Publication: Mail and Guardian Issued: Date: 2004-03-26 Reporter: Stefaans Brummer Reporter: Sam Sole

Iraq Oil Scandal Boomerangs



Mail and Guardian

Date 2004-03-26


Stefaans Brümmer, Sam Sole

Web Link


In an effort to stem a global scandal that has reverberated locally, United Nations chief Kofi Annan prepared this week to name an independent panel to investigate allegations of corruption in the Iraq Oil for Food Programme.

Annan was expected to announce panel members and their terms of reference this Friday, as fingers pointed increasingly at the UN secretariat and a senior official appointed by Annan.

In South Africa several companies, at least two of them with ties to the African National Congress, have been implicated. But the Department of Foreign Affairs seemed unperturbed, saying it knew of no wrongdoing.

The Oil for Food Programme was a UN-administered effort to mitigate the humanitarian consequences of international sanctions against Saddam Hussein's Iraq. Under the programme, the UN allowed Iraq to sell crude oil to pay for food, medicine and other civilian necessities.

But since new authorities settled into Iraq last year, there has been a steady flow of information about how the programme was abused to include systematic kick-backs and bribery.

Under the programme rules, Iraq nominated who got its crude oil allocations. Saddam's lieutenants used this power to buy diplomatic favour — it bestowed the lucrative contracts on whomever it thought could help counter Iraq's international isolation.

A spokesperson for Ahmed Chalabi, an influential member of Iraq's United States-appointed governing council, was quoted this week as saying: "Thousands of government and non-government officials and politicians were bribed, all under the nose of the United Nations. The United Nations allowed this to happen without interference."

The Mail and Guardian last month was the first to write how two South African companies that got oil allocations had such close relations with the African National Congress that the party's secretary general and treasurer general travelled to Baghdad with a principal of both companies, Sandi Majali.

The M&G raised the possibility that the allocations were meant to benefit the ANC financially. Majali has since acknowledged through his lawyer that he financially supported the ANC. Majali has chosen not to answer further questions.

ANC spokesperson Smuts Ngonyama denied at the time that the ANC had received money "from any government or organisation in exchange for ‘diplomatic support' or ‘diplomatic favours'".

Apart from Majali's two companies, Montega Trading and Imvume Management, two more South African companies got Iraq oil allocations, the one a joint venture in which Tokyo Sexwale was involved. Sexwale has denied wrongdoing.

A second abuse of the Oil for Food Programme was a pervasive kick-back system. While the UN formally controlled the purse strings by taking the revenue of the Iraqi oil sales and releasing it only for the purchase of approved civilian supplies, the Iraqis quickly found a way around it — they tended to demand that both the oil buyers and the suppliers of civilian goods pay illicit "surcharges" outside the UN control.

This kickback system partly defeated the purpose of the programme, as it gave the regime funds to buy armaments and diminished resources available to alleviate civilian hardship. The US Congress's General Accounting Office last week said it estimated Saddam's regime had reaped $4,4-billion in kickbacks from 1997 to 2002.

Probes into the scandal have been announced by a committee of the US House of Representatives and by the Iraqi Governing Council, which has contracted international auditing and legal firms to help. The UN also earlier started an internal probe, but that has been criticised as inadequate.

Annan's UN secretariat has been subject to accusations in the scandal. Generally, critics have asked how it could have tolerated the abuse of the programme.

But there have been specific allegations: a company associated with Annan's son, Kojo Annan, was contracted by the UN to inspect civilian goods exported to Iraq.

And, perhaps more damagingly, among the documents that have leaked from Baghdad there is purported evidence that Benon Sevan, the official appointed by Annan to head the Oil for Food Programme, was a beneficiary of the oil allocations. Sevan has denied this was so.

Annan sought late last week to stem the criticism by writing to UN Security Council members seeking support for what he termed an independent investigation, saying the allegations, even if wrong, "must be taken seriously and addressed forthrightly".

UN spokesperson Farhan Haq told the M&G Annan was likely to announce the members of the investigating panel and their terms of reference on Friday.

South African authorities, however, seem less concerned. Department of Foreign Affairs spokesperson Ronnie Mamoepa said on Thursday: "As far as we are concerned, government indeed encouraged a number of [local] companies to take part in the Oil for Food Programme under the auspices of the UN. We do not know of South African companies that were involved in attempts to subvert the programme."

Earlier this month, Minister of Foreign Affairs Nkosazana Dlamini- Zuma took a similar line when she wrote in response to a Democratic Alliance parliamentary question that "government [is not] aware of any wrongdoing by any individual or company".

With acknowledgements to Stefaans Brümmer, Sam Sole and the Mail & Guardian.