[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
THE UNITED NATIONS OIL-FOR-FOOD PROGRAM: A REVIEW OF THE 661 SANCTIONS
COMMITTEE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JUNE 21, 2005
__________
Serial No. 109-30
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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------------------------------
COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida Ranking Member
Vice Chairman HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia BART GORDON, Tennessee
BARBARA CUBIN, Wyoming BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING, ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman GENE GREEN, Texas
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida
MARY BONO, California JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon HILDA L. SOLIS, California
LEE TERRY, Nebraska CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey JAY INSLEE, Washington
MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
Bud Albright, Staff Director
David Cavicke, Deputy Staff Director and General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Oversight and Investigations
ED WHITFIELD, Kentucky, Chairman
CLIFF STEARNS, Florida BART STUPAK, Michigan
CHARLES W. ``CHIP'' PICKERING, Ranking Member
Mississippi DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon JAY INSLEE, Washington
MIKE FERGUSON, New Jersey TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas HENRY A. WAXMAN, California
MARSHA BLACKBURN, Tennessee JOHN D. DINGELL, Michigan,
JOE BARTON, Texas, (Ex Officio)
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Schweich, Thomas A., Chief of Staff, United States Mission to
the United Nations, U.S. Department of State; accompanied
by Andrew S. Hillman, Director of the Sanctions Unit,
United States Mission to the United Nations, U.S.
Department of State; and Eugene S. Young, U.S. Department
of State................................................... 12
Additional material submitted for the record:
Hillman, Andrew S., Director of the Sanctions Unit, United
States Mission to the United Nations, U.S. Department of
State, response for the record............................. 47
Schweich, Thomas A., Chief of Staff, United States Mission to
the United Nations, U.S. Department of State, response for
the record................................................. 49
(iii)
THE UNITED NATIONS OIL-FOR-FOOD PROGRAM: A REVIEW OF THE 661 SANCTIONS
COMMITTEE
----------
TUESDAY, JUNE 21, 2005
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:10 a.m., in
room 2123, Rayburn House Office Building, Hon. Ed Whitfield
(chairman) presiding.
Members present: Representatives Whitfield, Stearns, Bass,
Walden, Burgess, Blackburn, Barton (ex officio), Stupak, and
Inslee.
Staff present: Mark Paoletta, chief counsel; Andrew
Snowden, majority counsel; Tom Feddo, majority counsel; Michael
Abraham, legislative clerk; Edith Holleman, minority counsel;
Chris Knauer, minority counsel; and Voncille Hines, minority
assistant.
Mr. Whitfield. This morning the subject of our hearing is
the United Nations Oil-for-Food Program, a review of the 661
Sanctions Committee. I want to thank the witnesses for being
here this morning: Mr. Tom Schweich, who is Chief of Staff,
United States Mission to the United Nations at the Department
of State, and he is accompanied by Andrew Hillman, who is the
Director of the Sanctions Unit, United States Mission to the
United Nations, and Eugene S. Young with the U.S. Department of
State.
At this time, I will give my opening statement, and we will
do the opening statements and then we will get to the
testimony.
The United Nations Oil-for-Food Program has been described
as both a tremendous success and a dismal failure. While the
program did improve the humanitarian situation in Iraq, it also
permitted Saddam Hussein to steal from his own people billions
of dollars that were desperately needed. If sanctions are to
remain a viable tool for promoting freedom and human decency
around the world, we need to scrutinize the Oil-for-Food
Program and learn from its mistakes.
On May 16, this subcommittee held a hearing that examined
through a variety of recently translated documents how the
former Iraqi regime of Saddam Hussein attempted to undermine
sanctions by exploiting divisions among the various permanent
members of the United Nations Security Council. Today's hearing
will focus on how these divisions may have adversely impacted
the program and permitted Saddam to skim billions of dollars
that would rightfully have gone to the Iraqi people.
We will hear from several individuals who were involved in
the day-to-day inner workings of the 661 Sanctions Committee,
and we will review among other documents the minutes of
numerous meetings of the 661 Committee. Unfortunately, the
story of the Sanctions Committee at least as it relates to the
Oil-for-Food Program is somewhat a paradox. Because of the 661
Committee's economic consensus requirement, political and
economic agendas often carry the day.
Member states who were profiting from Saddam's
manipulations were unwilling to support reforms that could have
tightened sanctions and reduced much of the graft and
corruption. Perhaps the most egregious example of this blatant
national self-interest is the oil surcharges. Confronted with
substantial evidence that shady oil purchasers under the
program were reaping premiums of 5, 10 even 20 times what is
typical in the industry, monies that should have been flowing
into the program, these nations opted for a ``see no evil, hear
no evil'' approach.
When the United States and Great Britain ultimately
eliminated excessive premiums by imposing a retroactive pricing
system, these nations claimed that the reforms rather than the
illegal surcharges were hurting the Iraqi people by reducing
oil exports. This is like having someone set your house on fire
and then blaming the fire department for water damage after
they put out the blaze.
I would like to thank all three of the State Department
witnesses who will be testifying here today. I look forward to
hearing your experiences and impressions. The committee
appreciates the work you have done for this country and the
time you have devoted to this important issue.
Finally, I would like to express my disappointment with the
United Nations and the independent inquiry committee chaired by
Paul Volcker, a man with whom we had profound respect. We had
intended to have a former United Nations oil overseer here
today to testify about the interactions with the 661 Committee
and his efforts to eliminate the oil surcharges. Unfortunately,
the United Nations, at the request of Mr. Volcker, has refused
to allow this individual to appear before the committee. The
fact that the United Nations authorized committee staff to
interview this witness approximately 2 months ago made this
decision particularly inexplicable. For an organization that
has pledged itself to greater transparency in the wake of the
oil-for-food scandal, the United Nations clearly appears to
have a long way to go.
I might also add, when we finish this public portion of the
hearing today, we will go into executive session because of
some confidential minutes that we will be looking into. At this
time, I would like to recognize our ranking member, Mr. Bart
Stupak of Michigan.
[The prepared statement of Hon. Ed Whitfield follows:]
Prepared Statement of Hon. Ed Whitfield, Chairman, Subcommittee on
Oversight and Investigations
The United Nations Oil-for-Food Program has been described as both
a tremendous success and a dismal failure. I tend to think that the
truth is probably somewhere in between: while the Program did improve
the humanitarian situation in Iraq, it also permitted Saddam Hussein to
steal from his own people billions of dollars that were desperately
needed. If sanctions are to remain a viable tool for promoting freedom
and human decency around the world, we need to scrutinize the Oil-for-
Food Program carefully, warts and all, and learn from its mistakes.
On May 16, this Subcommittee held a hearing that examined, through
a variety of recently translated documents, how the former Iraqi Regime
of Saddam Hussein attempted to undermine sanctions by exploiting
divisions among the various Permanent Members of the United Nations
Security Council. Today's hearing will focus on how these divisions may
have adversely impacted the Program and permitted Saddam to skim
billions of dollars that should rightfully have gone to the Iraqi
people. We will hear from several individuals who were involved in the
day-to-day inner workings of the 661 Sanctions Committee, and we will
review, among other documents, the minutes from numerous meetings of
the 661 Committee.
Unfortunately, the story of the 661 Sanctions Committee, at least
as it relates to the Oil-for-Food Program, is neither pretty, nor
promising. Because of the 661 Committee's consensus requirement,
political and economic agendas often carried the day. Member States
whose companies were profiting from Saddam's manipulations were
unwilling to support reforms that could have tightened sanctions and
reduced much of the graft and corruption.
Perhaps the most egregious example of this blatant national self-
interest is the oil surcharges. Confronted with substantial evidence
that shady oil purchasers under the Program were reaping premiums of 5,
10, even 20 times what is typical in the industry--monies that should
have been flowing into the Program--these nations opted for a ``see no
evil, hear no evil'' approach. And when the United States and Great
Britain ultimately eliminated these excessive premiums by imposing a
retroactive pricing system, these nations claimed that the reforms,
rather than the illegal surcharges, were hurting the Iraqi people by
reducing oil exports. This is rather like having someone set your house
on fire and then blaming the fire department for water damage after
they put out the blaze.
I would like to thank all three of the State Department witnesses
who will be testifying here today: Thomas Schweik (pronounced Schwike);
Andrew Hillman, and Eugene Young. I look forward to hearing your
experiences and impressions. The Committee appreciates the work that
you have done for this country and the time that you have devoted to
this important issue.
Finally, I would like to express my disappointment with the United
Nations and the Independent Inquiry Committee chaired by Paul Volcker,
a man for whom I have profound respect. We had intended to have a
former United Nations Oil Overseer here today to testify about his
interactions with the 661 Committee and his efforts to eliminate the
oil surcharges.
Unfortunately, the United Nations, at the behest of Mr. Volcker,
has refused to allow this individual to appear before the Committee.
The fact that the United Nations authorized Committee staff to
interview this witness approximately two months ago makes this decision
particularly inexplicable. For an organization that has pledged itself
to greater transparency in the wake of the Oil-for-Food scandal, the
United Nations clearly appears to have a long way to go.
Mr. Stupak. Thank you, Mr. Chairman, over the past year
numerous allegations have been made in Congress and elsewhere
about improper action by officials at the United Nations in
administering the Oil-for-Food Program. Much outrage has been
expressed by many in Congress about the illegal smuggling of
oil by Saddam Hussein, mostly through Jordan and Turkey, even
though two congressional committees officially acknowledged the
smuggling every year. It was also discussed in the media more
than 4 years ago.
How could this have occurred under the sanctions program
established by the Security Council of which the U.S. is a
member? There has been a mysterious lack of public discussion
about the extremely cumbersome structure established for this
program by the Security Council and lack of effective member
oversight. There also has been no attention paid to the U.S.
role in refusing to stop the smuggling of Iraqi oil by its
allies, oil which often ended up in the United States.
I want to thank you, Mr. Chairman, for opening up at least
some of that discussion today by looking at the U.N. 661
Sanctions Committee which was charged with enforcing the
sanctions against Iraq and also administering the Oil-for-Food
Program. The 661 Committee was established in 1990 after Iraq
invaded Kuwait. All of the members were keenly aware of the
attempts by Saddam Hussein and others to get around the
sanctions. They knew about the smuggling, surcharges and all
types of kickbacks.
In 1997, the committee was told that Iraq was using money
from oil smuggling to obtain prohibited goods. In March 2000,
the committee was told Iraq could take in as much as $500
million in illegal revenue in that year alone. The committee,
which was composed of permanent and nonpermanent members of the
Security Council, was hamstrung by its consensus rule. When the
United States wanted to write a letter to Syria about reopening
of the oil pipeline from Iraq, other members refused, pointing
out that the U.S. will not even discuss the openly illegal
trade between Iraq, Jordan and Turkey.
Additionally, international sanctions imposed by the United
Nations are only as effective as the member states want them to
be. As one of the members of the Security Council stated in
1996, it is a fundamental principle that the Security Council
adopt resolutions, but that member states had responsibility
for their implementation.
Some neighboring countries such as Jordan and Turkey openly
negotiated trade memoranda of understanding with Iraq every
year. Iran traded in oil in full view of the Multinational
Inception Force, or the MIF. The MIF also gave the committee
regular reports on smuggling in the Persian Gulf. Others more
quietly just conducted trade. Allegations that a particular
country was violating the sanctions were followed up by a
letter to that country asking for an explanation. It could take
months to get a credible answer.
Last week Chairman Barton added to the United Nations
Reform Act a provision establishing a formal review of the
Volcker commission's report on the Oil-for-Food Program. During
that debate, the chairman said, ``any investigation of the Oil-
for-Food Program with even the appearance of bias or inadequacy
will result in, at best, unanswered questions or, at worst,
unresolved problems. Allowing either to fester in the U.N. can
only serve to degrade the organization's already strained
credibility and threaten its ability to function properly.''
I want to point out potential bias and inadequacy shown by
this committee in this investigation. Petroleum Intelligence
Weekly reported in March 2002 that, ``Russian firms holding
crude oil contracts under the U.N. Oil-for-Food Program are
currently the largest sellers of Iraqi crude while U.S.
refineries are the largest buyers, both sharing some 50 percent
of the volumes.'' Chevron, Texaco and other refiners couldn't
get enough of the Basra Blend, the newsletter reported. What do
these U.S. companies know about the smuggling and illegal
surcharges that were part of Iraqi's oil route?
Also over 1,000 U.S. companies were certified to provide
humanitarian goods to Iraq. Did they pay kickbacks to Saddam
Hussein to get the business? We have been told that the
chairman has no interest of looking at the role U.S. companies
played in the illegal smuggling and payment of surcharges to
Iraq. Why this committee would self-impose strategic limits on
its ability to find the truth is without precedent and is
rather bizarre. Are we afraid of the answers? Have we decided,
Mr. Chairman, if we are going to do a credible investigation or
a me-too pseudo investigation that conveniently leaves our
friends alone in exchange for wild goose chases?
After our last meeting our staff went to France to see if
we could uncover illegal profiting by French politicians. The
purpose of that visit was to interview Charles Pasqua, a
prominent French politician who was named in a recent Senate
report and in a letter that Chairman Barton sent to President
Chirac as being closely affiliated with the Oil-for-Food
scandal. Mr. Pasqua was named in the Chalabi produced list as
having been granted oil allocations by Saddam Hussein. Yet in
two recent letters sent to this committee by Mr. Pasqua and in
a transcript of his interview with the staff which are attached
to my opening statement, Mr. Pasqua emphatically denied that he
ever traded in oil, was never the beneficiary of allocations
from Iraq or received any remuneration from Iraqi crude oil
trades.
So what we have here is an unanswered question and
unresolved problem, Mr. Chairman. The list of oil allocations
which cannot be verified suggests Mr. Pasqua's involvement in
this matter, but Mr. Pasqua flatly denies involvement. Mr.
Pasqua encouraged this committee to explore fully the facts and
agreed to open his financial records to the committee. Mr.
Pasqua is either untruthful or his name has been unfairly
tarnished as a result of this matter. We can attempt to dig
more deeply into the Pasqua case to determine who actually
benefited from some of these transactions and how they were
structured, who were the middlemen trading companies, such as
Jenmar that apparently lifted the crude oil in Mr. Pasqua's
name. Can any of these employees associated with Jenmar be
located and interviewed? Where did the proceeds go? Do we have
a money trail?
We can follow the Pasqua allegations from France, Iraq and
Switzerland and to wherever the oil went in and hope to get
enough credible evidence to come to reasonable conclusions. It
would take a long time and a great deal of resources. It may be
important to learn the facts about how these transactions
occurred and who benefited from them. It might be easier and
useful to this Nation to determine how U.S. refiners and other
companies participated and benefited from the sordid schemes of
Saddam Hussein. I would suggest once again that this committee
concentrate its efforts here.
Thank you, Mr. Chairman.
Mr. Whitfield. I recognize the gentleman from Texas, Mr.
Burgess.
Mr. Burgess. Thank you, Mr. Chairman, and thank you for
holding yet again another important hearing on the oil-for-food
situation. It is well known that the United Nations originally
established Oil-for-Food for the noble cause of aiding and
providing for the humanitarian needs for the Iraqi people
trapped under Saddam Hussein's regime. This program was quickly
morphed into a financial scandal of epic proportions. It has
now turned into an international crisis, and I sincerely hope
this committee will continue its oversight regarding this
serious matter.
At our last hearing, we focused on Saddam Hussein's regime
use of oil allocations to accentuate diversions or divisions
within the United Nations Security Council as a means of
undermining sanctions. I look forward to examining these
divisions from the perspective of individuals who have actually
worked within the 661 Committee. Particularly I would like to
discuss if there were divisions among the permanent member
states within the 661 Committee concerning the Oil-for-Food
Program. Also, I would like to examine whether certain
permanent member states resisted remedial efforts to eliminate
many of the abuses of the Oil-for-Food Program perpetrated by
the regime.
I realize that these concerns may have to be further
addressed in the closed session, but I do look forward to
getting to the bottom of this grave issue.
Mr. Chairman, I would just add to what you already said
about this committee not having receiving permission from the
Volcker commission to interview the U.N. oil overseer during
this investigation as well. I think that was unfortunate, and I
hope you will continue to apply the pressure that you can to
bring all of the concerned people before this committee, and I
yield back.
Mr. Whitfield. Thank you, Dr. Burgess. At this time, I
recognize Mr. Inslee of Washington.
Mr. Inslee. Thank you, Mr. Chair. This may be a bit of an
unusual comment, but I want to express comments about our
hearing today and what I think my neighbors would say. I live
in the Holly neighborhood on Bainbridge Island in Washington
State, and one of our sons we have watched grow up in Little
League is going to Baghdad in January. And he is a single
parent of a 10-month old son. And he is shipping out with the
U.S. Army to Baghdad and he is in training now. And I just kind
of think my neighbors might ask some very serious questions
about why we are here today when we are sending my neighbor's
son to war in Baghdad.
I have to question whether the reason we went to war is
because of Saddam's fooling around with the Oil-for-Food
Program. I don't think that is why he is being sent to war. He
is being sent to war because an administration used false
information to start a war that is sending my neighbor's
children to a potential demise in the sand of Iraq. I would be
pleased and I think my neighbors would be more interested as to
how the Federal Government of the United States started a war
based on materially false information, sending our children to
war, than fiddling around with how Saddam stole some oil from
United Nations or Exxon or anybody else.
We ought to be investigating what we now learn from the
Downing Street memos that, according to the British review of
our intelligence, our intelligence was fixed around our policy
rather than the other way around and that our intelligence was
folded, spindled and mutilated leading to a war in which we
have lost 1,700 of our children. And we read in the Downing
Street memos that the President of the United States made a
decision to take this country to war well before, well before
there was any material effort to resolve this matter other than
through armed conflict.
Those are matters worthy of the U.S. Congress
investigating, and I don't blame the chairman for this because
this may not be within his jurisdiction, and I respect the
Chair and whatever decision he makes about this hearing. But
those are the things that the U.S. Congress ought to be
investigating. Our children are not dying because of any
scandal from the Oil-for-Food Program. They are dying because
of materially false information used to invade another
sovereign country.
This is something that we ought to get to the bottom of,
and the only people that had a discussion has been down in the
basement in a nonsanctioned hearing by the U.S. Congress to
find out what happened here. And my neighbors in the Holly
neighborhood would prefer us focusing on a different place. And
I just have to tell you that perhaps I am influenced by the
personal mourning of these people going to war, but I just
think we are looking at the wrong place that the U.S. Congress
ought to be working on.
Mr. Whitfield. Recognize the gentleman from Florida, Mr.
Stearns.
Mr. Stearns. Thank you, Mr. Chairman, and I want to thank
you for holding this hearing. I think this is more than the
gentleman from Washington indicates. This is not just some oil
that was stolen. I think it should be a much investigated
thing. It has relevance here. The war on Iraq does not have
relevance on this oversight subcommittee, it is International
Affairs, and as the gentleman knows, there is no jurisdiction
here with that and it is a separate issue.
The issue of the Oil-for-Food Program has come to the
forefront, and I think it is because of some congressional
investigations, of which this is one in which we have
jurisdiction. Numerous reports have been released, and even as
we speak more investigations are going on. And of course as we
dig deeper and deeper into this scandal, we find it fraught
with fraud and abuse and it is much more widespread than we
thought. Documents released by our full committee demonstrate
the more we know, the worse it gets. And yet we may be just
scratching the surface even with all the information we know,
this wider web of corruption.
The abuse of the Oil-for-Food Program has become
symptomatic of the overall mismanagement at the United Nations.
The United Nations, I believe, needs to be reformed. They once
was a relevant organization. Now I think it has more or less
just become a debating society and it appeases terrorists.
Proliferations of weapons of mass destructions are never looked
at. They are excused almost under the table. They are enabled.
And of course the Oil-for-Food scandal becomes part of that
whole problem with the United Nations.
According to CRS, the Oil-for-Food Program terminated
following the fall of the Saddam Hussein regime. Unless we
stopped Saddam Hussein that Oil-for-Food Program would
continue. However, since the fall of the regime there has been
numerous allegations of mismanagement and abuse and we all know
that Saddam Hussein has manipulated the program to influence
all of these United Nations officials, not only officials but
contractors and politicians, and businessmen in numerous
countries.
So new attention has been focused on Iraq's oil for sale to
neighboring countries that are even outside the control of the
monitoring program itself. Now some of the things the
investigation had revealed, corruption and mismanagement and
contractors who were intimately involved with the program, and
it really calls into question the lack of action on the part of
the United Nations.
Sanction committee members, including the United States,
were to halt Iraq's profitable oil for sales outside of the
program over its 10-year period. According to investigations
conducted by the United States, U.N. and Iraqi officials, the
regime of Saddam Hussein used two distinct illicit methods to
generate funds following the imposition of sanctions on Iraq by
the United Nations Security Council. Iraq illicitly sold oil to
some neighboring countries from 1990 to 2003 in violation of
the U.N. sanctions that predated and remained outside of the
auspices or control of the program. And second, Iraq exploited
loopholes and program regulations to impose a surcharge on
buyers purchasing approved oil shipments and to solicit
kickbacks from suppliers of humanitarian and other civilian
goods purchased with funds from the program's escrow account.
Now some of these illicit funds were used to procure
military supplies and commodities that again were banned under
the U.N. sanctions in the first place. The primary concern of
U.S. officials prior to the fall of Saddam Hussein was that
Iraq was reportedly using illicit revenues to buy prohibited
military and weapons of mass destruction technology. Following
the regime's fall in 2003, allegations have emerged concerning
Saddam Hussein's purported use of his control over oil and
humanitarian goods contracts to simply influence foreign
officials, parties and companies and then go back and reward
individuals and entities perceived to be supportive of Iraq's
position.
As we can see, Mr. Chairman, the U.N. Oil-for-Food Program
lacked proper accountability at the U.N. oversight and thus
caused this massive corruption and fraud. I look forward to our
panel and look forward to hearing your thoughts on what can be
done to ensure other U.N. programs do not suffer the same fate.
Mr. Whitfield. I recognize the gentlelady from Tennessee,
Mrs. Blackburn, for her opening statement.
Mrs. Blackburn. Thank you, Mr. Chairman, and I would like
to thank the chairman for holding this hearing today and I
would like to thank the full committee chairman for allowing us
to have this hearing today.
As this subcommittee goes about and continues its
investigation into the Oil-for-Food Program, I hope that we are
going to be able to expose all the parties who have
contributed, participated and instituted the illegal and
questionable activities conducted as a part of this program. I
think that for many of us we worry that it is symptomatic of
other programs there at the U.N. The Oil-for-Food Program is
just one example of why this body, the House, passed the U.N.
Reform Act last week and why we think it is so important to
require programs to become accountable, to have financial
disclosures, to ask the U.N. to look at the way they manage
their operations and their programs, and we will be watching.
We will be watching very closely. We hope that there is
progress made.
We must hold the U.N. and its employees and members
accountable for past mismanagement and confiscation and the use
of our dues. You know, the U.S. contributes more than $400
million in dues and then spends billions on voluntary aid and
military aid peacekeeping. My constituents are quite concerned
about this. They are very concerned. They are very concerned
about the conduct. They are very concerned about the lack of
desire, apparent desire, for financial accountability, and I
hope that this hearing is another positive step toward holding
these employees accountable.
I want to welcome and thank our witness, and Mr. Chairman,
again I thank you for agreeing to hold the hearing and I yield
back.
Mr. Whitfield. Thank you very much. At this time I
recognize the chairman of the full committee, Mr. Barton of
Texas.
Chairman Barton. Thank you, Mr. Chairman. I want to say
several things in this opening statement and I may take a
little bit longer than the 5 minutes. First of all, I want to
respond to my good friend Mr. Inslee's opening statement about
why we are doing this hearing.
The Energy and Commerce Committee doesn't have total
jurisdiction over the Federal Government nor even the United
Nations, but it does have some jurisdiction over energy policy,
and it is my clear belief that Saddam Hussein used the oil,
which is the energy of the Iraqi people, to keep himself in
power. It is my clear belief that Saddam Hussein used the
auspices of the United Nations to abuse the humanitarian intent
of the Oil-for-Food Program, which all U.S. citizens support
that we should provide food and clothing and medicines to
alleviate suffering not only in Iraq but anywhere in the world.
Saddam Hussein used our humanitarian instinct in a positive way
from our behalf, in a very negative way for his behalf. And as
chairman of the full committee, if I have any authority and any
ability to bring that corruption to the surface and, at a
minimum, prevent it from being done in the future, I am going
to do that, and I make no apologies for it.
I think these hearings--and I would tell my friends on the
minority side, this is the committee that did the first hearing
on the Oil-for-Food scandal, not in the Bush administration but
back in the Clinton administration when the Clinton
administration strongly defended the program. We are the first
committee that brought the corruption in the program to light,
you know, 6 years ago.
These hearings might result in some of the money that has
been ripped off being actually recovered and used for good
purposes for the Iraqi people today. These hearings might
result in some reforms at the United Nations today. These
hearings should definitely result in future humanitarian
programs done under the auspices of the United Nations being
run properly and not misused as the Oil-for-Food Program was
misused or in some cases used for illegal or contrary purposes.
So that is why we are doing these hearings. That is the job
of the U.S. Congress, to be an oversight watchdog for the
American people. And unfortunately in today's world, sometimes
it is the American people that almost unilaterally have to
stand for truth and justice. I wish that weren't the case, but
sometimes it appears it is the case.
The United Nations has become a forum for anti-Americanism.
The United Nations is not the United Nations that was intended
in 1945 when Eleanor Roosevelt was the delegate from the United
States that went to the initial meeting in San Francisco where
the United Nations was created. Her United Nations is a far cry
from the United Nations of today. And what little jurisdiction
that the Energy and Commerce Committee has over these kinds of
programs that can be used to fund the public good, so be it. I
am for that.
And I want to speak specifically to this hearing. This
hearing today is to focus on the aspects of the 661 Committee,
which was the oversight committee or the management committee
of the Oil-for-Food Program. The United States is a member of
the 661 Committee, and United States representatives, in my
opinion, generally tried to actually use the 661 Committee to
operate the Oil-for-Food Program in an appropriate way.
Unfortunately, they were not allowed to do that because some
members of the 661 Committee felt it was the job of that
committee to be a coverup for Saddam Hussein.
Now we have one specific member who was a staff member on
the 661 Committee, a gentleman by the name of Michel Tellings.
He is a United States citizen. He was interviewed by committee
staff on two occasions, once by telephone and once in person,
and he wanted to come and testify before this committee hearing
today. But he had to sign a confidentiality agreement because
he is also working for the Volcker commission. So my Staff
Director, Bud Albright, called Paul Volcker and said would you
let Mr. Tellings waive his confidentiality agreement? Would you
let him testify before this subcommittee today? And Mr. Volcker
said no. Wouldn't let him. So he is not here.
Now we could subpoena Mr. Tellings because he is a United
States citizen, or I am told he is. We have chosen not to do
that because we use the subpoena authority of the Congress very
sparingly. I don't want to be a committee chairman who coerces
testimony when it has been the tradition by Mr. Dingell before
me and Mr. Tauzin and Mr. Bliley and I would assume Staggers
that we only use the subpoena authority when it was absolutely
necessary. But we have a U.S. citizen who could come before us
today and he has not been allowed to because Paul Volcker
doesn't want him to, and I say shame on you, Paul Volcker. If
you are really trying to get truth and justice, you should
allow everybody who can provide information to this committee,
to come and do so.
I have just been told that Mr. Tellings is not a U.S.
citizen. So we could not subpoena him. We would have to have
the permission of Mr. Volcker to have him come. We are not
going to have a full hearing today as we would have otherwise.
But when we get into the question period, I am told it is
appropriate to put in the testimony some of the information
that we got from Mr. Tellings in the staff interviews.
Mr. Chairman, I appreciate you holding this hearing. We are
going to try to get the ball moving forward, and what we are
doing and the other committees are doing and with the U.N.
reform bill that passed the House last week, we may yet get a
U.N. that does cooperate and does stand for the ideals we hoped
it would stand for when we created it at the end of World War
II.
With that, I yield back.
[The prepared statement of Hon. Joe Barton follows:]
Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy
and Commerce
Thank you Chairman Whitfield. This morning our Committee continues
its careful scrutiny of the United Nations Oil-for-Food Program.
During last month's Committee oversight hearing on the Program, I
mentioned that the U.N.'s ``661 Committee'' was paralyzed by
bureaucratic infighting while Saddam Hussein's deception unfolded, thus
crippling the Program and ensuring that it ended in disgrace.
Today, we will hear testimony and examine documents which
demonstrate that even when the U.N.'s own ``oil overseers'' identified
illicit activities, and even when the United States provided the 661
Committee with clear evidence of abuse and manipulation, the 661
Committee could not or would not act. When the United States or the
United Kingdom pressed for action based upon this convincing evidence,
other members would demand more proof or more time to consider the
issue, or would only agree to issue ambivalent and toothless public
statements.
The failure of the 661 Committee to stop Iraq's deceit gave Saddam
tacit approval to rebuild the police state that allowed him to
intimidate patriots inside Iraq and to threaten his neighbors.
The 661 Committee's infighting and the self-interested delay
tactics by member nations expose a critical weakness in today's United
Nations. That is why the House passed legislation last week that will
demand meaningful reform, and will withhold a substantial portion of
this nation's dues until that reform occurs. I enthusiastically support
that bill, and added an amendment specifically dealing with the Oil-
For-Food tragedy. I only wish the underlying bill and, therefore, my
amendment, were stronger.
My amendment will require an investigation of the Oil for Food
Program from top to bottom. Not only will that investigation be
required to examine every aspect of Saddam's abuse of the Program, but
also: every aspect of the U.N.'s involvement with and management of the
Program, every aspect of the Volcker Commission's investigation, and
finally, the extent to which the U.N. has cooperated with Congress--or
perhaps more accurately, failed to cooperate.
On the failure to cooperate, this very hearing is a perfect
example. We invited a U.N. oil overseer to today's hearing. He was
available and wanted to testify. Yet the U.N. and the Volcker
Commission refused to waive his confidentiality agreement and allow him
to appear before us today. My Staff Director contacted Mr. Volcker
directly and asked him to reconsider, and he refused. Let me just say
that this is unacceptable, and does not support the U.N.'s claims that
its operations are transparent or that it wants to get the bottom of
this scandal.
This is why the U.N. must be reformed, and I hope the Hyde bill
will jar the UN bureaucracy and begin to facilitate honest reform.
Without change, the American people will never trust the United
Nations.
Thank you, Mr. Chairman. I yield back the remainder of my time.
Mr. Whitfield. At this time, I recognize the gentleman from
New Hampshire.
Mr. Bass. I waive.
Mr. Whitfield. At this point, we will swear in our witness
for the morning. Mr. Schweich, you are aware that the committee
is holding an investigative hearing and when doing so we have
the practice of taking under oath. And do you have any
objection to testifying under oath this morning?
Mr. Schweich. No objection.
Mr. Whitfield. Now, it is my understanding that you have
with you today Mr. Hillman and Mr. Young. And while the
majority of the questions are going to be asked of you, I do
know that there has been some interest in asking some questions
of Mr. Hillman and Mr. Young. Do you mind if we bring them up
and ask them to be sworn in at this time as well? I assume you
don't want to be represented by counsel.
[Witnesses sworn.]
Mr. Whitfield. You are now sworn in and you have 5 minutes
for your opening statement.
TESTIMONY OF THOMAS A. SCHWEICH, CHIEF OF STAFF, UNITED STATES
MISSION TO THE UNITED NATIONS, U.S. DEPARTMENT OF STATE;
ACCOMPANIED BY ANDREW S. HILLMAN, DIRECTOR OF THE SANCTIONS
UNIT, UNITED STATES MISSION TO THE UNITED NATIONS, U.S.
DEPARTMENT OF STATE; AND EUGENE S. YOUNG, U.S. DEPARTMENT OF
STATE
Mr. Schweich. Mr. Chairman and distinguished members of the
committee, I am pleased to appear before you today to assist in
your ongoing assessment of the multilateral sanctions regime
previously imposed on the Iraqi Government from 1990 to 2003
and your focus on the U.N. Oil-for-Food Program which was
established by the U.N. Security Council to alleviate the
humanitarian consequences of these sanctions on the people of
Iraq.
My oral statement is intended to complement and amplify the
testimony presented before this committee on May 16 by my
Department of State colleague. I have tried to focus my remarks
on the works of Iraq's 661 Committee, problems associated with
the pricing of Iraqi oil exports, oil smuggling, flights, ferry
service and multiple efforts in which we and the British
engaged during the life of the sanctions regime on Iraq to
compel member state compliance. In addition, I stand ready to
respond to questions that you and other committee members may
pose on these and other related issues concerning sanctions on
Iraq and the Oil-for-Food Program.
Mr. Chairman, you and the committee members will recall the
Security Council, through the adoption of Resolution 661, acted
to impose comprehensive trade and financial sanctions against
the former Iraqi regime 4 days after Iraq invaded Kuwait in
August 1990. The U.S. Government supported this measure as part
of a larger strategy to force Iraq to cease hostilities and to
withdraw its forces from Kuwait.
At the end of the Gulf War in 1991, the Security Council
adopted Resolution 687 that extended comprehensive sanctions on
Iraq to ensure that Saddam Hussein complied with major
provisions of the cease-fire. By retaining the sanctions, the
Council also sought to deny Iraq the capability of rearming or
reconstituting its weapons of mass destruction and other
military programs.
Mr. Chairman, the sanctions were not anticipated to remain
in place for more than a year or 2 before Saddam complied.
However, we now know that Saddam chose not to comply. By 1995,
in the wake of deteriorating humanitarian conditions in Iraq,
many in the international community called for an end to the
restrictions, reflecting concern that the impact of sanctions
was being borne by innocent Iraqi people.
As my colleague Mr. Anderson noted in his testimony on May
16, it was against this backdrop that the Security Council
adopted Resolution 986 in April 1995, thereby establishing the
Oil-for-Food Program. The program was intended to alleviate the
serious humanitarian crisis under way in Iraq while maintaining
comprehensive restrictive measures to deny Saddam access to
items that he could then use to pose a threat to the
international community. The Sanctions Committee that was
established under Resolution 661, known as the 661 Committee,
was tasked by the Council with monitoring implementation of the
overall sanctions regime on Iraq and after the Council's
adoption of Resolution 986 with monitoring implementation of
the Oil-for-Food Program.
In addition, the 661 Committee, through each of its
members, also was responsible for reviewing humanitarian
contracts, oil spare parts contracts and oil pricing submitted
on a regular basis by Iraq's State Oil Marketing Organization
for approval. The United States delegation was an active
participant in all such reviews.
Mr. Chairman, the 661 Committee, like all Security Council
sanctions committees, operated as a subsidiary body of the
Security Council. However, unlike the Council, decisions were
made on a consensus basis, requiring agreement of all parties
and all members. The efforts of the U.S. and United Kingdom to
counter or address noncompliance often were negated by other
members' desires to ease sanctions on Iraq. The fundamental
political disagreements between members over the Council's
imposition of comprehensive sanctions often was exacerbated by
the actions of key member states in advancing self-serving
national economic objectives. The atmosphere in the committee,
particularly the program involved in the late 1990's, became
increasingly contentious.
In retrospect, although a consensus rule often stymied
progress in the committee, that same consensus rule helped the
U.S. Achieve its objectives in a number of critical ways.
In previous testimony before other congressional committees
investigating Oil-for-Food matters, I have tried to delineate
the various ways in which Saddam Hussein attempted to undermine
and subvert the comprehensive sanctions regime imposed under
Resolution 661. Specifically, I referred to what I describe as
a pull-down menu of manipulative mechanisms that Saddam
employed to circumvent the sanctions. They included surcharges,
topping off of oil loadings, influence peddling, product
substitution, product diversions, phony service contracts,
phantom spare parts, shell corporations, illusory performance
bonds, hidden bank accounts and plain old-fashioned bribery and
kickbacks to the tune of millions of dollars.
Saddam cleverly exploited these avenues for noncompliance
by granting oil and humanitarian supply contracts to those
willing to bend the rules in Iraq's favor. So when the United
States and United Kingdom attempted to institute an oil pricing
policy in the 661 Committee, a policy which came to be known as
retroactive pricing, that was aimed at reducing or eliminating
unauthorized excess charges being imposed by the Iraqi
Government on oil exports contracts, certain 661 Committee
members then strongly resisted our efforts. In that instance,
we were able to use the consensus rule to our advantage to
withhold our consent to oil prices proposed at the beginning of
each month by Iraq's State Oil Marketing Organization until we
were able at the end of the month to determine whether the
proposed prices reflected fair market value in comparison with
other comparable crude oils. By all accounts, our strategy
succeeded in greatly reducing oil premiums from 50 cents per
barrel to about 5 cents per barrel, thereby reducing the
involvement of oil middlemen who, according to the overseers,
contributed nothing to Iraq's oil export efforts under the Oil-
for-Food Program.
Mr. Chairman, 661 Committee members with strong economic
interests in Iraq used numerous tactics, both procedural and
substantive, to delay or oppose our attempts in coordination
with the British to achieve widespread compliance with the
sanctions.
The combined efforts of Saddam to evade sanctions coupled
with the willing acquiescence of certain governments to permit
unauthorized deviation from the measures made it increasingly
difficult for the United States and United Kingdom to maintain
the effectiveness of the restrictions despite our best efforts.
Much of what the U.S. could and could not achieve with regard
to monitoring the Oil-for-Food Program and implementing the
sanctions was directly related to the political situation
surrounding the contentious issue of Iraq and the Security
Council and the 661 Committee. Our efforts to keep the
comprehensive sanctions regime in place for as long as we did
from August 1990 until May 2003, despite its inevitable
weakening, far exceeded the expectations of policymakers at the
time the restrictions were first imposed.
In the time remaining, I would like to cite three examples
of the types of problems we and the British faced in our
dealings with the 661 Committee. One situation we attempted to
correct, only to be met with stiff resistance from other
committee members, involved the unauthorized flow of oil
through the Iraq-Syria pipeline, a violation we repeatedly
criticized both in our public statements and in our discussions
with other Security Council and 661 Committee members. During
an October 2002 meeting of the 661 Committee, we requested an
explanation as to the apparent discrepancies between the amount
of oil Syria produced domestically, the amount consumed
domestically, and the total annual volume of oil that Syria
exported. The Syrian representative, a member at the time of
the 661 Committee, supported from other delegations, questioned
the reliability of the figures we quoted, which we had drawn
from publicly available oil industry publications. Another
delegation seeking to deflect focus from Syria suggested the
committee's work would be more effective if alleged sanctions
violations were not considered singularly and in isolation but
were viewed in the relative context of other reports of
noncompliance.
A second example to which I would draw your attention
involved the use of ferries traveling from the United Arab
Emirates to and from Iraq, ostensibly authorized only to
transport passengers and their immediate possessions and not
commercial goods. In a series of 661 Committee meetings, we and
the British objected to giving permission to the governments of
Bahrain, Oman and Qatar to initiate their own ferry service to
Iraq unless and until the illegal practices of the ferries
operating from UAE first were stopped. We specifically took
such action because several successive briefings to the
committee by the Commander of the multinational Maritime
Interception Force, which I will refer to as the MIF, operating
in the Gulf, confirmed with photographic evidence that
commercial goods and supplies were being loaded onto ferries in
the UAE in direct violation of previously agreed committee
rules governing ferry service. Other 661 Committee members
severely criticized the U.S. and British for linking our
decision to block committee approval of ferry service from
other Gulf states to the ongoing problems associated with ferry
service from the UAE to Iraq. However, we maintained our
opposition to the new ferry service and required that steps be
taken to compel the government of the UAE to exercise greater
control over ferries departing from its ports to Iraq.
A third issue that merits your consideration, Mr. Chairman,
on which I would offer brief comments, concerns flights to Iraq
during the time the multilateral sanctions were in force. It
was the consistent position of the United States, with support
from the United Kingdom, that Resolution 661 prohibited flights
to and from Iraq unless they were carrying food, medicine or
other essential humanitarian needs and that, as per paragraph 4
of Resolution 670, which the Security Council adopted on
September 25, 1990, the 661 Committee authorized each specific
flight on a case-by-case basis.
A number of Security Council and 661 Committee members,
among them France, China and Russia, took the position that
member states only were obligated to provide 661 Committee
members with prior written notification. Unlike other 661
Committee members, with the exception of the British, the
United States delegation reviewed each flight request,
including cargo lists and flight manifests, before granting its
approval. Our aim was to prevent Saddam from getting access to
possible dual use and weapons of mass destruction items.
Finally, Mr. Chairman, concerning the oil voucher program
established by Saddam allegedly to award individual groups and
entities who helped the Iraqi regime, I would like to offer two
brief observations: First, knowing now of the existence of such
a program, in retrospect, possibly helps to explain why certain
members of the Security Council and the 661 Committee fought so
strenuously with the U.S. and British to abandon our
retroactive oil pricing policy to release our holds on what
amounted in the spring of 2002 to $5.4 billion in humanitarian
goods contracts and generally to ease the restrictive measures
against Iraq; and had we and the British known at the time of
Saddam's effort to influence individual groups and other
governments by means of an institutionalized secret oil
allocation program, we likely would have considered other
strategies to address sanctions, noncompliance and the apparent
influence peddling in which Saddam was extensively engaged.
I have limited the length of my formal statement in order
to permit additional time for questions for you and the other
committee members. I know you are aware there are some
limitations as to what I can say in an open briefing. I will
attempt to answer all of your questions within the confines of
U.S. Law limiting public dissemination of classified material.
Should you and the other committee members seek additional
information pertaining to classified material that might
require a closed session, I stand ready to provide you whatever
details in whatever form you may desire.
Mr. Chairman, I thank you for the opportunity to appear
before you today, and I am happy to answer any questions.
[The prepared statement of Thomas A. Schweich follows:]
Prepared Statement of Thomas A. Schweich, Chief of Staff, U.S. Mission
to the United Nations, U.S. Department of State
Mr. Chairman, distinguished members of the Committee, I am pleased
to appear before you today to assist in your ongoing assessment of the
multilateral sanctions regime previously imposed on the former Iraqi
Government from 1990 to 2003, and, specifically, your focus on the UN
Oil-for-Food (OFF) Program which was established by the UN Security
Council to alleviate the humanitarian consequences of these sanctions
on the people of Iraq.
Mr. Chairman, my brief oral statement is intended to complement and
amplify the testimony presented before this Committee on May 16 by my
Department of State colleague, Gerald Anderson. I have tried to focus
my remarks on the work of the Iraq Sanctions ``661'' Committee,
problems associated with the pricing of Iraqi oil exports, oil
smuggling, flights, ferry service, and the multiple efforts in which we
and the British engaged during the life of the sanctions regime on Iraq
to compel Member State compliance. In addition, Mr. Chairman, I stand
ready to respond to questions that you and other Committee members may
pose on these and other related issues concerning sanctions on Iraq and
the Oil-for-Food Program.
Mr. Chairman, you and the other Committee members will recall that
the Security Council, through the adoption of Resolution 661, acted to
impose comprehensive trade and financial sanctions against the former
Iraqi regime four days after Iraq invaded Kuwait in early August 1990.
The United States government supported this measure as part of a larger
strategy to force Iraq to cease hostilities and to withdraw its forces
from Kuwait.
At the end of the Gulf War in 1991, the Security Council adopted
Resolution 687 that extended comprehensive sanctions on Iraq to ensure
that Saddam Hussein complied with the major provisions of the
ceasefire. By retaining the sanctions, the Council also sought to deny
Iraq the capability of rearming or constituting its weapons of mass
destruction and other military programs.
Mr. Chairman, the sanctions were not anticipated to remain in place
for more than a year or two before Saddam complied. However, we now
know that Saddam chose not to comply. By 1995, in the wake of
deteriorating humanitarian conditions in Iraq, many in the
international community called for an end to the restrictions,
reflecting concern that the impact of the sanctions was being borne
primarily by the innocent Iraqi civilian population.
As my colleague, Mr. Anderson, noted in his testimony on May 16, it
was against this backdrop that the Security Council adopted Resolution
986 in April 1995, thereby establishing the Oil-for-Food (OFF) Program.
The Program was intended to alleviate the serious humanitarian crisis
underway in Iraq while maintaining comprehensive restrictive measures
to deny Saddam access to items that he could use to again pose a threat
to the international community.
The sanctions committee that was established under Resolution 661,
known as the ``661 Committee,'' was tasked by the Council with
monitoring implementation of the overall sanctions regime on Iraq, and,
after the Council's adoption of Resolution 986, with monitoring
implementation of the Oil-for-Food Program.
In addition, the 661 Committee, through each of its members, also
was responsible for reviewing humanitarian contracts, oil spare parts
contracts, and oil pricing submitted on a regular basis by Iraq's State
Oil Marketing Organization (SOMO) for approval. The United States
delegation was an active participant in all such reviews.
Mr. Chairman, the 661 Committee, like all Security Council
sanctions committees, operated as a subsidiary body of the Security
Council. However, unlike the Council, decisions were made on a
consensus basis, requiring the agreement of all parties and members.
The efforts of the U.S. and the United Kingdom to counter or address
non-compliance often were negated by other members' desires to ease
sanctions on Iraq. The fundamental political disagreement between
members over the Council's imposition of comprehensive sanctions often
was exacerbated by the actions of certain key Member States in
advancing self-serving national economic objectives. The atmosphere in
the Committee, particularly as the Program evolved during the late
1990s, became increasingly contentious.
In retrospect, although the consensus rule often stymied progress
in the Committee, that same consensus rule helped the U.S. achieve its
objectives in a number of critical ways.
In previous testimony before other Congressional committees
investigating Oil-for-Food matters, I have tried to delineate the
various ways in which Saddam Hussein attempted to undermine and subvert
the comprehensive sanctions imposed under Resolution 661 (1990).
Specifically, I referred to what I described as a ``pull-down menu'' of
manipulative mechanisms that Saddam employed to circumvent the
sanctions. These included surcharges, the topping off of oil loadings,
influence peddling, product substitution, product diversion, phony
service contracts, phantom spare parts, shell corporations, illusory
performance bonds, hidden bank accounts, and plain old-fashioned
bribery and kickbacks involving millions of dollars.
Saddam cleverly exploited these avenues for non-compliance by
granting oil and humanitarian supply contracts to those willing to bend
the rules in Iraq's favor. So when, for example the United States and
the United Kingdom attempted to institute an oil pricing policy in the
661 Committee, a policy which became known as ``retroactive pricing,''
that was aimed at reducing or eliminating unauthorized excess charges
being imposed by the Iraqi Government on oil export contracts, certain
661 Committee members strongly resisted our efforts. In that instance,
we were able to use the consensus rule of the 661 Committee to our
advantage to withhold our consent to oil prices proposed at the
beginning of each month by Iraq's State Oil Marketing Organization
(SOMO), until we were able at the end of the month to determine whether
the proposed prices reflected ``fair market value'' in comparison with
other comparable crude oils. By all accounts, our strategy succeeded in
greatly reducing oil surcharges from fifty cents per barrel to about
five cents per barrel, thereby reducing the involvement of oil
middlemen who, according to the UN Oil Overseers, contributed nothing
to Iraq's oil export efforts under the Oil-for-Food Program.
Mr. Chairman, 661 Committee members with strong economic interests
in Iraq used numerous tactics, both procedural and substantive, to
delay or oppose our attempts, in coordination with the British, to
achieve widespread compliance with the sanctions.
The combined efforts by Saddam to evade sanctions, coupled with the
willing acquiescence of certain governments to permit unauthorized
deviation from the measures, made it increasingly difficult for the
United States and the United Kingdom to maintain the effectiveness of
the restrictions, despite our best efforts. Much of what the U.S. could
and could not achieve with regard to monitoring the Oil-for-Food
Program and implementing the sanctions was directly related to the
political situation surrounding the contentious issue of Iraq in the
Security Council and in the 661 Committee. Our efforts to keep the
comprehensive sanctions regime in place for as long as we did, from
August 1990 until May 2003, despite its inevitable weakening, far
exceeded the expectations of policymakers at the time the restrictions
first were imposed.
Mr. Chairman, in the time remaining for my prepared testimony, I
would like to cite three examples of the types of problems we and the
British faced in our dealings in the 661 Committee. One situation we
attempted to correct, only to be met with stiff resistance from other
Committee members, involved the unauthorized flow of oil through the
Iraq-Syria pipeline, a violation we repeatedly criticized both in our
public statements and in our discussions with other Security Council
and 661 Committee members. During an October 2002 meeting of the 661
Committee, we requested an explanation as to the apparent discrepancies
between the amount of oil Syria produced domestically, the amount it
consumed domestically, and the total annual volume of oil that Syria
exported. The Syrian representative, a member at the time of the 661
Committee, with support from other delegations, questioned the
reliability of the figures we quoted, which we had drawn from publicly
available oil industry publications. Another delegation, seeking to
deflect the focus on Syria, suggested the Committee's work would be
more effective if alleged sanctions violations were not considered
singularly and in isolation, but rather were viewed in the relative
context of other reports of non-compliance.
A second example to which I would draw your attention involved the
use of ferries traveling from the United Arab Emirates to and from
Iraq, ostensibly authorized only to transport passengers and their
immediate possessions, not commercial goods. In a series of 661
Committee meetings, we and the British repeatedly objected to giving
permission to the governments of Bahrain, Oman and Qatar to initiate
their own ferry service to Iraq unless and until the illegal practices
of the ferries operating from the UAE first were stopped. We
specifically took such action because several successive briefings to
Committee members by the Commander of the Multinational Maritime
Interception Force (MIF), operating in the Persian Gulf, confirmed with
photographic evidence that commercial goods and supplies were being
loaded onto ferries in the UAE in direct violation of previously agreed
Committee rules governing ferry service. Other 661 Committee members
severely criticized us and the British for linking our decision to
block Committee approval of ferry service from other Gulf States to the
ongoing problems associated with ferry service from the UAE to Iraq.
However, we maintained our opposition to new ferry service and
requested that steps be taken to compel the government of the UAE to
exercise greater control over ferries departing from its ports to Iraq.
A third issue that merits your consideration, and on which I would
offer brief comments, concerns flights to Iraq during the time
multilateral sanctions were in force. It was the consistent position of
the United States, with support from the United Kingdom, that
Resolution 661 prohibited flights to and from Iraq, unless they were
carrying food, medicine, or other essential humanitarian needs, and
that, as per paragraph 4 of Resolution 670, which the Security Council
adopted on September 25, 1990, the 661 Committee authorized each
specific flight on a case-by-case basis.
A number of Security Council and 661 Committee members, among them
France, Russia and China, took the position that Member States only
were obligated to provide the 661 Committee with prior written
notification. Unlike other 661 Committee members, with the exception of
the British, the United States delegation reviewed each flight request,
including cargo lists and flight manifests, before granting its
approval. Our aim was to prevent Saddam from gaining access to possible
dual-use and WMD items.
Finally, Mr. Chairman, concerning the oil voucher program
established by Saddam allegedly to reward those individuals, groups,
and entities who had helped the Iraqi regime, I would like to offer two
observations:
a) knowing now of the existence of such a program, in retrospect,
possibly helps to explain why certain members of the Security Council
and the 661 Committee fought so strenuously with us and the British to
abandon our retroactive oil pricing policy, to release our holds on
what amounted by the Spring of 2002 to 5.4 billion dollars in
humanitarian goods contracts, and generally to ease the restrictive
measures against Iraq; and,
b) had we and the British known at the time of Saddam's efforts to
influence individuals, groups, and other governments by means of an
institutionalized, secret oil allocation program, we likely would have
considered other strategies to address sanctions non-compliance and the
apparent influence-peddling in which Saddam was extensively engaged.
Mr. Chairman, I have intentionally limited the length of my formal
statement in order to permit additional time for questions from you and
the other Committee members. I know you are aware that there are some
limitations as to what I can say in an open briefing. I will attempt to
answer all your questions within the confines of U.S. law limiting
public dissemination of classified material. Should you and other
Committee members seek additional information pertaining to classified
material that might require a closed hearing, I stand ready to provide
you with whatever details you may desire.
Mr. Chairman, thank you for the opportunity of appearing before the
Committee today. I am happy to answer your questions.
Mr. Whitfield. Thank you. It is our intention to go into
executive session after everyone has had an opportunity to ask
questions.
First of all, how long have you been the U.N. Chief of
Staff?
Mr. Schweich. Mr. Chairman, 1 year.
Mr. Whitfield. And Resolution 986 was passed in April 1995
and that established the Oil-for-Food Program, is that correct?
Mr. Schweich. That's correct, Mr. Chairman.
Mr. Whitfield. When did the U.S. first become aware that
Iraq was generating illegal surcharges on oil contracts under
the program?
Mr. Schweich. There were rumors in the summer of 2000, but
they gained a critical mass around November of 2000.
Mr. Whitfield. At that time how much of a premium were the
purchasers making on each barrel of Iraqi oil sold under the
program?
Mr. Schweich. It varied substantially but the premium
varied from 20 to 70 cents per barrel, with the average being
closer to 35 to 55 cents per barrel.
Mr. Whitfield. What was typical in the oil industry?
Mr. Schweich. 5 cents per barrel.
Mr. Whitfield. So that is quite a spread there. Did the
U.N. oil overseers consider these premiums to be excessive?
Mr. Schweich. Yes, they did.
Mr. Whitfield. And how were these oil purchasers under the
program able to obtain such huge premiums?
Mr. Schweich. The arrangement for pricing was made with the
oil overseers in connection with the oil organization in Iraq
and they would try to set prices very low so that there would
be an excessive premium and charge a kickback or a surcharge.
Mr. Whitfield. So we are clear, these excessive premiums
are monies that should have gone into the Oil-for-Food Program
to assist the Iraqi people, is that right?
Mr. Schweich. Yes.
Mr. Whitfield. When the U.S. first learned of these
excessive programs, what steps did it take to put a stop to the
premiums and when did it take these initials steps?
Mr. Schweich. I have put together a brief chronology. In
December of 2000, very soon after we first became aware of the
excessive premium and the surcharges in particular, at the
United States' request and with the support of the United
Kingdom, we requested that the oil overseers issue a letter
saying they should not pay a surcharge and they should be very
careful and that it was illegal and contrary to U.N.
resolutions.
That was the first step. There was some resistance from
some countries, but we did get that letter out. At the same
time, the Office of Foreign Assets Control in the Treasury
Department issued a similar letter saying they should not pay a
surcharge. That was the first activity that occurred.
Then in February of 2001, the United States sent a letter
to the 661 Committee Chair, I think it was Ambassador Colby at
the time, asking for action against the surcharges and for the
oil overseers to issue a report on the surcharges. They had
gone out to the field and already verified that the surcharges
existed.
In March 2001, the U.S. proposed a very specific set of
measures to the 661 Committee to combat the surcharges. They
included more frequent pricing, mandatory lifting requirements,
registration fees, contract clauses against the surcharge and
related certifications to individual oil purchasers to not pay
the surcharge and then a review by all the countries that were
providing lists of companies that were authorized to lift oil
of those companies, including proof of their creditworthiness,
proof of previous involvement in oil trading, involvement in
trade organizations, other things to establish the bona fides
of the companies that they were legitimate oil companies.
From March to October 2001, there were over 35 661
Committee meetings and Security council meetings in which the
United States aggressively asked the 661 Committee and the
Security Council to take action against surcharges. So there
was a very aggressive pattern in the United States and United
Kingdom saying that we cannot allow these surcharges to
continue, that is money right out of the pockets of the Iraqi
people and going right to Saddam Hussein's palaces. There was
tremendous resistance by other countries that I'm happy to
discuss with you at any time.
Finally, because of the lack of progress and success in
getting any sort of revision to the pricing policy or any sort
of activity to increase the quality of the people or companies
that were lifting the oil, we finally said that we ought to
implement a policy of pricing the oil, first every 10 or 15
days and, when no one agreed to that, just retroactively.
By the fall of 2001, the United States and U.K. Were using
the consensus rule to our advantage. Instead of having the oil
priced at the beginning of the month, we waited until the end
of the month to approve the pricing so it could be established
very close to the market rate, and that prevented excessive
premium, which meant that no one had the money to pay a
surcharge. And that was a very effective mechanism, strongly
resisted by other Security Council members because it was
effectively unilateral action by the U.S. and U.K. And there
was nothing else that any other country could do about it
because of the consensus rule. And that had a positive effect
on reducing the premium.
At the same time, the State Department also met with U.S.
oil lifters, reminding them not to pay surcharges and insisting
the contract clauses were put in their contracts indicating no
surcharge had been paid. That is a quick summary.
Mr. Whitfield. Did the U.S. communicate to its principal
oil companies that these surcharges were illegal as well?
Mr. Schweich. Yes, in at least two letters and also in
individual meetings with those companies.
Mr. Whitfield. You submitted a formal letter to the 661
Committee saying that this was taking place and steps needed to
be taken to stop it?
Mr. Schweich. That's correct. It was done several times.
Mr. Whitfield. You said more than 40 attempts or somewhere
in that neighborhood, attempts were made to correct the
situation, and was Great Britain the only country that joined
the U.S. in that effort?
Mr. Schweich. No. I think the Netherlands sometimes
supported us and a couple of the oil overseers actually
supported us as well. But by and large it was the U.S. and U.K.
Mr. Whitfield. But you were able to make some significant
progress by going to the end of the month review of the
pricing, is that correct?
Mr. Schweich. That's correct. It drastically reduced the
ability of companies to take advantage of the disparity between
the oil price and the--the market price and the contract price.
Therefore there was less money available to pay the surcharge
that Saddam Hussein was demanding.
Mr. Whitfield. Do you know whether other countries on the
661 Committee took similar steps that the U.S. took in
notifying various entities about the illegality of what was
going on?
Mr. Whitfield. Other countries initially acquiesced in the
oil overseers sending letters to all the companies that were
authorized to lift oil saying they shouldn't pay a surcharge. I
don't know of any direct efforts that were made by other
countries, but they did permit the overseers to send the letter
early in the process.
Mr. Whitfield. What was the primary argument for those
countries that were not cooperating with Great Britain and the
U.S.? What was their primary argument as to why they were not
concerned about this?
Mr. Schweich. They had a variety of tactics that they used.
The principal one was lack of proof of the surcharges. That was
a common statement that the Russians made. You have interviewed
a few people, but how do we know anybody is paying these
surcharges?
Mr. Whitfield. Was there adequate proof of surcharges?
Mr. Schweich. There was substantial proof. The oil
overseers interviewed many lifters of oil who didn't want to
pay the surcharge who were saying look, they are trying to make
us pay the surcharge and we don't want to do it. We felt there
was very, very strong evidence, and in retrospect we were
correct about that.
Mr. Whitfield. But Russia was one country that specifically
said there was no proof?
Mr. Schweich. They said there was inadequate proof. They
said it was up to individual countries to determine how this
should be done. They claimed it was outside the scope or
authority of the 661 Committee to get involved in the oil
pricing market. They said coming up with standards of conduct
would be very difficult and they denied that the middlemen--or
middlemen said these were legitimate companies when they were
proved not to be.
Mr. Whitfield. Did the oil overseers subsequently make any
recommendation as to how the 661 Committee could reduce these
excessive oil premiums?
Mr. Schweich. They listened very attentively and came
around to our side. In March 2002, they issued a report. They
recommended two basic things, which is consistent with what I
just said, more stringent selection of contract holders and
measures to set the price closer to market value. And that's
pretty much what we have been advocating.
Mr. Whitfield. But it did require unanimous agreement of
all members to take action?
Mr. Schweich. We simply withheld our consent to the price
that had been set by the oil overseers until we had a chance to
see it was a good price.
Mr. Whitfield. I have heard some critics of the U.S. say
that the U.S. delayed a lot of so-called dual use contracts but
they did nothing as far as stopping any other kinds of
contracts. How would you respond to that?
Mr. Schweich. This is an argument I heard with respect to
the humanitarian goods, not the oil but the food and the other
humanitarian goods, that we put a hold on about $5.4 billion
worth of humanitarian contracts because we were concerned that
they might be concerned to reconstitute programs of weapons of
mass destruction. And the criticism I have heard is that we
didn't look at the pricing so that he could obtain a kickback
and we didn't do much about it. And we reviewed that
allegation. And first of all, there were a couple of contracts
that we did reject because of pricing and there were several
where we sought dual use potential but also noted that the
price was way too high and could be subject to a kickback.
The problem with the 661 Committee, basically a group of
people reviewing contracts paper in New York to identify an
excessive price was very, very difficult. DCAA did an audit of
several thousand of these contracts in 2003 and they concluded
the same thing. When you look at the paper, it's hard to tell
that something's overpriced, especially since Saddam Hussein
often didn't just overprice the goods. He had other ways to get
his kickback. For example, he would have performance bonds
issued by the selling company. Normally the selling company
issues a performance bond 10 percent of the value of the
contract. Then when they perform, the money is returned to the
seller. Well, he would have the money returned to him.
So that wouldn't even be evident from the face of the
contract. So he had a series of ways in which he could extract
his kickback that were not evident from the paper that was
being reviewed by the 661 Committee.
Mr. Whitfield. What percent of the total humanitarian
contracts did the U.S. and Great Britain put a hold on?
Mr. Schweich. You know, I have seen different numbers on
that, Mr. Chairman. I have seen the French accused us of as
high two-thirds. But if you look at the total volume, we put
holds on $5.4 billion. And there was $40.6 billion worth of
contracts actually that were submitted. I don't have a
calculator here. But $5 billion out of $46 billion is what I
would say the percentage would be.
Mr. Whitfield. Okay. Well, my time is about to expire, so
at this point I would recognize the gentleman from Michigan Mr.
Stupak.
Mr. Stupak. Thank you, and thank you for appearing here
today.
In your statement you indicated that political disagreement
and self-serving national economic objectives made it difficult
to address noncompliance of the sanctions by the member states.
I assume you are pointing your finger at some of the countries.
But didn't the U.S. also refuse to enforce sanctions against
Jordan and Turkey for illegal trade with Iraq?
Mr. Schweich. Congressman, I am glad you asked the
question. It is true that there were substantial amounts of
revenue obtained by Jordan by Saddam Hussein through Jordanian
and Turkish contracts. But I would like to, if I can have a
couple of minutes to walk you through how that process evolved.
Mr. Stupak. I don't want to lose a couple of minutes. The
question is really simple. Did the U.S. refuse to do the
enforcement against Turkey and Jordan?
Mr. Schweich. I wouldn't say that is an accurate
characterization, Congressman.
Mr. Stupak. What would you call it?
Mr. Schweich. In 1990, Jordan asked for an exception under
Article 50 of the U.N. Charter pointing out a severe hardship.
The Secretary General said we should give them exceptional
relief. Everyone on the 661 Committee pretty much acquiesced in
that. They issued a note to Jordan when Jordan indicated it was
resuming importation of oil--this was 5 years before the Oil-
for-Food program--saying that we understand you have severe
hardship here, we understand that you are in a unique situation
with respect to Iraq, and so we will take note of the fact that
you are continuing to import Iraqi oil, and just report to us
on how much you are importing, which they did.
So I would consider this much more akin to--I don't know if
you call it an exception, but an approved activity by the
entire 661 Committee committee, not just the U.S. and the U.K.,
and something that would actually have been recommended by the
United Nations. It was a geopolitical balance that had to be
made.
Mr. Stupak. But the fact is outside the program, Jordan and
Turkey were allowed to trade with Iraq, which was money outside
the program, and, therefore, money for Hussein. That is
correct, but----
Mr. Schweich. The balance was to allow the Jordanian
economy to tank, and that, we thought, would create greater
instability in the Middle East. And most other countries agreed
with us on that.
Mr. Stupak. What about Turkey? Did you think that would
tank if you didn't allow them to have the oil?
Mr. Schweich. They came in with a very good case for
hardship also--that was about 5 years later--and again asked
the 661 Committee for permission. In fact, under Resolution986
they were allowed to import directly Iraqi oil.
Mr. Stupak. But isn't it fair to say if the U.S. is going
to look the other way when it comes to Jordan and Turkey for
geopolitical reasons, won't that really lead to refusals by
other members of the sanction committee to approve letters to
such countries such as Syria, which is also engaged in
illegal----
Mr. Schweich. Well, Congressman, it is a totally different
situation with Syria. First of all, their economy did not
depend on Iraqi----
Mr. Stupak. Wait a minute. How can it be totally different?
You also said in your opening statement that if we would go in
and aggressively enforce these, probably in a year or 2, you
said, we could force Saddam to his knees.
Mr. Schweich. Right.
Mr. Stupak. We are going to start making exceptions, a year
or two, go a little longer, right.
Mr. Schweich. Actually the Jordanian protocol started in
1990, and from 1990 to 1995 Saddam experienced great hardship.
And that is why the Oil-for-Food program occurred. So the
exception proved to be a pretty good balance between keeping
the heat on Saddam and not allowing Jordan to go under.
With respect to Syria, it was a totally different
situation. They didn't come and say, we have hardship, we need
the Iraqi oil. They denied the whole time that they were
importing any Iraqi oil. They said they were testing the
pipeline. It was a situation of total corruption, whereas
Jordan came to us totally honestly, got an authorized exception
from the entire Security Council.
Mr. Stupak. But look at your exhibit book there, number 25
J, which is the second to last article in the book.
Kuwait complained to the United States in 1998 about
massive smuggling. And it is--going to go to the last tab, 25,
second to last article. And if you look at that on the second
page, Kuwait was upset about this, and this is December 11,
1998. Top paragraph says, along with increased airstrikes, that
is what Kuwait was asking us to do, he called for retooling of
the oil-for-aid program that would put food distribution
squarely in the hands of U.N. Officials through independent
distribution centers. He also wanted stronger enforcement by
the U.S. with or without the U.N. To limit oil smuggling
between Iraq and Iran, Turkey and Jordan. I mean, there was--we
moved some sales, but over and above that there was illegal
activity going on that we knew about back in 1998, and no one
did anything about it.
Mr. Schweich. Well, I would agree with you that independent
of the actual contractual protocols between the government,
there was smuggling by private organizations that we objected
to. And, in fact, in Resolution 1284 and with our smart
sanctions resolution, which was blocked, we did attempt to
reduce that.
Mr. Stupak. Well, if you take a look at it, Mr. Duelfer in
his report found that this illegal trade with Jordan was the
key to Saddam's financial survival until the Oil-for-Food
program was implemented; isn't that correct?
Mr. Schweich. He made a comment that smuggling in general
did help Saddam Hussein, that is correct.
Mr. Stupak. If we were to vigorously enforce these
sanctions, why did it take the Security Council so long to take
steps to legalize this trade with Turkey I am talking about?
You know, why didn't the Security Council take steps to
legalize this trade and bring them within the program?
I would think with Turkey, Syria, Iran, Jordan, if you got
illegal smuggling going on, you know it. You have approved
contracts going on for geopolitical reasons, as you said. Why
not bring all of that transaction within the Oil-for-Food
program where you could have some control over it?
Mr. Schweich. That is a very good question. This was
something that was discussed extensively within the U.S.
Government at the time. The perception was, I think, that the
program was stretched so thin with resources, people, and that
basically since everyone had pretty much agreed that Jordan and
Turkey could constitute exceptions, there simply wasn't an
appetite among the 661 Committee members to add that
significant additional responsibility because they felt it was
working adequately well the way it was.
I know that is not a perfect answer, but these people were
stretched very thin. They were viewing 36,000 oil contracts--
36,000 food contracts, 2,000 oil contracts, and adding the
entire Jordanian and Turkish protocols on would be very, very
difficult.
Mr. Stupak. So seriously and basically that the members of
661 Committee went through and decided, well, even though we
know they are trading illegally, we are not going to enforce it
because it would be too much of a burden on trying to get it
done.
Mr. Schweich. Well, Congressman----
Mr. Stupak. I went all the way through these minutes, and
we didn't see anything like that at all.
Mr. Schweich. Well, Congressman, I would characterize it a
little bit differently. I would say that people didn't want to
address it because they felt that the exception that was
granted in 1990 to Jordan was adequate, and the same situation
roughly occurred with Turkey. I wouldn't say it was discussed
in the 661 Committee so much as within the governments that
were very concerned about it.
Mr. Stupak. I don't disagree in 1990, if you want to make
an exception for geopolitical reasons, fine. But over and above
there was illegal smuggling, I think Jordan was like $4.3
billion alone, why didn't you bring that under the program to
get some control?
Mr. Schweich. Will with--if we are going to distinguish
between the protocols, government-to-government protocols, that
is where most of the $4.4 billion came from. The smuggling that
you are talking about, I think, was about $1.5 billion,
according to Duelfer. We did make extensive efforts to try to
stop that. The whole smart sanctions regime that was rejected
by the Security Council, 661 Committee, was an attempt to have
more stringent border controls and more stringent efforts to
stop individual or private smuggling that went on, and we were
unable to get that pushed through.
Mr. Stupak. I think you answered this, but let me ask it
again. Did you find in the Duelfer report that this illegal
trade with Jordan was the key to Saddam's financial survival
until the Oil-for-Food program was implemented?
Mr. Schweich. Congressman, I believe that is the way Mr.
Duelfer characterized that.
Mr. Stupak. Do you believe that?
Mr. Schweich. I don't, no.
Mr. Stupak. You know?
Mr. Schweich. No.
Mr. Stupak. When we talk about enforcing these sanctions,
you mentioned at the end--and you are summarizing, the oil
through Syria, you said the ferry service was a concern;
flights to Iraq, you are trying to control that. How then does
like the CEO of Coastal Oil Company get on an airplane and fly
to Iraq during the time that you are trying to enforce these
flights? I mean, couldn't the U.S. even stop that?
Mr. Schweich. Well, that was a very difficult situation.
Resolution 670 specifically says there needs to be approval for
flights to go into Iraq and not noticed. But several of the
other 661 Committee members, including the French, the Russians
and the Chinese, said no, it was simply a notification rule. So
as long as we notify you, there is no way to stop it. You can
go in.
Our position was we really did need to look at who was on
the flight and what the purpose was. There was a tremendous
conflict that spanned several years over that issue.
Mr. Stupak. Well, how about--during this time, you know,
most of that oil, illegally traded oil that had surcharge,
ended up at U.S. refineries, right?
Mr. Schweich. That is correct.
Mr. Schweich. What did the U.S. do to crack down on U.S.
refineries to not accept illegally traded oil from Iraq?
Mr. Schweich. Well, it was a very difficult process,
because these were not companies generally that lifted the oil
directly from Iraq and paid the surcharge. These were companies
that bought them in resale, second- or third- or fourth-
generation resale.
Mr. Stupak. You knew--when the oil came to refinery, you
knew where it came from if it was Basra light; correct?
Mr. Schweich. That is correct.
Mr. Stupak. Is this Iranian oil? They would say no, no, no;
this is Basra light crude. They knew that when it came to the
U.S.
Mr. Schweich. Yes.
Mr. Stupak. Why didn't the U.S. turn back the shipments?
Mr. Schweich. Well, there weren't surcharges. A lot of
companies refused to pay surcharges. It was a mixed bag. There
was not a surcharge on every barrel of oil. One of the reports,
I don't remember if it was Duelfer or one of the ones we
referred to, said about a third of their contracts had
surcharges paid on them.
So what the U.S. did was insist there were contract clauses
and notifications saying there was no surplus paid on oil that
came in from Iraq. We know now, at least if we believe what is
in the indictment thatthe Justice Department recently issued,
that Bay Oil was paying surcharges, if that is correct. And I
believe in innocence until proven guilty, but they have built a
pretty good case laid out in that indictment. So we know of one
U.S. company was paying surcharges, but we really don't know of
any other.
Mr. Stupak. Well, we know of a couple more, because we
realized two ships that the MIF force had taken and held up,
that was part U.S., Soviet and other companies all involved in
that ship; isn't that correct?
Mr. Schweich. I am not sure which one you are referring to,
Congressman.
Mr. Stupak. I will get it for you.
Mr. Whitfield. The gentleman's time has expired. We will
have a second round.
At this time, I recognize the chairman of the committee,
Mr. Barton of Texas.
Chairman Barton. Thank you. Thank you, Mr. Whitfield. If
Mr. Stupak needs some of my time, I will be happy to yield it
to him when he gets the information he was just asking about.
My first question to you, sir, does the name Michel
Tellings ring a bell with you?
Mr. Schweich. Yes, Mr. Chairman.
Chairman Barton. Do you have an opinion as to why the U.N.
And Paul Volcker doesn't want him to testify before our
committee?
Mr. Schweich. Yes, Mr. Chairman, I have extensive interface
with the Volcker people. I am sort of the main guy they go to--
at the U.S. mission they go to when they have questions and
things.
I think the position they have taken, and I am not
endorsing it or not endorsing it, is that they have been given
a grant of immunity by the United Nations so that they can
conduct a thorough investigation without any outside
interference; that it is better for them to get to the bottom
of issues without exposing their witnesses and the issues they
are investigating until it is over so they don't tip off
witnesses and the like; and that they would be happy probably
to make people available after they are done, but not during
the course of their investigation. I think that is the position
they have given to me.
Chairman Barton. It is my understanding that Mr. Tellings
is willing to testify. He is not asking to be shielded from
this committee.
Mr. Schweich. Yes. That same issue came up with Mr. Parton,
who, as you know, has given documents to Chairman Hyde in his
investigation. And the position that the united Nations has
taken is that immunity that is enjoyed is not by an individual,
but by the organization, and that can only be asserted or
relinquished by that organization.
Chairman Barton. Well, I take umbrage at that. I believe
that the House of Representatives and the U.S. Senate is a co-
equal branch of government under the Constitution, and that
since it is the House and the Senate that are appropriating the
funds that we send to the United Nations, that when we have a
legitimate need for information, that our--I understand that
Mr. Volcker is not representing the United States, that he has
been appointed by the U.N. To chair this committee, but at
least the intent of that committee is to get the facts on the
table, and that it is my opinion that Mr. Volcker's committee
should cooperate with the committees of the House and the
Senate that are conducting the investigations.
And it just is beyond me why we have a witness who has been
interviewed by committee staff and is willing--I won't say he
is volunteering to testify, but he is willing to testify--he is
not a U.S. citizen, he is a Dutch citizen, as it turns out--is
not allowed to. That tells me that Mr. Volcker is engaged in a
cover-up and that there is something that this witness has that
he could tell in public that the Volcker Commission and the
U.N. Doesn't want to be made public.
Mr. Schweich. Well, Mr. Chairman, as you know, both
legislation in the House of Representatives and in our own
reform package that we are advocating at the U.S. mission and
at the State Department, we are advocating that if there are
allegations of misconduct, that waiver of immunity ought to be
virtually automatic. So we are fairly sympathetic to your
position, and they want those enforced, but at this point the
U.N. Has asserted it has confidentiality agreements, and they
want those enforced.
I may--I might add that when I first took over this job a
year ago as Jack Danforth's Chief of Staff--when he was the
U.N. Ambassador, he met with Chairman Volcker and Secretary
General Annan and said, you know, when they are in a situation
like this, when there are allegations flying everywhere, being
open is always the best possible route.
So I can't dispute what you are saying at the same time our
argument--I do understand their argument that we want to get
our investigation done without tipping out witnesses as to what
people might be saying and the like, and, therefore, we would
rather wait until it is over to make public statements. I think
that is the balancing that has to be done.
Chairman Barton. I think it is a fair statement that--
again, I am not putting Mr. Volcker in this camp--but the
leadership of the United Nations would rather this
investigation by the U.S. Congress just go away. They would
rather it not be going on at all. Isn't that a fair statement?
Mr. Schweich. I can't speak for them, Mr. Chairman, but I
also wouldn't dispute what you are saying.
Chairman Barton. Well, had Mr. Tellings been allowed to
testify, it is my understanding, based on staff notes from the
interviews that he did have on two occasions, once by telephone
and once in person, that he tried to bring to the attention of
the 661 Committee that many of these oil traders that were
being picked to trade the oil, the Iraqi oil, had no previous
background in oil trading, that they appeared to be politically
motivated, or Iraqi foreign policy motivated contacts. Would
you dispute that?
Mr. Schweich. I think that, Mr. Chairman, is exactly
correct. The U.S. had that view. I think that oil overseers had
that view. One of the principal proposals, before we had to go
to retroactive pricing, was to squeeze out some of the
middlemen and the people who did not have any experience in
that oil industry.
Chairman Barton. It is also my understanding that had Mr.
Volcker allowed Mr. Tellings to testify, that he would have
testified under oath in public that when he, Mr. Tellings,
brought some of his concerns to Mr. Benon Sevan's attention--
and he was the individual charged with running the program,
who, as it turns out, appeared on a list of Hussein's as a
person getting personal vouchers--that when he brought this to
Benon Sevan's attention, Mr. Sevan told him to not rock the
boat, that things were going along swimmingly, and he should
just leave it alone.
Would you dispute that?
Mr. Schweich. Mr. Chairman, I am not aware of any
communications that occurred between Mr. Sevan and Mr.
Tellings.
Chairman Barton. Are you aware that this Mr. Sevan has
since been suspended by the United Nations, and that there is
shock and amazement that has been expressed that Mr. Sevan may
have been involved in some of these trades, although Mr. Sevan
publicly says that he hasn't been?
Mr. Schweich. Yes, Mr. Chairman. I believe in the first
Volcker report they outline in quite a bit of detail what they
believe to be the factual situation regarding the allocations
that he received.
Chairman Barton. Okay. You may have said this in your
opening statement, but just for the record, once again, which
members of the 661 Committee--and my understanding is the 661
Committee was made up of representatives of the permanent
members of this U.N. Security Council; is that correct?
Mr. Schweich. The permanent members and also
representatives of the 10 nonpermanent members. So there were
15 members, yes.
Chairman Barton. So whoever happened to be on the U.N.
Security Council had a representative on this committee.
Mr. Schweich. That's correct, Mr. Chairman.
Chairman Barton. Which one of those members routinely tried
to thwart the intent of the program?
Mr. Schweich. I would say--and I would like to caveat this
briefly by saying that it's a delicate situation I am in
because I negotiate with these countries every day on these
issues, including U.N. Reform, and I wanted to put on the
record that they have been much more cooperative with us lately
on a reform efforts. But if we go back a few years, it was
pretty much Russia, China and France.
Chairman Barton. Russia, China and France.
Mr. Schweich. That's correct.
Chairman Barton. So staff information is that the United
States representative and Great Britain's representatives, as
the program was implemented, would invariably point out flaws
in the implementation of the program, and that the French and
the Russians and the Chinese would try to stall or divert these
inquiries to make the program in the way in which the U.S. and
the British thought it should be run. Is that a fair statement?
Mr. Schweich. Mr. Chairman, it wouldn't be true of all
three of those countries we were discussing, but as a general
matter I wouldn't dispute the characterization.
Chairman Barton. Did at any point, either in the past or
currently, U.S. officials have a reason to believe that some of
these other national representatives or officials of other
nations were somehow given improper incentives or bribes or in
some way bought off to prevent the proper implementation of the
Oil-for-Food program?
Mr. Schweich. I will defer to my experts who were on the
661 Committee, but my understanding, Mr. Chairman, is that
until 2003 when an article appeared in the Alameda newspaper
indicating that there was a secret oil voucher allocation
program, the United States was not aware of this influence
peddling that had been going on.
Chairman Barton. So even during the implementation, when
representatives of the United States and Great Britain would
see flaws in the program and would try to rectify them or try
to make the program run properly, and the French or the
Russians or the Chinese or all or some subset of that would try
to stop it, there was never any information that they were
somehow improperly tainted so that they had a personal or at
least a national interest in preventing the proper
implementation of the program?
Mr. Schweich. Mr. Chairman, the United States was aware
that these countries, prior to the first Iraqi War, had
significant economic interest in Iraq and had a lot of
incentive to work with Iraq on economic issues. What they were
not aware of was the secret oil allocation program where
specific individuals were targeted and then asked to influence
governments to reduce the sanctions or alleviate the sanctions
on Iraq.
Chairman Barton. My time has just expired, so my final
question--in hindsight, what should the U.S. or what could the
U.S. have done to insist that the program run properly as the
original intent was?
Mr. Schweich. Well, I think that it's more of a question--
the way the program was set up, it was almost inevitable that
certain things happened. When you have somebody as determined
as Saddam Hussein, somebody as corrupt as he is in such a
broad-based sanctions program, in retrospect it is probably too
broad of a sanctions program.
What we have tried to do in subsequent sanctions programs
is be much more targeted, go after specific companies or
individuals or entities or geographic areas that are involved
in a given country, not have something so broad and sweeping;
targeted sanctions, greater use of experts. There were no
humanitarian good experts, for example, to evaluate the
possibility of kickbacks.
There have been a series of events that we have implemented
on future sanctions programs, more streamlined, more focused,
with more accountability, more oversight, too. There was
inadequate auditing of the Oil-for-Food program, and we have
advocated in our reform package that we are pushing now at the
U.N. Much greater auditing of sanctions regimes.
Chairman Barton. One thing that definitely should be a part
of any future program is you shouldn't let the country that is
being sanctioned to pick the contractors it does business with.
Mr. Schweich. That's exactly right, Mr. Chairman. As you
know, the reason that occurred, we tried--in 1991, we tried to
set up an Oil-for-Food Program under Resolution 706 and 712
that didn't allow that. And Saddam Hussein was willing to
exploit his own people, have them suffer for 4 more years so
that he could get we he needed out of that program, which was
control of the contracts.
So we tried very hard not to allow that to happen. But he
didn't care how many people died. He wanted to get control over
them. And if it meant 4 years and thousands more years--and
thousands of more deaths, that was okay with him.
Chairman Barton. I understand.
Thank you very much, Mr. Chairman.
Mr. Whitfield. The gentleman from Washington is recognized
for 10 minutes.
Mr. Inslee. Thank you, Mr. Schweich. My name is Jay Inslee.
I am from Seattle. From my questions, I wanted you to note
several of the presumptions I have before we start.
No. 1, the chairs of the subcommittee and the committee are
both honorable people and have the best intentions on this and
other hearings.
Second, Saddam Hussein was a despicable monster.
Third, the U.N. Is an imperfect organization that failed to
fully enforce the Oil-for-Food program; that multiple nations
participated in that; and that the United States, I believe,
was not sufficiently aggressive in multiple ways that I will
talk about in a minute.
Now, with that said, I want to focus on the relative
success or failure of the United Nations oil sanction policy on
Iraq relative to other successes or failures in our government.
We have found that the goal, obviously, of this sanction policy
was to prevent Saddam Hussein from obtaining weapons of mass
destruction to threaten our security. That was the goal of the
program.
We have learned that Saddam Hussein, on the date we started
hostilities, did not have, repeat, after multiple millions of
dollars of looking for them, did not have weapons of mass
destruction. It appears then that the United Nations program
for its goal was successful. The second program that we had is
that I presume that the President had a goal of telling the
American people the truth about whether or not Saddam Hussein
had weapons of mass destruction.
From this, can we conclude that the United Nations sanction
policy was successful in its major goal of depriving Saddam
Hussein of his desires of weapons of mass destruction, and that
the administration's goal--and that it was therefore
successful; that the administration's goal of telling the
American people the truth as to whether or not he had weapons
of mass destruction failed? In other words, did the U.N. Meet
its goal and the administration fail in those two issues?
Mr. Schweich. Congressman, I would say yes, in terms of the
question of did the Oil-for-Food at least have some success, it
did stop Saddam Hussein from getting weapons of mass
destruction. And it had another success, which was the
malnutrition rate for Iraqi children went down dramatically,
and it did help feed the people. So it had two successes.
I would have to say with respect to the administration's
policy on weapons of mass destruction disclosure--I am a
diplomat in New York and just completely unqualified to talk
about that.
Mr. Inslee. Well, we will leave that to the conclusion of
American people.
Now, is it also fair to say that the United States
Government--you know, I like--we are the best country in the
world, gave the world democracy, freedom of speech, freedom of
religion, you know. It's a great country, but I find it a
little bit difficult for us to chastise and chide, scold the
rest of the world when the conclusion I have reached, just
sitting in this hearing and looking at this briefing material,
is that the U.S. Government, for, I would assume, legitimate
reasons, on occasion turned a blind eye to known violations of
the Oil-for-Food program for reasons we thought were important;
for instance, allowing Jordan to buildup some oil preparatory
to war, for instance, for a variety of reasons that we thought
made sense to us.
But isn't it, when we do that, a little bit hard to turn
around and be the scold to the rest of the world when they made
decisions to violate these sanctions? Don't you think that's a
little bit difficult for the United States to do?
Mr. Schweich. I understand the point you are making,
Congressman, but I would take two small issues with what you
said. First of all, with respect to the exceptions that we
allowed, they were generally agreed on by everybody that they
should be allowed, not just the United States.
I am a little bit concerned about characterizing the other
exceptions that other people wanted as equivalent to an open
decision to allow Jordan and Turkey to import oil. We are
talking about some of the things we were objecting to were
kickbacks, bribes, people gaining personally, personal
profiteering, not political reasons for granting an exception.
Mr. Inslee. Are you saying that the rest of the world
agreed when we let this smuggling go on in Turkey and Jordan?
In fact, Kuwait complained to us and asked us to be more
aggressive, didn't they?
Mr. Schweich. That was over-the-border smuggling, I
believe.
Mr. Inslee. I want to make sure you understand the
question. Kuwait complained to the U.S. Government that we were
not sufficiently aggressive stopping cross-border transfers to
Jordan and Turkey, and we failed to meet their demands; isn't
that true?
Mr. Schweich. I really--I don't know. I just read the
Kuwait document for the first time this morning.
Mr. Inslee. Isn't it true from 1997 when the U.S. was
taking only 13 percent of the oil, being the end user, by 1999
the U.S. portion climbed to 35 percent of Iraqi oil, and by
September 11th we were purchasing well over 50 percent--I think
it was something like 65 percent during the Bush
administration--of all the oil that came out of Iraq came to
refineries in the United States; isn't that right?
Mr. Schweich. That's correct. But, of course, there was
nothing illegal about importing Iraqi oil. That was the purpose
of the Oil-for-Food.
Mr. Inslee. I understand that. But for this administration,
the President, to sanction Iraq, if he wanted to really get
serious about this in light of this fraud that you have talked
about with multiple nations, could a sanction of Iraq--saying,
we are cutting off oil imports to our oil refineries, period,
is a sanction; I am not going to tolerate this anymore in
Turkey, Jordan, Russia or the United States. He could have done
that. He didn't do that. Couldn't he have?
Mr. Schweich. He could have, but I would have to say I
would have thought--I think that would have been the wrong
decision.
Mr. Inslee. Well, it would have been perhaps the wrong
decision because, you know, we are addicted to oil in this
country, and, frankly, we are not doing anything to beat that
problem. But that is not--that is outside of your jurisdiction.
I want to ask you about the conclusion from Paul Volcker--I
want to read a quote to you. It's an article dated January 13,
2005, from the Financial Times of London: ``Although the
financial beneficiaries, Iraqis and Jordanians, the fact
remains that the U.S. Government participated in a major
conspiracy that violated sanctions and enriched Saddam's
crony,'' a former U.N. Official said. ``That is exactly what
many in the U.S. are now accusing other countries of having
done. I think it's pretty ironic.''
Then Paul Volcker goes on to say--confirmed--excuse me.
Last week Paul Volcker, head of the independent commission
created by the U.N. To investigate failures in the Oil-for-Food
Program, confirmed that Washington allowed violations of the
oil sanctions by Jordan in recognition of its national
interests.
Is that accurate?
Mr. Schweich. I would dispute one statement that you made,
which is that we were engaged in the conspiracy. Congressman, a
conspiracy is something that is secret. That is the stuff we
were objecting to, secret, private deals, under the table,
where people are enriching themselves. The Jordanian protocol
was approved--noted by the Security Council with no objection.
They even sent a report to us on how it is going, which
they did. And it was done for geopolitical reasons, as I said,
that were concurred on by everybody at the time. I don't think
you can equate that or call that a conspiracy. When there were
conspiracies going on for influence peddling, kickbacks,
bribery, things that really are criminal acts, this was a
decision made by the Security Council, made at the
recommendation of the Secretary General--by the way, which is
surprising that U.N. Officials are saying this--to allow--I
don't know if you call it an exception, but to note that Jordan
was doing this, recognizing it was necessary to keep the Middle
East stable. And it was done for valid reasons and reasons of--
that you can't call corrupt.
I mean, you might object to how it was implemented. I can't
say that Jordan always followed the rules as we understood them
to be, but what I would say is the overall intent of the United
States, the U.K., and all the other Security Council members in
allowing Jordan to import this oil was honorable and was not a
conspiracy at all. It was totally open.
In fact, under the Foreign Operations Assistance Act, under
three administrations, Bush 1, 8 years of Clinton
Administration, and Bush 2, they--the President issued a waiver
for Jordan, sent it off to Congress, published in the Federal
Register. To me that is not a conspiracy.
Mr. Inslee. But at least one country was complaining. We
know Kuwait. Was anyone else complaining?
Mr. Schweich. I am not aware of that.
Mr. Inslee. Well, let me suggest to you that maybe there
was reason for it, because it appears that while all this was
going on, the U.S., under Bush administration policies,
continued to increase its imports of Iraqi oil. I will read a
quote to you, March 27, 2002:
Despite the war fever engendered by U.S. rhetoric in recent
weeks, lifting of Iraqi crude by U.S. refineries have averaged
some 800,000 barrels per day so far this year, and even higher
in the second half of last year. While some such as Exxon Mobil
have moderated their Iraqi intake, Chevron, Texaco, top
independent Valero and others seemingly can't get enough of
Basra blend. As Chevron doubled its intake of 172,000 BD from
the first to the second half of last year when prices were low,
Valero doubled its imports from 187,000 BD.
So, the fact of the matter is, there are two things I want
to make sure that you think are correct. No. 1, while these
concerns are being raised, we continued to substantially import
more Iraqi oil, leading up to this war, and give money to
Saddam Hussein.
No. 2, whatever you want to say about the United Nations
Oil-for-Food program, it is not the reason that our children
are dying in Iraq.
Would you agree with both of those statements?
Mr. Schweich. I really can't comment on the last statement.
It's way beyond, again, my area of expertise. But with respect
to the increase in Iraqi oil imports, the objective of the Oil-
for-Food program was to provide money for Iraqi children and
for food. There was nothing inherently wrong, I think, with
importing Iraqi oil. The problem was if people were importing
it while they were paying illegal surcharges, kickbacks. I
think I outlined to you the numerous actions we took to
eliminate that.
Mr. Inslee. Apparently those failures did not prevent the
U.N. sanctions from working of preventing this scoundrel from
getting WMD; is that true?
Mr. Schweich. Well, that is because--there are two aspects
to this program. There was the oil part of it, and then there
was the importation of humanitarian goods.
What you are talking about is the second piece. We were
successful about putting the holds on items of dual use in
keeping weapons of mass destruction from coming in. But that's
a little different from the issue you have, the oil imports.
Mr. Inslee. Thank you.
Mr. Schweich. Thank you.
Mr. Whitfield. The gentleman from Texas is recognized for
10 minutes.
Mr. Burgess. Thank you, Mr. Chairman, I thank the witness
for being here this morning and enduring this.
At some length we have discussed the surcharges under the
Oil-for-Food and how efforts to eliminate the surcharges were
resisted by various countries within the 661 Committee. Can you
tell us whether this was an isolated example, or was it part of
a larger pattern?
Mr. Schweich. It was a larger pattern. I have outlined--and
just preparing for this hearing--7 or 8 methods that these
countries that were obstructing us used. They did it for a
period of 2 or 3 years when it came to our attention in 2001,
all the way up to 2003, 2002. I would be happy to go through
them with you if you like.
They raised process objections, saying that things were not
properly before the committee or beyond the mandate of the 661
Committee, like activities relative to the Multinational
Maritime Interception Force, which they said we shouldn't be
involved in. They said there wasn't enough evidence to take
action with respect to the Syria pipeline, Iranian violation of
surcharges, kickbacks.
They indicated what is being proposed in retroactive
pricing would increase the suffering of the Iraqi people, so we
shouldn't do it. Same thing with holds on humanitarian goods
and the sanctions generally. They said the committee wasn't
qualified to take action. We shouldn't be looking at oil
pricing because we are not oil experts. They said that the
actions would provoke Saddam to expel arms inspectors or
increase smuggling. If you crack down on him, he will get even
more violent, more nasty, so we shouldn't crack down on him.
They claimed that the plans wouldn't work. We heard over
and over again that retroactive pricing would not be
successful; it would simply reduce the amount of Iraqi oil
being lifted without eliminating the surcharge. It did reduce
the amount of Iraqi oil being lifted for a while, but it did
help stop the surcharge.
Then we also heard what I call the ``trust the bad guys''
theory. We repeatedly heard people saying, well, you know,
Syria says it is not doing anything wrong; we have to trust
them. If the Iranians say they are not violating the sanctions,
well, we ought to listen to what they have to say. I think it
was a concerted lengthy process with a lot of tactics over a
long period of time.
Mr. Burgess. You have provided to us, under--what is
recorded as Exhibit 17 is an e-mail. Do you have that available
to you?
Mr. Schweich. Yes.
Mr. Burgess. Does this e-mail that we have been provided
reflect some of these issues over which there were divisions in
the 661 Committee concerning the Oil-for-Food program?
Mr. Schweich. Congressman, let me just take 1 minute to
look it over again.
Mr. Burgess. Sure.
Mr. Schweich. This reflects some of the issues,
particularly with respect to the air flights that I mentioned
in my initial statement.
Mr. Burgess. Well, on the issue of the Syrian pipeline that
you mentioned just a moment ago, what exactly was a discrepancy
noted regarding Syrian oil production and exports?
Mr. Schweich. Let me refer to something I wrote up here
over the weekend. I think I have the statistics here one
moment, if you will just give me a minute.
There was a briefing given by the U.S., which determined
that based on public sources, Syria produced at that time
520,000 barrels per day of oil, domestically consumed 260,000,
but its exports for that particular month had been 500,000. So
if you do some simple math, 520 minus 260 are for consumption,
would leave 260,000 barrels left over for export. Their actual
exports were 500,000, so there was a discrepancy of 240,000
barrels.
So we asked where was that coming from. We knew it was
coming from Iraq, but they repeatedly denied it. That's in
marked contrast to Jordan and Turkey, which said, we are
getting this, and we need it, we have problems. They just
denied it. They said, well, we are testing the pipeline, we
don't know what you are talking about. We comply with all
Security Council resolutions. We were saying, well, where do
you get this 240,000 barrels extra you are exporting over what
you use and produce?
Mr. Burgess. Well, could other delegations question
publicly available industry data with straight faces?
Mr. Schweich. They did, yes. The Russians said the figures
aren't accurate. The only reliable source of information is
that which comes from the Government of Syria.
Mr. Burgess. That's how they attacked the data?
Mr. Schweich. Yes.
Mr. Burgess. With regard to the illegal ferry service for
the United Arab Emirates, did the United States ever have any
luck in stopping that traffic?
Mr. Schweich. I don't know about the UAE. I will defer to
some of my experts if you would like to talk to them in the
closed session. I know that we were successful in keeping other
ferries from opening with other countries. That was our
principal objective.
Mr. Burgess. Even though if we were to provide photographic
evidence of something going on, it was difficult to rein that
in?
Mr. Schweich. Yes.
Mr. Burgess. Was any other agency or body able to interdict
any of the ferry traffic during that time?
Mr. Schweich. Not that I am aware of.
Mr. Burgess. Mr. Chairman, thank you for your indulgence. I
will yield back the balance of my time.
Mr. Whitfield. Thank you very much.
At this time I will recognize the gentlelady from Tennessee
Mrs. Blackburn.
Mrs. Blackburn. Thank you, Mr. Chairman.
Thank you for your patience. We appreciate you being here
today.
I want to step back into the book we have got. We have
mentioned a couple of times, if we can, section 25, some of the
communications there. Looking at this first e-mail or the first
headline is November 16, 2,000. We were talking about Iraq
requiring the $050 per barrel premium.
One of the things that is, I guess, kind of puzzling to me
is looking at the leadership that was in charge of--more or
less being certain that the U.N. Was abiding by the rules of
the 661 Committee, was working within the framework of the
resolution that put them in place. Let's see, we had Secretary
Albright as Secretary of State at that point; correct?
Mr. Schweich. Correct.
Mrs. Blackburn. So Secretary Albright was at the helm, and
this was--who did we have over as our U.N. Representative at
that time?
Mr. Schweich. Richard Holbrooke.
Mrs. Blackburn. Mr. Holbrooke. All right. So we had
Secretary Albright and Mr. Holbrooke that were supposed to be
guiding the ship for us, more or less. How in the world could
we continue to have the volume that's just in front of us today
of communications that was coming back in to us from the U.N.?
And looking at articles like the November 16th and the November
21st, 2000, December 4, 2000, December 17, 2000, you know, what
were these folks--what was their focus? Why were they not
questioning or raising this issue? Why did it take us until
2003, 2004, 2005 to begin to realize that there was a problem
here that we could not trust what we were being told by some of
the members of the 661 Committee? Do you have a thought on
that?
Mr. Schweich. Madam Congressman, I certainly can't speak
for Richard Holbrooke or Madeleine Albright, but I would note
that during the time period of these articles, when the issue
of the surcharge first came up, we did succeed in getting the
661 Committee to issue letters to companies and tried to stop
it.
It took another 10 or 11 months before the retroactive
pricing regime went in place that actually did stop it, but I
would attribute most of that to the resistance we met from
other countries. But I really don't know the communications
that were going on at the levels that you are talking about.
Mrs. Blackburn. Okay. It looks like the first of those
pieces of information addressing these situations where we
realized we had a problem with that goes back to 1996 or 1997.
So looks like they gave them plenty of time to decide they had
a problem, right?
Mr. Schweich. Which article are you referring to, ma'am?
Mrs. Blackburn. Let's see. We were going--let's see. There
is one, 3/10/97.
Mr. Schweich. Is that under----
Mrs. Blackburn. Under section 25. That is where I was
looking. 3/10/97. So we have got--we have given them plenty--we
gave our--Mr. Holbrooke and the State Department plenty of time
to realize that there was a problem.
I do have a couple of other questions that I want to ask
you about also. Go ahead and respond to that, if you would like
to. Then I do have a couple of other questions.
Mr. Schweich. The issue of the surcharges, I don't think,
was known until 2000, but, yes, there were a lot of problems
with the program from its inception that we were quite aware
of, yes.
Mr. Schweich. Let's go back for just a moment and talk
about Mr. Sevan. You know, this is--we have had a hearing--we
had a hearing back May 16th, and it seemed as if his name came
up quite a bit, and questions about conduct and activities came
up quite a bit. How much contact did he have with members of
the 661 Committee and especially those that were resisting our
U.S. efforts to--in Iraq's manipulation of the Oil-for-Food?
Mr. Schweich. Well, again, I would defer to my experts, who
are actually on the 661 Committee, but my understanding, Madam
Congresswoman, is that since he was the head of the Office of
Iraq Programs, it was his job to interface frequently with all
members of the 661 Committee, and he did so.
Mrs. Blackburn. Okay. And we have talked a little bit about
the U.K. And the Netherlands supporting the U.S., and then the
opposition--you mentioned Russia, China and France pretty much
led the opposition.
Mr. Schweich. At various times, yes.
Mrs. Blackburn. At various times, okay.
Did that seem to be orchestrated, or is there anything that
would lead us to believe that if they were orchestrated in
those efforts?
Mr. Schweich. I don't know of any specific orchestration
efforts, but the general dynamic of the Security Council and
the committees of the Security Council is different delegations
consult with one another to determine their positions.
Mrs. Blackburn. Okay.
Mr. Schweich. And there was sort of a pattern after a 1997
Resolution 34 where the United States was concerned about
obstruction of the weapons inspectors, where a pattern seemed
to emerge--sort of two against three of the permanent five,
U.S., U.K. Versus Russia, France, and it wasn't true in every
resolution in every case, but it was a fairly consistent
pattern after 1997.
Mrs. Blackburn. What type tactics were used primarily by
those to try to delay or oppose our attempts to achieve
compliance?
Mr. Schweich. It was raising procedural issues, things that
are outside the mandate. It was also saying that action we are
taking is going to lead to more suffering of the Iraqi people;
some of the other issues that I discussed in a slightly
different context with Congressman Burgess a few minutes ago.
Mrs. Blackburn. All right. Thank you, Mr. Chairman. I think
I will yield back.
Mr. Whitfield. Thank you.
At this time I will recognize the gentleman Mr. Walden.
Mr. Walden. Thank you very much, Mr. Chairman. I appreciate
your work on this very important topic.
I would like our witness to turn to tab 22 in the book. I
am wondering, the exhibits 22, 23 and 24 describe an incident
involving the United Nations Development Program and a Swedish
company, and you are nodding as if you are familiar with these
cables and the incident. And so I assume you are.
Mr. Schweich. Yes, Congressman.
Mr. Walden. Can you explain what happened?
Mr. Schweich. I would actually defer to my colleague,
Andrew Hillman, who was directly involved, but I can go over it
generally here.
Mr. Walden. If Mr. Hillman wants to come up, that's fine. I
believe he is sworn in, right?
Mr. Schweich. If that's okay.
Mr. Walden. It is fine by me, if it is okay with the
chairman. As I understand, he was sworn in earlier.
Mr. Whitfield. Yes, he was sworn in.
Mr. Walden. Mr. Hillman, maybe you could explain what this
is all about, because it is quite disturbing, frankly.
Mr. Hillman. Congressman, we received notification from the
State Department in early June of 2002 that there had been a
discussion that occurred in--at our embassy in Yugoslavia, in
the former Yugoslavia, in Serbia, in Belgrade.
Mr. Walden. Could you pull that mike a little closer?
Mr. Hillman. And a Swedish Ambassador to the former
Yugoslavia accompanied by a representative of a Swedish company
told our Ambassador in Belgrade that when they applied for a
contract that was under consideration for an electrical project
in northern Iraq, that they had been told by a representative
of the U.N. Development Program, the U.N. Agency that was
letting out the contract for consideration by various bidders,
that they would have to bypass or work around U.S. export laws
concerning items that may have been produced in the United
States and that were prohibited from reexport.
Secondarily, it was alleged by this representative of the
Swedish company that the UNDP official had advised them that
they would have to pay the additional fee that the Government
of Iraq had requested at roughly a 10 percent surcharge.
Mr. Walden. Who was this person at UNDP that allegedly made
these comments?
Mr. Hillman. We subsequently learned that he was their
representative who oversaw UNDP's work on the Iraq program.
Mr. Walden. And who would that be?
Mr. Hillman. His name is Michel Gotier, G-O-T-I-E-R.
Mr. Walden. G-O-T-I-E-R. He was with the U.N. Development
Program.
Mr. Hillman. He worked for the U.N. Development
Program,correct.
Mr. Walden. He was the one who alleged--what nationality is
he?
Mr. Hillman. I am not sure I am familiar with his
nationality, Congressman.
Mr. Walden. But he was the one who basically told the
Swedish company basically ignore the U.S. exportation laws.
Mr. Hillman. Right.
Mr. Walden. Computers, right.
Mr. Hillman. Yes. Computers that were going to be used for
this electrical project in northern Iraq.
Mr. Walden. Do you know the issues involving those
computers and that law? Why would that be an issue?
Mr. Hillman. Congressman, I am not sure that I was fully
briefed on this, other than what I was given in the instruction
cable from the State Department, which, in essence, said that
there were prohibitions on the reexport of these items by any
company that may have been in receipt of them, based on U.S.
existing legislation.
Mr. Walden. Because my understanding is that there is a
concern that these computers are some of the higher-speed
computers and could facilitate computing processes that could,
in effect, not be done elsewhere or by other computers, that,
in effect, could be used against us then in some terrorist way
or some other way.
Mr. Hillman. Congressman, I am familiar that the
legislation concerned possible use of items such as the ones
you just described by potential terrorists, yes.
Mr. Walden. Now, in the cable under tab 22, number 22, and
some of it seems to be redacted, but it says that an ABB--that
ABB excluded the computer system because it was not authorized
for reexport by the Office of Foreign Asset Control of the U.S.
Department of Treasury for antiterrorism reasons. However, the
ABB representative said that in early September of 2001, the
UNDP representative in New York--is it Michel Gotier?
Mr. Hillman. Yes, Congressman.
Mr. Walden. Challenged the legality of the U.S. reexport
law. Why would that occur?
Mr. Hillman. Well, I think what was challenged was the
desire on the part of the--the concern on the part of ABB not
to be in violation of an existing U.S. legislation concerning
reexport. They were, I believe, considering the use of U.S.-
produced minicomputers for this project and knew that there
were these restrictions in place.
Mr. Walden. But why; is there any other information
regarding Mr. Gotier's feelings about our reexportation law?
Because it sounds like he the one who is saying that you don't
have to follow this law.
Mr. Hillman. When we raised this issue with him, and I went
to meet first with his supervisor and then subsequently with
him directly, he denied that he had made any of these
statements to the representativefrom UNDP.
Mr. Walden. So, is that right?
Mr. Hillman. Yes, Congressman.
Mr. Walden. What was your reaction to that?
Mr. Hillman. I heard--I first met with the supervisor,
subsequently met with the two of them, and my sense was that I
wasn't convinced that I was hearing the absolute truth on the
issue.
Mr. Walden. Do we have any evidence, or have you had any
other information, to indicate that he might have made these
same comments to anyone else?
Mr. Hillman. No, Congressman, not that I am aware of.
Mr. Walden. Who was his supervisor; do you recall?
Mr. Walden. Only by, again, consulting the document, a
gentleman by the name of Oscar Fernandez-Taranco, who also was
a U.N. Development official.
Mr. Walden. But you didn't necessarily believe you are
getting the straight story?
Mr. Hillman. I had some concerns and reported back----
Mr. Walden. Did you follow up then with the Swedish
contacts?
Mr. Hillman. I did not. We deferred back to the State
Department for further guidance and further instructions.
Mr. Walden. Did they follow up?
Mr. Hillman. I am not sure I am aware of that, Congressman.
I don't have the answer.
Mr. Walden. You just don't know.
Mr. Hillman. Yes.
Mr. Walden. All right. Did Mr. Gotier say anything else
during this meeting that you had with him and his supervisor?
Mr. Hillman. Well, as I say, he denied that he had
encouraged ABB to circumvent our U.S. export laws, reexport
laws. And he also denied that he had, in any way, shape or
form, encouraged ABB to pay a surcharge, a 10 percent
additional fee, to the Government of Iraq.
Mr. Walden. Did he ever suggest that not every company
doing business under the OFF program had to abide by U.S.
export laws?
Mr. Hillman. I believe our reporting cable makes note of
this, that he alluded to the fact that not everyone was
required to use U.S.-produced goods for shipment into Iraq
under the Oil-for-Food program. You could go to other suppliers
from other countries to obtain some goods, if they were
available.
Mr. Walden. So, what you are saying is he was saying they
could find a different way to get in, not that they could avoid
the U.S. export laws?
Mr. Hillman. Yes. Thank you. Thank you for clarifying that.
Mr. Walden. Now, why would ABB raise this as an issue and
then say they weren't going to do that because they were
concerned about their own contacts in the U.S. and other
business that they were doing?
Mr. Hillman. Congressman, I can only go by the information
that was provided to us in our instruction cable from the State
Department. I am not sure that that was made evident to us.
That is my only source of information on this issue.
Mr. Walden. Mr. Schweich, there are two other questions I
would like to ask you. In your opening statement you said that
661 Committee members with strong economic interest used both
substantive and procedural tactics to oppose U.S. Efforts to
maintain sanctions. Can you explain the substantive and the
procedural tactics that these countries used?
Mr. Schweich. Yes. When I say procedural, I meant raising
process objections; rolling things over to the next meeting;
saying, we don't have time for this, let's deal with it the
next meeting, the next meeting; those types of things which
would be more parliamentary maneuvers to stop our activities.
When I would say substantive, they would introduce
competing resolutions to defeat our resolutions to get their
allies on their side. And then they would also make very
specific arguments about the effect of what we wanted to do on
the Iraqi people, starving them, or that it might provoke
Saddam to do something. That's what I meant by that
distinction.
Mr. Walden. I mean, were there circumstances where we had,
for example, where we had photos of equipment going in
violation, and countries said, that's not good enough?
Mr. Schweich. Yes. I mean, I recall one situation where we
showed some pictures of illegal activity going on. One of the
other countries, which I will not mention right now, said,
where did you get that camera lens, it is really quite good,
and then dismissed totally what we had to say about it.
Mr. Walden. More concerned about the camera than----
Mr. Schweich. They were interested in how good our spy
techniques were and not really so interested in what we were
saying about what they had uncovered.
Mr. Walden. Was that sort of a standard view?
Mr. Schweich. It was--that was the only time that
particular comment was made, but it was not atypical to have
that sort of attitude in the 661 Committee.
Mr. Walden. I appreciate your testimony today.
Thank you, Mr. Chairman.
Mr. Whitfield. The gentleman from Florida Mr. Stearns is
recognized for 10 minutes.
Mr. Stearns. Thank you, Mr. Chairman.
You indicated in your opening statement that had the U.S.
been aware of Saddam's secret oil allocation program at the
time, it would have considered any additional measures to
combat this abuse. What additional steps do you think could
have been taken?
Mr. Schweich. I think the main additional step that could
have been taken--Congressman, that's a very good question--kind
of what the U.S. is doing now--we are practically the only
country now--is urge prosecution of criminals whoare accepting
bribes, kickbacks and doing all of these illegal things.
As you know the United States Department of Justice, even
though I think that the U.S. was a minimal player in any of the
corruption, has already indicted two Americans on this issue. I
believe there are investigations going on in Italy and also in
France also that haven't led to any sort of indictments.
I think what we would have done is push for judicial and
prosecutorial action against the perpetrators.
Mr. Stearns. Do you think Russia or France or China would
have done anything?
Mr. Schweich. I don't know the answer to whether they would
have done anything. I think they certainly could be put in a
very difficult position publicly.
Mr. Stearns. In his opening statement, Mr. Stupak stated
that Iraq smuggled oil to Iran in full view of the Multi
Interception Force, MIF. Was there a reason that the MIF did
stop all smuggling to Iran?
Mr. Schweich. It did try to stop it repeatedly. It boarded
a lot of boats and actually uncovered pretty substantial
evidence that the corruption that was going on--they found
falsified passports, falsified documents that appeared to have
been generated in Iran. They also interviewed witnesses who
said that the Iranian Republican Guard, or the equivalent of
that, was exacting fees for protection. That was all brought to
the attention of the 661 Committee.
Mr. Stearns. Did the MIF provide regular briefings to the
661 Committee committee concerning the smuggling to Iran?
Mr. Schweich. Congressman, I believe twice yearly they
provided briefings, which included that and other issues, yes.
Mr. Stearns. Did the U.S. actively support measures to
limit this smuggling to Iran?
Mr. Schweich. Yes.
Mr. Stearns. What were they?
Mr. Schweich. One, I think we just repeatedly asked for
letters to be written to the Iranian Government asking them to
cease their illegal activities. In fact, I have to say, you
have to give a little bit of credit where credit is due. Toward
the end of the program, the Iranians, they initially said yes--
they were very clever. They initially said, yes, we know there
is smuggling going on, but it isn't the government; it is all
private entities.
As we built up the evidence against them, they actually did
reduce the amount of smuggling that went on there. We actually,
I think, in a couple of 661 Committee meetings--I am not sure
if it was there or elsewhere--complimented them for finally
agreeing to comply. So they were no big friends of Iraq anyway.
Ultimately they were somewhat helpful toward the end of the
program.
Mr. Stearns. I think you answered this. Were other member
states supportive of these measures?
Mr. Schweich. Not initially, no. They basically said the
same thing. The Iranians were saying, well, we all knew this
was going on, but this has nothing to do with the Iranian
Government.
Mr. Stearns. Perhaps this question has not been asked. The
Secretary General, Kofi Annan, how much do you think he knew of
a lot of what we talked about this morning?
Mr. Schweich. You know, I hesitate to speculate on that,
because we have talked about----
Mr. Stearns. Well, I will ask the questions, you just
answer them then.
Mr. Schweich. Okay.
Mr. Stearns. Do you think Mr. Annan was keeping up to speed
with what was happening in the 661 Committee?
Mr. Schweich. I would say no. He delegated most of that to
Mr. Sevan, who was in charge of the program.
Mr. Stearns. Did Mr. Sevan ever brief him on what was
happening?
Mr. Schweich. I don't know.
Mr. Stearns. Would you speculate yes or no? I mean, you
would think he would brief him.
Mr. Schweich. You would think so.
Mr. Stearns. And Mr. Sevan is his name.
Mr. Schweich. Benan Sevan.
Mr. Stearns. How much of what we've talked about this
morning was he aware of?
Mr. Schweich. He was involved. The contracts, for example,
for the oil and the food went from the contract holders and the
deals that were arranged by Saddam Hussein to his office and
then to the 661 Committee. So he was actually responsible for
transmitting the documentation to the 661 Committee. So he
would be involved in everything.
Mr. Stearns. He knew pretty much intimately what was
happening?
Mr. Schweich. I would defer to my experts, but I would say
the answer is most likely ``yes.''
Mr. Hillman. He was the executive director of the office of
the Iraq program, and in that capacity it was his job and
responsibility to oversee the ongoing implementation of the
program in its entirety.
Mr. Stearns. So if you have somebody who is intimately
involved and knows all the details and it turns out there is a
great deal of corruption, most likely he knew about? Wouldn't
you speculate that he must have known some of this corruption,
just ``yes'' or ``no.''
Mr. Schweich. Congressman, I spent 20 years as a trial
lawyer, and I always told my witnesses not to speculate. I am
sympathetic to what you are saying.
Mr. Stearns. Okay, so he knew about the corruption. I am
going to move a little further.
You have indicated he knew intimately all the details of
the 661 Committee. He had oversight and was intimately involved
and so he must have known about the corruption and abuse.
The next question is, did he ever brief the Secretary
General? And in a normal procedure, wouldn't you think he would
brief the Secretary?
Mr. Schweich. I know the Secretary General has solid
reporting lines throughout his organization.
Mr. Stearns. Isn't there a line that runs from him to Sevan
on this matter?
Mr. Schweich. I would suspect so.
Mr. Stearns. So there is an organizational hierarchy that
goes from Sevan to Kofi Annan?
Mr. Hillman. I have not looked at a U.N. Organizational
chart, but I know Mr. Sevan had held the title of Under
Secretary General in his capacity.
Mr. Stearns. My impression is, he would be speaking to the
Secretary General on a regular basis. And if he was intimately
involved and knew about the corruption, he had a moral
responsibility to tell the Secretary that there are problems
there.
Mr. Schweich. First of all, Congressman, Under Secretary
Generals generally report to the Secretary General. As a
general rule, he would be the kind of person that would report
to the Secretary General. Volcker has claimed that he actually
got oil allocations, so that not only was he aware of things,
he was participating in them. That is certainly the allegation.
Mr. Stearns. Sevan was participating in it? So it seems
inconceivable that he had not briefed Kofi Annan about some of
this or that Kofi Annan tacitly knew what was going on. He was
the Under Secretary and reports to Kofi Annan. I think we can
assume a certain amount of this information was available to
the Secretary General.
Mr. Schweich. The Secretary General had available to him
the information you have, which describes the issues that are
going on. I wouldn't make the jump to say that he condoned or
approved of any corruption.
Mr. Stearns. Let's say it was presented to him in a matter-
of-fact way that these are circumstances I don't quite
understand. At this point, don't you think the Secretary
General should at some point fire some people and clean house
and do something?
Mr. Schweich. At the time or now?
Mr. Stearns. At the time.
Mr. Schweich. I can't----
Mr. Stearns. How about now?
Mr. Schweich. He is disciplining one person already.
Mr. Stearns. Disciplining is different than firing
somebody.
Mr. Schweich. I think he actually did terminate him.
Mr. Stearns. Is Sevan still employed?
Mr. Schweich. He is. There are some disciplinary
proceedings pending with him.
Mr. Stearns. If you find a scandal of this magnitude and
you still keep the person involved on the payroll and you don't
fire them, it doesn't seem like you are doing too much to make
the program be in repair.
Mr. Schweich. Well, Congressman, I am not here to defend
the Secretary General. The reason he appointed Paul Volcker was
to look into these issues.
Mr. Stearns. Were many of the problems of the 661 Committee
ever discussed with the Security Council?
Mr. Schweich. Yes. There were meetings of the general
Security Council in which these issues were discussed, several
of them.
Mr. Stearns. So all during this time from 1995, and only
one or two times they talked with the Security Council?
Mr. Schweich. I think it was several.
Mr. Stearns. Do you know anything about those presentations
and who gave them? Did Sevan give those presentations?
Mr. Schweich. I will defer to Mr. Hillman on that.
Mr. Hillman. Mr. Sevan would brief the Security Council
approximately every 6 months. That tied into the phases of the
program of which there were 13 phases. And it was toward the
end of each phase that he would update the council.
And with regard to the question you asked Mr. Schweich
concerning the number of times that the Security Council may
have dealt with issues similar to those discussed in the
committee, frequently, when we reached an impasse in our
discussions in the committee, they were brought to the
Ambassador level, to the attention of the Ambassadors within
the Security Council, for example, oil pricing and the dispute
that occurred.
Mr. Stearns. But even if you brief the Security Council
about the 661 program, you need a unanimous consent to do
anything; so nothing could be done, right? If Sevan came
forward and said, These are the problems and these are the
discrepancies, the Security council would say, We want to do X,
Y, Z, United States and United Kingdom, but nothing could be
done because you needed unanimous consent.
Mr. Schweich. In the Security Council you don't need
unanimous consent. You need nine votes without a veto. In the
661 Committee, you did need consensus.
Mr. Stearns. In the Security Council, if a problem of this
magnitude was brought before them, could they have acted or
done anything? Were there votes there to start moving out and
change this program? The Security Council is at fault here,
too.
Mr. Schweich. They could have acted. The P5 all had vetoes.
The countries we have been talking about, that have hindered
our efforts, all had a veto, but I don't think it ever got to
that point.
Mr. Stearns. Never got to the point where you had a vote
where the nine votes were needed or France could veto.
I guess the question is, did the Security Council ever have
this presented to them and was there a veto by any member of
the Security Council as a result of the presentation of
possible corruption in the Oil-for-Food program.
Mr. Schweich. I am aware that when we proposed the Smart
Sanctions Resolution in early 2001 to really refine the
process, get the goods that needed to get in, that Russia
threatened a veto. And as a result, the whole thing fell apart.
Mr. Stearns. What year was that?
Mr. Schweich. July 2001.
Mr. Stearns. Just 30 seconds, unanimous consent. And that
resulted because somebody presented to the Security Council
activities on the 661 Committee which created such a donnybrook
that Russia threatened a veto?
Mr. Schweich. I think that's correct.
Mr. Stearns. The information that was presented was what?
Mr. Schweich. There had been criticism that the sanctions
regime was falling apart and the new administration wanted to
upgrade it by making it easier for certain goods to come into
the country, but more difficult for other ones, just to be
refined in the overall approach, and the Russians were against
it. We ended up getting France and China on our side. It was
the Russians that threatened the veto.
Mr. Stearns. Mr. Volcker's commission, do you think it can
get to the bottom of this without what appears to be--some of
this staff leaking documents? What is your test here? Can he
get to the bottom of this?
Mr. Schweich. The test will be when he issues his big
report in August or September.
I work a lot with the Volcker people. It is a very
dedicated, talented and experienced group of people, but they
are having problems with internal dissension. And how that is
going to cut, I am not sure.
Mr. Stearns. Why did Russia oppose Smart Sanctions?
Mr. Schweich. We don't know exactly why they opposed the
Smart Sanctions. They claimed, at that point, they wanted
sanctions lifted entirely. That would probably be the reason we
tried to refine them and make them work better, and that went
against their overall objective.
Mr. Whitfield. The gentleman's time has expired.
At this time, I am going to recognize the gentleman from
Michigan for 5 minutes to follow up on the information he was
trying to find earlier. While you are trying to find that, I am
going to ask unanimous consent that we introduce into the
record this evidence binder. Without objection, so ordered.
I would also say that after consultation with the minority,
after Mr. Stupak asks his 5 minutes of questions, we are going
to offer a motion that the subcommittee move into executive
session.
So, at this time, I recognize you, Mr. Stupak.
Mr. Stupak. Thank you, Mr. Chairman.
Sir, I was telling you about the two tankers that the U.S.
had seized, an MIF force had seized. Looking at the document we
had in the last hearing, it said that a tanker named Volganeft-
147 was owned by Soviet-Finnish-American trans company, a joint
venture among the Russian ministries and American company,
Transcisco, and financed by European Bank for Reconstruction
and Development.
Were you aware of these tankers being seized that the U.S.
Had an interest in?
Mr. Schweich. This is not an incident I am familiar with,
but I would be willing to take the question and provide you a
written answer if you like.
Mr. Stupak. Of the 77 ships--Mr. Stearns had some questions
about MIF. Of the 77 ships that were seized, cargo seized, it
is our understanding only two of the 77, proceeds from those
cargoes being sold, was put back into the U.N. Oil-for-Food
program. What happened to the revenue from the other 75 ships?
Mr. Hillman. Congressman, when a ship was seized by the MIF
and then diverted to a port in a neighboring country, that
neighboring state was allowed, under the Security Council
resolutions, to deduct costs associated with the off-loading,
for example, of the oil that may have been on that vessel, and
perhaps the disposal of that vessel or the return of that
vessel to its rightful owners. And it was understood that the
receiving state could deduct expenses, so a number of states,
after deducting expenses, didn't have much left to put into the
778 account.
Mr. Stupak. Was that program ever audited? I would think
that a whole ship full of Basra light crude there would be some
profit on that when you would sell it on the world market.
Mr. Hillman. Congressman, I am not aware of the quantities
involved when you make reference to the seizure of the ships
and how much oil had been seized by the MIF.
Mr. Stupak. Was the program ever audited?
Mr. Hillman. Frequently. The U.N. Oil-for-Food program was
officially audited every 6 months to correspond with the
phases.
Mr. Stupak. Of the 77 ships, 75 we received no money on.
Was that program ever audited?
Mr. Hillman. I am not sure, but we would be happy to find
out the answer for you.
Mr. Stupak. Mr. Chairman, I had other areas to go into. I
just wanted to clarify that point that I made earlier. Let me
ask you this question then. Did the subsequent Security Council
resolutions--the committee was encouraged to clarify its
working procedures and develop expedited procedures; did the
committee ever do this? Did the Security Council ever force any
changes in the way the committee operated?
Mr. Schweich. Not that I am aware of.
Mr. Stupak. When you went to the so-called Smart
Sanctions--that was on May 14, 2002, U.N. Resolution 1409--
Smart Sanctions really just opened up smuggling even greater
than what it was before; did it not?
Mr. Hillman. That might be a bit of an unfair
characterization.
What we tried to do, as Mr. Schweich suggested, was to
reinforce the sanctions regime as it then existed and to focus
on those goods that might present the greatest possible threat
for dual use.
Mr. Stupak. We did away with the distribution plan of oil
and we focused more on what items had dual use?
Mr. Hillman. What we tried to do was to have an actual
list, as it suggested, the goods review list, of items that
would need careful security by the U.N. Office of Iraq program,
by the International Atomic Energy Agency.
Mr. Stupak. It really allowed Iraq to produce and sell as
much oil as it wished and spend the money on what it saw fit. I
mean, we actually lost--weakened international control when it
went to the Smart Sanctions under 1409.
Mr. Hillman. Resolution 1409, my memory of it and my
reading of it is, we didn't adjust or change in any way Iraq's
oil exports and its ability to export oil.
Mr. Stupak. Well, what we saw was, as you said, more of a
dual use. We looked more at what was being purchased with the
money, not necessarily how much oil was going where, what was
the distribution or what was the cost.
Mr. Hillman. Resolution 1409 did not address the exports,
but the imports.
Mr. Stupak. On the export of oil, it did nothing to make it
a smarter program?
Mr. Hillman. With that comment, I concur with that.
Mr. Stupak. Mr. Hillman, let me ask you this. Are you
familiar with the incident in February 2003 when Odom Marine
lifted oil from an unauthorized port in Iraq that went to
Jordan?
Mr. Hillman. I have certain familiarity. I know the
chairman has suggested that there will be some issues in
executive session that might be more appropriate for executive
session.
Mr. Stupak. The Financial Times--so it has been in the
papers. It wouldn't be that confidential because even the
Financial Times described this one to Odom Marine as the single
largest and boldest smuggling operation in the Oil-for-Food
program. Fourteen tankers were involved in this operation.
Mr. Hillman. I can only comment on what I read in the
newspaper.
Mr. Stupak. He said 14 tankers were involved. My
understanding is that Michael Tellings, one of the oil
overseers, told you that he was receiving calls from other
companies, legitimately lifting oil, whose captains had
witnessed this illegal oil lifting.
What did you do with that information?
Mr. Schweich. This whole issue, even though there have been
some public leaks, it still contains a significant amount of
classified information. We would like to discuss it in
executive session, but we don't think we should do it here.
Mr. Stupak. Well, let me just ask this for the record. Will
you submit then to the committee classified information on this
program, this Odom Marine, so at least the committee would have
it?
I am not talking about making it public. We have no
information. We have been trying to put it together. I want to
make sure we get the information we are asking.
Mr. Schweich. We would like to discuss that with you in
executive session.
Mr. Whitfield. Okay. At this time, I will make this motion
pursuant to clause 2(g) of rule 11 of the Rules of the House,
the remainder of the hearing will be conducted in executive
session to protect information that might endanger national
security.
Any discussion on the motion?
Those in favor will say aye.
The ayes have it and the motion is agreed to. We will
reconvene at 1 in room 2218. And that will give you plenty of
opportunity to go to one of our fine eating establishments in
the building.
See you at 1 in 2218. And thank you very much for your
time.
[Whereupon, at 12:20 p.m., the subcommittee recessed and
subsequently proceeded to other business in closed session.]
[Additional material submitted for the record follows:]
Questions for the Record Submitted to Andrew Hillman by Representative
John Dingell
Question: In February of 2003, Odin Marine, a U.S. company working
for a Jordanian company, lifted oil from an unauthorized port in Iraq
that went to Jordan. The Financial Times described it as the ``single
largest and boldest smuggling operation'' in the Oil-for-Food program.
Fourteen tankers were involved. (``US Ignored Warning on Iraqi Oil
Smuggling,'' Financial Times, Jan. 13,2005)
Our staff has received information that Michel Tellings, one of the
oil overseers, received information from other shippers who observed
the smuggling activities, and told you about it, but received no
response. Did Mr. Tellings contact you? What did you do?
Saybolt, the company hired to oversee oil-loading operations in
Iraq, also reported the smuggling. Please describe in detail your
actions and the actions or lack of actions taken by the U.S. Mission to
the United Nations, its representative on the 661 Committee, the State
Department, or any other Government agency in response to this
information from Mr. Tellings and Saybolt.
Answer: On February 18, 2003, UN Office of the Iraq Program's (OIP)
then-Executive Director Benon Sevan contacted officials at the U.S.
Mission to the UN to inform them of reports received from the Persian
Gulf concerning alleged illegal oil loadings at the Iraqi port of Khor
Al Amayah that the Multinational Maritime Interception Force (MIF)
might want to investigate. Sevan indicated he had obtained this
information from local sources in Iraq. Also in the same timeframe, one
of the UN Oil Overseers, Michel Tellings, passed similar information to
USUN officials.
USUN promptly conveyed this information through appropriate
channels to officials at the State Department in Washington, seeking
guidance. Department officials, in turn, reported this information,
again through appropriate channels, to the Department of Defense, who
had operational responsibility for the MIF. Our records do not indicate
what further actions were taken by the recipients of this information.
PROVISION OF REQUESTED DOCUMENTS
The U.S. Department of State is assembling and reviewing the
relevant documents that reference this matter. Given the classified and
sensitive nature of these items, State Department officials are
determining how best to convey this information to the Committee
without violating existing national domestic laws governing the
handling and dissemination of classified documents.
Question: The Washington Post subsequently reported that an
official in the Office of Foreign Assets Control at the Treasury
Department informed an attorney for Odin Marine that Treasury would not
take action against Odin Marine. Please describe your knowledge of the
role of the Treasury Department in this incident as it was related to
you.
Answer: I do not recall learning of any Department of Treasury role
involving communications with representative of Odin Marine. I was
unaware until I read this question that an official in Treasury's
Office of Foreign Assets Control had spoken with an attorney for Odin
Marine.
Question: Do you agree with the statements in the Duelfer Report
and elsewhere that illegal trade with Jordan, Turkey, Egypt, Syria and
other countries provided the major source of income for Saddam Hussein
from 1991 through 2003 (Duelfer Report, pp. 22-24.)
Answer: From the moment the UN Security Council first imposed
comprehensive sanctions on Iraq under Resolution 661 adopted August 6,
1990, former Iraqi leader Saddam Hussein and members of his regime
sought to avoid compliance with the measures and to garner revenue
illegally. Their efforts included unauthorized trade with compliant
partners, smuggling, and a wide range of strategies designed to
undermine the effectiveness of the multilateral sanctions regime
imposed by the international community.
One method of non-compliance was smuggling, both through the
unauthorized export of Iraqi crude oil, and through the illegal import
of goods not first approved by the Iraq Sanctions 661 Committee. Oil
smuggling, which reached an estimated peak level of $2 billion in 2002,
totaled approximately $5.7 billion over the life of the UN Oil-for-Food
(OFF) Program (Dec 1996-Nov 2003). This figure does not include oil
illicitly exported from Iraq prior to the establishment of the OFF
Program.
As U.S Mission to the United Nations Chief-of-Staff Thomas A.
Schweich testified on June 21, 2005, before the House Energy and
Commerce Committee, Subcommittee on Investigations and Oversight,
Saddam Hussein also attempted to undermine and subvert the
comprehensive sanctions regime imposed under Resolution 661 (1990)
through other manipulative mechanisms, including surcharges, topping
off of oil loadings, influence peddling, product substitution, product
diversion, phony service contracts, phantom spare parts, shell
corporations, illusory performance bonds, hidden bank accounts and
straight bribery.
Therefore, there were multiple ways by which Saddam acquired
illegal revenue. Concerning Iraq's ``illegal'' trade with its
neighbors, a clear distinction needs to be made between the unique
cases of Jordan and Turkey, and other states in the region. Shortly
after the Security Council imposed comprehensive sanctions against Iraq
in 1990, the Government of Jordan sent a formal request for relief
under Article 50 of the UN Charter to the Secretary-General, indicating
that Jordan was being negatively impacted by the restrictive economic
measures authorized by the Council against Iraq. A UN mission was sent
to Jordan by the Secretary-General to investigate Jordan's claims of
economic loss.
In May 1991, the Jordanian Government wrote to the Iraq Sanctions
661 Committee to inform Committee members that Jordan had resumed its
importation of oil from Iraq given its unique dependence on Iraqi oil
to meet its essential domestic needs. In response, the 661 Committee
``took note'' of Jordan's decision. The Jordanian Government thus
indicated to the 661 Committee, and thereby, the Security Council, that
it wished to comply with the sanctions, but that it was necessary to
continue importing the oil to ensure its national economic survival and
to prevent a domestic economic catastrophe.
The Jordanian Government did not act secretively, and the State
Department, as per Section 531 of the Foreign Operations Appropriations
Act, successively, over three separate Administrations, sought a waiver
on behalf of Jordan of the U.S. restrictions that prevented the
provision of assistance to countries that were violating the 661
sanctions. Congress was notified on each occasion that such a waiver
was granted, and this information was published in the Federal
Register.
In the case of Turkey, paragraph 2 of Resolution 986 (1995), the
resolution that established the ``Oil-for-Food'' (OFF) Program,
authorized the Turkish Government to import sufficient quantities of
Iraqi oil ``to meet the pipeline tariff charges, verified as reasonable
by the independent inspection agents referred to in paragraph 6 [of
resolution 986], for the transport of Iraqi petroleum and petroleum
products through the Kirkuk-Yumurtalik pipeline in Turkey.''
The Security Council and the international community were aware of
Jordan's and Turkey's commercial interaction with the former Iraqi
regime. However, Iraq's unauthorized trade with its neighbors and other
states, such as Syria, was conducted in secrecy and denial, and was in
total violation of the comprehensive measures imposed by the Security
Council under Resolution 661 (1990) and subsequent resolutions.
Question: You testified that it was your ``sense'' that Michel
Gotier, a UN employee, was not telling the ``absolute truth''
concerning his discussions with ABB? Please state for the record the
factual basis for that statement.
Answer: My observations, as reflected in a ``comment'' section of
my reporting cable to the Department of State dated August 2, 2002,
concerning what I perceived to be Michel Gotier's less than total
candor when I met with him, were prompted by what I felt was the
combative and argumentative posture Mr. Gotier adopted during our
discussion, and my assessment that he very likely had advised a
representative of ABB-Sweden to seek a non-U.S. source for computer
hardware and software not subject to U.S. re-export restrictions. I
also suspected, without clear evidence, that Mr. Gotier, in his
discussions with ABB-Sweden representatives, probably referred to the
rumored Iraqi practice of demanding a kickback on UN Oil-for-Food
humanitarian supply contracts as the requisite cost for doing business
in Iraq.
I intentionally separated such observations in the cable from my
otherwise purely factual recounting of my August 2, 2002 discussion
with Mr. Gotier, and his superviser, UNDP Deputy Assistant
Administrator and Deputy Regional Director for Arab States, Oscar
Fernandez-Taranco. My comments were placed in a separate paragraph to
clarify that they represented my personal views and, thus, needed to be
evaluated as opinion.
Question for the Record Submitted to Chief of Staff Thomas Schweich by
Representative John Dingell
Question: You stated in your testimony that it was very, very
difficult for the persons from the 661 Committee to determine that
humanitarian goods contracts were overpriced. What actions could the
661 Committee have taken to uncover and eliminate the kickbacks on
these contracts?
Answer: Under the arrangements governing the UN Oil-for-Food (OFF)
Program, the former Iraqi regime was, in general, free to select to
whom it would sell Iraqi oil, and from whom it would purchase
humanitarian goods using the revenue derived from its oil exports.
Resolution 986 (1995), which established the OFF Program, did not
require Saddam Hussein to purchase the best valued products or the
least expensive ones. The focus was on enabling Iraq to acquire goods
to provide for the nutritional and health needs of its people. The
Security Council placed primary emphasis on denying the Iraqi regime
access to arms, including WMD, and related war materiel with which it
might again pose a threat to regional and international peace.
There were earlier attempts, under Resolutions 706 (1991) and 712
(1991), to establish a UN-administered program to use Iraqi oil revenue
to provide for the humanitarian needs of the Iraqi people. These
original proposals were based on the premise that the UN would serve as
contracting agent on behalf of the Iraqi people in procuring
humanitarian supplies, but the former Iraqi regime repeatedly rejected
such plans. Our request for humanitarian goods overseers also was
deemed unacceptable. Short of forcefully imposing such a program on
Iraq in the face of Saddam's defiance, having the UN purchase
humanitarian supplies for Iraq was not politically achievable.
Therefore, having the UN, rather than the former Iraqi regime,
enter into humanitarian supply contracts was not an option for the 661
Committee to pursue as a means of uncovering and eliminating kickbacks
on supply contracts. If UN officials who were tasked with administering
the OFF Program at the Office of the Iraq Program (OIP) had spent more
time evaluating whether prices on specific items in OFF contracts were
similar to those being charged for comparable merchandise found in
other markets, it would have further delayed the processing and
approval of OFF humanitarian contracts at a time when the Iraqi people
desperately needed supplies to survive. In retrospect, perhaps OIP
officials could have conducted more random assessments of various
contracts that contained different types of products to determine if
there was deliberate over-pricing, but the main focus remained to
prevent Saddam from rearming. It is clear having the subject of the
sanctions enter into contractual relationships with those who sought to
buy its products (i.e., oil) and to sell it humanitarian supplies was
not a desirable arrangement, but that was the only approach the Iraqis,
as well as several key Security Council members, found acceptable. Had
the former Iraqi regime been more accommodating, the UN could have
sought the assistance of professionals to administer the Oil-for-Food
(OFF) Program.
Question: Did the United States ever withhold approval of a
humanitarian goods contract because it was overpriced?
Answer: The United States did place holds on UN Oil-for-Food (OFF)
contracts based on pricing concerns. Although such holds only involved
a relatively small number of contracts, the U.S. did in other instances
assess the price of specific items when deciding whether to approve or
place on hold individual OFF humanitarian contracts.
One example was Comm #730859, submitted during the 7th Phase of the
OFF Program (12/12/99-06/08/00), in which the U.S. Delegation, in
placing a ``hold'' on the contract, advised the UN Office of the Iraq
Program (OIP) that ``prices for delivery and handling services and the
after-sale services are considered to be significantly higher than what
is considered reasonable.''
A second example of a contract placed on hold by the U.S.
Delegation because of pricing concerns involved Comm #930167,
originally submitted during the 9th Phase of the OFF Program (12/16/00-
06/03/01). Our records indicate that the U.S. initially placed Comm
#930167 on hold because of suspicions that certain items might be dual-
use, but we also noted, ``even if the supplier were able to address
this objection, another objection is that the price charged seems
excessive for the normal cost of these goods.''
Question: In your testimony, you stated that the sanctions were not
anticipated to remain in place for more than a year or two because
Saddam was expected to comply with the provisions of the cease-fire.
You also stated that the illegal export of Iraqi oil to Jordan, which
began in 1990, was an ``approved activity by the entire 661
Committee.'' The Duelfer Report, however, in referring to the open, but
``illegal,'' export of oil from Iraq to Jordan, found that ``Jordan was
the key to Iraq's financial survival from the imposition of UN
sanctions in August 1990 until the implementation of the UN's OFF
program.'' (Duelfer Report, p. 24.) Do you agree with this statement?
If not, please explain.
Answer: As was discussed during the June 21, 2005 House Energy and
Commerce Committee, Subcommittee on Investigations and Oversight
hearing, the comprehensive sanctions imposed on Iraq by the Security
Council under Resolution 661 (1990), following Iraq's invasion of
Kuwait, had an initially profound impact not only on Iraq but also on
its neighbors, particularly Jordan, given Jordan's historically
extensive trading relationship with Iraq. It therefore was understood
by Security Council members that an ongoing arrangement for Jordan
would be necessary to counteract the negative impact of the sanctions
on Iraq, to prevent a potential economic catastrophe in Jordan.
Shortly after the Security Council imposed sanctions on Iraq in
1990, the Government of Jordan sent a formal request to the Secretary-
General for relief under Article 50 of the UN Charter, indicating that
Jordan was being severely negatively impacted by the restrictive
economic measures authorized by the Council against Iraq. The
Secretary-General sent a mission to Jordan to investigate Jordan's
claims of economic loss and demanded that the UN Security Council take
measures to alleviate the hardship on Jordan.
In May 1991, the Jordanian Government wrote to the Iraq Sanctions
661 Committee to inform Committee members that Jordan had resumed its
importation of oil from Iraq, given its unique dependence on Iraqi oil
to meet its essential domestic needs. The Jordanian Government thus
indicated to the 661 Committee of the Security Council, that it
recognized and wished to comply with the sanctions, but that it was
necessary to continue importing Iraqi oil to ensure its national
economic survival.
The Jordanian Government made the 661 Committee aware of the
ongoing trading relationship between Jordan and Iraq, and the Committee
agreed to take note of such an arrangement, for geopolitical reasons.
The 661 Committee's correspondence with the Jordanian Government read
as follows:
``I have the honour to inform you that, given the unique
position of Jordan in regard to Iraq, as the Committee has
previously acknowledged, the Committee at its 41st meeting,
held on 21 May 1991, took note of Jordan's resumption of the
import of Iraqi oil and oil derivatives as described in your
note vebale, pending any arrangements that can be made to
obtain supplies from other sources, and on the understanding
that such Iraq oil exports are subject to the provisions of the
Security Council resolution 692 (1991).''
The Committee acknowledged the serious economic impact that the
sanctions on Iraq were having on Jordan, and requested that the
Jordanian Government report to the Committee on the quantities, value,
and date of import of each oil shipment it received from Iraq. This
arrangement was done to alleviate economic hardship and to avoid the
severe consequences that a failing Jordanian economy might have on the
world. It was done transparently and openly, with the knowledge of the
entire 661 Committee, and the international community.
The U.S., a member of the 661 Committee, over three successive
Administrations, acknowledged such trade, determining that the national
security priority of preventing Saddam from rearming and again posing a
threat to his neighbors did not simultaneously necessitate weakening
Jordan's economy to such an extent that the future stability of the
Jordanian Government would be put at risk. The State Department, as per
Section 531 of the Foreign Operations Appropriations Act, successively,
over three separate Administrations, sought on behalf of Jordan a
waiver of U.S. restrictions that prevented the provision of assistance
to countries that were violating the 661 sanctions. Such a waiver was
granted, Congress was notified on each occasion, and this information
was published in the Federal Register. To our knowledge, no member of
Congress voiced objections to this arrangement.
Cooperation by the 661 Committee, the Security Council, and
successive U.S Administrations with Jordan to ensure its survival
should not be equated with Saddam Hussein's outright efforts from the
moment the Security Council first imposed multilateral sanctions on
Iraq to evade compliance with the measures. I testified on June 21,
2005 that there was a distinction between the government-to-government
protocol that existed between Jordan and Iraq, and the pure smuggling
in which the former Iraqi regime engaged to generate revenue. The U.S.
took extensive steps to curtail and arrest such smuggling. As I noted
at the June 21 hearing, U.S. and UK efforts to establish a ``smart''
sanctions regime for Iraq, by establishing more rigorous border
controls and more stringent restrictions designed to curtail smuggling,
was rejected by other key Security Council members, particularly the
Russian Federation.
In my view, U.S. and UN Security Council acknowledgement of
Jordan's special situation is not analogous to the bribery, corruption,
kickbacks, and other actions that Saddam Hussein and members of the
former Iraqi regime took to evade and undermine the effectiveness of
the multilateral sanctions regime that was imposed on Iraq.
Question: The 661 Committee minutes indicate that it never approved
the request by Jordan to import oil from Iraq or to sell goods to Iraq.
In fact, in 1997, the U.S. representative to the 661 Committee stated
that taking ``note'' of the Jordanian trade did not imply approval and
questioned whether the 661 Committee even had the authority to approve
such export. The British representative agreed with this
interpretation. Do you disagree with this position?
Answer: While the 661 Committee did not formally approve Jordan's
ongoing trade with Iraq, the decision by the Committee in May 1991 ``to
take note of'' Jordan's resumption of its importation of oil from Iraq,
despite comprehensive sanctions against Iraq, was considered tacit
acknowledgement of the situation, including by the United States, that
Jordan's ongoing stability should not be undermined as a result of the
sanctions on Iraq. The objective of containing the former Iraqi regime,
and of preventing Saddam from rearming and acquiring WMD with which to
pose a threat to regional and international stability, was not seen as
requiring the simultaneous weakening and destruction of Jordan. Just as
keeping Saddam in check was determined to be a U.S. national security
priority, so, too, was it determined to be in the best interests of the
U.S. and the international community to avoid irreparably harming
Jordan's economy and society by eliminating the close cross-border
trading relationship between Jordan and Iraq that had developed over
centuries, and on which continued Jordanian stability depended.
This was a calculated geopolitical decision taken by all Council
members. No delegation recommended follow-up action. However, this
acknowledgement did not condone abuse of such a special relationship,
and it was for this reason that the U.S. and UK jointly attempted in
the Spring of 2001 to seek Security Council adoption of a draft
resolution that would have tightened border controls on Iraq and that
would have sought to regularize cross-border traffic between Iraq and
its neighbors. A number of key Council partners opposed the U.S. and UK
efforts, in particular, the Russian Federation, thereby preventing
adoption of the draft resolution.
Question: You have stated that allowing Jordan to import oil and
pay billions of dollars to Saddam Hussein was ``honorable.'' What do
you mean by that? Are you saying that it was honorable to provide
Saddam Hussein with the financial resources to continue in power?
Answer: First, I note that what I specifically said during my
testimony on June 21, 2005 before the Committee was that even though
Jordan may not always have followed the rules as we understood them to
be, ``the overall intent of the United States, the UK, and the other
Security Council members in allowing Jordan to import this oil was
honorable and not a conspiracy at all. It was totally out in the
open.'' I also noted that under requirements of the Foreign Operations
Assistance Act, the President, under three separate administrations,
issued a waiver for Jordan that allowed U.S. assistance to continue,
and that copies of such waivers were provided on an annual basis to
Congress and they were published in the Federal Register. Also for the
record, I note that I did not characterize Jordan's actions as
honorable or dishonorable. What I said specifically was:
``I can't say Jordan always followed the rules as we understood
them to be. But what I would say is the overall intent of the
United States, the U.K. and all the other Security Council
members in allowing Jordan to import this oil was honorable and
not a conspiracy at all. It was totally out in the open. In
fact, under the Foreign Operations Assistance Act, under three
administrations, Bush I, eight years of the Clinton
administration, and Bush II,--the president issued a waiver for
Jordan, sent it off to Congress, published it in the Federal
Register. To me that is not a conspiracy.''
My comment did not imply that it was honorable or desirable to
provide Saddam with sufficient financial resources to continue in
power. Rather, it was a reference to the thoughtful, open, and
geopolitically wise decision taken by three successive U.S.
Administrations, with Congressional notice to allow Jordan to import
oil from Iraq. It was meant to underscore the critical importance to
U.S. and regional security that a stable Jordan represented.
Question: Did the United States ever bring its concerns about the
difficulties and limitations of the 661 Committee or the way it was
managed to the UN Security Council? If so, what was the result of those
discussions?
Answer: There were numerous occasions where lack of agreement among
661 Committee members prompted discussions among members of the
Security Council at ambassadorial level on a wide range of issues,
including: oil pricing, flights to/from Iraq, the need for stricter
border controls, the former Iraqi regime's arbitrary and abrupt
termination of its oil exports, contract holds, insufficient funding
for the Oil-for-Food (OFF) Program, and many other contentious matters.
Most key issues concerning management and implementation of the OFF
Program, in particular non-compliance, were the subject of discussion
among Security Council members.
Separately, the U.S. Mission to the UN held a number of informal
briefings for other Security Council members, usually with the presence
of experts from Washington, to inform the Council of problems the U.S.
perceived in the management of the OFF Program, and in the workings of
the 661 Committee. The contentious atmosphere that pervaded 661
Committee and Security Council consideration of issues concerning Iraq
limited our ability to implement the types of changes we sought. It
should be pointed out, however, that the working methods of the
Committee enabled the U.S. to block importation of dual-use goods to
Iraq on many occasions. Such working methods also allowed the U.S. to
use Committee rules to our advantage in implementing a system of
``retroactive'' oil pricing that allowed us and the British to assess
the relative price of comparable crude oils at the end of each month
before we agreed to prices proposed for Iraqi oil exports submitted by
the Iraq State Oil Marketing Organization (SOMO).
Question: Please describe the involvement of the U.S. Department of
State in the lifting of Iraqi oil by Odin Marine in February of 2003
for Millennium, a Jordanian company.
Answer: The first the U.S. Mission to the United Nations (USUN)
learned of the lifting of Iraqi oil by Odin Marine in February 2003,
for the Jordanian company Millennium, was when, on February 18, 2003,
then UN Office of the Iraq Program's (OIP) Executive Director Benon
Sevan contacted USUN officials to inform them of reports received from
the Persian Gulf concerning alleged illegal oil loadings at the Iraqi
port of Khor Al Amayah, reports that the Multinational Maritime
Interception Force (MIF) might want to investigate. Sevan indicated he
had obtained this information from local sources in Iraq. Also in the
same timeframe, one of the UN Oil Overseers, Michel Tellings, passed
similar information to USUN officials.
USUN promptly conveyed this information through appropriate
channels to officials at the State Department in Washington, seeking
guidance. Department officials, in turn, reported this information,
again through appropriate channels, to the Department of Defense, which
had operational responsibility for the MIF. Our records do not indicate
what further actions were taken by the recipients of this information.
Provision of Requested Documents
The U.S. Department of State is assembling and reviewing the
relevant documents that reference this matter. Given the classified and
sensitive nature of these items, State Department officials are
determining how best to convey this information to the Committee
without violating existing national domestic laws governing the
handling and dissemination of classified documents.