Iraq's Oil-for-Food Program: Illicit Contracts Analyzed

Overview of the Oil-for-Food Program

In Heaton's study, the United Nations' Oil-for-Food program and its suspected illicit dealings are investigated. Over a six-and-a-half-year period beginning in 1996, more than 1,300 oil contracts were issued with the intended purpose of providing humanitarian relief for the Iraqi people. However, many have questioned whether all of the money transferred during contract issuance through oil extraction went to the humanitarian aid it was originally intended for. Heaton looks to answer the economic question of whether Saddam Hussein utilized these contracts to line his personal coffers and to purchase weapons.

Research Questions and Significance

This is an important question that needs to be answered for two reasons. First, the United Nations needs to understand not only where their Oil-for-Food program went right, but also where it went wrong. The idea behind the program is a sound one: it allows the UN to economically sanction a country and punish its leaders while remaining compassionate toward the general populace, who have little to no say in their country's affairs. However, as this work demonstrates, if there are loopholes in the program and the details are not sufficiently considered, the punishments intended by economic sanctions will barely be felt by those in power. In fact, despite rules to the contrary, sanctioned countries may be able not only to acquire the hard currency they desire but also to obtain weapons, thereby circumventing restrictions.

The article implies that Hussein was able to offer oil contracts at prices significantly below market value in exchange for kickbacks, which were paid when those contracts were resold to other individuals or organizations who extracted the oil at closer to market price.

Second, a lesson regarding the vulnerability of the UN Security Council and its votes can be drawn, should these allegations of illicit contracts prove true. Although the Security Council is intended to function as a globalized judicial force above reproach, Heaton appears to indicate that bribery and manipulation were used over the course of the program to sway the votes of Security Council members toward Iraqi-friendly policies. If true, this is a weakness that certainly needs to be addressed.

Data Sources and Variables

To reach these conclusions, the author uses several datasets to determine whether the Iraqi government used illicit contracts for underpriced oil to reward those who voted pro-Iraq and to entice other countries to follow suit. Data were drawn from the Iraq Survey Group, including the list of 1,374 oil contracts published in Annex B of its Comprehensive Report. This list includes the individual or company that received the oil allocation, the amount of the allocation, the name of the company that eventually extracted the oil, the amount ultimately extracted, and the extent of Iraq's illicit weapons program.

In addition, the estimated profit per contracted barrel was used, although these figures were based on SOMO estimations of value for payments and may be biased. The composition of the Security Council — including the rotating ten member nations over the course of the Oil-for-Food program — forms another dataset included in the calculations. Country-level data for contract recipients were also utilized, including the size of the recipient country's oil industry, whether the government is democratically elected, and whether the country supported the anti-Iraq coalition during the Persian Gulf War of 1991. Lastly, data on how Security Council member countries voted on three substantive resolutions relating to Iraq during the Oil-for-Food program were used to classify each country as pro-Iraq, moderate, or anti-Iraq.