OIL FOR FOOD: THE TRUE STORY

A debt of dishonour

During the Gulf war in 1991 the US deliberately

targeted Iraq's drinking water supply in violation of

the Geneva convention on war crimes. The media

have ignored recent research by a US academic

which confirms a deliberate strategy to destroy the

whole country. Ten years after the end of the

conflict the Iraqi people are still paying for the

intransigence of both the US and Saddam Hussein.

Despite the recent direct flights from Moscow,

Paris and Amman to Baghdad, flouting the

embargo, there is no sign of Washington yielding

any ground. On the contrary, the presidential

election campaign has raised the odds. Meantime,

the pillaging of Iraq continues, as shown by the

work of the UN Compensation Commission - a

secretive body which operates on a distinctly

shaky legal basis and creams off a third of Iraq's

oil revenue.

by ALAIN GRESH

We know about the sanctions that have impoverished Iraq, claiming

many lives through lack of medicines and malnutrition, and leading to

the slow disintegration of one of the world's oldest civilisations. But

we haven't heard much about the money Iraq still raises through

exporting oil, other than the concept of "oil for food". This slogan

implies that all permitted oil exports fund necessary humanitarian

supplies for Iraq, but this is not true. For four years - since December

1996 - a third of Iraq's $11bn export income has been collected to

compensate companies and individuals claiming for losses during the

invasion and occupation of Kuwait, and the Gulf war: the collection

and awards are made discreetly by a UN organisation with a dubious

legal basis, the United Nations Compensation Commission (UNCC),

dominated by the US, which still believes that Iraq must pay endless

reparations for Saddam Hussein's ambitions a decade ago. The Kuwait

Petroleum Corporation, and a few others, were awarded this year, in

just a single payment, $15.9bn - which is double the amount the

Baghdad government received between 1996 and 2000 to feed and care

for 17m people. It is also almost equal to the total compensation due to

2.6m private claimants.

But the UNCC's judgments have just been challenged from within. The

high-ranking diplomats from the 15 UN security council member

countries who make up the governing council of the UNCC were asked

to decide on that claim for compensation submitted by the Kuwait

Petroleum Corporation, and others, for $15.9bn. French and Russian

diplomats blocked the move, saying they couldn't allow an opulent

emirate to take so much from Iraq, which grows daily poorer. UNCC

meetings were adjourned repeatedly until 28 September last month,

when the claim was voted through unanimously, in exchange for which

cooperation the French and Russian objectors were conceded cosmetic

changes to the UNCC's functioning and the percentage of Iraqi exports

commandeered for compensation.

How did the UN come to be running a compensation service which acts

as judge and jury and refuses to allow Iraq to spend any of its export

revenues to hire legal help to defend itself against the claims? The

UNCC was set up in 1991 (by resolution 692 passed on 20 May) after

the security council confirmed that Iraq was "liable under international

law for any direct loss, damage ... or injury to foreign governments,

nationals and corporations, as a result of Iraq's unlawful invasion and

occupation of Kuwait". There is no precedent for this procedure, at

least not since the Treaty of Versailles, which concluded the first world

war and paved the way for the second, by laying the full responsibility

for the war on Germany and forcing it to pay endless reparations - the

"Germany must pay" slogan ultimately led to Adolf Hitler taking

power. Now the slogan in the US (which failed to ratify the Versailles

treaty) is "Iraq must pay".

A discreet body

The UNCC is a discreet body, with offices scattered around Geneva's

international quarter. It decides the amount of compensation on the

basis of a report by a panel of three commissioners - experts appointed

by the secretariat, a theoretically administrative body but in practice

the seat of real power. From the start, representatives of the US took

control of the secretariat and directed - or misdirected - all the UNCC

decisions. Every year $50m is deducted from Iraqi exports to fund the

UNCC itself, the business-class travel expenses of its experts, its

commissioners' hefty fees and so on. The most serious aspect of all

this, though, is that, for the first time in international law since the

second world war, a state has been allowed no right of appeal against a

procedure in which it is involved. Even a criminal is entitled to

defence lawyers, and is not required to pay for investigations, trials or

judges.

In 1991 the UN secretary-general recommended that Iraq should be

"informed of all the claims and will have the right to present its

comments to the commissioners". But later, the security council

decided that Iraq had only "a right to receive the summary reports of

the executive secretary and comment thereon" - more like the

Inquisition than modern legal practice; Norbert Wuhler, head of the

UNCC legal department, describes it as an "inquisitorial procedure"

(1). And the UNCC first secretary, Carlos Alzamora, says the

inconvenient legal safeguards "which generally encumber judicial

proceedings" have been eliminated. Michael E. Schneider, a former

professor of international public law, is a lawyer with a firm which

filed a request to defend Iraq, paid for from UNCC funds (2). The

request was rejected. He says the main flaw in the procedure is that Iraq

has not been recognised as "a defendant party and no attempt has been

made to obtain its agreement. Iraq, and only Iraq, must pay for every

penny of the procedure, the fees of the commissioners and their

experts, yet it cannot even consult the experts' findings."

Muhammad al-Douri, Iraq's ambassador to the UN in Geneva and also

a former professor of international law, says he works "under an

embargo". Iraq has lost the right to vote at the UN because it has not

paid its dues (3), although the US, which is the organisation's largest

debtor and more than $1bn in arrears with its dues, has never been

penalised. Communication between the Iraqi ambassador and his

government is laborious: an envoy takes at least four days to make the

round trip from Geneva to Baghdad and back. Al-Douri doesn't even

have office equipment. Xerox has refused to sell him photocopiers:

perhaps the company is afraid he will use them as chemical weapons.

He tries to explain how impossible the whole situation is: take two

claims which totalled $21.6bn, for the suspension of production and

sale of Kuwaiti oil during the Iraqi occupation, and loss through fires.

Tens of thousands of pages of claims were filed six years ago and

passed to the three commissioners. The secretariat gave the Iraqi

government a summary of their contents five years after the filing and

gave Kuwait only weeks to respond. As the Iraqi delegation explained

to the UNCC council, the claims "address too many legal, scientific,

technical, engineering and accounting aspects. How much time is

required to prepare a comprehensive, scientific and appropriate

response? The members should work out the time required for

communicating the voluminous documents, verifying, studying,

translating them from a foreign language to Arabic and back again to

English, and then prepare the response."

Al-Douri adds: "We did submit our comments, to which Kuwait

replied, but we have no idea what it said in response. After much

procrastination we were at last allowed to state our case to the

commissioners - in no more than one hour." The commission awarded

$15.9bn to the claimants: this was the original handout that prompted

the French and Russian UNCC representatives to express misgivings.

Al-Douri says: "Iraq is responsible but there is no justification for

violating international law."

Michael Schneider asks: "How can a case be judged unless

contradictory opinions are expressed and both parties are given an

opportunity to state their point of view? Kuwait organised an

international call for tenders to prepare and plead its case. To get to the

bottom of it would require painstaking work for which the commission

does not have time. Not only has Iraq been refused money to defend

itself, but all the major law firms have already been hired by the

claimants or by the UNCC itself." The UNCC hired Price Waterhouse

after it had worked for Kuwait, creating a conflict of interest.

Some are more equal than others

The UNCC justifies its behaviour by the pressing need to refund

hundreds of thousands of ordinary people who suffered during the

invasion of Kuwait . Out of 2.6m claims, most were made by private

individuals, although these add up to only $20bn of a total of $320bn.

By speeding up procedures for dealing with individual claims (using

statistical models because of the impossibility of examining each claim

separately), the commission facilitated compensation through

short-cuts, many politically motivated.

The claims are divided into categories. Category C claims group

(1,659,840) individual claims - for destruction of goods, mental

anguish, flight - for less than $100,000. The last C category claims

were settled in September: 97% were dealt with, but the claimants did

not all receive the same treatment. Almost all the Kuwaiti claims were

successful, and some claimants were given more than they had

demanded. But 40,000 Jordanians (mainly Palestinians) only received

40% of their claimed compensation.

From the start, the whole procedure was guided. Michael F Raboin, the

UNCC deputy executive secretary, an American, in charge of handling

claims, set up the secretariat in 1991 and recruited Norbert Wuhler,

with whom he had worked on the Iran-US claims tribunal, founded in

the early 1980s and still at work in The Hague settling disputes

between the two countries. Both men say: "We are impartial. The

commission made allowance for Iraq's case. Particularly as we had to

deal with several hundred thousand claims in a very short time. Many

claimants have actually complained that we were too favourable to

Iraq."

Impartial is perhaps not quite the right word. Five years ago the head of

the category C claims unit, Erik Wilbers, told his team: "All this

abstract work that we do in this air-conditioned building in

Switzerland makes it very easy for us to forget what we are here to

achieve: to help the claimants." He added, in reference to the torture

Kuwaitis had suffered: "I think it is useful for us to remember the

luxurious position we are in. All of us are guilty of this to a smaller or

greater extent; the important thing is for you to realise when you may

be going a little too far." This was a fairly overt encouragement to cut

corners.

'Make the criteria generous'

A former Egyptian civil servant who worked in the unit remembers

that, in the course of his work, he was regularly asked to "make the

criteria as generous as possible", so as to make many awards. Another

civil servant was struck by recurrent references to "doctoring the

samples". The statistical models used to compensate victims more

quickly had been modified. The restricted number of documents

(receipts, invoices) provided by claimants made operations easier. The

Kuwaitis filled in 160,000 individual claims, some on behalf of

new-born babies. In many cases identical telephone numbers appeared

on separate claims for the same losses. Various documents reported

these duplicates. The Chinese representative protested several times,

and an audit criticised the sloppiness, but nothing changed. A European

civil servant said the Kuwaiti delegation lobbied "to ensure that the

process favoured its country. The victims played an active part in this.

Although it would be exaggerating to say that they were in our offices

every day. More like every two days."

Many Kuwaiti business men were awarded compensation for

companies belonging to nationals of other countries, often Palestinians,

as Kuwaiti law requires foreign nationals to have a local sponsor to

start a company. In 1998 the US government officially asked the

governing council to review the criteria applied to payments to

Kuwaitis. According to an undisclosed document: "The US recalled

that it supported the use of the statistical model, considering it to be

fair way to process a large number of claims on an expedited basis.

However, the US reported that it was now concerned that there may be

an error in the model." The secretariat complied with the advice.

The largest compensation claims are still being examined and $267bn

is outstanding as of 16 June. Many claims are unfounded and have been

or will be dismissed. Some countries filed for the cost of mobilising

troops. But US allies - in particular Kuwait, Saudi Arabia and Israel -

have qualified for special treatment because they were hit by Scud

missiles. Israeli businesses, including florists, greengrocers, cinemas

and hotels, have received millions of dollars to compensate for revenue

lost during the crisis (which is as if the UK had demanded

compensation from Germany because cinema attendance dropped

between 1939-45).

Kuwaiti ministries filed claims of $2.2bn and were awarded $1.53bn.

The commission in charge of the case sent six missions to Kuwait and

the US to check claims, but Iraq was not given a chance to send a

representative or state its case to the commission. Only one member of

the commission actually made the trip, otherwise sending "experts"

provided by the secretariat. Issues raised by the gains or savings made

by Kuwait because of the war - increased oil prices, inactivity of its

institutions, renewal of capital assets - were ignored or scarcely

discussed.

The UNCC has received claims worth $320bn, including $180bn for

Kuwait, equivalent to nine times the country's gross domestic product

in 1989. Even if we assume (as rumoured in UNCC corridors) that only

a third of this will actually be awarded, it would still add up to around

$100bn. To that must be added the interest, for periods from 10-15

years, bringing the total to about $300bn (5). At the current high price

of oil, this would absorb all Iraqi oil exports for 15-20 years. If the

country continues to spend one third of its revenue on compensation, it

would clear its compensation debt slate by 2050-60 - setting aside

debts contracted before 1990 (6). But by then, what would be left of

Iraq's schools, hospitals and infrastructure (7)?

Iraq will pay until 2070

The security council last month decided that for the next phase of "oil

for food" (2000-2001), the percentage of Iraqi exports for

compensation will be 25%, not 30%, and UNCC procedures will

change to give Iraq a bigger say in the discussions. But instead of

paying compensation until 2060, Iraq will now have to pay until 2070.

Is it legal to make a country pay without making allowance for its

resources or setting an upper limit? The 1951 peace treaty between the

US and Japan stated: "It is recognised that Japan should pay reparations

to the Allied Powers for the damage and suffering caused by it during

the war. Nevertheless, it is also recognised that the resources of Japan

are not presently sufficient if it is to maintain a viable economy, to

make complete reparation for all such damage and suffering and at the

same time meet its other obligations" (8). Remember that the then head

of state of Japan was Emperor Hirohito, a war criminal who could -

much as Saddam Hussein - have been judged by the International

Criminal Tribunal, had it existed.

In this case, the original UN resolution (687) recognised that the

"requirements of the people of Iraq [and] Iraq's payment capacity"

should be taken into account in the calculation of compensation. But

does the UN abide by its own decisions? For many years the

International Law Commission, set up by the UN, has been studying

the rights and duties of states. It is preparing a convention which has

already won a broad consensus, and one article of the convention

(Article 42) will stipulate that in no case may reparations deprive a

people of its means of subsistence.

Some legal specialists, such as Bernhard Gräfrath from Germany, have

gone further, questioning the right of the security council to decide the

amount of compensation due in a dispute between two parties (9). On

several occasions - for example, the Israeli attack on Beirut airport in

1968 - the security council decided that compensation was due to the

victims, but never set the amount. That is outside its prerogatives: in

one such case, the UK representative on the security council pointed

out that it is not a "court of law, nor is it the appropriate forum to

determine questions of restitution and compensation for damages".

When asked about this, Raboin, with other members of the secretariat,

explained "we thought that the UN had drawn a line" after the invasion

of Kuwait, establishing the rule of law in international affairs. The

validity of this precedent, and the corresponding new world order,

became apparent soon after in Bosnia, South Lebanon and Palestine.

Will Israel be required to compensate Lebanon for occupying the

southern part of the country for 25 years? According to a European

diplomat, the UNCC's partial dealings must be seen in the

international context of 1991. "Now an institution of this type would

never be set up. The US would never get its way. Everyone would be

against it."

1.Norbert Wuhler, "The United Nations Compensation

Commission: A new contribution to the process of international

claims resolution", Journal of International Economic Law,

Oxford University Press, Oxford, 1999

2.The firm, Lalive & Partners, filed a request to defend Iraq, paid

for from UNCC funds. The request was rejected. The firm has

only been able to represent Iraq in one case, the Well Blowout

Control claim. See also Michael E. Schneider, "How Fair and

Efficient is the United Nations Compensation Commission

System?", Journal of International Arbitration, vol. 15, no 1,

March 1998.

3.Iraq's proposal that the UN deduct what it owes from oil exports

was rejected.

4.The claims, Nos. 4003197 and 4004439 were filed on 20 May

and 24 June 1994.

5.On 18 December 1992, the governing council decided that

interest would be due.

6.Compensation claims filed by UNCC do not curtail all legal

procedures against Iraq, for the competence of the commission is

not exclusive. Plaintiffs may also take Iraq to court to settle other

claims.

7.See Alain Gresh, "Iraq's silent agony", Le Monde diplomatique,

English edition, July 1999.

8.Quoted by Bernhard Gräfrath, "Iraqi Reparations and the

Security Council", Heidelberg Journal of International Law,

Heidelberg, 1995,55/1.

9.Ibid.

Translated by Harry Forster