International Relations
International Business and Trade

What is the oil for food scandal?

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August 13, 2007 9:06PM

It was intended to allow Iraq to sell oil through an escrow system in exchange for food, medicine, and other humanitarian needs for ordinary Iraqi citizens without allowing Iraq to rebuild its military. It is termed a scandal because of the corruption related to it and not, contrarily to popular belief, because of it having allowed Iraq to rebuild its military.

Individuals and organizations favoring Saddam's Iraqi regime were offered oil contracts through the Oil-for-Food program. These contracts were then sold on the open market and the seller was allowed to keep a transaction fee. These contracts were awarded to persons who agreed to refund a portion of this fee the Iraqi government or politicians who could influence their countries' policies toward Iraq. Companies that sold commodities were overcharging by up to 10%, with part of the overcharged amount being diverted into private bank accounts for Saddam Hussein and other regime officials and the other part being kept by the supplier. Some commodities ordered and paid for were never delivered or were unfit for use, and the distribution system within Iraq was controlled by politics, not humanitarianism. The French bank handling funds transfers for the program made payments without proof that goods were delivered and to third parties who were not authorized recipients. Investigators estimate that the bank received more than $700 million in fees under the program. This webpage gives more detail about the program and the various UN officials, politicians, businessmen and companies involved in the scandal.