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Focus on Oil-for-Food contracts

[Iraq] An Iraqi woman receives her food ration. IRIN
Companies that once were exempted from Oil-For-Food programme rules are now being swept out of the way by Iraq's trade ministry workers seeking to level the playing field. As many outside the country suspected, former President Saddam Hussein had ensured that certain companies did not have to observe Oil-For-Food programme contracting rules, a trade ministry official told IRIN. The ministry's workers were now going through a list of thousands of companies to separate those that previously received exemptions from those that did not, said Ahmad al-Mukhtar, the ministry's director-general for planning and follow-up. He said he did not know how many companies might be involved. "We’re reviewing to see the companies we used to deal with so we can clean it [the programme] of the ones that had favoured status," he told IRIN. "We used to get orders from the vice-president to exempt certain companies." Under the UN-administered Oil-For-Food programme, Saddam was allowed to export much of Iraq’s oil to buy food and humanitarian aid for his people. Starting at the end of 1996 to alleviate the effects of years of international sanctions against Iraq, the programme expanded to cover virtually every area of the economy, dealing with items ranging from electrical spare parts and truck tyres to the rice given out to families once a month. PROGRAMME TO CONTINUE UN representatives on 21 November handed over the reins of the programme to the US-led Coalition Provisional Authority (CPA) officials running the country. But the programme is expected to continue until the end of 2004, because many contracts with suppliers retain their validity well into next year. "Everything that makes Iraq run comes through this supply chain," Steve Mann, who is heading the Oil-For-Food transition for the CPA, told IRIN. "It’s an enormous logistical challenge." Saddam also appears to have created shell companies with his cronies in countries like Russia, Egypt, Syria, Lebanon and Jordan to drain off money from the Oil-For-Food programme, according to Iraqi Trade Minister Ali Alawi. FAKE COMPANIES SHUT OUT Those companies should have been shut out of the process as contracts were handed over to the US administrators by the UN, Mann explained. "If there are sham companies, I’m sure they have gotten thrown out," Mann said. "As of 21 November, we have an additional layer to protect against this. We have a new coordination centre. They’ll have to think of a more creative way to steal the money," he added. Some of those alleged shell companies also apparently did side deals with other companies in a complex semi-legal arrangement, al-Mukhtar said. Companies used to be awarded contracts, by virtue of their political connections for example, and then would turn out to be unable to deliver the goods, he said. They would sell the contracts to other companies, he explained. "Now we’re compiling a list of reputable international companies, including the ones from countries that were banned like the United States and Canada," al-Mukhtar said. NO MORE KICKBACKS Another challenge has been cleaning up the contract kickbacks that appear to have put millions of dollars into Saddam’s pockets over the last couple of years. An additional 10 percent to 30 percent was tacked onto each contract approved by the UN, according to officials in the trade and health ministries. The UN had been unaware of the frauds, a spokesman has said. "We’ve eliminated the after-sales service fees and renegotiated every contract to eliminate the 10 percent," Mann said. Trade ministry workers expect to take over the truncated Oil-For-Food programme in June 2004, with the main goal of distributing food rations to 27 million Iraqis. Over a period of time, the programme is expected to be phased out, first with money distributed to the population to buy food, then to a full free-market economy, according to Alawi. UN figures for the programme show that it handled more than US $65 billion in six years. The oil-sale money was put in escrow accounts designed to keep it out of Saddam's reach. A team of World Food Programme (WFP) workers checked all WFP contracts against the value of the goods coming into the country, said Mia Turner, a WFP spokeswoman based in Amman, Jordan. The United Nations Development Programme, the Office of the United Nations High Commissioner for Refugees and the United Nations Children’s Fund also handled smaller components of the massive humanitarian programme. Administrators have reduced the number of Oil-For-Food supply companies to 3,900 - down from an estimated more than 6,000 contractors before the war. Some contracts were declared void when suppliers had declined to continue to ship goods, others cancelled when contracts were seen as having no relative utility, said Mann. In recent days, some $748 million in Oil-For-Food contracts have been turned over to officials in northern Iraq to handle themselves. International administrators in the rest of Iraq would handle another $8 billion in ongoing contracts, Mann said.

This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information: https://shop.un.org/rights-permissions

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