U.N. Agencies to Give $40 Million Back to Iraq

The nine U.N. agencies involved in the oil-for-food program have agreed to pay Iraq about $40 million in oil proceeds they received in 2003 to finish their work but never spent, United Nations officials said Tuesday.

Former U.S. Federal Reserve Chairman Paul Volcker is leading a U.N.-backed inquiry into the scandal-tainted operation. His team has focused on the nine agencies and their handling of the money. The cash, which came from Iraqi oil sales, was a flat fee and there had been no expectation that it would be returned.

Nonetheless, Iraqi officials and Volcker’s team had raised questions about the message that would be sent by keeping the funds. U.N. Controller Warren Sach sent a letter on the issue to the agencies and all have agreed to pay back any surplus, U.N. spokeswoman Marie Okabe said.

The money was meant to help the agencies wrap up their work under the 1996-2003 humanitarian program whose goal was to help Iraqis cope with U.N. sanctions imposed after Iraqi President Saddam Hussein’s 1990 invasion of Kuwait.

The total amount to be returned was expected to be about $40 million, two U.N. officials said. They spoke on condition of anonymity because they were not authorized to discuss Volcker’s findings before they are publicly released next week.

The United Nations refused to release Sach’s letter or disclose exactly what it said. But one of the U.N. officials read excerpts in which Sach reports Volcker’s finding that the agencies didn’t spend all the money and asks that they return it.

Neil Gallagher, a spokesman for the World Food Program, said his agency had already sent back its portion, which he estimated at $10 million. It will go to the Development Fund for Iraq, which replaced the oil-for-food program in 2003.

The nine agencies involved are: the U.N. Development Program; UNESCO; the World Food Program; the Food and Agriculture Program; the World Health Organization; U.N. Habitat; the U.N. Office for Project Services; the International Telecommunication Union; and the U.N. Children’s Fund.

The officials said the U.N. Office for Project Services would pay back about $11.5 million and the U.N. Development program would pay about $2 million.