The Danish Peace Academy

Sanctions against Iraq - what have we learnt?

By Hans-C. von Sponeck and Coilín Oscar ÓhAiseadha 2003

Introduction

The US Administrator in Iraq, Paul Bremer, when asked on the CNBC channel’s TV show Capital Report at the end of July 2003 what it would cost to rebuild the country, made particular reference to the high costs of repairing such basic infrastructural elements as the water system and the electrical system.

On the question of total cost, he was unable to suggest a definite sum: “It’s probably well above $50 billion, $60 billion, maybe $100 billion. It’s a lot of money,” he concluded.

And indeed, it does seem like a lot of money, particularly as one suspects that progressive revision of the budget estimate might continue indefinitely: $100 billion, $200 billion, maybe $500 billion?

After all, water and electricity are but two of the most basic needs of modern society. What about sewerage, healthcare, communication, transport, education, agriculture, policing, government administration and other institution building? What about the cost of the reconstruction of the oil industry itself, which is intended to provide the revenues to fund the other aspects of the project?

The task is without historic precedent, and it is not surprising that the American governor has no knowledge of plausible budgets for all of these things – or if he does, dares not mention the real total.

Revealing figures

A review of the basic resource picture for the whole period of the Oil-For-Food Programme reveals that the funds available from oil revenues were nowhere near sufficient to meet the needs of the population:

Oil revenues for the entire period of the programme (1996-2003) amounted to approximately $65 billion.

Funds allocated to the humanitarian programme amounted to just under $49 billion, but the total value of goods that actually arrived in Iraq under the programme was only $28 billion. (The failure of contracted supplies to arrive was due to the complexity of the procurement process, politicisation of trade relations by Iraq and the blocking of contracts by the United States and United Kingdom.)

Dividing this sum over a period of 6 years and 4 months (from 16 December, 1996, to 20 March, 2003, and a median population of 23 million, the funds available amounted to just under $195.

The following amounts per capita per annum were available for specific sectors:

• foodstuffs and food handling $106;
• medicines $15;
• water and sanitation $8;
• electricity $14;
• agriculture and irrigation $16;
• housing $12;
• education $4.

Inherent inadequacies

When Dennis Halliday assumed the role of Humanitarian Coordinator in Iraq in September, 1997, he very quickly realised that the programme was inadequate to relieve the humanitarian crisis that the sanctions had created in the country. Statistics from UNICEF revealed a state of famine, with greatly increased infant and under-five mortality figures.

In Baghdad, Halliday lobbied representatives of countries accredited to Iraq, particularly France, Russia and China, for improvements, and was successful in having the financial ceiling for the programme doubled from $1.3 billion per 6-month phase net to $2.6 billion per phase – i.e. $5.2 billion per year. Unfortunately, even this increase did not turn out to provide a solution to the problem. In an interview with David Barsamian in 2000, Halliday explains:

“[T]he inability of Iraq to pump enough oil to reach even the existing ceilings of the oil-for-food levels means that it’s unable to get anywhere close to the amount of money it needs, even for basic food and medicines, let alone the longer-term solution to malnutrition, which includes repairing the water treatment facilities and sewage treatment.”

(The occurrence of diarrhoeal diseases transmitted through dirty water exacerbates undernutrition. Hence the need to tackle water treatment.)

Compensation

Another thorny issue was the question of compensation payments to victims of the invasion of Kuwait. Resolution 687 directed that the needs of the Iraqi population be taken into account when calculating percentages of exports to be directed towards payment of compensation for war damages, but clearly, these payments exacerbated the plight of the desperate Iraqi population.

A comparison of funds transferred to an account for the payment of compensation to victims of the invasion of Kuwait with the value of goods delivered to Iraq under the programme is thought-provoking:

• Total sum paid out to cover compensation costs: $18 billion.
• Total value of goods actually imported to Iraq under the programme: $28 billion.

That such a large portion of the available revenues was transferred to the compensation fund reflects an inhumane disregard for the vast suffering of the population of Iraq under the programme. Compensation to firms and well-to-do governments like that of Kuwait could have waited, giving priority to saving lives in Iraq.

Successful distribution

It seems implausible that the United States, United Kingdom or any other western country believed that the centralised purchasing and distribution plan enforced through the introduction of the Oil-For-Food Programme would function efficiently; even Russia and China have long since realised the enormous difficulties of centralised national distribution systems.

And yet, the food distribution system implemented by the Iraqi administration was actually highly efficient, as Tun Myat, who succeeded von Sponeck as Humanitarian Coordinator in Baghdad, has repeatedly confirmed. Critics of the dictator might suggest that any efforts in that direction constituted part of a propaganda campaign in which Saddam Hussein promoted himself as the fatherly carer and protector against the besieging forces led by the barbarian American and British, but whatever the motivation, the distribution system for the monthly food basket was a proven success. Benon Sevan, the Executive Director of the Office of the Iraq Programme, visited Iraq in early 2002, and on his return he stated the following to the Security Council:

“[C]onsiderable achievements have been made in several sectors ... which have arrested the decline in the living conditions of the average Iraqi citizen, and have, in fact, improved the nutritional status of the population, particularly in the three northern governorates.” However, he emphasised that “with all the oil resources of Iraq as well as the resilience of the Iraqi people, they definitely deserve a far better standard of living.”

Kurdistan’s advantages

Careful note should be made of Sevan’s observation that the nutritional status in the three northern governorates (covering Iraqi Kurdistan) showed a particular improvement. Not only did the World Food Program (WFP) and WHO ensure that deliveries of food and medicines were handled appropriately in Baghdad, but Iraqi Kurdistan actually enjoyed several advantages.

For one thing, the funds that were actually available to the northern governorates were proportionately larger than those available to central and southern Iraq, since the basis of calculation was different.

Also, there was a cash component available to the agencies running the programme in northern Iraq. This enabled the United Nations to purchase food and other goods locally, at great benefit to the local economy.

Informal trade with neighbouring countries and a more hospitable climate due to the elevated topography are other relevant factors.

This picture, based on first-hand observation and insight into primary documentation, stands in sharp contrast to allegations that Iraqi Kurdistan suffered significant disadvantage due to Saddam Hussein’s interference in the operation of the Oil-For-Food Programme.

Audit

Naturally, under United Nations rules, a programme of this size and nature was subject to audit. Each of the agencies (WHO,UNDP, FAO, WFP, UNICEF, etc.) involved in implementing the Oil-For-Food Programme conducted regular audits – internal or external, or both.

In addition, the Office of the Humanitarian Coordinator for Iraq/Office of the Iraq Programme was also subject to regular audit: while von Sponeck was functioning as Humanitarian Coordinator in Baghdad, his office was audited by the Auditor-General’s Department of the Government of India. Thus, although the data for all of the agencies in the programme was not assembled and subject to a single, integrated audit, it is incorrect to suggest that the programme was never audited, as Martin Hvidt states in his article in Udenrigs 1, 2003.

US and UK: kings of a ruined castle

It is profoundly paradoxical that the United States and United Kingdom should have painted themselves into a corner where they find themselves unable to cope with the task of restoring order and reconstructing an Iraq to whose devastation they have made such an eminent contribution over the last 13 years. At the time of writing, they are in desperation weighing the thought of a new UN resolution to rescue them from their sticky, self-inflicted fate.

Sanctions as a weapon of war

In this process, the devastating effects of the trade embargo and of repeated bombings go hand in hand.

Documents of the US Defence Intelligence Agency demonstrate that the sanctions were seen from the start as an extension of American military strategy in Iraq. The earliest accessible and most striking in this series of documents is entitled “Iraq water treatmment vulnerabilities”. Dated 18 January, 1991, the report describes the risk of epidemics arising as a result of sanctions on the import of water treatment supplies: “Unless water treatment supplies are exempted from the UN sanctions for humanitarian reasons, no adequate solution exists for Iraq's water purification dilemma ... Unless the water is purified with chlorine, epidemics of such diseases as cholera, hepatitis, and typhoid could occur.”

This remarkable series of documents was uncovered by a public health researcher, Thomas J. Nagy, who presented a summary of his findings in The Progressive magazine in September, 2001.

Extension of conventional warfare

Critics have suggested that the key report mentioned above might have been intended to be used to prevent the destruction of the water supply, but actual events demonstrate the direct opposite: the Allied bombing during the 1991 Gulf War deliberately targeted the civilian infrastructure, knocking out the electricity system in every major city within hours. This had a devastating effect on the water purification system and did, in fact, gave rise to epidemics of cholera.

The fact that the United States could not only contemplate a strategy of creating enormous civilian suffering but actually make it a part of a conscious strategy is incontrovertible. One needs look no further than the US Air Force doctrine document, Strategic Attack, where the following comments are quoted regarding the Gulf War:

“The electrical attacks proved extremely effective. By 0310L (H+10) CNN (Cable News Network) reported that Baghdad had completely lost commercial power. ... The loss of electricity shut down the capital’s water treatment plants and led to a public health crisis from raw sewage dumped in the Tigris River.”

Thus, we should not be surprised, or look elsewhere for explanations for the fact that many hundreds of thousands of civilians – and perhaps as many as 2 million – died as a consequence of the combination of conventional military assault and trade sanctions. On the contrary, it is self-evident that a universal trade embargo, as distinct from an arms embargo, will cause suffering among the civilian population; that, after all, is the very intent. On the other hand, we must question a military strategy in which bombings and sanctions become twin prongs of a campaign that is calculated to cause civilian suffering through the destruction of such fundamental human necessities as the water supply.

Holds and blocks

It is clear that, after the introduction of the Oil-For-Food Programme in 1996, the United States, and to a lesser extent also the United Kingdom, specifically obstructed imports of items designed to repair and maintain the electricity system and the water purification system. In a report to the UN Sanctions Committee of 20 November, 2001, the Electricity Working Group reported that the value of goods in the electricity sector for which the Committee had placed holds on imports up to that point was slightly greater ($1.06 billion) than the value of items for the electricity sector that had actually arrived in Iraq during the entire period of the Oil-for-Food Programme ($1.05 billion). In many cases, goods that arrived were useless in the absence of certain other goods required to make up a complete functioning system.

The group pointed out the following effects of applications on hold:

“Interruption of power supply affects humanitarian facilities such as hospitals, water treatment plants and educational institutes. Power cuts affect households, agriculture and industries.”

It seems doubtful that these items had any special significance to the production of weapons of mass destruction, and in any case all these items in question could have been monitored by a large team of UN observers who were assigned to Iraq for exactly that purpose!

Illegal revenues

Critics mention that the Government of Iraq engaged in oil smuggling side by side with the Oil-For-Food Programme, in order to provide for the expensive tastes of Saddam Hussein and his family and friends, and while it is undoubtedly true that some of these illegal revenues were used for building palaces and the like, the major portion had to be spent to cover the necessities involved in running the nation.

It should be recalled that the punitive approach of the sanctions regime made no allowance whatsoever for recurrent expenditure. Where should the money come from to pay civil servants’ and teachers’ wages, and for the maintenance of schools and hospitals? From taxes? Nobody paid taxes. From export trade? Apart from oil exports under the terms of the Food-For-Oil Programme, no export trade was permitted. Another means by which the Government of Iraq could earn extra revenue was to impose surcharges on oil exports. As mentioned in Martin Hvidt’s article in Udenrigs 1, 2003, prices for Iraqi oil exports were (initially) set by the UN Security Council at below-market prices. This practice was exploited by the Iraqi authorities, who secretly added a surcharge of up to 30 cents per barrel.

A Reuters report of 16 July, 2002, suggested that the Iraqi authorities had earned perhaps $200 million from this practice in the course of the intervening 18 months, in addition to the income from illegal oil exports which, it is believed, had an annual value of between $2 and 3 billion. From September, 2001, however, the Committee changed practice, now insisting on setting prices retroactively based on average market prices for the previous month. Thus, buyers were expected to agree to buy oil at a price to be determined later! The resulting uncertainty about prices, along with reduced profit margins and fears of an American attack, led to a dramatic reduction in revenues – again at the expense of the civilian population.

The Danish experience

Having presented a general outline of the realities of sanction practices, it may be useful to outline specific aspects of the Danish situation.

The bureaucratic hurdles

The process by which a foreign company might gain permission from the Sanctions Committee to export goods to Iraq under the Oil-for-Food was lengthy. Typically, an interval of 10months to one year might pass from the point in time at which a supplier in a western country signed a contract with the Iraqi authorities, to the arrival of the goods in Baghdad.

Exports had to be approved by trade boards, foreign ministries and often also by ministries of defence. Contracts were processed by the exporting country’s mission to the UN, by the Sanctions Committee of the UN Security Council and by the UN Secretariat, and a letter of credit had to be opened by the Government of Iraq with the BNP (Banque National de Paris), the holder of the Iraq oil account.

In the case of Denmark, a source in the export industry states, the Ministry of Foreign Affairs had a requirement that all contracts first be approved by the Danish Agency for Trade and Industry, Erhvervsfremmestyrelsen. This filter added five months to the process, as well as the investment of time and effort in the preparation of the relevant paperwork by the Danish contractor.

These delays created great difficulties for the suppliers wishing to participate in the programme:

In the first place, the fact that many contracts were blocked created uncertainty for suppliers. The contract might be blocked by the Agency for Trade and Industry or the Sanctions Committee, and the time and effort invested in the export project might thus be entirely wasted. In some instances, our source reveals, the resulting loss of turnover led to the dismissal of the Danish export manager!

Contracts from Denmark and Sweden placed on hold or blocked by the American representatives in the UN Security Council included: silo mechanical spare parts from Cimbria Unigrain A/S, Denmark; medical equipment from Polystan A/S, Denmark; chemicals for water treatment from R. Window, Sweden; tractors and trailers from Scania CV AB, Sweden; and an ambulance and spare parts from Middle East - Skan Consulting and Trading, Sweden. Also, there was the problem of ‘capital tie-up’. A Danish manufacturer might be obliged to invest a large sum in the manufacture of goods for export to Iraq and then wait more than a year for payment, thus losing interest on the sum invested, which might perhaps more conveniently be invested in some other project, with quicker returns.

Only larger companies might be expected to negotiate these hurdles, and Danish applicants for contracts for exports to Iraq under the Oil-For-Food Programme were therefore few.

These difficulties were well known to all parties involved, including the Danish Government, and one must wonder why nobody intervened to facilitate the smooth functioning of the humanitarian programme.

Admittedly, these problems were compounded by the fact that the Iraqi Government traded preferentially with countries that supported it politically.

Nevertheless, Denmark, historically skilled in walking foreign policy tightropes, could have done much to support the humanitarian programme while maintaining an appropriate distance from the regime.

Danish misinformation: “Unlimited opportunities?”

The debate about the Iraq conflict, as it has been presented in the Danish parliament and media, reveals a problem of misinformation that has made its mark on the thinking of successive Danish governments on various aspects of the conflict. Here, misinformation about the sanctions is just one example of a more general problem, also being experienced by the current Government with respect to its statements about the foundation for participating in the war.

Thus, speaking to the Danish parliament on 22 March 2000, Foreign Minister Niels Helveg Petersen made the following statement: “After the most recent improvement in [the Oil-for-Food Programme], Iraq now has unlimited opportunities to export oil and to use the revenues from this to purchase food, medicine and spare parts for the oil industry and to pay compensation for war damages. Unfortunately, the Iraqi Government does not exploit this possibility fully, and it does not conduct an efficient distribution of the goods that come to Iraq under the scheme.” Although it is true that the limits placed on volumes of oil which Iraq was permitted to export were removed in December 1999, this was little more than a political ploy, since it was known that it was impossible to increase the output of the run-down oil industry. The subsequent minor increase in oil revenue occurred not because of increased volume but because of increased oil prices on the world market; oil output remained stable at the level of 3.1 million barrels a day that had been produced before the ceiling was lifted.

Furthermore, an examination of the figures reveals that the Iraqi Government actually signed contracts in excess of the revenues available under the programme:

• Total oil revenues: approx. $65 billion
• Funds budgeted under distribution plans: $48.63 billion
• Funds actually available for contracting by GoI: $39 billion
• Value of contracts signed by GoI: $52.36 billion
• Contracts notified / approved by Sanctions Committee: $44.14 billion
• Value of all goods delivered to Iraq: approx. $28 billion
  (GoI: Government of Iraq)

From these figures, it clearly emerges that the Government of Iraq made genuine efforts to spend the meagre resources at its disposal. In fact, if all contracts signed had been approved, the account of the programme would have been overdrawn. This was the case during several phases of the oil for food programme.

The consequences of the pattern of misinformation become even clearer in the light of the failure of the occupying powers to find weapons of mass destruction in Iraq. As outlined in the Danish newspapers in the course of recent months, the Danish Government in presenting arguments for participation in the invasion have been found to have misinformed the parliament and the public on a series of points.

Because the Government maintains majority support in parliament, this may not have immediate consequences; without this support, legal proceedings might be initiated. In any case, the Government’s performance on this major foreign policy issue is likely to impact on public confidence in the future.

Von Sponeck clarified all of the key issues mentioned above in the course of a meeting with the Danish Foreign Policy Committee on 8 October, 2002. It is regrettable that the Government paid little heed to his warnings that Denmark was contributing to a human tragedy in Iraq through its blind association with a self-serving US handling of the Iraq crisis.

Similarly, von Sponeck presented his perspective on these vital issues in a public hearing and debate in the Danish parliament building, Christiansborg, on the same day. Given that this was advertised in the daily newspaper Politiken a week in advance, it is regrettable that Martin Hvidt missed the opportunity to inform himself through direct contact with a reliable primary source.

Conclusion: lessons to be learnt

We would like to suggest here two simple lessons:
Firstly, comprehensive economic sanctions constitute a devastating weapon, with the potential to create extraordinary human suffering on a scale that matches or exceeds that of conventional warfare. Care must be taken to see that sanctions are not abused in the future as an extension of conventional warfare, rather than as a targeted tool to force a government to return to internationally accepted norms of behaviour.

Secondly, no rational and honest foreign policy can be outlined in the knowledge vacuum that arises out of a choice between brute ignorance and a dogged commitment to misinformation.

Sources

Rebuilding Iraq May Cost Up to $100 Billion, Bremer Says, 31 July 2003. Reuters, Washington.

Report of the Secretary-General S/2003/576, United Nations Security Council, 28 May 2003.
http://www.un.org/Docs/sc/sgrep03.html

Barsamian, D.: Iraq: The Impact of Sanctions and U.S. Policy - An interview with Phyllis Bennis and Dennis Halliday.
http://www.austinagainstwar.org/halliday_bennis.html

United Nations Security Council Resolution 687, S/RES/687 (1991), 8 April 1991. http://www.un.org/Depts/unscom/unscmdoc.htm

Office of the Iraq Programme - Oil for Food: Statement by Benon v. Sevan, 26 February 2002.
http://www.un.org/Depts/oip/background/latest/bvs020226.html

Nagy, T.J.: The Secret Behind the Sanctions. The Progressive, September 2002.
http://www.progressive.org/0801issue/nagy0901.html

Strategic Attack Air Force Doctrine Document 2-1.2, 20 May 1998. http://www.dtic.mil/doctrine/jel/service_pubs/afd2_1_2.pdf

UN Electricity Sector Working Group report on Iraq, 20 November, 2001. http://www.casi.org.uk/info/unelecsecwg011120.pdf

Iraq cuts its illicit oil surcharge-trade, Reuters, 16 July 2002.

List of U.S. Holds as of February 28, 2001, U.N. Office of the Iraq Programme, Parts II, III, IV. http://www.ccmep.org/list.html

Folketinget Spm. nr. S 1966: “Hvorledes vurderer udenrigsministeren konsekvenserne af FN's økonomiske sanktioner ...” 22 March 2000. [Danish parliament Q. no. S 1966: “How does the Foreign Minister assess the consequences of the United Nations’ sanctions ...”] http://www.folketinget.dk/Samling/19991/spor_sv/S1966.htm

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