Where Has Iraq's Money Gone?

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 United Nations 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 organization. A report by Paul Volcker, the former chairman of the U.S. federal reserve, was meant to have proved that, as a result of corruption within the UN's oil-for-food program, Saddam Hussein was able to sustain his regime by diverting oil revenues into his own hands. 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] Program'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 United States, knew about them but did nothing. "United States law requires that assistance programs to countries in violation of United Nations sanctions be ended unless continuation is determined to be in the national interest. Such determinations were provided by successive United States administrations."

The government of the United States, in other words, though it had been informed about a smuggling operation which brought Saddam Hussein's regime some $4.6 billion, 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 United Nations but by officials in the United States. Strange to relate, neither Mr. Hyde nor Mr. Coleman have yet been bellyaching about it. But this isn't the half of it.

It is true that the UN's auditing should have been better. Some of the oil-for-food money found its way into Saddam Hussein's hands. One of its officials, with the help of a British diplomat, helped to ensure that a contract went to a British firm, rather than a French one. The most serious case involves an official called Benon Sevan, who is alleged to have channelled Iraqi oil into a company he favored, 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 United States has handled the far graver allegations against its own officials.

Four days before Paul Volcker reported his findings about Saddam Hussein, the U.S. Inspector General for Iraq Reconstruction published a report about the Coalition Provisional Authority, the U.S. 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, $8.8 billion 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 Mr. Sevan is alleged to have been paid.

The Authority, the Inspector General found, was "burdened by severe inefficiencies and poor management." This is kind. Other investigations suggest that it was also burdened by false accounting, fraud and corruption.

Last week a British adviser to the Iraqi Governing Council told the BBC's File on Four program that officials in the Coalition Provisional Authority (CPA) were demanding bribes of up to $300,000 in return for awarding contracts. Iraqi money seized by U.S. forces simply disappeared. Some $800 million was handed out to U.S. commanders without being counted or even weighed. A further $1.4 billion was flown from Baghdad to the Kurdish regional government in the town of Irbil, and has never been seen since.