Iraq: Widen Oil-For-Food Probe

Iraq called Friday for a widening of the investigation of the U.N. oil-for-food program and demanded the immediate return of money in the U.N. account that paid for administration of the humanitarian relief effort.

Iraq's U.N. Ambassador Samir Sumaidaie also reiterated the government's demand that the United Nations stop using oil-for-food money to pay for the independent investigation into the program led by former U.S. Federal Reserve Chairman Paul Volcker.

"It is outrageous that Iraqi funds were mismanaged and then we have to pay for finding out about the mismanagement," he told a news conference a day after Volcker issued a 219-page preliminary report saying the program was undermined by mismanagement and political cronyism and that its chief was guilty of serious conflicts of interest.

Also Friday, the U.S. State Department praised U.N. Secretary-General Kofi Annan amid a widening scandal over corruption and flawed management in the $60 billion U.N. oil-for-food program.

Annan holds himself responsible and accountable for management of the program, and has reiterated a commitment to take "appropriate action" against misbehaving U.N. officials, Adam Ereli, a State Department spokesman, said approvingly.

"I think this is a clear statement of concern and commitment and responsibility on the part of the leadership of the United Nations," Ereli said. "And we welcome that."

The oil-for-food program, launched in December 1996 to help ordinary Iraqis cope with U.N. sanctions imposed after Saddam Hussein's 1990 invasion of Kuwait, quickly became a lifeline for 90 percent of the country's population of 26 million.

Under the program, Saddam's regime could sell oil, provided the proceeds went to buy humanitarian goods or pay war reparations. Saddam's government decided on the goods it wanted, who should provide them and who could buy Iraqi oil. But the Security Council committee overseeing sanctions monitored the contracts.

In a bid to curry favor and end sanctions, Saddam allegedly gave former government officials, activists, journalists and U.N. officials vouchers for Iraqi oil that could then be resold at a profit.

In a press conference, the permanent Iraq representative to the United Nations condemned the now apparently blatant favoritism toward Saddam.

"Saddam used the sales of oil as a political instrument. He awarded millions of barrels of oil to newspaper editors, to ministers of neighboring countries, to opinion formers. People around Iraq and further afield were bought by Saddam for oil," Sumaidaie said. "Gradually the facts will appear."

He said Volcker's report raises serious questions about U.N. credibility and "political influence" on the U.N. Secretariat in the administration of the oil-for-food program.

"We found that in the early days the Secretariat bent over backwards to please the Saddam regime," Sumaidiae said.

A committee appointed by the United Nations to investigate said Thursday the former head of the program, Benon V. Sevon, had helped a company owned by a friend obtain valuable contracts to sell Iraqi oil.

Sevan has denied he ever received any money.Annan will discipline Sevan and another U.N. official, Joseph Stephanides, who may have used unethical bidding for an oil-for-food contract, Mark Malloch Brown, Annan's chief of staff, said Friday.

The investigation report released Thursday by the panel headed by Paul A. Volcker, a former chairman of the Federal Reserve, described the U.N. program as marred by political favoritism and mismanagement. In the report, Volcker accused Stephanides of "tainting" biddingfor an oil-for-food contract. Stephanides now heads the Security Council Affairs Division in the U.N. Department of Political Affairs.

Ereli, noting another report will follow the interim one issued on Thursday, said the State Department was not in a position "to come into any definitive conclusions until the full accounting is done."

Investigations also are being conducted by five congressional committees and a federal prosecutor in New York.

Sen. Norm Coleman, the Republican who called for Annan's resignation over the oil-for-food allegations, said he was pleased with Volcker's report and urged the secretary-general to lift Sevan's diplomatic immunity so the case can be reviewed by U.S. federal prosecutors.

"There is more than enough probable cause to believe Benon Sevan's actions constitute criminal activity," Coleman said.

Volcker disagreed, saying "we are not here to tear down, we are here to restore" the credibility of the United Nations. But he warned that "unless the United Nations maintains high standards of integrity it will not be able to command the support of member states."

Despite Sevan's claims that he never recommended any oil companies, Volcker's Independent Inquiry Committee said it had evidence that Sevan asked Iraq to give a small Swiss-based oil company, African Middle East Petroleum Co. Ltd. Inc., known as AMEP, the opportunity to buy oil. The company received the allocations and earned $1.5 million from them, it said.

Volcker's panel said it is still investigating "the scope and extent of benefits" that Sevan received for his requests.

The report did not say Sevan received kickbacks, but expressed concern at $160,000 in cash, which he said he received from his aunt in his native Cyprus from 1999-2003. The report questioned this "unexplained wealth," noting that his aunt, who recently died, was a retired Cyprus government photographer living on a modest pension.