Fact Sheet
Office of the Spokesman
Washington, DC
February 3, 2005

The UN Oil-for-Food Program: Uncovering the Facts and Preventing Abuse


Transparency and Investigations

* Firsthand Iraqi accounts and documentary evidence of abuses of the UN
Oil-for-Food Program surfaced in 2003, when the Coalition Provisional
Authority obtained access to official Iraqi documents that revealed
systemic abuses of the Program by the former Iraqi regime. As early as
2000, the United States brought reports of these abuses to the attention of
the UN Security Council and its Iraq Sanctions ("661") Committee. Charles
Duelfer's October 2004 report provided new information about the extent of
Saddam Hussein's efforts to subvert the Program.

* The United States is committed to ensuring that the serious allegations of
fraud, abuse, and corruption related to the Program are investigated fully
and transparently. Those responsible for any wrongdoing should be held
accountable. Transparency and accountability in UN programs are fundamental
to their success.

* The State Department welcomes and actively supports the investigations
underway. These are the Independent Inquiry Committee's probe, U.S.
Congressional investigations (Senate Permanent Subcommittee on
Investigations; House Appropriations Subcommittee on
Commerce-Justice-State; House International Relations Committee; House
Government Reform Subcommittee on National Security, Emerging Threats and
International Relations; and House Energy and Commerce Committee), as well
as the U.S. Justice Department's probe and the Iraqi Board of Supreme
Audit's investigation.

* Through 2004 and early 2005, the State Department has continued to respond
to numerous requests for information and briefings from the investigative
committees. It has devoted considerable time and resources to retrieving
relevant archived documents covering the span of the Program, making them
available to investigators. The process is ongoing; the Department
continues to review and share documents.

* Since the Independent Inquiry Committee began its work in April 2004, the
State Department has provided access to approximately 1,400 pages of
Department documents, including official records on the work of the 661
Committee. It has facilitated multiple interviews with Department employees
familiar with the Program, and worked with Iraqi authorities to ensure that
the Independent Inquiry Committee was provided relevant Iraqi Oil Ministry
documents, numbering in the thousands of pages.

* We have been similarly responsive to requests from Congressional committees
for documents. State Department officials have appeared before several
Congressional committees, including the Senate Foreign Relations Committee,
the House International Relations Committee, and the House Government
Reform Subcommittee, to discuss the Program. There have also been numerous
briefings of Congressional staff.


Efforts to Prevent Abuse during the Program

* During the Program's existence, the United States sought on a continuing
basis to prevent Iraqi activities such as imposing illegal surcharges on
oil sales and seeking kickbacks from suppliers.

* In late 2000, UN Oil Overseers--independent oil experts responsible for
reviewing proposed oil purchase contracts and pricing--informed the 661
Committee of reports of an Iraqi scheme to impose illegal surcharges on oil
sales. The United States convinced the 661 Committee to issue a statement
that surcharges were unacceptable.

* In Spring 2001, the 661 Committee first discussed the issue of oil
surcharges. Absent 661 Committee consensus on countermeasures, in early
Fall 2001 the United States began to deny approval in the 661 Committee of
the pricing proposed by Iraq that had these surcharges attached. Our
imposition of this new pricing mechanism began to restrict significantly
Iraq's ability to profit illicitly from these sales within a few months.

* In July 2000, the 661 Committee first discussed allegations of Iraqi
demands for kickbacks on humanitarian supply contracts. In March 2001, the
United States presented a proposal that member states prosecute companies
engaged in kickbacks and bar such companies from further Program
participation. The United States also proposed measures to prevent Iraq
from levying illegal commissions on contracts. Due to lack of consensus,
the 661 Committee took no official action on these proposals.

* In order to prevent Iraq from importing dual-use items for diversion to its
military programs, the United States placed holds on questionable contracts
worth billions of dollars. In May 2002, the Security Council streamlined
the processing of contracts for humanitarian supplies. It authorized export
of goods determined by the Office of the Iraq Program to be purely civilian
in nature, banned goods that were prohibited under an arms embargo, and
mandated a review of dual-use goods contained in a "Goods Review List"
before approval.

Background on the Program

* In August 1990, the UN Security Council adopted Resolution 661, which
imposed comprehensive sanctions on Iraq following its invasion of Kuwait.
Through the Iraq Sanctions ("661") Committee, the United States worked with
other Security Council members to ensure their effective implementation.
Adopted in 1991, Security Council Resolutions 706 and 712 permitted Iraq to
sell a limited amount of oil and use the proceeds to meet the humanitarian
needs of its people. Iraq refused to make such sales or to discuss
alternate arrangements.

* Concerned about deteriorating humanitarian conditions in Iraq, the Security
Council adopted Resolution 986 in April 1995, establishing a UN program
that became known as the Oil-for-Food Program. It provided Iraq with the
opportunity to sell oil to finance the purchase of medicine, health
supplies, foodstuffs, materials and supplies for essential civilian needs,
while denying it access to goods that could be used to reconstitute its
military and weapons of mass destruction programs. The UN Office of the
Iraq Program was responsible for overall management of UN humanitarian
activities under Resolutions 661 and 986 and for administration of the
Program.

* Iraq's initial unwillingness to accept the Security Council's conditions
blocked implementation of the Program until December 1996, following the
conclusion of a Memorandum of Understanding between UN and Iraqi officials
the previous May that specified the arrangements for its implementation.

* Resolution 986, which permitted Iraq to retain control over the selection
of oil purchasers and goods suppliers, represented a compromise necessary
to maintain support for the continuation of sanctions. The compromise
decision over time was abused and manipulated by Saddam Hussein to
undermine the Program.

* The Oil-for-Food Program ended in November 2003, as mandated by Security
Council Resolution 1483.

2005/139

Released on February 3, 2005