The other story How US took Iraq’s money

George Monbiot:

The Republican senators who have devoted their careers to mauling the UN are seldom accused of shyness. But they went strangely quiet last Thursday. Henry Hyde became Henry Jekyll. Norm Coleman’s mustard turned to honey. Convinced that the UN is a conspiracy against the sovereignty of the United States, they had been ready to launch the attack which would have toppled the hated Kofi Annan and destroyed his organisation. A report by Paul Volcker, the former chairman of the US Federal Reserve, was meant to have proved that, as a result of corruption within the UN’s oil-for-food programme, Saddam Hussein was able to sustain his regime by diverting oil revenues. But Volcker came up with something else.

“The major source of external financial resources to the Iraqi regime,” he reported, “resulted from sanctions violations outside the (oil-for-food) programme’s framework.” These violations consisted of “illicit sales” of oil by the Iraqi regime to Turkey and Jordan. The members of the UN Security Council, including the US, knew about them but did nothing. “US law requires that assistance programmes to countries in violation of UN sanctions be ended unless continuation is determined to be in the national interest. Such determinations were provided by successive US administrations.” The government of the US, in other words, though it had been informed about a smuggling operation which brought Saddam Hussein’s regime some $4.6bn, decided to let it continue. It did so because it deemed the smuggling to be in its national interest, as it helped friendly countries (Turkey and Jordan) evade the sanctions on Iraq. The biggest source of illegal funds to Saddam Hussein was approved not by officials of the UN but by officials in the US.

Some of the oil-for-food money found its way into Saddam Hussein’s hands. The most serious case involves an official called Benon Sevan, who is alleged to have channelled Iraqi oil into a company he favoured, and who might have received $160,000 in return. Kofi Annan, the UN secretary general, has taken disciplinary action against both men, and promised to strip them of diplomatic immunity if they are charged. There could scarcely be a starker contrast to the way the US has handled the far graver allegations against its own officials.

Four days before Volcker reported his findings about Saddam Hussein, the US inspector general for Iraq reconstruction published a report about the Coalition Provisional Authority (CPA) - the US agency which governed Iraq between April 2003 and June 2004. The inspector general’s job is to make sure that the money the authority spent was properly accounted for. It wasn’t. In just 14 months, $8.8bn went absent without leave. This is more than Mobutu Sese Seko managed to steal in 32 years of looting Zaire. It is 55,000 times as much as Sevan is alleged to have been paid. Investigations suggest that the authority was burdened by false accounting, fraud and corruption.

Last week a British adviser to the Iraqi Governing Council told the BBC’s File on Four programme that officials in the CPA were demanding bribes of up to $300,000 in return for awarding contracts. Iraqi money seized by US forces simply disappeared. Some $800m was handed out to US commanders without being counted. A further $1.4bn was flown from Baghdad to the Kurdish regional government in the town of Irbil, and has not been seen since.

Contracts to US companies were awarded by the CPA without any financial safeguards. They were issued without competition, in the form of “cost-plus” deals. They had therefore a powerful incentive, to spend as much money as possible. Auditors at the Pentagon, for example, allege that, in the course of just one contract, a subsidiary of Halliburton overcharged it for imported fuel by $61m. This appears to have been officially sanctioned.

Other companies appear to have charged the authority for work they never did, or to have paid subcontractors to do it for them for a fraction of what they were paid by the CPA. Yet, even when confronted by cast-iron evidence of malfeasance, the authority kept employing them. When the inspector general recommended that the US army withhold payments from such companies, it ignored him. No one has been charged or punished. The US department of justice refuses to assist the whistle-blowers who are taking these companies to court. What makes all this so serious is that more than half the money the CPA was giving away did not belong to the US government but to the people of Iraq. Most of it was generated by the coalition’s sales of oil. Throughout the entire period of CPA rule, there was no metering of the oil passing through Iraq’s pipelines, which means that there was no way of telling how much of the country’s wealth the authority was extracting.

The authority was plainly breaching UN resolutions. As Christian Aid points out, the CPA’s distribution of Iraq’s money was supposed to have been subject to international oversight from the beginning. But no auditors were appointed until April 2004 - just two months before the CPA’s mandate ran out. Even then, they had no power to hold it to account or even to ask it to cooperate. But enough information leaked out to suggest that $500m of Iraqi oil money might have been “diverted” (a polite word for nicked) to help pay for the military occupation. —The Guardian