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November 19, 2004

Transcript

LEAD STORY

PAUL GIGOT: Welcome to THE JOURNAL EDITORIAL REPORT. According to a report by Senate investigators this week, it turns out that Saddam Hussein stole more than 21 billion dollars from the Oil for Food program and from oil smuggling -- more than twice as much as previously thought. And it becomes more and more clear that Saddam had a lot of help from the United Nations and from some of our supposed allies.

We depart from our usual format this week to call on the expertise of two journalists who reported and wrote extensively about this scandal, when hardly anyone else was. They are Claudia Rosett, a columnist for THE WALL STREET JOURNAL EUROPE and for OpinionJournal.com, and Rob Pollock, a senior editorial page writer for THE WALL STREET JOURNAL.

Claudia, the Oil for Food program was designed in the middle 1990s to be able to provide food and medicine for Iraqis who, we thought, were suffering under sanctions. Now we know that didn't happen. Tell us how Saddam Hussein was able to fleece this program.

CLAUDIA ROSETT: He used scams so simple a 10-year-old familiar with markets could have spotted them. There were three basic ways. He undercharged for the oil he sold, which meant that the person buying the oil got a very fat profit, which he then kept part of and kicked back part to Saddam. Saddam over-paid for relief goods, say, baby food, which meant that the person selling him the baby food got a fat profit, kept some, kicked back part to Saddam, bank deposits into secret accounts where Saddam is getting it and the Iraqi people aren't. And he smuggled out billions worth of oil, which was all produced under what was supposed to be the supervision of this program.

PAUL GIGOT: That sounds like an old fashioned skimming operation.

CLAUDIA ROSETT: Oh, it was classic text book stuff. In fact, it's the kind of thing any remotely responsible manager setting up a program would look for ways to guard against.

PAUL GIGOT: And not only were the people of Iraq not getting the food and medicine in the quantities that they were supposed to, but they were getting rotten food in many cases, because they were shipping poor quality goods but charging as if they were high quality goods.

CLAUDIA ROSETT: Precisely. And substandard medicine. And in fact, given that the inspections company that Kofi Annan, the secretary, had hired -- the one that employed his son for awhile -- not only inspected, by general accounting office estimates, seven to 10 percent of the goods, we don't even know that the erstwhile shipments, that all of the erstwhile shipments, contained goods at all.

PAUL GIGOT: Wow. Rob, 21 billion dollars. Maybe there'll be more later, we don't know. The toll keeps rising. What did Saddam do with that money?

ROB POLLOCK: Well you know, a lot of people talk about this scandal, first of all, as if the size of the scandal is somehow equal to the size of the unmonitored revenues, whether that be the new estimate of 21 billion or the previous estimate of 10 billion. But the fact of the matter is, that Saddam was able to exploit every legitimate dollar within this program to reward his friends and allies. So we're talking about 97 billion dollars.

PAUL GIGOT: And he could do that how? By assigning -- by allocating contracts for oil and for food, is that it?

ROB POLLOCK: That's right. He gave those contracts to people he wanted to influence in one way or another.

PAUL GIGOT: Okay. But the net take of his was still 21 billion. And I grant you that the 97 billion was used to buy influence, and I want to talk about that. But the 21 billion went for something. What did it go for?

CLAUDIA ROSETT: It went for -- and by the way, that number may still be small. I think the estimates make it larger. It went for a number of outrageous things. It went to buy influence, including, we have from Charles Duelfer on the Iraq Survey Group, to bribe crucial members of the Security Council -- China, Russia, and France, among many others. It went to buy weapons, which Saddam was doing. Conventional weapons, but those are killing people right now in Iraq very likely. It went to fund terrorists. We now know for sure the Palestinian suicide bombers, but there are many other troubling terror links in this U.N. program. And it also went to buy things like palaces and Mercedes for Saddam's regime.

PAUL GIGOT: All in all, it went to sustain Saddam's rule for a decade after the Gulf War, when we had wanted to depose him. Right, Rob? Isn't that kind of the big picture here, that that's what this allowed him to accomplish?

ROB POLLOCK: That's right. He was buying influence abroad. He did about 23 billion dollars worth of business with the Russians. He did about seven billion dollars worth of business with the French. Now it's possible, we can imagine that maybe the French and the Russians aren't too worried about losing that business. But if nothing else, they certainly don't want that web of corruption exposed.

PAUL GIGOT: Who were some of the individuals involved here? We know Charles Pasqua, the former French Interior Minister, for example. Weren't there also people who were close to President Putin in Russia?

CLAUDIA ROSETT: Yes, one of his right-hand men. Well, people named in the list alleged to have --

PAUL GIGOT: This was on the list.

CLAUDIA ROSETT: Yeah, these are allegations, but interesting ones. Aleksander Voloshin, His right-hand man, a lively player in Russian politics for some time. Vladimir Jirinovski, who appears to have funneled money, according to the allegations. The President of Indonesia is on the list, but mostly going back to France, Charles Duelfer mentions aides to President Jacques Chirac, the former French ambassador to the United Nations. It's really an interesting roster. And then of course, the jewel in the crown, the alleged head -- the head of, he's not alleged -- alleged to received oil bribes from Saddam, the former head of the Oil for Food program, Benon Sevan.

PAUL GIGOT: All right. Let's talk about Kofi Annan's role in here, because you brought that up. He was not around as Secretary General when the program was created, but he came shortly thereafter. And he did have a big role, wide latitude, in creating -- or in developing the program. What is his role here, Rob?

ROB POLLOCK: Well, as you noted, the resolution creating the Oil for Food program gave the Secretary General a lot of discretion to design a program to insure what it called the "equitable distribution of foodstuffs and other goods" to the Iraqi people. It also gave the Secretary General the authority and responsibility to sign off on each six-month phase of the program and report back to the United Nations on how well it was working. It clearly doesn't seem that Kofi took his oversight role very seriously.

PAUL GIGOT: Willful ignorance here?

CLAUDIA ROSETT: Oh, signing off on things like the sports stadium for Saddam's son Uday toward the end of the program, broadcasting equipment from France and Russia.

PAUL GIGOT: Wait a minute. The U.N. actually knew that the money was going to build that kind of a stadium?

CLAUDIA ROSETT: Kofi Annan's personal signature is on the plan approving that. I cannot see any way you can think -- that anyone can think -- it was willful ignorance. There are only two possibilities. Either there was such astounding incompetence that Kofi Annan should never be let near running anything, let along the United Nations, or he knew what was going on, and what we are now dealing with is this amazing stonewall where he will not release records that would tell us more.

PAUL GIGOT: Wasn't there supposed to be some supervision here by the Security Council powers, the French, the Russians, and the United States? Weren't we supposed to be paying attention here?

ROB POLLOCK: We were, we were, and we tried a bit -- I believe it was 1999 was the first time that the U.S. and Britain held up some obviously corrupt contracts under Oil for Food. And that happened again a few times. And then, in 2000, when Saddam added the oil surcharge, the United States and Britain tried, and eventually succeeded, despite a lot of kicking and screaming from the French and Russians, to introduce a scheme called "retroactive pricing" so Saddam couldn't -- didn't know what he could charge for a barrel of oil, and build in the room for the kick-back.

PAUL GIGOT: Okay.

ROB POLLOCK: So ...

PAUL GIGOT: So they made some progress. But basically it went on right until Saddam was deposed.

CLAUDIA ROSETT: With the enthusiastic urging of Kofi Annan that it be expanded, that the range of its allowed so-called humanitarian imports grow. And he himself took over direct supervision from mid-2002 until the program ended because Saddam fell, for all the food, medicine, all the so-called sort of direct humanitarian supplies, which were the ones where the most was scammed out of the contract.

PAUL GIGOT: What does this tell us about, more broadly here, the future of the United Nations as a body, an institution? As a force for collective security in the world, and our ability to trust it as a partner?

ROB POLLOCK: How can you set up as the ostensible arbiter of the legitimate use of international force, an organization that is so obviously vulnerable to corruption and to blackmail?

PAUL GIGOT: How about you, Claudia?

CLAUDIA ROSETT: It tells us you should not trust the United Nations with anything involving serious responsibility. If you want to lock them all in a room and let them be a debating society, that's a great idea. But no budget, no power to -- nothing where we are depending on them to enforce things on which our lives depend.

PAUL GIGOT: All right. Short answers here from each of you. Knowing what we know now about how Oil for Food operated, do either of you think there was any chance that the U.N. Security Council was going to vote to topple Saddam Hussein?

ROB POLLOCK: Zero chance.

CLAUDIA ROSETT: Never.

ROB POLLOCK: Even if they weren't worried about losing the business, they didn't want it exposed. Zero chance.

CLAUDIA ROSETT: Sure, they were open to blackmail, even if they weren't in good faith enough to say "bought." It was never going to happen.

PAUL GIGOT: All right. Thank you very much. Next subject.