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The story of the United Nation’s Oil-for-Food program is tragic. Meant as a humanitarian program to support the war-weary people of Iraq, it came to symbolize not only Iraqi President Saddam Hussein’s antipathy to his own people, but also UN administrators’ venality and corruption.
Alas, Saddam’s fall did not end corruption. Despite the poverty Iraqis suffered under Saddam, Iraq was never a poor country. The United Nations held billions of Iraq’s money, and Saddam had hidden billions more. When the Baathist regime fell, the United States set up the $17 billion Development Fund for Iraq which included unspent Oil-for-Food money, Saddam’s frozen assets, and proceeds from new oil sales.
“Both Masud Barzani and KRG Prime Minister Barham Salih have promised reform. Financial transparency must be at the top of their agenda alongside press freedom.”–Michael Rubin
Much of that money is now missing, and Iraqis are rightly indignant. A letter sent last month by the Iraqi parliament’s Integrity Committee to the United Nations’ office in Baghdad demands accountability, and accuses the United States of corruption. “All indications are that the institutions of the United States of America committed financial corruption by stealing the money of the Iraqi people, which was allocated to develop Iraq, [and] that it was about $17 billion,” the letter reportedly read.
The Coalition Provisional Authority (CPA) certainly wasted much money in poorly conceived development projects. (In full disclosure, I worked in the CPA but not in a financial or developmental capacity). There was disorganization, poor accounting, waste, and neither a cohesive strategy nor consensus about goals. The CPA did not, however, steal $17 billion; it mismanaged it. It should certainly be held accountable for that.
Some money did disappear. In the CPA’s waning days, its administrator L. Paul Bremer transferred $1.6 billion in cash to the Kurdistan Regional Government (KRG), slightly less than half of the money which the KRG demanded. The transferred Oil-for-Food money was to be split between the Kurdistan Democratic Party and Patriotic Union of Kurdistan. That was not the only money transferred, however. According to family members and senior politicians, both leaders also received money from the American intelligence community and development funds from across the U.S. government. International donors provided additional cash. As Nechirvan Barzani stepped down from the premiership, he reportedly bragged that the KRG had $4 billion in the bank.
That cash and much of the rest transferred to the KRG now appears to be missing. While the money was meant to belong to the citizens of Iraqi Kurdistan, top political leaders in both major Kurdish political parties apparently transferred funds from the international payments into personal bank accounts. Granted, too often in Iraqi Kurdistan, leaders treated the treasury and personal bank accounts as interchangeable. The Korek cell phone company is the prime example. Its leaders apparently used several hundred million dollars in KRG money to purchase the national license. In effect, they used the Kurdish citizens’ own funds for personal gain. Korek today may be worth billions of dollars. In a democracy, a company would have issued shares to provide start-up funds. The shares would reap profit or loss for investors. In Kurdistan, however, ordinary citizens assume the loss but family members of the political leaders monopolize the gain. In effect, they gamble without risk of loss. Assuming each Iraqi Kurdish resident received a share for what was, in effect, their forced investment in Korek, every individual in Kurdistan should now receive cash dividends for their share.
Assuming Nechirvan Barzani’s account of a $4 billion surplus was accurate, then Kurds should demand accountability not only for the $4 billion, but for the interest and profit that $4 billion would generate. If senior Kurdish officials from both parties transferred any or all of that money into their personal bank accounts, then they should be accountable not only for the principle, but also for the interest, stock dividends, and profits from investments in companies and real estate. Kurds may not realize it, but they now own shares in companies in China, hotels in the United Arab Emirates, and stocks in American companies. If, for example, that $4 billion investment generated 5 percent profit per year which was reinvested, then in the last two years, the principle has grown by more than $400 million.
Both Masud Barzani and KRG Prime Minister Barham Salih have promised reform. Financial transparency must be at the top of their agenda alongside press freedom. Borrowing from government coffers is not legitimate; it is theft. When public officials seek personal profit from the public treasury while ordinary, non-politically connected citizens struggle to get by, they are not simply gambling or investing; rather, they are replicating the financial crimes Saddam committed against the Iraqi people.
Michael Rubin is a resident scholar at AEI.
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