THE WEDNESDAY WATCH
Analysis and Commentary from UN Watch in Geneva
Wednesday, 19 January 2005
Issue 127

Oil-for-Food Scandal: The UN's Own Tsunami

As the UN struggles to lead global relief efforts for victims of the Indian
Ocean Tsunami, the world body's senior staff are experiencing a tidal wave
of their own. In a sweeping overhaul, Secretary-General Kofi Annan is
replacing many of his top deputies, a belated response to the series of UN
scandals-from corruption in the "oil-for-food" program to sexual abuse of
girls by peacekeepers in Congo-that have created, in the words of Annan
spokesman Edward Mortimer, "a gathering crisis." The Volcker Committee's
preliminary report finds the UN guilty of systematic mismanagement and
incompetence in running the $56 billion oil-for-food program, with UN
agencies frequently operating in an "ineffective, wasteful and
unsatisfactory manner." Whether Annan's management reshuffle will put an
end to his self-described "annus horribilis" depends on how damning future
revelations will be.

Things looked quite different from the 38th floor of UN headquarters one
year ago, when the oil-for-food allegations first broke. Then, Annan and
his staff dismissed out of hand any questions of UN malfeasance in
overseeing Sadaam's billion-dollar transactions. The position of Annan's
spokesman, Fred Eckhard, was that the program had already been "audited to
death." Not only would no investigation be launched-"these allegations are
just not credible from our point of view"-but, the spokesman insisted, "it's
really not clear to us even what the allegations are." Less than a year
later, with several major inquiries underway, the allegations have become
clear indeed.

In the executive summary that accompanied the Volcker Committee's release of
more than 400 pages of internal audit papers (accessible at
www.iic-offp.org),

investigators found that the audits described inadequate procedures, policy,
planning, controls and co-ordination across numerous areas. Some
reports.present a wholesale failure of normal management and controls." In
the words of The Daily Telegraph, the UN suffered "one of the most
far-reaching indictments in its history."

"It's a lot harder to shrug this off as a rightwing conspiracy," conceded
Mark Malloch Brown, Annan's new chief of staff. Appointed to implement the
management shake-up, the highly regarded Briton-who continues to hold his
post as head of the UN Development Program until a replacement is
found-warned that "the crisis is still building." In a remarkably candid
interview with the Financial Times, Malloch Brown predicted that further
oil-for-food revelations will include "some pretty tough stuff on
management."

The staff changes are significant. First, Malloch Brown replaces Iqbal
Riza, Annan's veteran chief of staff. The 70-year-old former Pakistani
diplomat, known for his behind-the-scenes machinations against the U.S. and
Israel, sought to spin his departure as a planned retirement. In fact, as
Judith Miller reports in The New York Times, the decision came after a
private meeting with Annan.

The Secretary-General's decision to restructure followed frank assessments
given to him, first, by the group of sympathetic foreign policy Brahmins who
gathered at the apartment of Richard Holbrooke, former U.S. ambassador to
the UN; and then by a UN inner circle meeting at the home of Annan's deputy,
Louise Frechette. The common message, according to reports, was that the
Secretary-General needed to mend fences with Washington-no mean feat given
his vocal opposition to the U.S.-led war that ousted Sadaam's regime.

Robert Novak, writing on December 19th, speculated that Annan might break
precedent by not choosing an American as new head of UNICEF. In the end,
however, Annan went with President Bush's preferred candidate, outgoing U.S.
Agriculture Secretary Ann M. Veneman. She will replace Carol Bellamy, a
nominee of President Clinton, whose second term expires in April. In a
joint press conference yesterday, Annan acknowledged that Veneman's
"relationships and contacts with Washington will be helpful."

Several other changes result from scheduled, and unscheduled, retirements.
Peter Hansen leaves his post as head of the UN Relief and Works Agency for
Palestinian refugees. His desire to stay on was ill-served by his recent
expression of satisfaction with employing members of the Hamas terrorist
group on the UN payroll. At a meeting in New York last month, reports The
Guardian, Annan told Hansen: "I don't have the political capital with the
Americans to keep you." Jean Arnaud, the former UN deputy envoy to
Afghanistan, considered highly competent and professional, is said to be the
top candidate to replace Hansen.

Terje Roed-Larsen, the UN's point man for the Middle East peace process,
ended his term in December, and will represent Annan in talks designed to
end Syria's occupation of Lebanon, which was declared illegal by a recent
Security Council resolution. Sir Kieran Prendergrast, being pushed out of
his position as head of Political Affairs, is actively lobbying to become
the new Mideast envoy.

Finally, Catherine Bertini, the American undersecretary-general for
management, said she would resign in the spring; Jean-Pierre Halbwachs, the
UN controller, retires in February; and David Veness, a senior
counterterrorism official at Britain's Scotland Yard, has been named to the
new post of undersecretary-general for safety and security.

According to Malloch Brown, however, the changes will go further, and
include "human accountability" reforms addressing other recent scandals,
such as accusations of sexual harassment against senior officials like Ruud
Lubbers, head of the UN's refugee agency. A new sexual harassment policy
will provide "a single standard from the highest level to a peacekeeper on
the ground."

And so the repercussions of the oil-for-food scandal continue to move the
earth beneath the UN, shifting the tectonic plates of the most immovable
bureaucracy. Apart from the consequential staff replacements, the scandal,
according to Harvard professor John G. Ruggie, enables profound change
within the UN by shifting power from those who see the organization as being
beholden to member states, into the hands of those who endorse
accountability to the UN's own agencies, non-governmental organizations and
the public.

Even on a micro-level, the oil-for-food scandal is impacting UN operations.
In an unusual move, the organization announced it would use an outside
accounting firm to help track the billions pledged to help Tsunami victims.
Kevin Kennedy, a senior official with the UN Office for the Coordination of
Humanitarian Affairs, denied that oil-for-food played any role. Yet his
statement was belied by the Secretary-General's spokesman who, insisting
that lessons of the Volcker Committee were already being applied, emphasized
exactly such a connection: "On the financial side of the Tsunami relief
effort, the UN is already implementing procedures for greater accountability
and transparency."

By the same token, the UN's handling of the Tsunami disaster offers Kofi
Annan a chance to prove the worth of his institution, and perhaps change the
subject from the coming oil-for-food revelations. In March, Annan is set to
publicize his grand vision for institutional reform of the UN, a response to
the High Level Panel proposals. If he can keep his ship steady until then,
he may yet have a chance to leave his desired legacy, and not one imposed on
him by scandal.

Also Watched.

* Silent Disasters: Global poverty kills more than 150,000 children every
month from malaria alone, according to "Investing in Development: A
Practical Plan to Achieve the Millenium Development Goals." The new plan,
directed by Professor Jeffrey Sachs, calls for a doubling of aid from
industrial nations to poor countries, in order to halve extreme poverty and
save the lives of millions by 2015. However, Nancy Birdsall, president of
the Center for Global Development in Washington, comments in the New York
Times that the report puts too little emphasis on the need for poor
countries to make deep political and social changes to reduce poverty.

* UN Marks Holocaust: The UN General Assembly on Monday will hold a Special
Session to mark 60 years since the liberation of the Nazi death camps,
approved by at least 138 states. This is the first time ever that the UN
will commemorate the Holocaust.

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