Crude Calculus


Believe it or not, the United States is on the verge of another
donnybrook at the U.N. Security Councilthis time over whether to
extend the oil- for-food program in Iraq, which expires on June 3.
The Bush administration is divided over what to recommend, but
conservatives have been strongly urging the Bushies to let the
program die. In the last month, Rush Limbaugh, William Safire,
Steve Forbes, Charles Krauthammer, The Washington Times and The
Wall Street Journal editorial page, and various members of the
Pentagon's Defense Policy Board have all gone on record against it.
"It's a stupid program to help French companies," Defense Policy
Board member Ken Adelman said. "We should close it down."The Bush administration would be wise to ignore their advice. The
program, which has to be renewed twice per year, need not be
extended indefinitely. But, over the next six months, while working
to create a legitimate government in Baghdad, the United States and
Great Britain need the program to feed Iraqis and to answer to
charges that they invaded Iraq to control its oil. And the program
also serves a little-known but enormously important financial
purpose: It prevents countries to whom Iraq owes money from tying
up its oil revenues in lawsuits.

The oil-for-food program was established in 1995 to address the
humanitarian crisis then unfolding in Iraq. After Iraq's 1990
invasion of Kuwait, the United Nations had passed sanctions that
restricted Iraq's trade until it demonstrated to U.N. arms
inspectors that it was free of weapons of mass destruction. By
1996, with about one-third of Iraq's children suffering from
chronic malnutrition, the United Nations adopted the oil-for-food
program, which allowed Saddam Hussein's regime to sell oil in order
to import food and other necessities (and to pay off Iraq's war
debts to Kuwait). Saddam brokered the sales (which, after 1999,
were no longer limited in amount), but the revenues from them were
kept in a U.N. escrow account and used to buy items approved by the
United Nations.

Saddam clearly took advantage of the program. His regime demanded
secret kickbacks from the middlemen who purchased Iraqi oil and
bought the bulk of its goods from countriesincluding France,
Russia, and surrounding Arab stateswhose support it sought in
Turtle Bay. But, in spite of this, the program did considerable
good. The United Nations built a network of 4,000 workers and 55,
000 distribution centers in Iraq to hand out goods to Iraqi
citizens, and, in six years, it substantially reduced malnutrition
in the country. According to unicef estimates, malnutrition rates
were cut in half from 1996 to 2002 in the parts of Iraq that Saddam
controlled. By this year, 60 percent of Iraqis relied on the
program for their diet.

If renewed, the program could continue to suffer from inefficiency
and wastebut probably not from the kind of corruption and
favoritism that characterized it under Saddam. And conservatives
have not really advanced a plausible alternative to the program's
existing networks for dispensing food aid. Having the United States
dispense aid itself, as Newt Gingrich recommends, would add still
another task to overburdened American occupation forces. And it's
not realistic to think, as one Fox News commentator predictably
recommended, that private charities could do the job. Says Bathsheba
Crocker of the Center for Strategic and International Studies, "As
a matter of pure necessity, it doesn't make sense to scrap the
program's fifty thousand food- distribution mechanisms."

The program could also serve an important political function. Many
of the war's critics in Europe and the Middle East continue to
believe the United States went to war to seize Iraq's oil. If
anything, that conviction has grown with the failure to find
weapons of mass destruction; with reports that American troops
protected Iraq's oil ministry, but not other buildings, from
Baghdad's looters; and with the appointment of an American oilman,
Phillip Carroll, to oversee the reconstruction of Iraq's oil
industry. By letting the oil-for-food program handle oil sales for
the next six months until the Iraqis are ready to take control of
them, the United States could answer its critics while continuing
to help the Iraqis rebuild their industry.

What's more, if the United States extends oil-for-food, the
American, British, and Iraqi administration in Baghdad could also
avoid a financial imbroglio. Under the U.N. program, the countries,
companies, and individuals to which Saddam owes almost $400 billion
in debts, Gulf war compensation, and pending contractsa list that
includes Russia, Kuwait, and Saudi Arabiaare prevented from making
claims on Iraq's oil revenues to recoup the money owed to them. If
the oil-for-food program dissolves, and if Iraq tries to sell oil,
other countries, companies, and individuals could make legal claims
against the revenues, as the Russians have already threatened to
do. Foreign oil companies, fearing lawsuits, might be unwilling to
purchase Iraq's oil. Says Edward Luck, the director of Columbia
University's Center on International Organizations, "The United
States has to make sure there is an international arrangement that
won't be disputed, so there won't be legal challenges."

The program's critics dismiss this danger. "[T]he idea that it will
be difficult to find buyers for Iraqi oil absent a U.N. seal of
approval isn't credible," according to The Wall Street Journal
editorial page. But, even if companies do purchase the oil, they
would probably not be willing to pay market prices. Says Edward
Morse, a consultant with the Hess Energy Trading Company in New
York, "I think, if there were not the U.N. mechanisms and not an
indemnification procedure, the oil would sell at a lower value
because there would be a risk perceived by the buyer." That could
create a situation, warns Morse, where critics of the United States
could charge that Washington is "screwing the Iraqi people." The
oil-for-food program doesn't provide a long- term solution to these
problems, but it would give the Americans, British, and Iraqis at
least six months to set up a government and try to resolve these
past claims.

What will the Bush administration do when the program comes up for
renewal at the Security Council this month? In the war's immediate
aftermath, the Pentagon, reflecting the views of conservatives,
pressed for scrapping the oil- for-food program and putting Iraq's
oil sales and revenues in the hands of American advisers and their
appointed Iraqi managers. But that brought protests from the State
Department and the British. The State Department, with British
backing, argued for phasing out oil-for-food gradually. Explains one
State Department official, "You have to have some international
legitimacy." The State Department and the Pentagon are still
fighting it out, but, according to administration sources, the
United States is currently leaning toward offering a U.N.
resolution that will preserve at least part of the oil-for-food

On the Security Council, all the permanent members favor extending
the program, but, among America's leading critics, France and
Germany are open to compromise, and only Russia appears adamant
about long-term U.N. control of Iraq's oil. The Russians are
worried about $12 billion in debts that Saddam's regime owes them
and another estimated $52 billion in contracts that the former
Iraqi government signed with Russian oil companies. They want to
make sure that, as part of any deal for phasing out U.N. control
over Iraq's oil revenues, they are promised payment for their
debts. The State Department appears willing to deal with Moscow,
but conservatives within the Bush administration are skeptical.
Says one administration official, "It is inconceivable how the U.N.
can endorse a deal that would satisfy us and the Russians."

If the Bush administration takes the right's advice and simply
declares oil- for-food null and void, then it will provoke another
bitter, bruising battle at the Security Council. But, if it
supports the program's renewal for six monthsor even for threeit is
likely to gather considerable support and goodwill, even if it
doesn't fully satisfy the Russians. And, if the program itself is
renewed, it will reduce the enormous burden of reconstruction in
Iraq. That alone is reason to support it.

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