessment of the liabilities left against the account, the balance will be transferred to the Development Fund for Iraq.

Source: United Nations (April 23, 2004).

Chairman HYDE. Ms. Rosett. 

STATEMENT OF CLAUDIA ROSETT, SENIOR FELLOW, THE 

FOUNDATION FOR THE DEFENSE OF DEMOCRACIES 

Ms. ROSETT. Mr. Chairman, distinguished Members of the Committee, thank you very much for the chance to testify here this 

morning. 

I would like to make the basic point that this actually had a 

great deal to do both with U.S. tax dollars and, I think, with national security, and it is not simply an historical problem. And I 

start with a word about the allegations, which have clearly been 

distressing to the United Nations, especially to the Secretary-General, who has challenged his critics to produce evidence. 

One of the difficulties of this entire discussion, investigation, one 

I believe you yourselves will run into, is simply getting information 

from the United Nations. And it is disingenuous in the extreme for 

those in the Secretariat who actually have that information and do 

not release it—for the United Nations as an institution that controls vital records and does not release them, to then challenge critics to produce evidence. 

Now, I want to go on to say, there is evidence. But the difficulty 

that one runs into is, you pick up truly important threats in this 

tale, and you run, you follow them to the locked closets of the 

United Nations. Buried in the material that they kept secret, those 

30,000-some contracts over the years, are things that I think have 

great bearing on morality, on national security, on all the issues 

that this program was supposed to address, and some of great concern to us now. 

The evidence, I think some of the witnesses here have already 

reviewed, but what you basically need to know is there was the estimated 10 billion in graft, in smuggling. I believe that to be a 

highly conservative figure. I also would suggest that smuggling was 

very much the responsibility of the U.N. 

Iraq was under sanctions. The fact that a policy decision is made 

does not then excuse criminal doings. I believe they should still be 

called attention to. And the basic problem there is that the U.N. 

was not configured to take responsibility for enforcing its resolutions. That might suggest a deep need either for restructuring the 

United Nations in some way, or a very important need not to allow 

them to assume responsibility for something as important as controlling a hostile, aggressive, and extremely wealthy tyrant like 

Saddam Hussein. 

And this is where I would like to say, two of the things that have 

received great focus here are only part of the picture. The abuses 

were not limited just to waste, theft, fraud, graft, the now infamous 

Mercedes-Benzes and sports stadiums and so on. Part of the problem was that Oil-for-Food—and I have a piece in The Wall Street 

Journal this morning that will lay out for you some of the further 

detail. 

62

But it became, basically, because of the secrecy and because Saddam was allowed to choose his buyers and suppliers, a global network for Saddam Hussein’s regime of dirty money, of secret deals, 

of the ability to send huge amounts of funds, dwarfing, say, the 

funds we believe were available to Osama bin Laden anywhere he 

wanted to, not only under cover, but with the approving seal of the 

United Nations. 

And the Al Mada list, which has received so much attention, the 

alleged bribes, those are allegations that are yet to be proven. To 

make that the chief focus here, it is important, but it is dwarfed 

again by the mother ship here, which was the $111 billion worth 

of business that flowed through the secret accounts to which only—

really, those who had the most direct access were the U.N. Secretariat which kept the records, which finally—which controlled the 

escrow accounts in BNP Paribas, and which also had the presence 

on the ground, was the interlocutor with Saddam’s regime, hired 

the inspections firm. That was not done by the Sanctions Committee, that was the Secretariat. That was Mr. Annan, whose son 

worked for the better part of 3 years for the company that got the 

contract during that same period, and was not disclosed by the 

U.N. 

And the problem that you run into, if you start looking, investigating this, is that it is difficult for anyone outside the U.N. because the lists were kept so secret. You have to rely on leaked lists. 

Some have leaked, and I can tell you at this point that if you look 

at some of the companies that were authorized by the U.N. for Saddam to do business, I count up at least 65 registered in Switzerland under terms of the U.N. deal. These were supposed to be endusers buying at fair market price, the point being to minimize graft 

opportunities and maximize the funding for the Iraqi people. 

Switzerland, 65 firms. What was anyone thinking? Someone 

needs to go and look at exactly how much money then flowed and 

where it went. Forty-five in Cyprus, several in Panama, four in 

Liechtenstein, one of which is tied to a firm that is on the U.N.’s 

own designated terror watch list at this point with connections to 

Bank Al Taqua, a terrorist and al Qaeda financing bank in the Bahamas. 

And then finally we get to—and I would like to give you one specific example and try to wrap this up quickly. Seventy-five firms 

were authorized—this is approved by the U.N.—on the list kept by 

the U.N. to buy oil from Saddam that were based in the United 

Arab Emirates, a placed soaked in oil. They don’t need to import 

oil, they export. So what were these doing there? 

Well, Treasury recently designated one, and this will give you an 

idea of just how dirty this could get, and I do believe dangerous 

since there were ties running through some of these places to al 

Qaeda, to terrorist groups. 

There has been no systematic investigation of these contracts 

with an eye to that. None. In fact, it is not even obvious where the 

U.N. at this point has placed all the documents or to whom it has 

sent them. The case I point to was designated on April 15th by 

Treasury as a front for Saddam’s own regime, a company called Al 

Wasel and Babel, which set up business in Dubai, the United Arab 

Emirates, in 1999 advertising on its Web site that it was there speVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6601 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
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cifically to cater to the needs of the Oil-for-Food Program. It turned 

out to have been a front set up by senior officials of Saddam’s own 

regime to sell relief goods to Saddam’s own regime. 

From another list we can see, and I don’t have the full information. It is confidential, okay; I only have a piece of it that is leaked. 

From the year 2000 and 2001, Al Wasel and Babel had—Saddam 

ordered up from them $190 million worth of goods. 

Chairman HYDE. Could the gentlelady summarize in 1 minute? 

Ms. ROSETT. Absolutely. 

Basically, you had the chance on kickbacks coming and going for 

enormous amounts of funds to flow to places like this. There was, 

on the evidence, no supervision whatsoever. And I do believe it was 

incumbent upon the Secretary-General of the United Nations, who 

was present at the beginning, supervised the whole program, and 

hired the men who ran it to have stood up at some point and said, 

‘‘This is getting way out of control, this is dangerous, this is dirty.’’ 

And my recommendation to you would be, this is far too big and 

complex a system, a scam, a scandal and, I think, still a threat to 

the nation. 

There are parts of Saddam’s regime still out there that are aware 

of what happened, that people who took bribes or made kickbacks 

or were involved in some way in the graft are also, please remember, liable to blackmail by anyone who knows what they did. That 

would be leverage that may still be out there and must be taken 

into account. 

My recommendation would be that you need a full congressional 

investigation into this. You are, in fact, the only body that has real 

leverage to do anything here. You control with 22 percent of the 

budget; our tax money that you control or you appropriate goes to 

fund this. It is terribly important. 

And I thank you very, very much for your attention this morning. 

Chairman HYDE. Thank you. 

[The prepared statement of Ms. Rosett follows:]

PREPARED STATEMENT OF CLAUDIA ROSETT, SENIOR FELLOW, THE FOUNDATION FOR

THE DEFENSE OF DEMOCRACIES

Mr. Chairman, distinguished members of the committee, I thank you for the opportunity to testify here today. 

The title of this hearing is ‘‘Alleged Abuses & Oil-for-Food Program.’’ I would like 

to start with a word about these allegations, because the United Nations over the 

seven years of Oil-for-Food, and well into this year beyond, did so much to deflect 

and deny them. When horrendous exposes were surfacing almost by the week, earlier this year, Secretary-General Kofi Annan stuck rather longer than was remotely 

appropriate to the carefully hedged line that he had seen no evidence of wrongdoing. He challenged his critics to produce the evidence; he seemed unable to locate 

any himself, though he has access to the full records of the Secretariat, and we do 

not. This was disingenuous on the extreme, and I continue to fear that despite the 

investigation soon to begin—in which Mr. Annan basically laid out the terms for investigating himself and his own institution—there will be no significant reform of 

one of the most basic problems with the UN. 

The problem I am referring to is the practice of secrecy with regard to almost everything that—if disclosed—would help prevent the recurrence of scandal, wrongdoing and threats engendered by the UN to the democratic world, which I believe 

Oil-for-Food became. Whatever the arguments in favor of nuance and confidentiality 

in the UN’s dealings, there is no good reason the UN should not be fully accountable 

to the general public for its budgets and book-keeping, funded to a significant extent 

by U.S. taxpayers. There is no reason the Secretariat should not disclose in full its 

financial arrangements in dealing with member states—especially those states sadVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00067 Fmt 6633 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
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dled with corrupt and tyrannical regimes. There is no reason why the basic boost 

to honesty provided by normal daylight should not be brought to the UN, and today 

would not be a moment too soon. 

Which brings me back to the subject at hand: Oil-for-Food. Surely Mr. Annan and 

his colleagues in the Secretariat are aware that they sit on top of the very information needed to more precisely document what anyone has to recognize at this point 

as a huge relief program—the biggest every undertaken by the UN—gone horribly 

and dangerously crooked. This is especially clear in light of the General Accounting 

Office estimates of at least $10.1 billion in graft and smuggling during the seven 

years of Oil-for-Food (and anywhere from $10–$40 billion in illicit funds stashed 

away by Saddam’s regime). We can add to that the Defense Contract Management 

Agency’s review last year of 759 sample Oil-for-Food contracts estimated to be overpriced to the tune of $656 million, implying a graft overlay that varied among 

Saddam’s clientele, but in some cases according to the DCMA reached as high as 

40% above market price. We have had various statements by Treasury; we have had 

press reports of Oil-for-Food wrong-doing going back for years. And with a huge collection of anecdotal evidence still piling up, it is obvious that Oil-for-Food was deeply corrupt. It is reasonable that Mr. Annan should request of his critics precise details, specific names and dates and instances. But in following those threads, one 

slams into—over and over—the locked closets of the UN 

The arguments made to me over and over by various officials in the UN Secretariat about the UN practice of confidentiality are absurd, and self-serving, at public 

expense. There were many aspects of Oil-for-Food for which the UN was quite willing to break with precedent. The UN had never before tried to supervise the entire 

foreign commerce of a major oil-producing nation run by a murderous and conniving 

tyrant, but decided to do so. The UN has never before funded the Secretariat by 

way of hefty commissions on oil revenues of a member state, but the Secretariat was 

willing to vary routine to absorb that change. Transparency might be an alteration 

of UN custom, but it is in no way too much to ask—or to demand. 

To this I would add that it is vital to understand that the abuses under Oil-forFood were not limited solely to such egregious matters as waste, theft, fraud, graft, 

the short-changing of the Iraqi people, the building of palaces, import of MercedesBenz luxury cars and the influence-peddling among members of the UN itself, including three veto-wielding members of the Security Council—China, France and 

Russia. 

Oil-for-Food became, in the end, something worse than the sum of all that. 

Through this program, the United Nations allowed Saddam Hussein not only to perpetuate his totalitarian rule of lies, violence and mass graves; Oil-for-Food also allowed Saddam to set up a global network of dirty deals and filthy finance. Through 

Oil-for-Food, as designed and run by the UN, Saddam was basically able to funnel 

money as he chose, to just about anyone, anywhere, who was willing to become his 

business partner. Whether that included UN staff remains to be seen. But that it 

included a worldwide network of Saddam’s cronies and handpicked clientele can 

hardly be in doubt. That it may have also included terrorist networks is a strong 

probability it would seem ill-advised to ignore, though the UN for years certainly 

ignored it, and no one in a position of official responsibility seems to have yet taken 

that danger on board. 

Much attention has been focused on the list based on documents from the Iraq 

Oil Ministry and published January 25, 2004, in th Iraqi newspaper Al Mada, naming some 270 individuals and entities alleged to have received illicit oil vouchers 

worth millions from Saddam. That list is intriguing, naming as it does such entities 

as the Russian State, a major Chinese trading company, and such individuals as 

a former French Ambassador to the UN, a prominent businessman in South Africa, 

the President of Indonesia, and including the last name of the executive director of 

Oil-for-Food, Benon Sevan. But the Al Mada list remains to be fully investigated, 

and to make it the chief focus is to miss the main point. 

It was the official Oil-for-Food program itself that was the basic problem. The 

$111 billion worth of increasingly unfettered business that Oil-for-Food allowed to 

Saddam absolutely dwarfs the Al Mada list. In seeing what was wrong here, it is 

crucial to grasp a few things, for which we do have some documentation. One is that 

Saddam was allowed to pick his own clientele, and the UN almost never said no. 

The other is that many of these contracts had a thick layer of graft built in, which 

let Saddam cheat the intended beneficiaries—the Iraqi people—in order to enrich 

himself and his business partners. In other words, the UN-approved contracts 

served as corridors through which Saddam’s filched funds could flow—and they 

flowed by the billions. It is high time the UN shared with the world community its 

information about where, exactly, this money went. On a secret UN list of oil buyers 

authorized to deal with Saddam under Oil-for-Food, one finds (the list has leaked) 

65

at least 65 companies registered in Switzerland, 45 in Cyprus, seven in Panama and 

four in Liechtenstein. Add to that at least 75 firms registered in the oil-soaked 

United Arab Emirates. Does anyone seriously believe that the UN, in compiling this 

list, believed that Saddam was dealing, as prescribed by Oil-for-Food, with end 

users? 

In looking at this program, and some of the links, I have increasingly begun to 

wonder, in fact, whether Saddam, given his proclivities, and in tandem with his 

other projects, might have been sending funding to Al Qaeda or other terrorist 

groups via oil-for-food. 

Certainly there was ample opportunity. To see how it might have worked, let’s 

take the example of Al Wasel and Babel General Trading LLC, set up in Dubai, in 

1999. Al Wasel and Babel was designated earlier this month by Treasury as a front 

company set up by senior officials of Saddam’s own regime, to sell goods to 

Saddam’s own regime, via Oil-for-Food (while also, according to Treasury, trying to 

procure for Saddam an illicit, sophisticated surface-to-air missile system). 

Where was the UN in all this? 

There is plenty of blame to go around, but it was Mr. Annan’s Secretariat that 

had the hands-on management of the program and daily contact with the Iraqi regime. It was the Secretariat that had a massive presence on the ground in Iraq, 

direct exchanges with Saddam (via Benon Sevan’s visits, as well as Kofi’s 1998 trip, 

on which he met with Saddam in one of the palaces built under sanctions—did he 

not notice?) It was Mr. Annan’s Secretariat that in 1998 replaced Lloyd’s Register 

with Cotecna Inspections SA, without disclosing that Mr. Annan’s own son, had very 

recently been employed by Cotecna for the better part of three years—first on staff 

and then as a consultant. 

It was Kofi Annan who while excusing himself from public comment on the abuses 

under Oil-for-Food, went on record over and over criticizing the US and UK for placing too many contracts on hold. It was Mr. Annan’s signature on the distribution 

plans approved for Saddam. 

And it is Kofi Annan who has now set the terms of this investigation into what 

he refers to as the UN staff, though surely he himself should be one of those under 

scrutiny, along with the system heads. The issue is not simply whether people took 

bribes or violated procedure. It is whether there was gross dereliction of duty at the 

top, encouraged by a system of privilege and secrecy, configured to best serve those 

with things to hide. 

It bears noting, as well, that when Saddam went influence-peddling, it is highly 

likely that he procured not only the willing cooperation of his clients, but the ability 

to then blackmail them. He had little to lose: he was already under sanctions, and 

he had already thoroughly gamed the system. The recipients had plenty to lose, they 

still do, and we can expect that there will be huge pressure to stall and obstruct 

any serious inquiry. 

Oil-for-Food was far too big, too complex, and too crooked for any one congressional hearing, or even a series of hearings to get to the bottom of it. This scandal, 

for both size and menace, dwarfs BCCI. And if I can make one contribution today, 

it would be to strongly urge that the ‘‘independent’’ investigation of the UN, as 

framed by the Secretary-General of that same UN, be backed up by a full congressional investigation. American taxpayers fund some 22% of the UN’s core budget, 

and have sacrificed greatly in the effort to start righting some of the immense 

wrongs done under Saddam. In these, the UN by way of Oil-for-Food became a collaborator. What went wrong at the UN must be understood, and fixed before the 

UN should again be entrusted with anything involving serious or important responsibilities—especially in matters with so much bearing on national security.

Chairman HYDE. Mr. Soussan. 

STATEMENT OF MICHAEL SOUSSAN, FORMER PROGRAM 

COORDINATOR, UNITED NATIONS OIL-FOR-FOOD PROGRAM 

Mr. SOUSSAN. Thank you, Mr. Chairman, distinguished Members 

of the Committee. I welcome and thank you for the opportunity to 

appear before you today to discuss issues of accountability and 

transparency in the Oil-for-Food Program. 

First off, I want to touch on the allegations of corruption against 

individual U.N. staff. I think, as Dr. Ruggie said, that these are 

people who did risk their lives to help the Iraqi people, and I sincerely hope all of these allegations are baseless, and I think we 

66

ought to consider the people involved absolutely innocent unless 

proven otherwise. 

I do regret that it took a scandal of this proportion before the 

U.N. agreed to set up an independent investigation into this matter. But at this early stage, when all the facts are not known, I 

would also caution against focusing too much attention on individual allegations, because even if these are substantiated, they 

would not suffice to explain the system-wide failures that seem to 

have occurred. 

The Oil-for-Food deal was first offered to Saddam Hussein in 

1991, Security Council Resolutions 706 and 712. The Iraqi dictator 

refused to sign on to the deal for over 5 years. Far more Iraqi civilians died during that period than during the Persian Gulf War or 

during the subsequent years of the Oil-for-Food Program. 

If Saddam Hussein could be trusted to put the needs of Iraq’s 

population first, it would never have been necessary to impose U.N. 

oversight over the program. Yet, for reasons I have yet to fully understand, several U.N. leaders approached the implementation of 

the Oil-for-Food Program with more distrust toward the United 

Kingdom, which had initiated the program, and the United States 

than toward the regime of Saddam Hussein. In the hierarchy of 

hurdles we faced as we tried to make the program work, this, in 

my view, was problem number one. 

It is very difficult to run an operation when senior leaders, including two Assistant Secretary-General staff, do not believe in the 

mission. These two people resigned in protest against Security 

Council policy. Nonetheless, thanks to the hard work of many dedicated U.N. employees, the program was implemented. Some aspects of its implementation were successful, others were not. 

The onset of the Oil-for-Food Program provided enormous relief 

to the civilian population of Iraq. The program succeeded in cutting 

malnutrition rates in half, in improving Iraq’s agricultural output, 

in providing the population with improved access to health care, 

safe drinking water, and electricity. It is difficult to imagine what 

Iraq would look like today if not for the Oil-for-Food Program. Certainly the cost of rebuilding the country would be much higher for 

U.S. taxpayers. 

Nonetheless, if estimates by the General Accounting Office are 

correct and Saddam Hussein was indeed able to use the Oil-forFood Program to extort $4.4 billion in cash kickbacks from Iraq’s 

trading partners, then the United Nations clearly failed to live up 

to an important aspect of its mission, which was to keep money 

from flowing into Saddam’s bank account. 

It may indeed be true that several members of the international 

community simply did not care that Saddam Hussein misused the 

humanitarian program. This was particularly evident in some of 

the proceedings of the Security Council Sanctions Committee. But 

we and the U.N. Secretariat had a mandate to oversee the humanitarian program and report to the Security Council about its adequacy, its equitability and effectiveness. That is what we were paid 

for. And it is undeniable that Saddam’s kickbacks contributed to 

making the program less adequate, less equitable, and less effective. Therefore, I believe it fell squarely within our mandate to reVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00070 Fmt 6633 Sfmt 6601 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
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port any information that would indicate possible wrongdoing by 

the Government of Iraq. 

We should have spoken out when we came across indications 

that the Iraqi Government was demanding kickbacks as a cost of 

doing business. We should have spoken out when members of the 

Iraqi Government made intimidating threats against our staff. We 

should have spoken out when the Iraqi Government delayed or sabotaged our humanitarian program in Iraqi Kurdistan. We should 

have spoken out on a range of issues, but in most cases we did not. 

Ironically, I believe that the United Nations became embroiled in 

this scandal precisely because it sought to avoid controversy at all 

costs. Compounding this lack of transparency was a prevailing 

sense of moral relativism promoted by those within the system who 

were unable to draw a distinction between the interests of the Iraqi 

people and the interest of the Iraqi state led by Saddam Hussein. 

Before judging them, we must remember that the United Nations 

charter itself fails to draw such a distinction. In its current form, 

the U.N. Charter is legally blind to the distinction between two 

definitions of state sovereignty. We have the democratic definition, 

which holds that sovereignty stems from the consent of the people, 

and we have the totalitarian definition, which holds that the people 

and the state are one and the same thing regardless of the behavior of that state. 

Chairman HYDE. Could the gentleman summarize in about 2 

minutes? 

Mr. SOUSSAN. Yes. 

Chairman HYDE. Thank you. 

Mr. SOUSSAN. Two definitions, and to the U.N. Charter today, as 

it currently stands, these definitions are equal. 

Today, the U.N. faces questions from the media, including from 

a free Iraqi press, as to why it failed to hold the Iraqi Government 

accountable for misusing the humanitarian program. Then, as now, 

some people believe that it was not the U.N.’s job, that it was the 

job of the member-states to enforce the sanctions. The memberstates, in turn, point out that the U.N. never informed them anything was wrong or rarely informed them anything was wrong. 

The finger-pointing cannot go on forever. I believe that the independent investigation, now led by Paul Volcker, will reveal important lessons and can help the institution operate with a higher degree of coordination, accountability, and transparency. I also hope 

it will yield some clues as to what happened to the money that was 

siphoned off by Saddam Hussein and which may still be used in 

support of terror today. 

For the Volcker panel to succeed, it will need the full cooperation 

of U.N. member-states. But finding out what happened is only half 

the job. The other half will be to agree on what to do about it. In 

this regard, it is unfortunate that the United Nations did not use 

its own initiative to undertake a lessons-learned exercise immediately after closing down the Oil-for-Food Program. 

I still hope such an exercise can be launched with the support 

of legislative Committees such as this one and international academic institutions so as to complement the current investigations 

with reform-minded proposals. 

68

At the end of the period that took a severe toll on the United Nations and at a time when the U.N. headquarters in New York are 

set to be physically revamped and brought up to standard, there 

is an historical opportunity to take stock of the United Nations’ 

shortcomings, based in part on the experience of the Oil-for-Food 

Program, and initiate a real debate about the organization’s future 

role and the principles that should guide its actions. 

Mr. Chairman, thank you very much. 

Chairman HYDE. Thank you very much. 

[The prepared statement of Mr. Soussan follows:]

PREPARED STATEMENT OF MICHAEL SOUSSAN, FORMER PROGRAM COORDINATOR, 

UNITED NATIONS OIL-FOR-FOOD PROGRAM

Mr. Chairman, distinguished members of the Committee, 

I welcome and thank you for the opportunity to appear before you today to discuss 

issues of accountability and transparency in the implementation of the United Nations Oil for Food Program. 

I worked for the program between September 1997 and December 2000, at which 

point I submitted my resignation. In my resignation letter, I expressed the hope 

that the organization would find ways to reform itself. It is in the same spirit of 

reform that I testify here today. 

I am aware that there have been allegations of corruption against individual U.N. 

employees working for the program. I sincerely hope these allegations are as baseless, and I consider the people involved absolutely innocent unless proven otherwise. 

I regret that it took a scandal of the proportion we have now seen before the U.N. 

agreed to set up an independent investigation into the matter. But at this early 

stage, when all the facts are not known, I would also caution against focusing too 

much attention on individual allegations, because even if they were substantiated, 

they would not suffice to explain the system-wide failures that seem to have occurred. 

The United Nations Oil for Food Program was the largest, and probably the most 

controversial humanitarian operation in UN history. In essence, it was a compromise born of a dilemma. The dilemma was created when Saddam Hussein was 

allowed to remain in power in 1991, to preside over a country that remained under 

sanctions, and a population that no longer had access to sufficient food, medicines, 

safe drinking water or electricity. The compromise was to allow Iraq to sell oil and 

import humanitarian goods under U.N. supervision. 

This deal was first offered to Saddam Hussein in 1991, in Security Council resolutions 706 (1991) and 712 (1991). But the Iraqi dictator refused it, banking that images of dying babies would eventually force the international community to lift the 

sanctions altogether. It was not until 1996, after his regime had been threatened 

by a serious coup attempt, that Saddam Hussein signed onto the deal. 

For over five years prior to the start of the humanitarian program, Iraq’s population was hostage to Saddam’s continued policy of defiance towards the United Nations. Far more Iraqis died during that period than during the Persian Gulf War, 

or during subsequent years when the Oil for Food Program was implemented. 

If Saddam Hussein could be trusted to put the needs of Iraq’s population first, 

it would never have been necessary to impose U.N. oversight over Iraq’s exports and 

imports. Yet for reasons I have yet to fully understand, several U.N. leaders approached the implementation of the Oil for Food Program with more distrust toward 

the United Kingdom (which had initiated the program) and the United States, than 

toward the regime of Saddam Hussein. In the hierarchy of hurdles we faced as we 

tried to make the program work, this, in my view, was problem number one. 

Two of the program’s humanitarian coordinators in Iraq—people with the rank of 

assistant secretary-general—as well as several heads of UN agencies in the field, 

resigned in protest against Security Council policy. After they had announced their 

intention to resign, many of them were allowed to remain in their posts for months 

while they continued to criticize the program—even going as far as to accuse the 

United Nations of overseeing genocide in Iraq; this, at a time when the Iraqi Government was refusing to import as much food as the Secretary-General had recommended in his supplementary report to the Security Council on February 1, 1998 

(S/1998/90). 

It is very difficult to run an operation when senior leaders do not believe in the 

mission. Nonetheless, thanks to the hard work of many dedicated U.N. employees, 

69

the program was implemented. Some aspects of its implementation were successful. 

Others were not. 

The onset of the Oil for Food Program provided enormous relief to the civilian 

population of Iraq (and, it must be said, to the collective conscience of the international community). The program succeeded in cutting malnutrition rates in half 

throughout the center and south of Iraq. We could have done much better if the 

Iraqi Government had accepted the recommendation of UNICEF to target vulnerable groups for extra nutrition, but the U.N. seldom aimed its advocacy campaigns 

at the Government of Iraq. 

Of course, it must be said that a given population cannot live on food and medicines alone. The perception of those who visited Iraq after Operation Desert Storm 

was that the country had been bombed back to the pre-industrial age. Bridges, 

power plants, water and sanitation networks and telephone exchanges had all been 

targeted as part of the 30-day air war that preceded the ground offensive in 1991. 

Some of these facilities are still being repaired today, since they suffered from continued deterioration throughout the 1990s. 

It was to stop the deterioration of Iraq’s basic civilian infrastructure that the 

United Nations recommended that the humanitarian program be expanded in 1998. 

Following the recommendations of the Secretary-General, the U.N. Security Council 

voted unanimously to expand the program, first to allow Iraq to sell $5.2 billion 

worth of oil every six months, then to lift the cap on oil sales altogether. It could 

be said that by the end of 2000, Iraq was allowed to import as many civilian goods 

as it could afford, as long as they did not have a military use. This allowed for a 

number of significant achievements across a range of sectors, which are listed as 

an annex to this statement, and must be taken into account in any overall evaluation of the program. 

No matter how much relief the U.N. allowed for, the Iraqi Government, and unfortunately, many people in the humanitarian community, including in our own 

ranks, continued to criticize the United Nations for overseeing genocide in Iraq. We 

should never have allowed the regime of Saddam Hussein to win this propaganda 

war. Especially given the fact that Iraq was now using a far greater proportion of 

its oil revenues on the civilian sector than it had prior to 1991, when so much of 

its resources was used to buy tanks, airplanes, and other military equipment. 

The United Kingdom and the United States understood the need for more infrastructure rehabilitation in Iraq, but they repeatedly urged the UN to build up its 

observation capacity, and tighten its system of controls to deal with the increasing 

influx of goods, and therefore the higher potential for misuse. If the estimates of 

the General Accounting Office are correct, and Saddam Hussein was indeed able to 

extort $4.4 billion in kickbacks from Iraq’s trading partners, then the United Nations clearly failed to live up to an important aspect of its mission, which was to 

keep money from flowing into Saddam’s bank accounts. 

It may indeed be true that many members of the international community did not 

care that Saddam misused the humanitarian program. This made the Security 

Council Committee established pursuant to resolution 661 (1990) (also known as the 

Sanctions Committee) significantly less effective at curbing Iraqi wrongdoing. But 

nonetheless, we had a mandate, and in line with that mandate, I believe now as 

I did then that we should have spoken out every time we came across evidence of 

wrongdoing by the Government of Iraq. 

We should have spoken out when we came across indications that the Iraqi Government was demanding kickbacks as the cost of doing business. We should have 

spoken out when members of the Iraqi Government made intimidating threats 

against our staff. We should have spoken out when the Iraqi Government delayed 

or sabotaged our humanitarian program in Iraqi Kurdistan. We should have spoken 

out when the Iraqi Government forbade us to visit certain areas, such as the 

marshlands of southern Iraq. We should have spoken out when the Government fed 

us bold-faced lies on a range of critical humanitarian issues. We should have spoken 

out about the ethnic cleansing of Kurds from the region of Mosul and Kirkuk, since 

it caused entire families to loose their food rations. We should have spoken out 

when the Iraqi Government sought to import goods that appeared clearly aimed for 

the leadership, and not the people. We should have spoken out on a range of issues, 

but we did not. 

Today, the U.N. faces questions from the media, including from a free Iraqi press, 

as to why it failed to hold the Iraqi Government accountable for misusing the humanitarian program. Then as now, some people at the United Nations think that 

it was not our job to do so—that it was the job of the Member States to enforce 

the sanctions. The Member States, in turn, point out that the U.N. never informed 

them that anything was wrong. The finger pointing cannot go on forever. 

70

Some observers believe that it is in the nature of the U.N. as an institution that 

the buck often stops nowhere. I do not believe it has to be this way. In fact I believe 

that the U.N. suffers enormously from the low-expectations of states. For the U.N. 

to reform itself, it must be held to a higher standard by members of the international community. Our job was to oversee the humanitarian program and report 

to the Security Council about its adequacy, equitability and effectiveness. Saddam’s 

kickbacks contributed to making the program less adequate, less equitable and less 

effective. Therefore, I believe that it fell squarely within our mandate to report any 

information that would indicate possible wrongdoing by the Government of Iraq. 

This was not only my opinion. It was generally also the opinion of my colleagues 

in the Division of Program Management. Unfortunately, many of the recommendations put forward by the Division did not prevail. 

I believe that the independent investigation now led by Paul Volcker will reveal 

important lessons that can help the institution operate with a higher level of coordination, accountability and transparency. I also hope it will yield some clues as to 

what happened to the money that was siphoned off by Saddam Hussein, and which 

may still be used in support of terrorism today. For Mr. Volcker’s panel to succeed, 

it will need to full cooperation of U.N. member states. But finding out what happened is only half the job. The other half will be to agree on what to do about it. 

In this regard, it is unfortunate that the United Nations did not use its own initiative to undertake a ‘‘lessons-learned’’ exercise immediately after closing down the 

Oil for Food Program. I still hope such an exercise can be launched, with the support of legislative committees such as this one, as well as international academic 

institutions, so as to complement the current investigations with reform-minded proposals. 

Ironically, I believe the United Nations became embroiled in this scandal precisely 

because it sought to avoid controversy at all costs. Compounding this lack of transparency was a prevailing sense of moral relativism, promoted by those, within the 

U.N. system, who were unable to draw any distinction between the interest of the 

Iraqi people, and the interest of the Iraqi state led by Saddam Hussein. 

Before judging them, we must remember that the United Nations Charter itself 

fails to draw such a distinction. In its current form, the UN Charter is legally blind 

to the distinction between two definitions of state sovereignty that are squarely at 

odds. The democratic definition holds that sovereignty stems from the consent of the 

people. The totalitarian definition holds that the people and the state are one and 

the same, regardless of the behavior of the state. 

In 1991, the international coalition played by the rules of the U.N. Charter and 

made no distinction between the sovereingnty of the Iraqi people and the sovereignty of Saddam Hussein. The results of this approach are now clear to us. Far 

more Iraqis perished after the war, from a combination of repression and deprivation, than during the war itself. Further deaths were prevented by the imposition 

of the no-fly zones over the Kurdish north and the predominantly Shiite south. 

These zones were never endorsed by the U.N. Security Council, however, and therefore they were subsequently criticized as illegal and illegitimate. At that point it occurred to me that if saving innocent lives was illegal then perhaps there was something wrong with the law itself. 

What further confirmed me in this opinion was the fact that my colleagues and 

I found ourselves in a very awkward position in Iraqi Kurdistan, where our mission 

was to implement the humanitarian program ‘‘on behalf of the Government of Iraq.’’ 

After visiting the small Kurdish village of Mamand, which the Iraqi army had destroyed seven times over, and which the villagers were now rebuilding for the eighth 

time with the help of the United Nations, it dawned on me how hypocritical our 

mandate was. If we were truly working in Iraqi Kurdistan ‘‘on behalf of the Government of Iraq,’’ we would have been in the business of gassing and collectivizing the 

Kurds, rather than helping them to rebuild their shattered villages. 

Such was the contradiction that lay at the heart of our mandate, and which, in 

my view, also lays at the heart of the United Nations mission in Iraq between the 

wars. For that reason, the line between helping the people of Iraq and helping the 

Government of Iraq was constantly blurred, and thus it is not surprising that a free 

people would today blame the United Nations for making the wrong call on a number of occasions. As we seek to learn the lessons from this experience, however, we 

should always remember that it was the regime of Saddam Hussein that bears primary responsibility for most of the wrongdoing that occurred. And to the extent the 

United Nations lost its moral compass on some occasions, it may have had a lot to 

do with the stark divisions that existed among the members of the Security Council. 

In the run up to Operation Iraqi Freedom, these divisions reached a climax, and 

plunged the United Nations into a profound existential crisis that now forces a 

choice: the U.N. can either stand on the side of freedom and human rights, or it 

71

can stand for the absolute sovereignty of brutal dictators. But it cannot stand for 

both, as it tried to do throughout this crisis, bending over backwards to please all 

sides and ending up pleasing none. 

Currently, the U.N. Charter does not contain a single reference to democracy. And 

yet we know that only democracies, or countries aspiring thereto, are in a position 

to uphold respect for the principles of the Universal Declaration of Human Rights. 

Article 108 of the UN Charter allows for a process of amendment through a vote 

of two thirds in the General Assembly and the concurrence of the Security Council’s 

permanent members. Five amendments were actually enacted in the past. They 

were mainly procedural, but they demonstrate that amending the Charter is not impossible. 

There is no doubt that it will take a long and arduous international debate before 

the U.N. Charter can be amended. And success is far from guaranteed. But the 

Charter itself foresaw the need for extraordinary debates. In Article 109, it specifically provides for the possibility of calling an international conference to review the 

Charter. 

At the end of a period that took a severe toll on the United Nations, and at a 

time when the United Nations’ headquarters in New York are set to be physically 

revamped and brought up to standard with current safety and security regulations, 

there is a historical opportunity to take stock of the United Nations shortcomings, 

based in part on the experience of the U.N. Oil for Food Program, and initiate a 

real debate about the organization’s future role and the principles that should guide 

its actions. 

Mr. Chairman, thank you again for the opportunity to share my observations with 

the Committee. I look forward to answering any questions you may have. 

ANNEX

ACHIEVEMENTS OF THE UN OIL FOR FOOD PROGRAM

(SOURCE: UNITED NATIONS) 

FOOD SECTOR

Center and South 

Under resolution 986 (1995) all Iraqi residents were entitled to receive the monthly Oil-for-Food basket and it was estimated that 60 per cent of the population were 

totally dependent on it. The nutritional value of the food basket almost doubled between 1996 and 2002 from 1200 to 2200 kcal/person/day. The supply of food commodities generally kept pace with national demand and contributed significantly towards price stability in the markets. A downward trend in the price of the food basket is reflected in the chart below. 

The Government of Iraq procured food and basic medical supplies in bulk and was 

responsible for their distribution in the 15 central and southern governorates, and 

to UN warehouses in the northern cities of Kirkuk and Mosul. The World Food Program (WFP) was responsible for food distribution on behalf of the Government of 

Iraq in the three northern governorates through a chain of some 11,000 food agents 

(corner stores). Government distribution of food, by the Ministry of Trade, in the 

centre and south was through some 44,358 food agents (corner stores). 

Improvements to infrastructure in the food sector included the installation of 

cleaning, handling and fumigation equipment in grain silos to reduce storage and 

handling losses. The maintenance and repair of mills and the installation of generators improved the reliability of flour milling operations. This in turn improved production capacity and the quality of flour available to the national food basket from 

more than 140 mills. 

The three northern governorates 

The size of the food basket increased during successive phases of the Oil-for-Food 

Program and by December 1998, it had met its targeted level of 2200 kcal/person/

day. In May 2002, the Program achieved 91 per cent of the targeted 2,475 kcals. 

In January 2002, WFP embarked on a large-scale population verification exercise 

in the three northern governorates to further strengthen the equitability and accuracy of the distribution process. 

A supplementary feeding project assisted the most vulnerable members of the 

population by targetting the specific needs of malnourished children, pregnant and 

lactating women, hospital in-patients, residents in social institutions and children 

in nurseries. These are groups that were not normally reached by the general food 

ration provided under Security Council resolution 986. 

72

Other projects addressed household food security. Small ruminant livestock were 

provided to around 10,000 beneficiaries, mostly female-headed households. A beekeeping project targetted another 150. These projects further empowered women 

through literacy and technical skills training as well as by providing them with a 

source of lasting income. The Program provided skills training for women in 10,200 

female-headed households. A Women Skills Enhancement project benefitted 2,000 

women. 

Health Sector 

Health care delivery services in Iraq improved significantly as a result of Oil-forFood funding for the diagnosis and treatment of diseases between December 1996 

and 20 March 2003. The country remained polio free for the previous 36 months 

following National Immunization Days that provided door-to-door vaccinations and 

reached 95 per cent of the 3.6 million targetted children under five years of age. 

In the central and southern governorates, major medical surgeries increased by 

40 per cent and laboratory investigations by 25 per cent between 1997 and early 

2003. There was a reduction in the transmission of communicable diseases, such as 

cholera, malaria, measles, mumps, meningitis and tuberculosis. The Oil-for-Food 

Program also helped to improve health care delivery in several new or rehabilitated 

centres in the centre/south, including: the Saddam Centre for Neurological Sciences; 

the AIDS Research and Study Centre; the Acupuncture Therapy Centre; the Tuberculosis Control Institute and; the National Centre for Haematology Research. 

In the three northern governorates, cholera was eradicated and the incidence of 

malaria was reduced to 1991 levels. The incidence of measles declined to levels 

ranging from 4—8 per cent and like the rest of the country, the north remained 

polio free for almost three years. 

Between 2000 and 2001, deliveries of medicines and medical supplies to the northern governorates doubled. Among the supplies delivered were high-demand items including antibiotics, intravenous solutions and oral suspensions. As a result, the rationing of medicines such as antibiotics was substantially reduced. 

Mine Action 

Mine Action was linked with other sectors of the United Nations humanitarian 

program in the three northern governorates of Iraq. As of 20 March 2003, it had 

paved the way for eight UN agency activities including housing, resettlement and 

the construction of electrical infrastructure, throughout the north. 

The Oil-for-Food Program funded the clearance of some 76,500 landmines since 

1998, restoring mine-free areas to landowners for agricultural and other civilian 

uses. Mine safety instruction courses were provided to 240 communities, reaching 

7,176 men, 8,353 women and 14,045 children. Medical consultations for mine victims ranged from treatment, to the fitting of orthoprosthetics and rehabilitation. 

The United Nations Office for Project Services (UNOPS) launched the ninth phase 

of its mine action project for the northern governorates in 2002. Its emergency 

demining program had a team of expatriate deminers stationed in each governorate 

where they train local teams in the latest clearance techniques. As of August 2001, 

approximately 27,000 families in 165 communities had benefitted from UNOPS-implemented mine clearance activities. As a result of this work, more than 400 additional tons of crops were produced in 2001 on cleared land, 34,700 livestock were 

able to graze safely, 3,300 people had improved water supplies, and 400,000 people 

near Sulaymaniyah gained access to electricity.

For further information concerning the UN Oil for Food Program in the areas of agriculture, infrastructure rehabilitation, education, transportation and electricity, 

please consult: www.un.org/depts/oip

Chairman HYDE. Now, ladies and gentlemen, we have one more 

panel following this panel which consists of the General Accounting 

Office, that will be, as were these witnesses, a very important witness. The Chair would very much like to get to the second panel 

before we have to adjourn or recess, so I am going to plead with 

you to be brief and succinct in your questioning. We have about 2 

hours’ worth of questions here if everybody gets 5 minutes. So I 

would like to move this along as best we can. 

We will have votes sometime soon, as well. So if someone wants 

to waive their questioning of this panel, the Chair would not be too 

distressed at all. But the Chair is also not so visionary as to expect 

73

that is ever going to happen in this lifetime. However, do try to be 

brief. It is for the benefit of all of us and the witnesses. 

With that attempt at mild intimidation, the Chair recognizes Mr. 

Lantos. 

Mr. LANTOS. Thank you very much, Mr. Chairman. I plead to be 

unintimidated by your observation. 

Chairman HYDE. I knew that. 

Mr. LANTOS. It is a staggeringly complex issue that we are considering, and I would like to spend a moment to try to keep our 

eye on the ball. 

The Saddam Hussein regime was a regime of mass murder. Saddam Hussein was responsible for the death of well over a million 

people, as the evidence now clearly indicates. And I think to be surprised that, in addition to being a mass murderer, he was also corrupt, would be naive in the extreme. So I don’t think there is any 

dispute as to the venality and corruption and baseness and vileness 

of the Saddam Hussein regime. 

What I find disturbing in some of the testimony, Mr. Chairman, 

is either a naivete or a pretension at expecting a tidy world in this 

incredibly complex, evil, vicious mess. I believe the attempt to malign a man of utmost integrity, the Secretary-General of the United 

Nations, is absolutely outrageous. I find the title of an article by 

one of our witnesses, ‘‘What Did Kofi Annan Know and When Did 

He Know It,’’ reckless, irresponsible, and repugnant. 

Kofi Annan—and I have had plenty of disagreements with Kofi 

Annan—deserves our utmost respect as an international civil servant of the highest integrity. And this innuendo, this suggestion 

that somehow Kofi Annan has been corrupt in the Oil-for-Food Program is absolutely sickening, and I personally reject it with all the 

emphasis at my command. 

I do find Professor Ruggie’s testimony enormously persuasive; 

and since he didn’t have a chance to read all of it, I would like to 

use some of my time, Mr. Chairman, to read a portion of a paragraph of his testimony, which, to me, is very much on point:

‘‘The Security Council had oversight for the Oil-for-Food Program, a committee of the whole called the 661 Committee, 

after the number of the resolution that authorized the sanctions in the first place. It approved roughly 36,000 contracts 

over the life span of the program. Every member had the right 

to hold up contracts if they detected irregularities, and the 

United States and Britain were by far the most vigilant among 

them. Yet, as best as I can determine, of those 36,000 contracts, not one, not a single solitary one was ever held up by 

any member on the grounds of pricing. Several thousands were 

held up because of dual-use technology concerns.’’

What does this suggest about United States and British motives 

as permanent members of that committee? Stupidity? Complicity? 

Or competing priorities? I strongly suspect it was the last. 

Support for the sanctions was eroding fast. Saddam’s allocation 

of contracts significantly favored companies in some of the countries that were also represented on the committee. So it seems reasonable to infer that the United States and Britain held their noses 

and overlooked pricing irregularities in order to keep the sanctions 

74

regime in place and to put all their efforts into preventing dangerous technologies from getting into Saddam’s hands. 

Besides, we need to bear in mind today that the magnitude of 

the skimming problem was not known to anyone at the time; it has 

become clear only as files have opened up in Baghdad. 

Mr. Chairman, it seems to me that this supercilious, holier-thanthou notion that we are dealing with a neat organizational structure, and somebody, presumably Kofi Annan, was asleep at the 

switch is just outrageous. 

We will find enormous corruption in this program; I would bet 

my last dollar on this. We will find corruption involving large numbers of countries, corporations, and individuals; there is not the 

slightest doubt in my mind of that. But I think at this stage, at 

a time when we are moving toward placing enormous responsibilities, following the handover on June 30th, upon the United Nations and the Secretary-General, to imply dishonesty on his part is 

so contrary to our national interests that it simply boggles the 

mind. 

Thank you, Mr. Chairman. 

Chairman HYDE. The Chair would say, in brief response, that I 

agree that there should be no personal charges until there are testimonies in support of them where conclusions can be drawn 

which—that may never exist. This is a search for truth, not an assertion of a point of view. 

Mr. LANTOS. I fully agree with you, Mr. Chairman. 

Chairman HYDE. We have two votes pending, and then I would 

ask the Committee to forgo their lunch and come on back. Pain 

builds character, and so holding off on lunch will help us finish the 

questioning with this panel and get to the next one. 

So we will adjourn or recess until—for 1⁄2 hour and then come 

right back. 

[Recess.] 

Chairman HYDE. The Committee will come to order. 

Mr. Delahunt. 

Mr. DELAHUNT. Thank you, Mr. Chairman. 

Dr. Ruggie, in terms of the United Nations, is—the term is used 

frequently in prepared statements, et cetera. But the United Nations itself—and I think you pointed out in your testimony, there 

is the Secretariat and there is the Security Council and then, obviously, the General Assembly. And you raised the point, I thought 

it was a very valid one, that in terms of overpricing, the members 

of the Sanctions Committee which, my understanding, consists of 

the permanent members of the Security Council, never raised an 

issue. 

I guess my question is, where were we? And whose responsibility? And I know the program obviously spanned two Administrations, both the Clinton and the Bush Administrations. Whose responsibility would it be on the part of the U.S. Representative to 

the United Nations to raise those issues? 

I mean, you indicated that it became widely known, and yet 

there was never an issue raised. To whom should we be looking to 

inform us, not through you, but as to whether in fact your testimony is accurate that it was a policy decision? 

75

I would like to see some representatives of the current Administration and the Clinton Administration to come forward and describe to us their knowledge, rather than read about it or hear 

about it second-, third- or fourth-hand. 

Chairman HYDE. Would the gentleman yield? 

Mr. DELAHUNT. Of course. 

Chairman HYDE. I have two dispatches, one March 2nd, 2000, 

and one February 2000, that indicate that we were aware and we 

did complain. And I will give them both to you for your perusal. 

But my own guess is, as Dr. Ruggie said, we were focusing on 

Saddam Hussein and trying to keep him bottled up. And we felt 

these other things, however expensive, were distractions. I guess. 

And that judgment was made by somebody high in the policy ranks 

of both Administrations, Mr. Clinton’s and Mr. Bush’s. 

But those two articles indicate we knew of it and we did complain. And I thank you for yielding. 

Mr. DELAHUNT. My instinct tells me that the Chair is correct, 

and most likely, these reports—one is from the French press and 

the other is from a publication out of Australia—are accurate. But 

I would hope at some point in the future that we would call to this 

particular Committee for direct questions those representatives of 

both Administrations, because here we are now, faced with allegations, assertions. The credibility of individuals is being attacked. I 

would like to hear from them directly myself. 

If you have anything to add, Dr. Ruggie. 

Mr. RUGGIE. Thank you for that question, Congressman. My 

statement wasn’t intended as an exercise in finger-pointing. I am 

sure you understand that. 

Mr. DELAHUNT. I understand. 

Mr. RUGGIE. I would say a number of things. 

First, if you put yourselves back in time, the magnitude of the 

scamming couldn’t have been known fully at the time. It only has 

become fully known as we have gained access to documents in 

Baghdad. So certainly there were suspicions about the overall problem. And you are right that the U.S. and the U.K., in fact, once 

did in the 661 Committee raise questions of a general nature about 

overpricing, not about any specific contract. 

However, I think the GAO may be a good witness on the question of how did the various branches of the U.S. Government fit 

into this. But I would like to say that the precise dimensions of the 

problem couldn’t have been known fully at the time. 

With regard to individual reviews of contracts, I believe it was 

Mr. Lantos who said earlier, and I believe he is correct, that the 

U.S. Government, through the Mission and then reaching into various branches of the government, had about 60 people, 60 government technical experts, review every single contract my understanding is. 

Mr. DELAHUNT. Well, what were they doing? 

Mr. RUGGIE. They were looking for dual-use, potential dual-use. 

If they stumbled across an individual pricing issue, they might 

have mentioned it. But I am not aware of that. And from the best 

that I have been able to determine, as I say, no contract was ever 

held up on pricing issues. 

76

Mr. DELAHUNT. Let me express a concern I have now, because I 

have confidence in Paul Volcker, and I think it is absolutely essential that there be a thorough and transparent investigation. 

But the program now, I understand, is managed by the CPA and 

the oil revenues go into the Development Fund for Iraq. And now 

one picks up the paper, on occasion sees a note, similar accusations 

and assertions about mismanagement, fraud, and corruption. 

Mr. RUGGIE. You mean currently? 

Mr. DELAHUNT. Currently. And would you agree that there 

seems to be some reluctance on the part of the CPA to allow a serious audit on the Development Fund for Iraq? 

Mr. RUGGIE. Congressman, I am not qualified to answer that 

question. I haven’t looked at the role of the CPA in this connection. 

I would like, if I may take 30 seconds——

Mr. DELAHUNT. Sure. 

Mr. RUGGIE [continuing]. To clarify one point that was raised 

earlier. 

I believe it was by Ms. Rosett who expressed concern about 

where the U.N. records were, and she expressed some doubt about 

where they were going. To the best of my knowledge, they are all 

in the U.N. archives. Those archives are in two facilities, one in 

Manhattan and one on Long Island. And Paul Volcker has access 

to every single document that was ever produced in connection 

with this program, including to internal management audits which 

are generally, like in the U.S. Government, not made public. 

Mr. DELAHUNT. Well, again, I would hope—and I direct this to 

the Chair—that we request some testimony or at least a panel to 

deal with where we are now in terms of the CPA, its management 

of the DFI. 

It is my understanding that it was—earlier, I think, Mr. Ackerman made reference to Mr. Chalabi, who is a convicted felon, is 

now the finance minister, if you will, for the CPA—who is in charge 

of administering that program. You know, let us not find ourselves 

2, 3 or 4 years from now having a similar panel when I think our 

oversight responsibility should be exercised now. And I am not 

making any allegations or any assertions. I am just saying it is 

what I read in the paper. And I think much of what I heard today 

are people’s opinions. 

But thank you very much, and I yield back. 

Chairman HYDE. I would just like to tell Mr. Delahunt that we 

are going to have follow-up hearings, and we will certainly invite 

witnesses from the Administration. 

Mr. Flake. 

Mr. FLAKE. Thank you, Mr. Chairman. 

Ms. Pletka, can you describe what the U.N. actually did with regard to allegations of price malfeasance in the 661 Committee? 

Isn’t it true that the U.S. and U.K. were consistently outvoted on 

issues when they brought them up? 

Ms. PLETKA. It is very important to understand. Thank you for 

giving me the opportunity to explain. 

It is important to understand that the 661 Committee only addressed certain contracts. Lots and lots of contracts actually only 

went through the office of the Iraq program, oil—I am sorry. Food, 

medicine, basic humanitarian, noncontroversial goods went largely 

77

through the office of the Iraq program and were given after the 

contract was completed to the 661 Committee. So they weren’t reviewing every single contract. 

But throughout the course of the Oil-for-Food Program, beginning in 1996, there were concerns about not only the question of 

dual-use going through, but also about overpricing and about all 

sorts of other financial manipulation by Saddam Hussein. There 

was no question—very few people were naive. They were well 

aware that Saddam Hussein was going to try to manipulate the 

program. But, in fact, in the reviews that I am aware of and that 

I actually asked about in my capacity as a staffer who had oversight over this in the Senate, we asked specifically about questions 

of overpricing and were told by the State Department and the CIA, 

throughout the Clinton and Bush Administrations, that this was 

something that was brought up on a consistent basis. 

The problem was that you had to do a cost-benefit analysis. Were 

we going to be objecting to perfectly acceptable commodities going 

into Iraq that happened to be overpriced, or were we going to be 

objecting to things that Saddam Hussein could have been using for 

a weapons program? 

And you had to always make those compromises because the 

committee operated on this kind of consensus basis. 

Mr. FLAKE. So, just to clarify, you were told that the U.S. and 

the U.K. had raised these issues on price malfeasance consistently? 

Ms. PLETKA. I don’t know whether they raised them consistently, 

but I know that it was an object of review every time a contract 

came through. Whenever it was possible to check whether something was appropriately priced, that check was done. But then 

there was a judgment made as to whether we would object to it, 

because we couldn’t object to everything. 

Mr. FLAKE. All right. 

Ms. Rosett, you referenced a locked closet at the U.N. Can you 

describe that locked closet? It has been said in this hearing that 

all information will be available to Paul Volcker, he just has to ask 

for it. Is that your understanding? 

Ms. ROSETT. The information that Paul Volcker needs to be sort 

of immediately concerned about getting would probably most directly be the BNP Paribas records, the internal audits of the BNP 

Paribas. Also—and on this one I offer you what I am able to know 

from the outside—in a number of conversations with the U.N. Office of the Treasurer I have received various accounts of the numbers of banks that were actually involved in this program. 

I hear from Claude Hankes-Drielsma, who is now looking at the 

KPMG review, that there was a DeutscheBank account involved, 

but it never did much. The U.N. comptroller recently told me there 

were actually seven or eight banks. Someone needs to find out how 

many banks were actually officially involved in the program and 

look at those records. 

But beyond that, the information that, had it been made public 

at the time, would have alerted everyone in this room that there 

were major problems were things as simple as the lists of the contractors, where these companies were based, the strange names. 

And what I alluded to earlier in my testimony on—there are two 

big lists, the contractors and the authorized oil buyers. And when 

78

you start seeing in what were supposed to be end-users and what 

were supposed to be people paying market price even before the 

press reports and so on on the oil pricing problems; when you start 

seeing things like dozens of companies based in Switzerland, which 

are certainly not the end-users—well, perhaps some were. But he 

needs to look at the individual companies; you need to look at the 

registries. 

Mr. FLAKE. Before my time is up. Will he have subpoena power 

then to get the documents that he requests, or does he have to rely 

on the good graces of the bureaucracy to get them? 

Ms. ROSETT. He will not have subpoena power. He will have to 

rely on the grace of the various people he approaches. And he expects considerable resistance. The Russians, who were huge players 

in this program, have already said they consider this an unimportant and historical matter since the program ended 5 months ago. 

Mr. FLAKE. In your view, and actually I am thinking of drafting 

legislation, or have gone some distance to draft legislation, to tie 

funding to the disclosure of information that is needed. Is something like that going to be needed to get the information out? 

Ms. ROSETT. Absolutely. The confidentiality that is built into the 

U.N. custom and system, I think at this point is dangerous. It is 

obsolete. You simply—the more transparent they become, the better chance you have of having a credible institution there. The 

same kind of standards that are applied to your own offices should 

apply to the U.N. 

Mr. FLAKE. Thank you. 

Chairman HYDE. Mr. Berman. 

Mr. BERMAN. Just a couple of comments about my perspective 

about this and then a couple of questions. 

A decision is made, as Dr. Ruggie pointed out, in 1991 to let this 

terrible regime stay in power. That was George Bush, father, Dick 

Cheney, Brent Scowcroft, Jim Baker; and they decided to let them 

stay in power. 

Now our policy becomes, how do you contain them? And we have 

inspections and we have sanctions, and building up all this time 

are efforts by other governments on the Security Council and in the 

Arab world to undercut the sanctions and weaken the inspection 

process constantly going on. Our major effort in containment is to 

stop technology and materials that will contribute to the resumption of a weapons of mass destruction program. So that is why Dr. 

Ruggie says that the 661 Committee, their first issue is to try to 

stop problematic technology from getting in the hands of Saddam. 

There are a thousand other ways he is doing it. There is smuggling going on, there are all kinds of other streams of revenue 

where he is able, we think, to do this. But we are still trying to 

hold on to some sanctions against our allies in the coalition in 

1991, who are now trying to undermine all of these kinds of things. 

Meanwhile, a calculated effort is trying to say that our policies 

are killing all kinds of children and people in Iraq by people who 

know, even after the Oil-for-Food Program is under way—with a 

stream of revenue designed to stop that consequence of our sanctions from happening, know the outrageous rip-offs. And those are 

coming out long before we attacked Iraq last year. We knew. Arab 

diplomats are talking about the streets of Cairo with people 

79

screaming about how America is killing these children. Even as 

their governments know, their government-sponsored media are 

passing on these stories without ever mentioning the rip-offs of 

Saddam and apparently the businesses that he was working with 

in all of this. 

And then many people, honorable, decent people, became victims 

of that propaganda and started spouting that line and trying to, in 

a sense, undermine the sanctions. You have got this whole movement for smart sanctions and no sanctions and everything else as 

a result of us trying to deal with what it was being made to look 

like was our cause of a humanitarian disaster. 

The thing that concerns us, I guess some of us here—and I guess 

I address this to Ms. Pletka and Ms. Rosett—is the response. There 

is an aspect of your testimony which sounds like the agenda here 

is to discredit the U.N. bureaucrats—and heaven knows, over the 

past years, there are reasons to discredit the U.N. bureaucracies, 

and at least one of you has been involved in efforts to try and reform that bureaucracy and, I thought, made some serious achievements. It is 22 percent of our taxpayer dollars going in, not 29 percent. And other changes, oversight inspector generals, different 

kinds of reforms. 

But, in other words, somehow the U.N. was to blame rather than 

both the complicated priorities and the agendas of the people who 

really control what the U.N. agenda is. 

So my questions are: Did Kofi Annan decide that the Oil-for-Food 

Program would have Saddam Hussein getting to decide who the 

vendors were and what would be paid rather than either a bureaucracy or the U.N.? Was that Kofi Annan’s decision, or was that 

a decision made by the Security Council of the U.N. and, therefore, 

not a U.N.; and, inherently, all that flowed from that, all the corruption and all the evil that flowed from that came from that decision, not from just malevolent U.N. bureaucrats? 

Not to say that there won’t turn out to be some serious ones, 

but——

And then, secondly, I would like to get a precise sense of why 

isn’t Paul Volcker and what I am told is a distinguished group of 

three with an ability to create a staff and investigators——

Chairman HYDE. The gentleman’s time has expired. 

Mr. BERMAN. Let me just finish this sentence. 

And why aren’t they the best people in a way? What are the institutional or other limitations on their ability to tell this full story, 

chips fall where they may, heads roll where they have to, indictments follow where they should as a result of this investigation? 

And why shouldn’t we at least now give our support to the Security-Council-resolution-backed committee that he chairs? 

So, a couple of comments for your reaction and the questions. 

Thank you, Ms. Pletka and Ms. Rosett, either one of them. 

Ms. PLETKA. May I just start on the issue of the decision not to 

get Saddam in 1991, and say, of course there are many of us who 

agree entirely. I think there is bipartisan agreement that it would 

have been nice to have gotten Saddam Hussein in 1991; but looking at the way that President Bush has been excoriated in the 

international community and, indeed, in Washington as well for 

the decision to go into Iraq unilaterally, we have to recognize, lookVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00083 Fmt 6633 Sfmt 6601 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
80

ing back, that in 1991 there was absolutely no mandate from the 

United Nations or the so-called international community to actually go and get Saddam. Perhaps we only postponed by 12 years 

the kind of difficulty we were going to have for unilateralism. But 

make no mistake, we would have been accused of that in 1991. 

I wish we would have gotten him, too. It would have avoided a 

lot of problems. 

Did Kofi Annan decide that Saddam should benefit from the manipulation of U.N. Security Council Resolution 986? No. Absolutely 

not. That was the responsibility of the Security Council. But it is 

important to understand the environment in which people operated. It was impossible to get Saddam Hussein to comply with the 

earlier resolution which would have put the power in the Secretary-General’s hands. The entire international environment, as 

you yourself alluded to, was pressure on us, pressure on the United 

States, pressure on Great Britain rather than pressure on anybody 

else or on Saddam. So we got what we could. 

Now, Kofi Annan added to that environment by consistently criticizing the United States and Great Britain for doing due diligence 

on the contracts, consistently criticizing us for not going forward 

with contracts, criticizing us for the overflights, criticizing us on a 

whole variety of areas. And so I think he added significantly to 

that environment, and for that he does bear responsibility. 

In addition, the Secretariat bore significant bureaucratic responsibility for administering the program. And there, you are right, 

the chips should fall where they may. But the Secretariat did have 

responsibility, and he is the boss, and the buck stops there. 

On the question of Volcker, I would really rather defer to Claudia 

who has more expertise in that area. 

Ms. ROSETT. Thank you very much. 

On the question of U.N. bureaucrats, this really has nothing to 

do with the notion that they are evil, not evil. Many of the sources 

for this story are unhappy people who, in fact, are in some way 

closely connected with the United Nations and very unhappy about 

some of the ways in which it conducts itself. And the issue here is 

that very bad things happen. 

The amount of corruption and graft is immense. It goes past 

some bounds, I think, at which you can say it was realistic to expect corruption. 10 billion is large, you know, a fraction of that. 

And the U.N. makes it—operates under rules that make it very 

hard to say this person precisely is responsible. 

The point I have tried to make with the Secretary-General, is 

that I began looking into this because I was curious about how the 

relief program worked. I never expected particularly to uncover a 

scam. As I began to learn about it, I was covering other things. At 

the time, each revelation was more appalling than the next. And 

the large problem here boils down to, if the U.N. is unable to contain something like this, if the Secretary-General will not call attention to problems that start to approach this scale, then it is not 

a good idea to entrust the U.N. with any mission as important as 

containing a Saddam or rebuilding an Iraq or basically——

Mr. BERMAN. Volcker. What about Volcker? 

Ms. ROSETT. I think Volcker is a man, as far as I know, of great 

integrity. The problem is this: The investigation is outlined by the 

81

Secretary-General, and one might note that this is, in itself, structurally a conflict of interest. He outlined the terms under which he 

will be——

Mr. BERMAN. I thought the Security Council outlined. 

Mr. BURTON. Mr. Chairman, regular order, please. The gentleman has had his time. 

Ms. ROSETT. No. He proposed and the Security Council approved. 

So, again, you can bounce it back and forth. You run into the same 

problem. Who is accountable? This is a problem with the United 

Nations; with the way it is arranged it leads to this kind of difficulty. 

With Volcker, the problem he will have is, he can get what people are willing to volunteer. There are people I would expect involved in this who have great concerns about their futures, their 

welfare. Enormous amounts of money are at stake, and they will 

not want to be forthcoming. 

If you took a bribe from Saddam Hussein and Paul Volcker 

comes to you for details, you probably aren’t going to produce everything you have in your power to produce. I would expect when 

he goes to the Russian Mission for information, which has consistent—or the French, he will run into serious difficulty getting 

the kind of thing that you yourself would consider satisfactory 

standards of evidence to investigate. 

Chairman HYDE. Mr. Burton of Indiana. 

Mr. BURTON. Thank you, Mr. Chairman. 

You know, the French and the Russians and the Syrians and the 

PLO all were beneficiaries of these oil contracts. I just found out 

that Mark Rich, who was one of the 10 most wanted criminals by 

the FBI and the world and was pardoned by the last Administration, was also one of the people that was involved in these contracts. 

The corruption, it appears to me, is legion. And what Mr. Flake 

was alluded to a while ago and what these gentleladies are talking 

about is, we really need to get to the bottom of it. We need to get 

to the bottom of it. 

And Mr. Volcker is an honorable man. I told my colleague from 

California that. I think he is an honorable man. But if he can’t get 

access to the documents that are relevant to a investigation that 

is thorough, then we are never going to get to the bottom of this. 

Mr. BERMAN. Then he should quit. He shouldn’t be a party to 

that. 

Mr. BURTON. I reclaim my time. 

But let me just say that Mr. Volcker—that is something that you 

could take up with him. But the fact of the matter is, this is a monumental issue and it has to be resolved. If we are going to trust 

the United Nations, if we are going to ask the United Nations to 

be a participant in bringing about stability in Iraq and helping us 

set up a government that is going to work over there, then, by 

golly, we ought to be able to trust them. And the fact of the matter 

is, from what I have seen so far and from what I have heard today, 

you can’t trust them. 

And the French and the Russians that don’t want us to get to 

the bottom of this thing, they are on the Security Council; and it 

is going to be very, very difficult. 

82

Now, we give 22 percent of the money to the United Nations. Mr. 

Flake alluded to this a while ago. And I think we ought to use the 

power of the purse to make sure we get all of the documents that 

are relevant to this investigation. 

Chairman HYDE. Would the gentleman yield? 

Mr. BURTON. I would be happy to yield to the Chairman. 

Chairman HYDE. I think it is important to bear in mind as we 

pile on the U.N., that the United States knew of some of this malfeasance, but for policy reasons decided to emphasize security and 

the confinement, the isolation, of Saddam Hussein rather than 

kickbacks and price manipulations on these civilian goods that 

were being sold, or the siphoning off of oil and the rest. 

In other words, I cannot say that we are not complicit. And as 

we, justifiably, with a righteous anger, try to clean out the stable, 

we ought to remember there are a couple of rooms down the hall 

that need cleaning out, too. 

Mr. BURTON. Mr. Chairman. 

Chairman HYDE. And so it is people who abuse an institution, 

and we ought to find out who those people are and isolate them. 

Mr. BURTON. Mr. Chairman, I agree with you wholeheartedly. 

Wherever the chips fall, then, by golly, we ought to get to the bottom of it. And people that committed or were complicitous in this 

process, they ought to be held accountable. 

If they have diplomatic passports and they are working at the 

United Nations, and we find out that they were involved in this 

kind of a scandal, they ought to be deported. We ought to pull their 

diplomatic passports and get them out of here, or bring them to 

trial and dispense with their diplomatic immunity. And if the 

United States was involved, then I would like to know about that 

as well. 

The bottom line is, if we are going to ask the United Nations to 

be a participant in this process and to be a participant in stabilizing the Middle East and, in particular, Iraq, then, by golly, we 

have got to have confidence that they can do it. And when Kofi 

Annan won’t give us the documents we need, when France and 

Germany who fought us all through this whole process, along with 

Russia, don’t want us to get to the bottom, when we find out that 

money was going to the PLO and possibly to Osama bin Laden and 

the Taliban, then, by golly, we need to get all the facts. 

And I don’t believe Mr. Volcker, as good a man as he is—and I 

have confidence in him—I don’t believe he is going to be able to get 

those documents because I believe there is such a scandal over 

there that they don’t want us to get those documents. And that is 

why I said, along with Mr. Flake, we ought to use the power of the 

purse and say, look, if you want us to be a participant in the 

United Nations, then, by golly, we have got to know that that place 

is going to work over there and be honorable, as honorable as possible. And if you are not going to do that, then, by golly, we ought 

to pull the purse. 

Mr. BERMAN. Mr. Chairman, could I jump in, please? 

Chairman HYDE. Mr. Burton? 

Mr. BURTON. Well, I have the time, and I would just like to say 

to Mr. Ruggie, were you responsible at all? Were you responsible 

for the Oil-for-Food Program? 

83

Mr. RUGGIE. No, sir, I wasn’t. 

Mr. BURTON. Well, then what do you have to say about it? 

Mr. RUGGIE. I am on a panel with a number of other people. 

Mr. BURTON. I know, but——

Mr. ACKERMAN. Point of order, Mr. Chairman. I don’t think that 

our invited witnesses, invited by the Chair and this Committee, 

should be intimidated in such a fashion. They were invited here. 

And maybe Mr. Burton should ask that question of the Chairman, 

why he was invited here. 

Mr. BURTON. I have——

Mr. ACKERMAN. He didn’t invite himself here. I resent your attitude. 

Mr. BURTON. I have the time, Mr. Ackerman. 

I will ask Mr. Ruggie again. Did you have anything to do with 

the Oil-for-Food Program? 

Chairman HYDE. Mr. Ruggie is here as an invited witness. We 

invited him because he has specialized knowledge. He is able to 

provide an overview. In addition, he was selected by the Democratic Members of the panel, and they have a right to select whomever they want. 

Mr. BURTON. I understand, Mr. Chairman. And I have got a right 

as the person who has the time to say to Mr. Ruggie, were you involved in the Oil-for-Food Program? And he said no. 

Chairman HYDE. Well, can we put that to bed now? 

Mr. BURTON. Okay. But he wants to make a comment about it, 

and I wonder what his expertise is. 

Mr. RUGGIE. May I? 

Chairman HYDE. I would say, yes, after the dialogue we have 

heard. 

Mr. RUGGIE. I am here at your invitation, and I thank you for 

the invitation. 

Chairman HYDE. Yes, you are. 

Mr. RUGGIE. I was an Assistant Secretary-General in Kofi 

Annan’s office. I was his Senior Adviser for Strategic Planning. My 

job was to provide him with advice on a variety of overall political 

issues, institutional reforms, relations with the United States, and 

matters of that sort. 

I didn’t run the Oil-for-Food Program, I didn’t work in the office 

of the Oil-for-Food Program. I worked in Kofi Annan’s office. 

A number of statements have been made here about how the Secretary-General’s office works and how the Secretary-General works, 

which makes me glad that I did come here, Congressman Burton, 

because they are incorrect. They are fundamentally incorrect. 

Let me say, if I may, to—Congressman Flake raised the issue before about the Secretariat not giving all the contracts to the 661 

Committee members. The United States and the United Kingdom 

asked to see and received every single contract on that committee. 

Not one did they not see. 

Secondly, with regard to the Volcker panel, I would like to ask 

what the alternative would be to a Volcker panel. We are doing an 

investigation that includes people from dozens of different countries, including Russia and France. Does the United States Congress want to take on the issue of trying to get Russia to submit 

documentation to a congressional Committee? Or are you prepared 

84

to give the Security Council, through its resolution and authorization of the Volcker Commission, a shot at getting out all the facts? 

Thirdly, Kofi Annan is on record. He has stated that Paul 

Volcker and his committee, which includes Justice Richard 

Goldstone from South Africa, who chaired the Reconciliation Commission in South Africa, was the first prosecutor of the International Criminal Tribunal for the former Yugoslavia, and a third 

person, a Swiss law professor who is an expert on money laundering—they have access to every piece of paper that the United 

Nations has in its possession relative to the Oil-for-Food Program, 

including internal management audits which are never intended 

for public consumption, but they too will be made available to the 

Volcker Commission. 

So my question is, what is the alternative to allowing this commission to go forward and do its work, supporting it as best we 

can? We don’t have reach over French diplomats or over Russian 

diplomats as the United States Congress. At least the SecretaryGeneral now has the commitment of those countries on the Security Council to cooperate fully. 

Mr. BURTON. Right. 

Chairman HYDE. The gentleman from New York, Mr. Ackerman. 

Mr. ACKERMAN. Thank you, Mr. Chairman. 

The gentleman from Indiana is a Member of the House for whom 

I have the greatest of respect and regard, so it must be a personal 

inadequacy of mine that I don’t know what the heck he is talking 

about. 

I learned for the first time that Mark Rich is the number one 

person on the FBI’s most wanted list. 

Mr. BURTON. He was in the top 10. 

Mr. ACKERMAN. Well, that is not number one, is it? 

Mr. BURTON. That is what I said, he was one of the top 10. 

Mr. ACKERMAN. You said he was number one. 

Mr. BURTON. I think if you check the remarks, the recording——

Mr. ACKERMAN. Well, let us not quibble over that. 

Mr. BURTON. Well, let’s get your facts straight. 

Mr. ACKERMAN. You get your facts straight. 

Name one document that Kofi Annan has refused to submit. Not 

one document. You come here and make all sorts of reckless 

charges against witnesses and Members and everybody else, and I 

am beginning to resent it. 

Mr. BURTON. Would the gentleman yield? 

Mr. ACKERMAN. No. 

Mr. BURTON. Well, you are the one who is telling me what I said. 

Mr. ACKERMAN. I said I won’t yield. 

Chairman HYDE. The gentleman hasn’t yielded. 

Mr. ACKERMAN. The gentleman has the right to his time, he 

doesn’t have to mine. He doesn’t have a right to his own facts either. He certainly has a right to his opinion. 

I would like to know, those of you who have studied this—and 

by the way, I didn’t have anything to do with the Oil-for-Peace plan 

or the Oil-for-Food plan, either. So I don’t know what any of us are 

doing up here, if that is the criterion for it. 

Chairman HYDE. We are trying to learn. 

Mr. ACKERMAN. I was asking a rhetorical question. 

85

Chairman HYDE. If we would stop lecturing and listen, I think 

it would be a real progress. 

Mr. ACKERMAN. Well, I think that is a lesson we ought might 

learn then, Mr. Chairman. 

It was said, I think by Ms. Pletka, that Kofi Annan should be 

held responsible, he is the boss, the buck stops there, in regard to 

the corruption that took place. I am not sure whether you or any 

of the other witnesses testifying today are holding Kofi Annan responsible, or the U.N. in general, or is it just individuals? 

But my question is, the overpricing and single-source bidding, et 

cetera, et cetera, with regard to Halliburton, which deals with U.S. 

taxpayer dollars, certainly bears looking into. 

Would you hold the President of the United States, being the 

boss, to that same standard that you are holding Kofi Annan to, 

being the boss, Ms. Pletka? So if we ever get around to investigating the abuse of U.S. taxpayer dollars, how would we approach 

that? The same standard? Different standard? 

Ms. PLETKA. I believe everybody should be held to a standard of 

responsibility for the people who work for them. 

Mr. ACKERMAN. So you would say that members of our Administration, if they did not stop whatever corruption that certain U.S. 

corporations have admitted to, that that responsibility lies with the 

President of the United States? Is that what you are saying? 

Ms. PLETKA. I have a strong suspicion that you might be a lawyer and that I am not. 

Mr. ACKERMAN. I am a schoolmarm from New York City. 

Ms. PLETKA. Well, you have far more practice in this sort of interrogation than I do. 

But let me say that if the President had the level of knowledge 

that I believe is exigent inside the United Nations about the kind 

of corruption that exists, then, yes, he should be held responsible. 

And I think that is the expectation of our democracy and our taxpayers. 

Mr. ACKERMAN. Could you tell us from your knowledge, then 

what knowledge Kofi Annan had, personal knowledge, if that is the 

standard? 

Ms. PLETKA. No. I think that there is an investigation that is 

going on, and that if that investigation finds that—if, in fact, there 

was knowledge of it, he should be held responsible. 

In addition, I would say——

Mr. ACKERMAN. Whether he knew——

Ms. PLETKA. Sir, I would like to answer your question, but just 

let me get the last bit of the sentence out. 

There was an enormous amount of knowledge that was available 

about corruption inside the program from the very get-go, and it 

is covered in ample articles in the American press. So the fact that 

the Secretary-General has claimed that no one knew anything 

about this is, I think, a strange credulity. 

Now, whether or not he was responsible is something that this 

commission can decide for itself. 

Mr. ACKERMAN. If the same kind of overpricing, and overcharging with U.S. taxpayer dollars in this case, is proven with regard to some U.S. contractors, and U.S. officials looked the other 

way or were too busy with the larger problems, then you would say 

86

the President of the United States should be held to the same 

standard? 

Ms. PLETKA. I would say that if the President of the United 

States was aware over a period of years that there was systemic 

corruption going on that his personnel were involved with and he 

did nothing about it despite the fact that it was brought to his attention on a repeated basis, then, yes, he should be held responsible. 

Chairman HYDE. The gentleman’s time, unfortunately, has expired. 

Mr. Green of Wisconsin. 

Mr. GREEN. Thank you, Mr. Chairman. Mr. Chairman, a couple 

of thoughts to begin with. 

I harken back to what you said and the Ranking Member said 

at the beginning of this hearing today, and that is that we are talking about, today, allegations; and we sometimes have to be careful 

that we don’t jump ahead and forget that these are allegations. 

And so I come into this with an open mind. I consider this the 

beginning of an examination that I hope will carry on for some 

time. 

We have had other Members talk about how it is important for 

us to keep our eye on the ball here, and then go on to talk about 

domestic politics as we are meeting as a Committee on International Relations. I think we should keep our eye on the ball. I 

think we do need to focus on the matter that is before us. 

I believe that this hearing and I believe that the subject matter 

of the hearing are terribly important. If the allegations are true 

only in part, then we are left undeniably with the fact that a wellintended program, a program that was set up for all the right reasons, became something very tragic, became a mechanism that not 

only worked for the benefit of Saddam Hussein, more than his own 

people, the Iraqi people; but in my way of thinking—even worse, 

perhaps—a mechanism for Saddam Hussein to thwart economic 

and political efforts to bring him into compliance with international 

sanctions, international resolutions, and the world community. And 

if that is true, then this program unfortunately condemned the 

very diplomatic efforts that we all hoped would bear fruit and bring 

Iraq into compliance with something short of military action. 

And if any of that is true, it is a great failure, and it is indeed 

something that is worth not only our attention, but the world’s attention. 

In terms of questions, Ms. Rosett, a question for you. Everyone 

has been talking about evidence and documents that we have and 

we don’t have. What sort of documents and what sort of evidence 

do we not have that we should be looking for? 

Ms. ROSETT. Thank you very much. There are levels here of who 

has what. And there is one I think I would like to address that I 

think has been very important, because there was a tremendous 

fund of knowledge available that U.N. policy completely bypassed 

in all this. 

If the information on the contracts and the oil buyers had been 

made public from the beginning, there are an enormous number—

not just the press, not just the media, but there are an enormous 

number of people worldwide who make a point of knowing how 

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these things work. The competitors of the contractors in honest 

parts of the business would have looked at the rice prices out of 

Thailand and said, That is 44 percent over, which was the DCMA 

finding. They would have looked at the infant formula and the milk 

overpricing—how cynical can you get—and said, This can be done 

cheaper, and they don’t have to be buying it from places like Saudi 

Arabia and Yemen and Syria and Sudan. 

And so, at the simplest level, the public—even now you would get 

great help if those were released to the public. 

I say that not just because I am a member of the press, but because there are people who would look and immediately know 

much better than, say, someone sitting in Washington what was 

going on with those 75 firms in the United Arab Emirates. That 

is one level. 

This should just be public knowledge. It would bring to bear expertise you cannot get as a Committee or a small group of people; 

bring the marketplace into it. 

Second, on the level of what you may have access to, there are 

bank records here that will tell you somewhere the transactions 

that were made, whether everything was in fact done properly; it 

has been a source of some mystery, from what I have been able to 

report, exactly who has had what. 

As far as I have been told, the Iraqi Governing Council in Baghdad never received any bank statements after the fall of Saddam. 

They were all with the United Nations. This was confirmed to me 

by the U.N. Treasurer’s Office in March. In other words, almost a 

year went by in which the U.N. did not disclose to anybody the 

statements or records of the bank that handled the escrow accounts 

of the program. 

So the bank records, I think, are just vital. And someone needs 

to find out simply where, in fact, they are, who has got them, 

where they have been. They have been in a black hole as far as 

I can tell for most of the past year. That is a sign that any of you 

should be alert to. 

Then there is simply the question of where exactly are the contracts. If they are in two facilities—I have also heard accounts from 

various quarters of files being corrupted, of things being lost, of 

things having disappeared, of things being incomplete. Again, 

where does the buck stop? 

Someone ought to just make up a list of what is actually where 

exactly. It will be very important. They have been, as far as I can 

tell, scattered in many directions, in many forms. 

So that is the very messy answer. 

Chairman HYDE. Mr. McCotter from Michigan. 

Mr. MCCOTTER. Thank you, Mr. Chairman. 

First, I would just like to say that this is a complex issue in 

many ways. We have to deal with issues of not only what is perceived as malfeasance, but potential misfeasance and the difference 

between the two. 

But I would just like to say, I am from Wayne County, Michigan. 

I am a Republican from Wayne County, Michigan. And perhaps the 

Chairman, with his knowledge of Cook County, will understand 

this: That, in many ways, what we are seeing is a machine, a political machine that is now being accused of having done something 

88

wrong. And the tactics that the machine uses to defend itself are 

quite similar. There will be confusion, distraction, an internal investigation which is controlled by the machine, the results of which 

may or may not be adequate for public consumption. And it is all 

to defend the institution. 

The reality is that the deeper debate that is going on is affecting 

what we are dealing with in this present instance, and that is how 

Americans view the role of the United Nations and what level of 

participation, based on that decision, America will continue to provide within the United Nations. 

The United Nations in many ways has simply a thin veneer of 

international idealism which this present instance endangers by revealing the dank undercurrents of real politic that occurs every 

day. 

So I would just caution everybody to keep your powder dry and 

see what happens, because the outcome of this investigation has to 

be fair, it has to be full, so that the American people can make 

their decision. 

In many ways, it is also interesting to note, what cannot be overlooked is—I would hope that what comes out of this is an understanding of how—should misfeasance or malfeasance in the Oil-forFood Program have occurred, what were the ramifications on subsequent actions by Saddam Hussein? 

If the Oil-for-Food Program wound up undermining the very 

sanctions that were put in place to alter or to end the behavior of 

Saddam’s regime, what role did that have when Saddam was faced 

with further U.N. resolutions? What role did it play in terms of the 

individual member-nation states and their dealings with Saddam 

and their dealings with the adoption of the enforcement of future 

United Nations resolutions? 

It seems to me that these are the issues at stake, and I would 

just hope that we can conduct this in an objective and fair way. We 

may not be off to the best start. 

And one of the things I would like to add is that I do not yet 

subscribe to the notion that the United States is complicitous in 

this. The way I view this is like a beat cop. The United States is 

a police officer, let us say, and you see someone running an Oilfor-Food scam and then on the other side of the street you see 

someone trying to acquire weapons of mass destruction or dual-use 

technology. 

The police officer uses his best discretion and tries to stop the 

weapons of mass destruction. That does not mean the United 

States is complicitous with the criminal running the Oil-for-Food 

Program scam across the street. 

So I would just like to put that on the record. 

I would like to thank you all for being here. I have so many questions of my own to ask myself. I have none for you. 

Chairman HYDE. Thank you very much. 

Ms. Ros-Lehtinen. 

Ms. ROS-LEHTINEN. Thank you very much, Mr. Chairman, for 

holding this important hearing. 

I wanted to ask our panelists, in their opinion, if the United Nations met its obligation under the Oil-for-Food Program; and if not, 

why not? Because, as all of us know, Mr. Chairman, the welfare 

89

of the Iraqi people, after having suffered under the yoke of Saddam 

Hussein’s regime for decades, was entrusted to the United Nations, 

the institution that was supposed to provide quality food and medicine to them as an exception to the international sanctions that 

were placed upon the Iraqi regime in retaliation for the regime’s 

aggression. And as the evidence now appears to indicate, it seems, 

that that trust was broken. The U.N., it seems from the evidence 

that is now available, allowed Saddam and his allies, his cronies, 

the ability to pick the products they wanted, their suppliers, and 

their price. And according to the information that the Committee 

has reviewed, the United Nations seems to have cared very little 

about the quality of the products or even their cost as long as those 

who supported the Iraqi regime got the contracts. They appear to 

have forced suppliers to give them kickbacks, pocketed the money 

for themselves, they cheated the Iraqi people, the very same people 

that they were supposed to represent. 

And Saddam’s criminal behavior was cynically overlooked by the 

U.N. Secretariat, the bureaucracy that runs the institution. They 

were in place to make the decisions to stop this kind of arrangement, but callously they chose not to. And according to the information gathered thus far, the U.N. allowed the people of the Kurdish regions in the north of Iraq to be deprived of the quality medical equipment and denied the ability to grow the very food that 

could have helped feed their own people. 

So the behavior of the U.N. in this, the largest humanitarian operation in its history, is disappointing. And I wanted to know your 

opinion about whether the United Nations, in fact, met its obligations under the program; and, if not, why not, if anyone cares to 

answer. 

Thank you. 

Mr. RUGGIE. Could I give that a shot? 

Actually, you should address the Kurdish issue, because everything that I know about the facts on the ground suggests that, if 

anything, the Kurdish area was disproportionately benefited by the 

Oil-for-Food Program, in relative terms. 

In absolute terms, it may have fallen short, Congresswoman. I 

am not claiming that that may not have happened. But in relative 

terms, it certainly was an area——

Ms. ROS-LEHTINEN. They got cheated less. 

Mr. RUGGIE. That was better off. 

One reason for that was that the rest of the country, the U.N. 

Oil-for-Food Program had to work through the Iraqi governmental 

agencies, whereas in the northern governorates it could deal directly with the local authorities and the people. 

I would just put that on the record, if I may. 

Ms. ROS-LEHTINEN. Thank you. 

Mr. ZIAD. I think, by any criteria, if you judge the performance 

of the U.N. in the Iraqi Kurdistan, it fell short. The simple fact is 

that they had nearly $8 billion to spend for the purposes, and they 

managed to spend less than 50 percent on those programs, in addition to the quality of the performance of the various projects. 

Another example: They gave the right of procurement to Saddam 

Hussein’s regime, which was a big mistake on the part of the U.N. 

Iraqi Oil-for-Food Program. 

90

In addition, I gave the example of the hospital in Sulaimani, 

which never got built. By the way, it is going to be tendered again, 

I gather, in about 2 weeks’ time, so—and the main reason, another 

reason, was the quality of personnel chosen by the U.N. to implement the programs in our region. They discriminated against employing Kurdish personnel in their international stop. Throughout 

that period, they never employed one single Kurdish expert. Of 

course, they wouldn’t allow United States or British personnel to 

be employed in our region. 

I just want to make that clarification. Thank you. 

Chairman HYDE. The gentleman from Indiana, Mr. Pence. 

Mr. PENCE. Thank you, Mr. Chairman. Thank you for holding 

this truly globally significant hearing about a topic that I know my 

constituents in Indiana are grateful to see your leadership and the 

participation of the Committee. 

I wanted to ask two specific questions of testimony. I would ask 

unanimous consent, Mr. Chairman, if an editorial by one of our 

witnesses, Claudia Rosett, that appears in The Wall Street Journal

today might be added to the record of this hearing. 

Chairman HYDE. Without objection. 

[The information referred to follows:]

THE WALL STREET JOURNAL

COMMENTARY

Oil-for-Terror 

By CLAUDIA ROSETT

April 28, 2004

It’s looking more and more as if one of the best reasons to get rid of Saddam Hussein was that it was probably the only way to get rid of Oil-for-Food. The problem 

wasn’t simply that this huge United Nations relief program for Iraq became a gala 

of graft, theft, fraud, palace-building and global influence-peddling—though all that 

was quite bad enough. The picture now emerging is that under U.N. management 

the Oil-for-Food program, which ran from 1996–2003, served as a cover not only for 

Saddam’s regime to cheat the Iraqi people, but to set up a vast and intricate global 

network of illicit finance. 

And though much debate has focused on the list published this past January in 

the Iraqi newspaper Al Mada—cataloguing some 270 individuals and entities worldwide alleged to have received illicit oil vouchers worth millions from Saddam—the 

Al Mada list may be the least of it (apart from the last name of the executive director of the Oil-for-Food program himself, Benon Sevan). Dwarfing the Al Mada list 

for size, scope and menace was the U.N.-piloted mothership, the entire $111 billion 

U.N. Oil-for-Food program. Supplied by Iraq’s oil wells, the sums involved in Oilfor-Food’s transactions were so enormous that even the routine rounding errors of 

a few hundred million here or there easily rivaled, for example, the $300 million 

or so in family money believed to have given Osama bin Laden his terrorist start.

In a world beset right now by terrorist threats—which depend on terrorist financing—it’s time to acknowledge that the U.N.’s Oil-for-Food program was worse than 

simply a case of grand larceny. Given Saddam’s proclivities for deceit and violence, 

Oil-for-Food was also a menace to security. By letting Saddam pick his own business 

partners and draw up his own shopping lists, by keeping the details of his contracts 

and accounts secret, and by then failing abjectly to supervise the process, the U.N.—

through a program meant to aid the people of Iraq—enabled Saddam to line his 

pockets while bankrolling his pals world-wide. In return, precisely, for what? That 

is a question former Federal Reserve Chairman Paul Volcker might want to keep 

in mind as he heads up the official investigation, finally agreed to by U.N. Secretary-General Kofi Annan, into Oil-for-Food. 

In tallying various leaked lists, disturbing leads and appalling exposes to date, 

what becomes ever more clear is that Oil-for-Food quickly became a global maze of 

middlemen, shell companies, fronts and shadowy connections, all blessed by the 

U.N. From this labyrinth, via kickbacks on underpriced oil and overpriced goods, 

91

Saddam extracted, by conservative estimates of the General Accounting Office, at 

least $4.4 billion in graft, plus an additional $5.7 billion on oil smuggled out of Iraq. 

Meanwhile, Mr. Annan’s Secretariat shrugged and rang up its $1.4 billion in Iraqi 

oil commissions for supervising the program. Worse, the GAO notes that anywhere 

from $10 billion to as much as $40 billion may have been socked away in secret 

by Saddam’s regime. The assumption so far has been that most of the illicit money 

flowed back to Saddam in the form of fancy goods and illicit arms. 

But no one really knows right now just how much of those billions went where—

or what portion of that kickback cash Saddam might have forwarded to whatever 

he deemed a worthy cause. A look at one of the secret U.N. lists of clients authorized by the U.N. to buy from Saddam is not reassuring. It includes more than 1,000 

companies, scattered from Liberia to South Africa to oil-rich Russia. And though the 

U.N. was supposed to ensure that oil was sold to end-users at market price—thus 

minimizing the graft potential for Saddam and maximizing the funds for relief—

there is an extraordinary confetti of clients in locations known less for their oil consumption than for their shell companies and financial secrecy. 

Why on earth, for instance, did the U.N. authorize Saddam to sell oil to at least 

65 companies in the financial lockbox of Switzerland. What was the logic behind approving as oil buyers at least 45 firms in Cyprus, seven in Panama and four in 

Liechtenstein? At the other extreme, would Mr. Annan care to explain why the U.N. 

authorized Saddam to sell oil to at least 70 companies in the petroleum-soaked 

United Arab Emirates? 

In Oil-for-Food, ‘‘Every contract tells a story,’’ says John Fawcett, a financial investigator with the New York law firm of Kreindler & Kreindler LLP, which has 

sued the financial sponsors of Sept. 11 on behalf of the victims and their families. 

In an interview, Mr. Fawcett and his colleague, Christine Negroni, run down the 

lists of Oil-for-Food authorized oil buyers and relief suppliers, pointing out likely 

terrorist connections. One authorized oil buyer, they note, was a remnant of the 

defunct global criminal bank, BCCI. Another was close to the Taliban while Osama 

bin Laden was on the rise in Afghanistan; a third was linked to a bank in the Bahamas involved in al Qaeda’s financial network; a fourth had a close connection to one 

of Saddam’s would-be nuclear-bomb makers. 

U.N. secrecy—in deference to the privacy of Saddam and his former clientele—

makes it extremely difficult to confirm the many whiffs of sleazy and sinister dealings in these lists. But for an example of how dirty Oil-for-Food could get, take the 

case of one of Saddam’s U.N.-authorized relief suppliers, a company called Al Wasel 

& Babel General Trading LLC, set up in Dubai, in 1999. This same Al Wasel & 

Babel was designated by Treasury earlier this month as a front company set up by 

senior officials of Saddam’s regime to serve as a foreign seller of goods to Saddam’s 

regime, through Oil-for-Food (while trying to procure for Iraq a surface-to-air-missile 

system). 

And although full information is hard to come by, partial lists leaked from the 

U.N. show that in 2000-2001 alone, Saddam’s regime ordered up from Al Wasel and 

Babel more than $190 million in construction materials, trucks, cars and so on. Over 

Mr. Annan’s and Mr. Sevan’s protests, the U.S. and U.K. blocked some $45 million 

worth of those contracts; that still left the Saddam front company of Al Wasel & 

Babel with about $145 million of Oil-for-Food business for that two year period 

alone. 

Basically, Oil-for-Food was Saddam—just slightly harder to spot, swaddled as he 

was in that blue U.N. flag.

Ms. Rosett, an OpinionJournal.com columnist, is a fellow with the Foundation for 

the Defense of Democracies and the Hudson Institute. A related article by the author 

appears in the May issue of Commentary.

URL for this article: 

http://online.wsj.com/article/0,,SB108310951312995487,00.html

Mr. PENCE. Thank you, Mr. Chairman. 

And it is about that, Ms. Rosett, that I wanted to speak. You 

make some fairly extraordinary assertions on the pages of The Wall 

Street Journal today, mostly having to do with whether or not—

well, I don’t want to characterize your piece. People can read it. 

But you raise the issue of whether or not as we talk about kind 

of grand larceny on a global scale, on the global graft that was 

going on here, some estimates in excess of $4 billion in kickbacks 

92

and payoffs, it would be easy to stop there. It would be easy to say, 

well, this was just people running away with the store. 

But it seems to me that—and I heard your statement, and I 

haven’t read your entire statement yet. But it seems to me—I 

would be anxious to have you speak to this suggestion—in your 

piece that all U.N. Oil-for-Food money may have ended up in accounts tied to the Taliban during the period of time that al Qaeda 

was being harbored and trained there; that it ended up in banks 

in the Bahamas involved in al Qaeda’s financial network; my question to you is, to what extent do you personally believe—and I 

know we are about, ultimately, trying to say what the evidence is—

but to what extent do you personally believe that Saddam Hussein 

used the Oil-for-Food Program and the contracting ability and 

voucher program and the rest to finance terrorism? 

Ms. ROSETT. Thank you for, I think, a really important question. 

Let me try to substantiate what I say as far as I can. 

We do not know that money from this program ended up in a 

bank in the Bahamas, the bank in question being Bank Al Taqua, 

which is on the U.N.-designated terror list of entities affiliated with 

al Qaeda. But it did have a connection to a firm that was authorized out of Liechtenstein to buy oil from Saddam Hussein. 

And, again, when you look at this, I think you all appreciate, as 

people who know something of the world, that when you see a firm 

in Liechtenstein buying oil from Saddam Hussein, there is enough 

there to ask the question, is this for home heating? And when you 

start to look through the lists, there are examples—I mean. 

Mr. PENCE. If I may interrupt to amplify your point. The sale of 

the oil to the United Arab Emirates, which I think you aptly described today as an ‘‘oil-soaked country’’——

Ms. ROSETT. Yes. 

Mr. PENCE [continuing]. And also a place where I think we have 

established, over time, since 9/11, a great deal of terrorist activity 

and interactions have taken place is deeply suspicious to this Congressman, and it seems to me an example of that to which you 

point in The Wall Street Journal today. 

Ms. ROSETT. Precisely. It is that when you look through—I have 

a leaked list. This is the kind of thing I was saying the U.N. should 

make confidential. I began sitting down and going through, with 

the help of someone I suggest you call as a witness, a lawyer who 

works for a firm in New York—I can give you more details—he is 

a financial investigator who has looked into financial sponsors of 

September 11th. 

This is the law firm Kreindler & Kreindler, and they filed a suit 

against the financial sponsors. And in the course of that, one of 

their investigators also wrote, I think, the best detailed report I 

have seen on sources of revenue for Saddam Hussein—it is public 

from the Coalition for International Justice, and it is heavily documented. 

Mr. PENCE. But it is your sense that—excuse me, for interrupting, but they limit my time. It is your sense that that is an 

issue in this investigation of this global scam? 

Ms. ROSETT. Let me make it very clear. 

My sense is that this was huge and it was dangerous. What we 

can establish is that Saddam Hussein had, absolutely, the ability 

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to send money through Oil-for-Food contracts to anyone he chose 

once he got it into a company like that; that if you put together—

and I just need to give you the crucial components—the graft-kickback element where we don’t know that it was all going back to 

Iraq once it was onto a company where Saddam Hussein had already done a dirty deal; and, again, the blackmail component, the 

cooperative component, it could be sent on. 

And the opportunities I began outlining, I began just looking at 

things that are strange, and you will see the—it goes on and on 

and on. When you start—that is what—and there is no official investigation. This was Saddam’s little black book. 

Ms. ROS-LEHTINEN [presiding]. Thank you so much. 

Thank you, Mr. Pence. 

Mr. BURTON. Would the Chairman yield for just a moment, 

please? If it is possible, I would like to have that put into the 

record. Could we have——

Ms. ROS-LEHTINEN. The little black book? 

Mr. BURTON. The information she is——

Ms. ROS-LEHTINEN. I will take it under advisement with the 

Chairman and let him decide. 

Mr. BURTON. I think it is extremely important. 

Ms. ROS-LEHTINEN. I will make sure that the Chairman notes 

that. Thank you, Mr. Burton. 

Mr. DELAHUNT. No objection from this side of the aisle. 

Ms. ROS-LEHTINEN. Thank you. 

Ms. ROSETT. I will provide it. I think it is important this should 

go public. 

[The information referred to follows:]

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Ms. ROS-LEHTINEN. Thank you. 

The gentleman from Iowa, Mr. Leach. 

Mr. LEACH. Thank you, Madam Chair. 

Perspective is always difficult to apply to any issue, particularly 

to this one; and it strikes me what you have here is an issue of 

a story of corruption and a story about judgment and how they 

interrelate. 

On the corruption side, probably the bitterest breach of trust 

imaginable in the world is corruption. And when you have corruption, it is worthy of review what we did about it. And by ‘‘we,’’ I 

don’t mean explicitly an official of the United Nations, the whole 

United Nations, but the whole world community. And it strikes me 

that we as a country, and many countries, more or less knowingly 

winked. And that is, in the guise of what Mr. Ruggie said, we had 

competing interests, and we viewed this interest as lesser than 

other interests. 

I think it is awfully important that we be prepared to conclude, 

fairly forthrightly, that that was a profound error of the United 

States, the United Kingdom, of the United Nations. 

The question, because it is often used a bit derogatorily—and it 

was raised today and objected to by—what do people know, when 

do they know it, and then the obvious follow-on question about 

what to do about it—is a very serious question, and it implies institutionally and for the community of nations. 

Now, we all know corruption is endemic in many societies; we 

know the United Nations to some degree is a barometer of the 

world system. But whereas the United Nations has to be in place 

for political compromise to take place, it should not be a place 

where corruption is tolerated to any degree whatsoever. And so this 

becomes very important, because there are consequences to corruption, and we have learned about some of those consequences. 

The distinguished Ranking Member said we shouldn’t be surprised that a dictator who kills people is also corrupt, but there is 

a corruption that facilitates killing people. And so it is a matter of 

enormous international and national concern. 

Now, some 15 years ago, I headed a commission on the effectiveness of the United Nations, and it was a commission that largely 

concluded that the United Nations could be looked at optimistically 

as a place where there could be some help moving toward world 

peace; but it also concluded that there was a great deal of incompetence and that there ought to be an Inspector General of the 

United Nations; and an Inspector General’s office with a very long 

name, Office of Internal Oversight Services was subsequently created in the early 1990s. 

I am told there are some 55 assessments of this Food-for-Peace 

program that developed, none of which have been made public, 

which may or may not be appropriate, but I assume they are made 

available to senior U.N. officials. 

Were you aware of those reviews, Dr. Ruggie. 

Mr. RUGGIE. Congressman Leach, I was aware of the fact that 

they were conducted. As is the case in governmental agencies domestically, the internal management audits typically are not forwarded to member-states, just as inspectors general reports in the 

U.S. typically aren’t forwarded to the Congress. 

121

Mr. LEACH. Were they read by anyone within the U.N. structure 

of decision-making? 

Mr. RUGGIE. I would certainly hope so and would assume so. The 

Volcker panel will have access to every one of those. 

Mr. LEACH. Well, my concern is that we lowered our tolerance for 

corruption in order to advance certain political agenda issues, and 

that that was the exact wrong circumstance for our country and for 

the U.N. system itself. And this is an embarrassment to the U.N. 

If you don’t have an institutional system that allows for accountability, you are going to lose a lot of respect. And I think it is the 

system, first of all, that we should raise the most questions about, 

including particularly the nation-state members and Security 

Council, which had particular responsibility for this. And, frankly, 

there was a reason for congressional review, and we clearly didn’t 

do it, and so there is accountability here as well. 

But I, for the life of me, think that this is a very serious issue 

that has to be raised first in the corruption arena and then, secondly, in the national security arena; and that one of the great 

questions is, can there be accountability? And then that relates to 

whose laws come under review and do officials of the U.N., do they 

have immunity for this sort of circumstance? 

Do officials of nation-states have immunity? And will governments waive that immunity? But I hope that it is understood that 

this is an incredibly serious issue and cannot be swept under the 

rug because our government had a different priority at the wrong 

moment in time. 

Mr. RUGGIE. Congressman, may I just add 30 seconds? 

I agree completely with what you said, and I hope that my testimony is not misconstrued as suggesting that the United States 

Government, the United Kingdom Government necessarily did anything wrong in what they did. I don’t think people at the time——

Mr. LEACH. I am sorry, I am going to retrieve my time because 

I have very little time. 

I am saying the exact opposite of this. The United States Government did do wrong by having no sense of judgment of what 

mattered. Corruption mattered, and it matters to national security 

and it matters on a humanitarian basis. We have here a gentleman 

representing the Kurds, who said they got no money and no support and no value from this. 

This is a humanitarian circumstance for which we are accountable, particularly because we are a member of the Security Council. 

And officials of the United Nations are accountable. And this Congress, for not reviewing to some degree some of the stories and applying an appropriate perspective, is accountable. We did do wrong. 

Mr. RUGGIE. I am sorry. I misspoke, Congressman. 

I believe if the United States, the United Kingdom, and senior 

U.N. officials had known what the magnitude of the problem was, 

certainly I don’t think the United States Government or the U.K. 

Government or the U.N. might have made the same decisions in 

the same way. 

Mr. LEACH. Well——

Mr. RUGGIE. It is easy in hindsight, now that we have a $4 billion figure on the table, but no one at the time——

Mr. LEACH. If the time——

122

Mr. BEREUTER [presiding]. Without objection, the gentleman will 

have an additional minute. 

Mr. LEACH. One of the unique features of United States law is that whether corruption is $50 or $500 or $5 billion, you are accountable under the law. And the United States should never, ever 

be in a position of saying, if we knew it was—the corruption was 

only of that magnitude, we would be concerned. I think there is 

good knowledge that there was a lot of corruption, and whether the 

magnitude was smaller or larger, it should have been of towering 

concern. 

And I am astonished with your perspective, Dr. Ruggie. I don’t 

accept it. 

Mr. BEREUTER. I thank the gentleman. 

The Chair will recognize himself briefly for a comment and then 

a question directed to at least two of the panelists, and then we 

will conclude this first panel. 

First of all, I apologize for having to be away from some of the 

hearing for the responses, but I did hear the testimony. 

Mr. Soussan, you made a point about the conflicting definitions 

of what is a ‘‘state’’ in the United Nations. And I think that is not 

just an abstract issue. I think it is very important, and you brought 

up a good point. And the fact that there is no reference to democracy in the U.N. Charter is not insignificant. Increasingly, I think 

that the United Nations must come closer to being a community of 

democracies, or there has to be a new institution set up for that 

purpose. 

About a year and a half ago I raised a question in a hearing here 

about the escrow account managed by the Bank of Paris, and I 

gave some direction to the GAO—and I hope to address this question to the next panelist from the GAO. But I would ask particularly the two ladies here who may have knowledge about this issue, 

have you any information or have you had an opportunity to examine, best of all worlds, the program’s escrow account managed by 

the Bank of Paris? If not, have you requested access to it, or any 

other bank records that are kept by the OIP or other private banks 

associated with that process? 

Would either of you gentleladies have a chance to comment on 

this or have anything to contribute? 

Ms. PLETKA. I am going to defer mostly to Claudia. But regarding BNP, part of the problem is that it was always my understanding that it was the only bank authorized to take letters of 

credit for goods. And I gather—from hearsay, I have to confess—

that, in fact, it wasn’t the only one, that there were other banks 

involved as well, but that the only way that outsiders knew about 

that was because documents were found authorizing letters of credit in the basements of Iraqi Government buildings. 

In addition, I again hear, but don’t know whether there is any 

truth to the matter that the Bank de Zona Paribas took letters of 

credit for goods, took them in Euros and then translated them into 

dollars and charged a conversion rate before they would do the 

deal. 

Now, if that is the case, that is absolutely scandalous. I don’t 

know, and one of the reasons I don’t know, and the reason that 

others don’t know is because their internal audit documents are 

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not, in fact, necessarily at the U.N. I don’t know whether they have 

been provided to the U.N. They need to be provided, and they need 

to be provided to everybody so they have clear access to them. 

Mr. BEREUTER. I certainly think that is the case. And I don’t 

know of course about the transaction fees and how much that was 

or the general management fees that were charged. But I would 

like to know. I think we deserve to know. 

Ms. Rosett. 

Ms. ROSETT. This is one of the murkiest aspects of the whole program. And you are asking a very good question. The BNP itself is 

entirely unforthcoming certainly as far as questions from outside. 

From the U.N. itself, there have been accounts that are simply 

confusing and basically a refusal to release, the closest I have come 

in questions as simple as: What were the amounts of interest paid 

on accounts that had balances of some 12 billion; is—at one point, 

in great haste, a U.N. official began reading off to me in a somewhat haphazard manner over the phone last year several figures 

that he thought might be interest totals for various periods. That 

was it. 

I have actually received different versions of the balances held in 

these accounts from the U.N. with the Treasurer proper, who actually deals with these accounts. 

Now, the U.N. has sole power of signature over the Iraq Oil-forFood Program accounts. At this point, the CPA still must ask the 

U.N. to release funds from the billions still held in these accounts. 

From the versions that—from what has been told to me, the CPA 

and the Iraqi officials in Baghdad have still not received any statement of what is in those accounts at this point. 

So, again, I am just trying to outline for you the mystery here. 

And all this—when I spoke with Suzanne Bishopric at the United 

Nations, who handles these accounts, who is in the Treasurer’s Office, what she told me last month, in March, is that there has been 

no sending of any records to anybody since the fall of Saddam Hussein; it was all in the U.N. office. 

The further conflicting statements I have received, and in keeping with what Ms. Pletka told you, are that there are five or six 

banks—I have always wondered, it would seem to me an easy number to keep track of. These are banks in a program involving billions. 

If you lost track of the number of banks in which you hold congressional accounts, I would also consider that a very bad thing. 

And I have been told by the U.N. comptroller’s office that there 

were seven or eight. 

As far as actually seeing into these accounts, going one further 

statement relative to the Kurds, who had the highest degree of autonomy under the program, I went looking 2 years ago—and have 

since then, periodically—for answers from the U.N. as to what was 

happening with the missing $4 billion from the Kurdish account; 

and was told simply that no one had any right to see the bank 

records, including the beneficiaries, the intended beneficiaries of 

the program. 

So the answer again is, this is an area of great murk; and it is 

very important because in those bank records are the payments, 

the interest statements, the transactions, where they went. It even 

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bears on the terror question. And someone should secure those documents soon. 

Thank you. 

Mr. BURTON. Mr. Chairman, may I have one quick follow-up? 

Mr. BEREUTER. The gentleman is recognized. 

Mr. BURTON. Could Ms. Rosett tell us who said we couldn’t have 

access to those records? 

Ms. ROSETT. This was a statement, I believe—and this is not 

something I would not wish to state as—this is not personal; I am 

simply telling you the official who did speak on the record. And as 

far as I am aware, she was simply doing her job as required by the 

United Nations. And I would look to her boss, the U.N., Kofi 

Annan, who actually runs the Secretariat for an explanation. 

Suzanne Bishopric in the U.N. Treasurer’s Office, who I have—

I am happy to provide to you the whole series of quotes saying, no 

one outside the U.N. has any access, no one will see these numbers, not the Kurds—I am paraphrasing here—not the Kurds, not 

the press, not anybody. 

It is important that these be seen, and the more public, I believe, 

the better. 

Mr. BURTON. I think that is great. And I would like to talk to 

you after this and get a copy of some of that information. 

Mr. BEREUTER. I thank the gentleman. I thank all of the panelists. 

The gentleman from Massachusetts. 

Mr. DELAHUNT. I thank the gentleman, and if the Chair would 

just indulge, I noted that Dr. Ruggie, I think, wanted to respond. 

And if we could just give him a minute to maybe educate and inform us as to Ms. Rosett’s conclusion. 

Mr. BEREUTER. Without objection, the gentleman from Massachusetts will be extended another minute, which he may pass to the 

witness. 

Mr. RUGGIE. Thank you, sir. 

The banks were subject to external audits, routine external audits. All of those audits were made available at the time to all of 

the member-states, which means the United States Mission has 

copies of all of those external audits. They are not a secret from 

the member-states. 

There is a peculiar thing about secrecy and transparency. It is 

unfortunate that the U.N. works that way, and I wish it didn’t. It 

is not secret when you share documentation routinely with 191 

member-states, those aren’t secret anymore, but they are, in a certain sense, nonpublic. I think it is important to differentiate between those two. 

But the bank was regularly audited. The external audits were 

given to all member-states. I think all of the members of the 661 

Committee—excuse me, including the United States and commission had them as soon as they were done. 

Mr. DELAHUNT. I thank the gentleman. 

Mr. BEREUTER. And ‘‘external’’ really means external, outside the 

United Nations? 

Mr. RUGGIE. There is an external audit procedure that the 

United Nations regularly employs for all of its accounts. 

Mr. BEREUTER. Mr. Burton. 

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Mr. BURTON. Could Ms. Rosett respond, please? 

Mr. BEREUTER. Yes. Certainly. 

Ms. ROSETT. Please do ask what the further details are here before us because as I have been told by the United Nations, there 

was the Office of Internal Oversight, which is in the Secretariat, 

reporting to the Secretariat. The external board of auditors, as it 

has been described to me, and as it is in U.N. documents, was a 

group consisting of three member States rotating, which is their 

GAOs basically. This was chaired last year by France. It was 

chaired the year before by the Philippines. It is not necessarily obvious that there was—that this was independent, that there was no 

political agenda involved. You should get more details before assuming that external was truly external and independent. 

Mr. DELAHUNT. If the gentleman from Indiana would yield to me 

for just a moment. 

Mr. BEREUTER. I would be happy to extend. 

Mr. DELAHUNT. I think this colloquy is beneficial and enlightening, I think, for all of us. But I think the point, Ms. Rosett, that 

Dr. Ruggie was stating was that in terms of the external audit that 

the United States’ mission, our representatives, representatives of 

the Executive Branch had access and presumably possesses that 

external audit. Are you disagreeing with Dr. Ruggie on that point? 

Ms. ROSETT. Well, what I was saying—no I am not disagreeing 

with him, but what I was saying was what were they auditing, 

what exactly were those audits about. There are many things you 

could audit in this program, and the question wasn’t simply did the 

arithmetic on what was handed out add up. 

Mr. BEREUTER. Dr. Ruggie, are you aware of the fact that among 

the recommendations of the external findings was that the U.N. 

needed to diversify the banks involved in holding these assets? 

Mr. RUGGIE. That is how more banks got into the picture. 

Mr. BEREUTER. I want to thank all the panelists on behalf of the 

Chairman and the Committee for the contributions that you have 

made very significant. We appreciate your time and your effort and 

your interest in this extremely important issue. Thank you. We 

may come to you for additional information or clarification. This 

panel is dismissed with appreciation. And I would like to call our 

second panel, which consists of one person, I believe. And that is 

Mr. Joseph Christoff. Mr. Christoff serves as Director of the General Accounting Office’s International Affairs and Trade team. 

Prior to this position, he managed GAO reviews that focused on 

the operations and programs of the Departments of Energy, Interior and Transportation. After receiving his BA in Public Policy 

from Miami University of Ohio, Mr. Christoff earned his Masters 

Degree in Public Administration from American University. Welcome Mr. Christoff. And to the extent that you call in any assistance from other members of your staff, just please introduce them. 

We will now pause a few seconds until you have a chance to take 

the table. We would like to have a 5-minute summary of your 

statement. We have written information from the Agency to us. 

But your full statement will be made a part of the record. Mr. 

Christoff, thank you for your patience and thank you for your role 

in helping us with this issue and extend that to the people that 

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have assisted you at the agency. And you may proceed with your 

statement as you wish. 

STATEMENT OF JOSEPH A. CHRISTOFF, DIRECTOR, INTERNATIONAL AFFAIRS AND TRADE, U.S. GENERAL ACCOUNTING OFFICE 

Mr. CHRISTOFF. Thank you for inviting GAO to this important 

hearing. Last year this Committee asked GAO to monitor reconstruction efforts in Iraq, and as part of that effort, we looked at the 

operations of the U.N. Oil-for-Food Program and its transfer to the 

Coalition Provisional Authority. And today, I would like to discuss 

the results of our findings and offer some suggestions on how the 

U.N., the CPA and the Iraqi governing council could target their 

forthcoming investigations. First, let me discuss the problems with 

the Oil-for-Food Program. Under U.N. sanctions, Iraq was allowed 

to sell oil to purchase food and other humanitarian goods from 

1997 to 2000. The U.N. controlled over $67 billion in Iraqi oil revenues and issued $38 billion in letters of credit to purchase commodities. And the program appears to have helped the Iraqi people by 

almost doubling their food intake over the first 5 years of the program. 

However, we estimate that the former Iraqi regime acquired about $10 billion in illegal revenues during this period. This included $5.7 billion in oil smuggled out of Iraq and $4.4 billion in 

surcharges on oil sales and illicit commissions on imported commodities. Oil was smuggled through Syria by pipeline across the 

borders of Jordan and Turkey by truck and through the Persian 

Gulf by ship. The Iraqi government also levied surcharges against 

oil purchasers and commissions against suppliers of commodities. 

According to Security Council members, the surcharges were up to 

50 cents per barrel of oil and the commissions were 5 to 10 percent 

of the commodities contract. 

So how and why did these problems occur? The United Nations, 

the CPA and the Iraqi governing council have begun investigations 

into the Oil-for-Food Program to answer these important questions. 

These investigations offer an opportunity to determine the extent 

of the corruption, the adequacy of the internal controls and ways 

to improve the delivery of humanitarian assistance under economic 

sanctions. Let me offer some suggestions on the key areas these inquiries should target. 

First, how did the structure of the Oil-for-Food Program enable 

the Iraqi government to obtain illicit surcharges and commissions? 

The Oil-for-Food Program gave the Iraqi government the authority 

to negotiate contracts directly with companies that purchased oil or 

supplied commodities. The MOU between the U.N. and the government recognized the sovereignty of Iraq in negotiating oil and commodity contracts. However, when the program was first proposed 

in 1991, the Secretary General included alternative procedures for 

contract negotiation. These alternatives would have allowed the 

U.N. or an independent agent to negotiate the contracts. Iraq’s control over contract negotiations was an important factor in allowing 

the government to levy illegal surcharges and commissions. 

Second, what role did U.N. member nations play in enforcing 

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olutions required all member States to enforce the sanctions imposed on Iraq. However, Jordan maintained trade protocols with 

Iraq that allowed it to purchase heavily discounted Iraqi oil in exchange for up to $300 million in Jordanian goods. Syria received 

up to 200,000 barrels of Iraqi oil per day in violation of the sanctions. And oil smuggling also occurred through Turkey and Iran. 

What actions did the United States or the United Nations take to 

deter the smuggling of Iraqi oil? 

In addition, member nations were also responsible for vetting the 

companies that sought approval to purchase oil or sell commodities. 

It is unclear what criteria member nations used to assess the qualifications of these companies. 

The third question: Who assessed the reasonableness of the 

prices negotiated between the Iraqi government and the commodities suppliers? U.N. Sanctions Committee procedures stated that 

the Office of the Iraq Program was to examine each commodity contract for price and value. However, OIP officials stated that no 

U.N. resolution tasked them with assessing the price reasonableness of the contracts. The Sanctions Committee was responsible for 

approving commodity contracts. However, it primarily screened 

contracts for dual-use items rather than price. Furthermore, beginning in 2000, the U.N. adopted fast track approval procedures for 

food, health, agriculture, sanitation, housing and water treatment 

contracts. How did these fast-track procedures affect the U.N.’s 

ability to assess contract price and value? Much of the information 

to answer these questions is in the contracts Iraq negotiated with 

the companies that bought oil or sold commodities. 

Subsequent investigations should review these contracts to document the full extent of illicit commissions and surcharges. The 

analysis should identify companies that consistently overpriced 

their contracts and the nations that condoned the overpricing. In 

addition, a comparison of the Oil-for-Food Program in the north 

and the south could provide insights on the relative effectiveness 

and transparency. The Iraqi government operated the program in 

southern and central Iraq while U.N. specialized agencies implemented the program in the three Kurdish regions in the north. Lessons learned from this comparison could be used to structure future 

humanitarian programs to ensure that funds are spent on intended 

beneficiaries. 

Mr. Chairman, this concludes my comments on the U.N.’s Oil-forFood Program, but I refer the Committee to my full statement, 

which also discusses problems with the U.N.’s transfer of the Oilfor-Food Program to the CPA. The statement also discusses the 

challenges the Iraqi government faces in addressing the legacy of 

corruption and in assuming responsibility for the food distribution 

system. Thank you. 

[The prepared statement of Joseph Christoff follows:]

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Mr. BEREUTER. Thank you very much, Mr. Christoff. We will 

begin the questioning under the 5-minute rule. First recognize the 

gentleman from Massachusetts, Mr. Delahunt. 

Mr. DELAHUNT. Thank you, Mr. Chairman. In earlier testimony, 

I think it was Ms. Rosett that listed a number of countries where 

one could infer that they were not the end user of the product. The 

UAE I think was one, Liechtenstein was another. And I think what 

that demonstrates to me is—and I have had discussions with colleagues about this, not just simply the difficulty of enforcement and 

compliance, but the reality is is that when we speak of these international conglomerates in terms of national companies, I think we 

err. There was a report in The Wall Street Journal dated April 23. 

Let me just read excerpts of it, and how do we address it is the 

answer that I will be looking for, because we have a different statutory scheme in terms of sanctions than other nations, and I understand that, aside from the multi-lateral sanctions that were imposed on Iraq.

‘‘The United States French conflict over Iraq both before and 

after the war that started in early 2003 routinely has included 

accusations that each side has been driven by commercial interests. But for a handful of big companies, especially U.S. 

ones, the argument didn’t matter much. Before the war, United 

States companies used French units of French go-betweens to 

sell goods to Iraq.’’

That was before the war. Since the war, French firms are using 

United States operations to bid for contracts in Iraq, though it is 

unclear whether they will succeed. One particular company—and I 

won’t mention the name, won more than $30 million worth of deals 

with Mr. Hussein’s Iraq in the 1990s through this device. It is a 

large American firm that is in the oil business. You know, we have 

statutes that prohibit American firms from doing business with socalled rogue nations. 

I am reminded of a piece on 60 Minutes where several of them 

created subsidiaries that were doing business with Iraq, Iran and 

I am sure other so-called rogue nations in one of the subsidiaries 

and one of these companies was headquartered in the Cayman Islands. Except when the investigative reporters from 60 Minutes

went to the Cayman Islands, they found an office with a telephone. 

And subsequent investigation revealed, at least according to this 

report, that there was an office in Dubai. 

Is Dubai part of the UAE, the United Arab Emirates? I want to 

be sure about my geography. I guess the point I am trying to make 

here is it is a real mess. I think what we have got to do is do a 

review and learn from our mistakes, but also understand that 

there are large international conglomerates that are doing business 

in a way to avoid both multi-lateral sanctions as well as our domestic legislation. Maybe there are loopholes that we should be addressing in our own statutory scheme. But when we talk about a 

program where those who are interested in selling commodities 

under this specific program, we are looking in many respects at 

ourselves and our failure to address those loopholes or to insist on 

strict compliance here with American companies that are doing 

159

business via subsidiaries abroad or doing joint ventures with other 

nations. If you have a comment. 

Mr. CHRISTOFF. I would add on that to maybe build on your 

point, one of the findings that the Defense Contract Audit Agency 

brought up was the use of middlemen and how often the use of 

middlemen could increase the costs associated with the contracts; 

why for example were Russians—I hate to keep using Russians, 

but why were Russians buying Australian or buying Argentinean 

and Canadian wheat under contract and then sell it to Iraq. So one 

of DCAA’s important findings was that you have to reduce the middle men because that can result in overpricing and some potential 

kickbacks as well. 

Mr. BEREUTER. Thank you, Mr. Delahunt. The gentleman from 

Indiana, Mr. Burton. 

Mr. BURTON. When you were conducting your audit, Mr. 

Christoff, did you deal with anyone over at the U.N.? 

Mr. CHRISTOFF. We worked with the office of Iraqi programs. 

Mr. BURTON. Were they pretty cooperative? 

Mr. CHRISTOFF. Yes. 

Mr. BURTON. Did you have access to any documents that you 

wanted? 

Mr. CHRISTOFF. We still would like to have access to the OIOS 

internal audits, to which we have yet to have access; 55 audits that 

were completed, 4 that are ongoing dealing with the Oil-for-Food 

Program. 

Mr. BURTON. Did you ask for those audits? 

Mr. CHRISTOFF. Sure. 

Mr. BURTON. What did they say? 

Mr. CHRISTOFF. I think as many people pointed out, number one, 

GAO doesn’t have audit authority over the U.N., we all recognize 

that. And the OIOS indicated that these were internal documents 

that we would not have access to. I must say in past reviews, we 

have had good working relationships with OIOS and we have obtained the documents. 

Mr. BURTON. I understand and the people you talked to are probably down the food chain a little bit. But what I am trying to figure 

out is are we really able to get to the bottom of this whole scandal 

without the full cooperation of the U.N. in getting all the documents that are necessary for us to peruse? 

Mr. CHRISTOFF. You would have to have access to all the documents. You have to have access to the OIOS documents. It is important to have information that defines the contracts, who were 

the contractors; which companies, countries did it go to. That is 

critical. 

Mr. BURTON. I guess the concern that I have and my previous 

comments was that we need to get to the bottom of this so that we 

can clean up this mess if it is possible as quickly as possible. And 

there may be U.S. contractors, there may be other governments involved. But unless we can get the full cooperation of the United 

Nations and get access to documents that can give us the full picture, even as hardworking as GAO is—and I know you guys work 

hard—we are never going to get the full picture. 

And the Secretary General of the United Nations I think should 

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essary, other countries have access to the documents in question so 

there is full disclosure. You know, when we are talking about a 

criminal activity, there is a discovery period. And the prosecutor 

and the defense counsel have the right to get all the documents 

that are relevant to the investigation. This is a huge criminal activity, if you will, involving probably hundreds of companies. And if 

we are going to be able to provide the kind of leadership and stability in the Middle East that is going to bring about democracy 

and freedom in Iraq and hopefully other areas, it seems to me we 

have to have more confidence in the process than we have right 

now. And I know you can’t give us any more answers than you 

have, but I am just commenting. 

If Mr. Kofi Annan or anybody at the U.N. is paying attention to 

this, in my opinion, it is extremely important that all documents 

that are relevant to this investigation be given to the United 

States, to the Congress of the United States and other governments, if that is requested, otherwise, we are never going to get the 

full picture. And this corruption has to be cleaned up as much as 

possible. 

Mr. BEREUTER. Mr. Chairman, would you like to be recognized? 

Chairman Hyde. 

Chairman HYDE. Thank you, Mr. Chairman. I just have one 

question. I have listened to a lot of testimony and read a lot and 

I am still unsure as to whose responsibility it was to make the determination that Iraq would control, supervise, oversee the handling of the individual contracts. Can you nail that down for me? 

Mr. CHRISTOFF. I wish I could. You begin in 1991 with some proposals that the U.N. submitted to Iraq in which there were alternatives for the contract negotiations. One alternative was to have 

the Iraqi government negotiate the contracts directly, which became the preferred alternative. But there were also suggestions for 

having an ‘‘independent agent’’ that was undefined or having the 

United Nations engage in the contract negotiations. From the period between 1991 until the final MOU was established, there were 

negotiations that I don’t have all the details of, but the end result 

was to allow Iraq to negotiate the contracts directly. 

Chairman HYDE. But going hand in hand with that judgment 

ought to have been effective, tight supervision, oversight and that 

was omitted evidently. 

Mr. CHRISTOFF. As part of the 1991 proposal, there was also a 

proposal that U.N. officials be attached to certain ministries in 

order to provide that oversight. And I believe that also was rejected 

by the Iraqi government as the basis of their agreement to even 

come to terms with an Oil-for-Food Program. 

Chairman HYDE. We were so anxious to get an agreement that 

we swallowed their intransigence, is that right? 

Mr. CHRISTOFF. Let us look at what was happening in Iraq in 

1995. Truly there was a humanitarian situation and a crisis in Iraq 

in 1995. After 4 years of economic sanctions, WHO and other U.N. 

agencies were reporting malnutrition, problems with sanitation and 

health, so there was a growing need to resolve and get food into 

Iraq quickly. 

Chairman HYDE. Which we took more seriously than Iraq. They 

are willing to let people starve to death and we were unwilling. So 

161

we should have proceeded with the war. Should have torn up the 

ceasefire. 

Mr. CHRISTOFF. I will pass on that. Thank you. 

Mr. BEREUTER. Gentleman from New York, Mr. Meeks, is recognized. 

Mr. MEEKS. Thank you, Mr. Chairman. I am just interested and 

trying to find out about this oversight with this 661. And I think 

that you have indicated that it was unclear whether the office of 

OIP performed its function properly. And the U.N. has indicated to 

our Committee that the OIP did indeed perform that function and 

that it refused to forward hundreds of contracts that fell outside of 

a range of acceptable pricing to the 661 Committee, and that this 

action effectively blocked hundreds of contracts from being approved. The U.N. has also indicated to us that when the missions 

representing the company submitted questionable explanations for 

overpricing the contracts, OIP then forwarded the contracts to 661 

with notes of concern about pricing. 

And further, the U.N. has indicated that those notes of concern 

never led to 661 to block a contract. My question is, did you interview or attempt to interview U.N. OIP officials to establish whether these facts in conducting your audit of the program. 

Mr. CHRISTOFF. Yes. We met with OIP officials. And one of the 

first questions we asked them for was what was their pricing criteria; what did they use to go out and about to determine the price 

reasonableness of the contracts. We have not gotten yet that pricing criteria from the Office of the Iraq Program. And they make a 

distinction. I think we need to think about distinctions here. They 

were tasked to look at the price and value of the contracts, but it 

is unclear to me as to how they translated that into looking at price 

reasonableness. 

If they looked at price reasonableness the way the DCAA audit 

did, perhaps they would have encountered more of this overpricing. 

DCAA found that 48 percent of all of the Oil-for-Food Program contracts it looked at were overpriced by 21 percent. I am not certain 

how they translated the mandate to assess price and value into a 

standard approach for assessing price reasonableness the way the 

United States or the DCAA would have undertaken a price reasonableness determination. 

Mr. MEEKS. With reference to the 661, I understand—wasn’t it 

the 661 Committee, didn’t they have the authority and responsibility to oversee the program? And did you investigate why the 

United States’s mission to the U.N. apparently did not attempt to 

use its power to block individual contractors shutting down overpricing in the humanitarian goods contracts? 

Mr. CHRISTOFF. When we did our investigation, we were told the 

majority of the holds—they are called holds on contracts—were 

holds that were placed primarily on the basis of dual-use items. 

There was $5.1 billion in holds. When we looked at the program 

in detail in May 2002, 90 percent of those holds were placed by the 

United States primarily because of concerns of dual-use items, not 

because of price. 

Mr. MEEKS. Well, further dealing with the 661 Committee, I believe there were about 60 experts that were reviewing the contracts 

162

to make sure they didn’t contain items that would be used in a 

weapons program? 

Mr. CHRISTOFF. Right. 

Mr. MEEKS. And how many were reviewing the contracts to see 

if they were overpriced, potentially hiding kickbacks? 

Mr. CHRISTOFF. When the U.S. oversight function was described 

to us, it was described as an interagency process consisting of the 

Department of State, Department of Commerce, Department of Defense, Department of Energy focusing on whether or not the line 

items in the contract contained commodities that had dual-use potential. That is how it was described to us as an extensive, 60-person interagency process. 

Mr. MEEKS. And one last question would be in May 2003, when 

the CPA was preparing to take over the Oil-for-Food Program contracts, the Defense Contracting Auditing Agency, DCAA was called 

upon to review those contracts for possible fraud. In reviewing just 

60 percent of the active contracts using only market data, the defense auditors found $656 million of potential overpricing. All of 

these contracts were approved by the State Department, and a 661 

Committee member, apparently without the benefit of such an 

audit. As a professional auditor, do you find it odd that the U.S. 

and the U.N. was approving these contracts without auditing them 

for price validity? 

Mr. CHRISTOFF. No. I think it gets back to the good work of 

DCAA. In looking at pricing value, one should have looked at the 

price reasonableness of the contracts. 

Mr. MEEKS. No further questions. 

Mr. BEREUTER. Gentleman from Iowa, Mr. Leach is recognized. 

Mr. LEACH. First, I think it is appropriate to express some appreciation to the GAO. This is a very important study that you have 

done. And in the tradition of the GAO, I think you have done a fine 

job. 

Mr. CHRISTOFF. Thank you. 

Mr. LEACH. Secondly, the idea of an Inspector General at the 

United Nations really was led by the United States with a U.S. 

commission recommending it with the Thornburg Commission recommending it and pressed by the United States. Having said that, 

I am intrigued with a couple of aspects of this, and I don’t know 

if you know the answer to this, but what are the practices and policies of this Inspector General office, OIOS as they call it in regard 

to who may see reports that they initiate? Have you asked that 

question? 

Mr. CHRISTOFF. If I understand the OIOS procedures to be that 

when they complete their audit, they then submit the completed 

audit to the head of the agency that they audited. The head of 

OIOS can also decide on a case-by-case basis to simultaneously 

submit the audit to the Secretary General. 

Mr. LEACH. At his discretion. 

Mr. CHRISTOFF. Who in turn can decide at his discretion? 

Mr. LEACH. Were any of these reports submitted? 

Mr. CHRISTOFF. I don’t know. I would like to get the reports. 

Mr. LEACH. I think we should have the answer to both reports. 

Now we have had the United States’ top ranking representative 

saying he didn’t see the reports. 

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Mr. CHRISTOFF. He didn’t see the OIOS reports? 

Mr. LEACH. I think that is extraordinary. And the reason you 

have an Inspector General or a GAO type of institution is that you 

give it to people that make policy and you don’t give it to the people you have just overseen exclusively. I mean that seems a little 

odd. 

Mr. CHRISTOFF. There is a vested interest in being defensive if 

you are the head of the agency that was the recipient of that audit. 

Mr. LEACH. I would like to turn to another subject. We have a 

new review panel underway, and very few people in the world have 

a higher regard for Paul Volcker than I do. I think he is an outstanding choice and also by background, having headed a premier 

banking regulatory institution in the United States. Have you 

checked with our banking regulators on whether banking laws may 

have been violated by any of these foreign institutions that held 

these accounts? 

Mr. CHRISTOFF. Have not done that. 

Mr. LEACH. Do you think that would be an appropriate area of 

inquiry? 

Mr. CHRISTOFF. Yes. 

Mr. LEACH. Also, is there an area of accountability here. I mean 

one is struck with unusual practices as being the norm here. And 

if it is the norm and if it is sanctioned, you have got a lot of interesting ramifications. One is that if you are a country that has significant private parties or governmental policy makers that might 

benefit from a circumstance, that may bias your determination of 

how you are perceived with other issues relating to, in this case, 

Iraq. And it appears, for instance, that one major bank in one principal country of the Security Council benefited a lot. 

It appears from your report and your testimony that in another 

security council country, there were a lot of intermediaries that 

played a role in these contracts. That really defines an international system that ought to be reviewed from that perspective 

alone. Do you have any judgments of your own in that regard? 

Mr. CHRISTOFF. I certainly have a lot of questions. One of the key 

questions that we think is just trying to better understand how the 

different countries—we are using the term ‘‘vetted’’—the different 

companies that were allowed to supply Iraq commodities or purchase its oil, what kind of transparency was surrounding that kind 

of vetting process, because it would have revealed whether or not 

the countries might have had a vested interest in trying to put 

most of these countries on the list, because it was these lists that 

the government chose from in terms of selling its oil or purchasing 

its commodities. 

Mr. LEACH. Well, let me just return to one aspect of the United 

States’ policy, because we err frequently by always criticizing ourselves. We are more internally self-critical than other countries, 

but I will be darned if I don’t believe that the United States’ Government erred grievously in not looking at this more seriously and 

not bringing it to the attention of the United Nations. And it appears to me that if we had the power to stop certain contracts in 

one way, we had the power to stop them in another. Am I wrong 

in this, or is this just an impression that might be in error? Did 

we have the power to stop these contracts? 

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Mr. CHRISTOFF. Yes. Absolutely. The United States placed over $5 billion of holds on U.N. contracts. And any U.N. Sanctions Committee member could hold a contract. 

Mr. LEACH. Am I not right to suggest that we appeared not to 

care about corruption, but to care about dual-use? 

Mr. CHRISTOFF. We were not focused on price. 

Mr. LEACH. And is price not the indicator of corruption? 

Mr. CHRISTOFF. If one looks at the DCAA audit, it certainly is. 

Mr. LEACH. Of these internal audits, did the United States’ mission at the United Nations have access to them? 

Mr. CHRISTOFF. I don’t know. 

Mr. LEACH. Did United States representatives working at the 

United Nations have access? 

Mr. CHRISTOFF. I don’t know. 

Mr. LEACH. I am hard-pressed not to think that our government 

was very sensitive to and too sensitive to conflicts of interests of 

countries we wanted their votes for and we had shackles on our 

eyes on the corruption issue at the same time that principals of the 

United States Government were making major speeches on the 

subject of corruption around the world. I may be wrong. Is that a 

valid observation? 

Mr. CHRISTOFF. I would also extend it to not just the contract 

side, but the oil smuggling side as well, the fact that Jordan, Syria 

were engaged in oil smuggling, clearly with the full knowledge of 

the United Nations and the United States and the enduring question is what actions, if any, had been undertaken to deter that type 

of violation of U.N. sanctions. 

Mr. BEREUTER. Time of the gentleman has expired. The 

gentlelady from California, Ms. Watson. 

Ms. WATSON. Thank you, Mr. Chairman and thank you, Mr. 

Christoff for your work. My interest here is not so much in the 

U.N. and its relativity to the Oil-for-Food, but getting right down 

to the principals who were able to give out contracts and was there 

a paper trail on what happened with the money? And at the GAO, 

I am sure that was your concern, too. What is happening with the 

U.S. dollars that we put into this program? How is it able—how 

was this program able to attract such corruption and how did it go 

so long? Can you shed any light? 

Mr. CHRISTOFF. I think the first weakness that we found and I 

think the prior panel has confirmed was that in allowing the Iraqi 

government, the central government, to directly negotiate its contracts both to purchase commodities and to sell its oil, that was one 

of the internal weaknesses, in effect having the regime make that 

important contract negotiations, because within that negotiation 

process, discussions of kickbacks and payments could have been 

made outside the purview of the United Nations. 

Ms. WATSON. You know, I am confounded by the fact that we 

supposedly were unaware. The government in Iraq was corrupt 

from the beginning, but we did business with them at another 

time, another era. And we should have been able to foresee that 

the provisions of the agreement would not hold up, but we went 

ahead anyway. I am hoping that—and I have got a summary of 

your report in front of me, but when this thing is wrapped up, I 

hope we would have some strong recommendations coming from 

165

the GAO based on your recommendations that you have already 

put into place after we have all these hearings. I hope that our Administration will take heed so as we go into the future, we won’t 

run into this kind of abuse of our monies and abuse of the people 

that these programs are intended to serve. 

Mr. BEREUTER. Thank you, Ms. Watson. Mr. Christoff, I have reserved some minutes of my time to ask a few questions. If I understood your answer to Mr. Burton a few minutes ago, you said the 

internal audits at the U.N., perhaps 55 have been conducted, and 

maybe four are underway would ordinarily go to the program head. 

Mr. CHRISTOFF. Yes. 

Mr. BEREUTER. And the program head is Mr. Benon Sevan about 

which allegations have been raised. And apparently under U.N. 

procedure, that may be as far as they go. He may decide—that person may decide to stop them or they could have—is that correct? 

Mr. CHRISTOFF. I don’t know where each and every one of those 

55 audits—where they ended up. Under the OIOS procedures, they 

send the results to the head of the audited agency and it is the discretion of the OIOS, to also send a copy to the Secretary General. 

Mr. BEREUTER. It is possible for him to stop them at that point? 

Mr. CHRISTOFF. Yes. 

Mr. BEREUTER. At this point, we don’t know exactly if any of 

them were referred to his supervisor or, in fact, the Secretary General. Now I would like to pursue a few things with respect to the 

bank of Paris. Have you examined the program’s escrow account 

managed by that bank? 

Mr. CHRISTOFF. No. 

Mr. BEREUTER. If not, have you requested access to it and any 

other bank records kept by the OIP or other credit banks associated with the program? 

Mr. CHRISTOFF. We are still trying to get records from the U.N., 

let alone going to a bank that we would have absolutely no audit 

authority over. 

Mr. BEREUTER. Do you know if the funds in this escrow account 

earned interest? 

Mr. CHRISTOFF. I don’t know. 

Mr. BEREUTER. Do you know if there was any involvement of 

U.N. staff in the kickback system and in the oil voucher scheme? 

Mr. CHRISTOFF. Consistently over the course of our review, even 

going back to 2002, we did not hear of any allegations of U.N. officials being involved in kickbacks. It was not until the list of the 

oil vouchers that came out in January that it first even came to 

our attention. 

Mr. BEREUTER. I am going to go back to the bank issue and the 

escrow accounts. Do you know from any source whether or not 

there were additional banks that eventually had escrow accounts 

for the United Nations with respect to the Oil-for-Food Program? 

Mr. CHRISTOFF. That is still a question that I don’t have a definitive answer to. I know the U.N. external auditors recommended 

that the U.N. diversify and not just rely on BNP Paribas. And I 

don’t know the exact number of additional banks that the U.N. did 

decide to place escrow account monies in. 

Mr. BEREUTER. I got a confirmation from Dr. Ruggie that this 

was one of the recommendations. And he indicated that is the reaVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00169 Fmt 6633 Sfmt 6601 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
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son why there are more banks involved in the program now. Is it 

possible—is there any reason that it is impossible for the U.N. to 

open its books or provide a full and complete disclosure concerning 

the operations and administration of the Oil-for-Food Program? 

Mr. CHRISTOFF. No. I mean GAO’s middle name is transparency 

and openness, and we fully support the release of all relevant documents so we can get to the bottom of the story. 

Mr. BEREUTER. Do you know who it was that negotiated the 

memorandum of understanding between the government of Iraq 

and U.N. of May 20, 1996? 

Mr. CHRISTOFF. I know who signed it. I don’t know who negotiated it. It was signed by the legal counsel of the United Nations 

and the Ambassador to Iraq at that time. 

Mr. BEREUTER. You have had a chance to read it, of course. What 

specific prerogatives and roles did it accord in Iraq that were not 

contained in U.N. Security Council Resolution 986? Did it put the 

responsibility for decisions on procurement of humanitarian goods 

and services for the three northern provinces, the Kurdish area, in 

the hands of the Iraqi government? 

Mr. CHRISTOFF. This is an important distinction. The resolution 

stated that in an annex to the resolution or MOU, it stated that 

the Iraqi government could procure food commodities because it 

was less expensive to procure them for bulk commodities. But the 

actual operations of specific projects in the north were under the 

direction of different U.N. specialized agencies. 

Mr. BEREUTER. We have heard a bit about the internal audits before. Did independent and certified public accountants audit the escrow account for the Oil-for-Food Program? 

Mr. CHRISTOFF. The U.N. external auditors did, yes 

Mr. BEREUTER. They are not employees or under contract in general terms for audit responsibilities but were appointed by someone? 

Mr. CHRISTOFF. Appointed by the Secretary General. 

Mr. BEREUTER. To conduct audits on the Oil-for-Food Program? 

Mr. CHRISTOFF. General Assembly appoints them, excuse me 

Mr. BEREUTER. Have you seen those audits? 

Mr. CHRISTOFF. We reviewed 12 of the external audit reports. 

Mr. BEREUTER. Do you have conclusions about your findings with 

respect to those in your written documentation? 

Mr. CHRISTOFF. It is in the statement and we have stated that 

in detail what they found? 

Mr. BEREUTER. Is there anything else we need to cover? Chairman Hyde, do you have anything additional? 

Chairman HYDE. I just want to thank Mr. Christoff and congratulate you on first rate work, indispensable work to the challenges that we have to face. We rely on you and we recognize the 

integrity of your product. 

Mr. CHRISTOFF. Mr. Chairman, thank you for the help of you and 

your staff in trying to get at some of the documents that we really 

needed. 

Chairman HYDE. We will be your silent stealthy aide. 

Mr. BEREUTER. Mr. Christoff, I join you in those commendations. 

And I would express the hope that the United Nations would be 

as absolutely as transparent in information as possible because I 

167

think the integrity of the institution demands that. I would ask 

unanimous consent to include in the record the document provided 

to the Committee by Ms. Rosett. Without objection, that will be the 

order. And again, thank you very much. The Committee stands adjourned. 

[Whereupon, at 2:35 p.m., the Committee was adjourned.] 

(169)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE NICK SMITH, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MICHIGAN

I want to thank Chairman Hyde for holding this hearing today. And I would also 

like to thank our distinguished witnesses for joining us. I look forward to hearing 

their testimony. 

The United Nation’s Oil-for-Food (OFF) program developed out of the sanctions 

placed on Iraq following its invasion of Kuwait in 1991. In 1995, the United Nations 

realized that a humanitarian crisis was developing and that Iraq, which has the second largest oil reserves in the world, could trade its oil resources for humanitarian 

goods. With UN Security Council Resolution 986, the OFF program was created. If 

effective, it would have limited the humanitarian impact of the sanctions while 

keeping resources out of the hands of Saddam Hussein’s regime. 

Saddam Hussein was a tyrant dictator who directed mass murder and torture. It 

is not surprising that he tried to cheat OFF. Unfortunately, resources were not kept 

out of Hussein’s hands. It is now apparent that OFF was abused. Several factors 

contributed this abuse. First, UNSCR 986 was simply flawed, and its flaws could 

not be fixed. Second, the UN has not allowed for sufficiently transparent auditing 

of OFF. And, third, there is the possibility that individuals in the UN bureaucracy 

were complicit in undermining the program. 

The UNSCR 986 was broken by design. Saddam Hussein picked the price at 

which he sold his oil. He picked his customers. And he controlled the oversight process. Together these allowed Hussein to demand kickbacks that reportedly totaled 

$4.2 billion. These flaws were known at the time, but it was impossible to fix them. 

They were written into UNSCR 986, and fixing them required unanimous support 

of the Permanent Members of the Security Council. France, Russia, and, to a lesser 

extent, China were able to prevent incremental improvements to the program. Each 

of these countries had significant oil contracts with Iraq that would have activitated 

had the sanctions been repealed. They had no interest in the success of OFF or the 

sanctions. 

At the same time, the UN bureaucracy appears to have failed in several ways. 

It appears that the OFF representatives in Iraq were slow to file reports and bring 

irregularities to the attention of the Security Council and its special committee that 

handled OFF, the 661 Committee. It appears that once the 661 Committee was informed of the flaws in the program, it attempted to address them, albeit, in classic 

UN style, very slowly. However, it took quite long for reports of the actions of misdeeds to reach the levels at which they could be systematically addressed. In the 

end, because Iraq controlled the program, the documents necessary for a proper 

audit have only become available since Saddam Hussein’s fall. 

Finally, there are reports that a number of people in the UN bureaucracy have 

been participants in this dysfunctional program. The most alarming accusations 

concern Benon Sevan, who was handpicked by Kofi Annan to run OFF. We do not 

yet know the facts, and the Secretary-General has appointed a panel to investigate 

headed by Paul Volcker. This is a step in the right direction. 

To be fair, we should remember that sanctions and OFF worked to a certain extent. Saddam Hussein’s military capacity was severely degraded by the sanctions. 

Approximately $46 billion was spent on humanitarian relief, even if Hussein eventually required kickbacks on these also. It is clear that the sanctions were both necessary and effective. 

The real story here is how the UN process breaks down. Countries will have different interests, as France and Russia did. However, the presence of their interests 

did not excuse their obstruction of American and British attempts to programVerDate Mar 21 2002 11:37 Jul 22, 2004 Jkt 000000 PO 00000 Frm 00173 Fmt 6601 Sfmt 6621 F:\WORK\FULL\042804\93391.000 HINTREL1 PsN: SHIRL
170

matically improve OFF. This demonstrates that the Security Council does not have 

any great moral authority. As UN leaders have repeatedly pointed out, it merely 

acts at the direction of its member states. We have also seen that the UN bureaucracy is insufficiently transparent and possibly corrupt. American taxpayers expect 

transparency for the dues that they pay, and the UN does not stand up to our 

standards. 

Again, I would like to thank the Chairmen for holding this hearing. The UN is 

an important part of the international system, but it is not a panacea to the world’s 

problems. The Oil-For-Food program is an excellent example of how member states 

and the bureaucracy can fail to achieve obviously good goals. We must remember 

this as we attempt to further involve the UN in Iraq. 

PREPARED STATEMENT OF THE HONORABLE RON PAUL, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF TEXAS

Rep. Ron PAUL: Mr. Chairman, while I am glad to see this Committee holding 

hearings that bring to light, even if on the margins, the corrupt practices of the 

United Nations, I am afraid this hearing really misses the main point. The problem 

is not that the ‘‘oil for food’’ program was mis-managed by corrupt Iraqis and UN 

officials, along with their co-conspirators in other countries. The problem is with the 

program itself, and the entire sanctions regime imposed on Iraq. The problem is 

with sanctions. Sanctions are immoral. Sanctions do not hurt the brutal regimes 

they are intended to undermine. Sanctions do not hurt dictators—no dictator has 

ever missed a meal due to sanctions on his country. While the Iraqi people were 

suffering and starving through US and UN imposed sanctions, the dictator Saddam 

Hussein was building castles and living a life of unimaginable wealth and comfort. 

While hundreds of thousands of Iraqi babies and children reportedly died because 

of the sanctions, Saddam rewarded his family members with palaces and other luxuries. But Saddam and his family were not the only ones to profit from the sanctions regime. According to press reporting, the same people who were tasked with 

enforcing these immoral sanctions on Iraq were similarly benefitting financially 

from the sanctions regime. Those with good political connections—inside and outside 

the United Nations—were able to make enormous profit doing business under cover 

of the United Nations oil-for-food program. This is unconscionable, but it should 

hardly surprise us. It is sanctions themselves that create these great opportunities 

for ill-gotten gain. 

As we see sanctions today being applied on countries like Syria and Iran and elsewhere, we should remember the lessons from a previous era: after more than 45 

years, sanctions on Cuba have produced nothing remotely approaching their intended purpose. The Castro regime remains as in control as ever. The only thing 

that has changed is that the Cuban people—whose well-being we purport to have 

in mind with the sanctions—have suffered for decades by the blockade.

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