UN plays blame game in Iraqi oil scandal

The interim report into oil-for-food payments found persuasive evidence that Benon Sevan, the director of the programme, used his influence with Iraq to benefit from the scheme.

Now the blame game is underway and the former UN secretary general Boutros Boutros-Ghali, who was in charge of the organisation when the programme began, yesterday moved to defend his position.

He went on the offensive in a series of interviews for the world’s media and told the BBC: "I share the responsibility, but don’t twist the whole operation. The basis [of the programme] was decided by the Security Council, approved by the Security Council, the execution was done during the mandate of my successor."

The oil-for-food programme was intended to be a lifeline for Iraq’s 26m population under the Saddam regime. But the report by Paul Volcker, the former US Federal Reserve chairman appointed by Annan to investigate the $67bn scheme, which ran from 1996 until 2003, has found that Sevan used his influence to help a small company gain profitable rights to sell Iraqi oil.

He did so while urging the UN to provide greater help in rebuilding Iraq’s oil equipment. Sevan claims he is being made a scapegoat but the apparent conflict of interest raises the clear possibility that he took bribes from Saddam Hussein’s regime.

It also questions Annan’s leadership of the UN amid pressure from US conservatives who have already demanded his resignation over the corruption allegations and wider criticism of the UN’s role in the world.

At best Annan was asleep at the switch, but the full investigation may have more severe implications for him.

Volcker’s interim report also found that Sevan helped steer oil contracts to a relative of Boutros-Ghali, who headed the UN from January 1992 until Annan took over in 1997. The report does not accuse any UN officials of receiving bribes, but Annan has said UN officials would be disciplined and diplomatic immunity lifted if criminal acts were committed.

The interim report showed that the programme, which was designed to allow Iraq to buy food and medicines to ease hardships caused by UN sanctions, suffered from lax UN controls. Following the overthrow of Saddam, however, documents emerged showing that the former Iraqi leader was skimming funds from the scheme, selling oil illegally outside the programme - often with the knowledge of Security Council members - and bribing a variety of officials around the world.

A CIA investigation last September found Saddam earned $1.7bn through kickbacks and illegal surcharges and took $8bn from illegal oil sales to other countries, all of which went to propping up the dictator’s regime.

Boutros-Ghali insisted yesterday that the programme was a success: "I regret the mismanagement and the scandal which appear now with the Volcker report. I consider that the fact that we have been able to sign the memorandum of understanding, to obtain the agreement of the Security Council and to obtain the agreement of the Iraqi administration, that this was a success for the poor people of Iraq who were suffering 10 years of economic sanctions."

Meanwhile, Iraq has called for a widening of the investigation of the oil-for-food programme, demanding the immediate return of money in the UN account that paid the humanitarian relief effort’s administration costs.

Iraq’s UN Ambassador Samir Sumaidaie also reiterated his government’s demand that the UN stop using oil-for-food money to pay for the Volcker’s investigation. He said: "It is outrageous that Iraqi funds were mismanaged and then we have to pay for finding out about the mismanagement."

In his book Unvanquished: A US-UN Saga, Boutros-Ghali describes the trouble he had getting Iraq to commit to the oil-for-food programme. He was also under enormous pressure late in his tenure, having learned around the time he was trying to put oil-for-food together that the United States would block his nomination for a second term as secretary general. Instead, the United States supported Annan.

The most damaging allegation in Volcker’s report alleges that Sevan, an Armenian Cypriot, asked senior Iraqi officials to grant oil allocations to Africa Middle East Petroleum, a company owned by Fakhry Abdelnour, a cousin of Boutros-Ghali.

But it is Annan who must pick up the pieces. He is already facing a report on the role of his son, Kojo, who worked for a contractor in the oil-for-food programme. President George W Bush has been noticeably reluctant to back Annan who failed to support America’s invasion of Iraq. Washington has made no secret of its anger at Annan since he described the conflict as illegal last year.

Mark Malloch Brown, Annan’s chief of staff, said: "The secretary general is shocked by what the report has to say about Mr Sevan."

But with the UN diplomats who profited from the discredited programme being labelled parasites by Iraqi human rights lawyers in a nation taking the first steps to democracy, and another report from Volcker to follow, the story is far from over. This time it will be Annan’s credibility that is at stake.