Outsmarting Sactions

It is a normal day in northern Iraq when the trucks sit bumper-to-bumper for mile after endless mile, waiting to cross the border into Turkey. Oil transports clog the northbound highway for 15 miles without break. Some will idle for days. Their drivers will sip cardamom-flavored coffee and trade news with shepherds crossing the road behind sheep that look hurried by contrast. Eventually the Turks will give a go-ahead and the immense convoy will be on its way to market.

This is commerce under Iraq's mandatory Oil for Food program, an evolving tableau of economic dos and don'ts administered by the United Nations. The program with its "smart sanctions" is designed to punish Saddam Hussein for the Gulf War without causing average Iraqis to suffer.

Instead, in six years of operation it has spawned a bloated bureaucracy in Baghdad, corruption on both sides of the borders, and migraines for locals and private relief workers who once believed the name of the game was helping starving Iraqi children.

This month Iraq's opposition leaders have sent their own experts-including a former UN manager of the Oil for Food program-to UN headquarters in New York. Their intent: to lobby the Security Council to become a better steward of Iraq's economy.

Bush administration officials, meanwhile, are planning a crucial gathering next month of the Iraqi opposition in Washington. If the Washington policymakers want to get tough with Iraq, they will want to look not only at a regime change for Iraq but also for its UN-managed economy.

The way the Oil for Food program is meant to work, Iraq is allowed to export oil on condition that the revenues be used to import goods that meet humanitarian needs. Allowed for import under the sanctions: food and medicine primarily, some building materials, and oil industry parts and equipment. Prohibited: imports with a military use and a sophisticated list of "dual use" goods. That puts the "smart" in smart sanctions.

In addition to controlling the import-export trade under prearranged six-month phases, the UN itself administers much of the humanitarian distribution, even actually delivering premeasured food baskets to each Iraqi family.

Reality, not surprisingly, is different. The program itself is a form of central planning that encourages Iraq's socialist government to squash private initiative. The government controls the oil sector, or more than 90 percent of Iraq's hard-currency earnings. Agriculture, on the other hand, left in private hands in Iraq, has been devastated by UN food imports.

More tragically, UN workers in Baghdad are increasingly co-opted by the government, giving Baghdad effective veto power over UN activities. For Saddam Hussein's regime, that's the "smarter" part of smart sanctions. Part of his power includes suppressing information-particularly related to child nutrition and health-that shows the Iraqi dictator is more to blame for malnutrition than UN sanctions.

At the same time, outlawed trade and black-market deals flourish. On the same day the legal trade in oil sits stalled at the Turkish border, fuel trucks across the Tigris River in northern Syria are busy hauling oil from a pipeline the locals say carries illegal Iraqi crude. If those deals benefit Iraq's neighbors enough, it will make coalition-building more difficult for the United States than before the Gulf War-smarter sanctions once again.

Barred from following the laws of supply and demand, entrepreneurs on both sides of the border are finding ways to manipulate the program. Local Kurdish governments levy a road tax on the oil trucks. They say the tariff is their only form of revenue outside the UN program and the only way to maintain roads and build new infrastructure. Turkey, in return, demands that for every shipment of Iraqi oil, one-and-a-half tons of food and other commodities from Turkey must be allowed back across to Iraq.

The quid pro quo can have bizarre consequences. One week after border officials dislodged the convoy of oil trucks, another traffic jam-open-bed delivery trucks all carrying the same thing, bananas-filtered across the border southbound into Iraq.

When the results aren't comical, they are deadly serious. The Oil for Food program began as a way to help starving Iraqi children. Comprehensive sanctions were first imposed on the Iraqi regime in 1990, following Saddam Hussein's invasion of Kuwait. But in post-war Iraq images of Iraqi Kurds clinging to snowy hillsides and tiny coffins in Baghdad moved the UN Security Council to alter sanctions in 1995 with the Oil for Food program as a "temporary measure to provide for the humanitarian needs of the Iraqi people." With the program into its 12th six-month phase, however, more children are actually dying in areas under Saddam Hussein's control than when it began.

According to the most recent UNICEF survey, infant mortality rates showed a major increase, as they have under every study since Saddam Hussein took power in 1979. From 1994 to 1999, the number of infant deaths per 1,000 live births grew from 80 to 108. The number of deaths per 1,000 children aged 1 to 5 years grew from 92 to 131.

Malnutrition is presumed to be the leading cause of death among Iraqi children. UNICEF blamed food shortages on UN sanctions.

"The Iraqi people would not be undergoing such deprivations in the absence of the prolonged measures imposed by the Security Council and the effects of war," reported UNICEF executive director Carol Bellamy. She recommended that "whenever sanctions are imposed they should be designed and implemented in such a way as to avoid a negative impact on children."

Those figures were used to bolster a call from the UN humanitarian establishment and liberal European governments to loosen the sanctions. What UNICEF did not publicize were separate surveys of child health conducted in the three northern regions of Iraq. Those surveys showed that infant mortality during the same period dropped-from 72 deaths per 1,000 live births to 59. Childhood deaths (ages 1 to 5) also declined, from 90 to 72. Why should children in northern Iraq have nearly twice the opportunity to survive their first five years as children in the rest of the country?

Both regions operate under the same UN sanctions; what separates them is local government control. The three northern regions operate under protection of a U.S.-patrolled no-fly zone and have local Kurdish administrative governments that function outside the grip of Baghdad.

Overall, while child mortality rates in south and central Iraq have more than doubled since Saddam Hussein came to power, in the north, where UN sanctions also apply, the trend has been the opposite.

Yet UNICEF embargoed the northern Iraq numbers, using only the figures from south and central Iraq in summary reports. Press releases quoting Ms. Bellamy repeatedly noted the increase in childhood deaths, without ever acknowledging that the childhood death rates in northern, Saddam-free Iraq had improved. The gloomier numbers succeeded in persuading officials to loosen sanctions. In 1999 the UN Security Council agreed to end limits on Iraqi oil exports, thereby freeing more money for the UN to spend in Iraq.

"The UN here should be neutral but it is pro-Baghdad," said a private relief worker in northern Iraq. "I have very little patience for people talking about starving children in Iraq unless they are talking about Saddam Hussein doing it."

(Western workers in Iraq asked not to be named in print because they fear recriminations or ouster if they are publicly critical of the current regime.)

Total oil sales under the UN program have now climbed past $55 billion. Security Council Resolution 986 is specific about how Oil for Food revenues can be spent: 59 percent in humanitarian aid to the south and central government; 13 percent to the northern governments; 25 percent to rebuild Kuwait; 2.2 percent in administration; and 0.8 percent in monitoring weapons of mass destruction.

The resolution made the government of Iraq responsible for the purchase and distribution of supplies in the south-central areas. In the north, the UN is directly responsible.

To carry out the program the UN employs 500 international staff workers and about 2,000 locals. Salaries range from $300 to $3,000 per month (most Iraqi families live on less than $200 per month).

Theoretically, the program has an administrative budget of over $1 billion. One former UN manager from Baghdad told WORLD: "Obviously there are more than enough funds for the UN to engage the best expertise in the world to analyze and plan and do what needs to be done."

Government officials and UN workers in Baghdad are not free to speak openly about the program's performance. Northern officials, who can speak out, say the program has made prosperity possible, but not without frustration.

Nasreen Sideek, minister of reconstruction for the Kurdish Democratic Party, said the program has succeeded in providing basic services to get people back on their feet. She remembers when trees were cut all over the region because there was no other fuel after a decade of fighting first Iran and then the United States. New buildings in the region these days hum with central air conditioning.

With development, she says, "people need more than food and medicine. The challenge is to expand the program and to improve sustainability." But she said Baghdad overrules plans to add infrastructure: dams, bridges, and more electricity. "We may face a crisis in being able to sustain our institutions," she said.

In the streets, Iraqis complain too. Once grateful for the necessities, they see themselves as part of a helpless cycle of dependency. Most Iraqis receive half of their food via the UN. Its cooking oil is too thin. The shops one week receive only bananas. Another, tomatoes-from Russia. Food rations include flour shipped from Australia, while local wheat farmers go bust.

No one seems to know who is making those arrangements, but Baghdad has gained veto power over many aspects of UN administration. The government regularly chooses UN workers by selectively approving or denying entry visas. American and European employees are shut out, while entry is approved for workers from mostly Muslim countries-Bangladesh, Jordan, Nepal, Nigeria, and Sudan.

Recently Baghdad denied visas to 300 land-mine detection and removal experts from the private Mines Advisory Group. They were to work in northern Iraq under a UN contract. The move angered the few private nongovernmental organizations working in Iraq, while leaving Kurds in land-mine areas to ongoing danger. Thirteen private groups subsequently signed on to a letter that charges, "not only are the sanctions preventing economic recovery, but OFF [Oil for Food] is as well."

Although $7 billion should have been spent in northern Iraq to date under the Oil for Food formula, UN records show that less than $3 billion-40 percent-actually has. Officials speculate that it is a combination of Baghdad imposing its own sanctions on the breakaway region, of bureaucratic bungling, and of corruption. Asked to comment, UNICEF referred WORLD to the UNÕs Office of the Iraq Program, which failed to return phone calls.

Kurdish officials have decided the shortfall is serious enough to personally lobby the UN Security Council. Last month, they sent delegates, including former UN staff from Iraq, to meet privately with council members. "The Security Council owns the dairy and the UN agencies only milk the cows," one former UN staff member told WORLD. "At the end of the day, after five years and the availability of a tremendous amount of resources, thousands of families continue to live in substandard conditions. This need not be so."

Gaps in the program show up in more ways than number crunching. Northern Iraq is dotted with unofficial refugee camps, set up extemporaneously to house Iraqis chased or starved from their homes in central Iraq. These camps appear not to rate UN attention-no blue-and-white flagged security and no attendants in white Land Rovers. One camp WORLD visited housed 104 families, or 618 people, sheltered in rows of mud-and-daub huts between the roadside and a stony bluff two hours' drive north of Baghdad.

Some were forced from their homes because they refused to join the ruling Baath Party. Others say they could no longer provide for their families. "Food rations for us were halved in 1996," said Nawzad Ahmed, who is from the south but lives in the camp with his wife and two children. "We had to sell our flour in order to buy clothes."

Halwa Mohamed Amin, a mother of six, said government police confiscated her home in Kirkuk two years ago. Her husband was active in supporting the Kurdish opposition but disappeared in 1988. Police jailed her until the family's eviction. They loaded her and the children into a truck, drove out of Kirkuk, and dumped them at the roadside south of Sulaymaniyah.

"You have to live there to understand how difficult the future is," said Halwa. "Police in the trucks forced us to pay 2,500 Iraqi dinars for the ride." In the camp she, like the other displaced, built her own quarters, a cramped three-room hut of mud with low ceilings and crickets living in the walls. A private Japanese organization provides plastic sheets, kerosene, pots, and water containers. Families collect their own water and wood for fuel. There is no coordinator of services at the camp, so local government workers say they plan to resettle as many as possible into nearby cities.

The Oil for Food story is not only about governmental waste or human misery. One much-overlooked aspect of the program is its actual link to Saddam Hussein's military buildup and his promotion of terrorism.

Defectors say that the Iraqi intelligence service has set up a network of commercial companies to launder money through the Oil for Food program. One told Vanity Fair magazine that dummy companies take the nonlethal items Iraq is permitted to trade, such as vehicles or building material, sell them for cash, and use the money to buy arms. The companies also smuggle military components by hiding banned goods, fiber-optic cables for example, inside imported refrigerators or televisions.

Ultimately economic sanctions are all about what Saddam is hiding. If he opened wide his doors to weapons inspectors tomorrow, economic sanctions-and economic hardship for his people-could end.