Volcker asks U.S., allies to link U.N. budget to reform

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The United States and its allies should threaten to cut the budget of the United Nations if it fails to end corruption and adopt badly needed reforms, the man who led the probe into the U.N. oil-for-food scandal said yesterday.

Former Federal Reserve Chairman Paul A. Volcker told a Senate Foreign Relations Committee hearing that he opposed a unilateral U.S. withholding of U.N. dues, but that a "de facto alliance" of nations demanding reform could cut through the world body's "culture of inaction."

The message, he said, should be: "Look, if the organization isn't ready to reform itself, that has budgetary implications."

The Iraq oil-for-food program has proven to be the biggest financial scandal in U.N. history, tarnishing the reputation of Secretary-General Kofi Annan and other top U.N. officials and fueling calls for a complete overhaul of the body's internal oversight and personnel practices.

The Bush administration opposes a House-passed bill that would require mandatory cuts in the U.S. dues payment to the United Nations if it fails to adopt more than three dozen specific reforms in the next few years.

John R. Bolton, the U.S. ambassador to the United Nations, restated that opposition yesterday, but he agreed with Mr. Volcker that Washington needed allies in the fight to change the United Nations.

"I absolutely agree it can't be seen as just an American initiative," Mr. Bolton told the Senate panel.

He said the U.N. summit last month on reform was "a good start," but that the United States was pushing for more.

Mr. Bolton said U.S. officials fear the momentum for reform might be lost if changes are not in place before member states approve a new two-year budget in December. He said U.S. officials are considering requesting the world body to adopt a short-term budget through the first quarter of next year to keep the pressure on.

Mr. Volcker's probe, which will issue a final report on oil-for-food contractor abuses in the coming weeks, has exposed deep failings in the U.N. program, designed to restrict Iraqi dictator Saddam Hussein from rearming while providing food and humanitarian supplies to ordinary Iraqis.

Mr. Volcker's investigators have faulted the design of the oil-for-food program, the way contractors were hired to run it, the absence of clear financial and managerial controls during its seven-year history, and conflicts of interest and outright corruption by senior U.N. officials charged with administering the program.

"As things stand, the U.N. has simply lost the credibility and the confidence in its administrative capacities necessary for it to meet large challenges that seem sure to arise in the future," Mr. Volcker said.

The former Fed chairman also revealed his estimate for the amount of money Saddam was able to skim off the program, which was shut down in 2003. Saddam was ousted by U.S.-led forces that year.

Mr. Volcker said his investigators estimate that Iraq earned about $12.8 billion in illicit payments under the oil-for-food program: $10.2 billion in smuggled oil sales to Jordan, Turkey and Syria, and $2.6 billion from bribes, kickbacks and other related scams.

The overall figure is about $2.8 billion higher than a widely cited Government Accountability Office estimate given to Congress last year.

Mr. Volcker took issue with those who say the program was still a "success" for the United Nations because it averted a humanitarian crisis in Iraq, preserved international sanctions against Baghdad, and helped prevent Saddam from acquiring nuclear and other weapons of mass destruction.

Mr. Volcker said any achievements had come at a huge cost to the reputation of the United Nations.

"Spreading reports of maladministration, ethical lapses and growing corruption reaching even into the U.N. itself have eroded confidence in U.N. competence and have heavily damaged its credibility," Mr. Volcker said.

Some of the criticisms have been "exaggerated," he added, but the investigation concluded that the failings of the oil-for-food program "are symptomatic of deep-seated systemic problems in the U.N. administration."