THE CONCLUSION OF the Volcker Committee — which went into the administration of the UN-sponsored Oil for Food programme (OFP) in Iraq — that there have been illicit payments for securing contracts for supply of humanitarian goods will not surprise anyone. Nor will the assertion that oil contract entitlements were awarded to people who, in turn, sold them at a premium in the market place or that oil importers quite willingly diverted a part of the total consideration for such supplies into a separate account controlled by Iraq's rulers through the device of special surcharge. For one, long before the constitution of a special independent committee it had been widely speculated that the entire process was riddled with corruption. Two, the general public is by now quite inured to the notion that corruption is a `global' phenomenon, as Indira Gandhi famously proclaimed.

That, of course, raises a more fundamental question: Was the UN so naïve that it did not realise what was so obvious to even the lay public? Or, is it merely that it was indifferent to their fiduciary responsibility of being custodians of Iraqi public wealth as to not put in place effective safeguards? The truth perhaps is a bit more complex. The UN's predicament lay in the very mandate that it assumed. It undertook to oversee a massive public procurement-cum-oil sales operation, which would have required it to duplicate the entire civil bureaucracy of the Iraqi Government. That, it simply could not do. Quite apart from the cost of such a venture, which would ironically, have had to be paid for by the Iraqi people, the logistics of keeping a massive neutral workforce inside Iraq under the hostile glare of the then ruling establishment would have been next to impossible. This was, after all, the mid-1990s. The world hadn't quite woken up to the wondrous possibilities of business process outsourcing. So the UN ended up depending on the very same bureaucracy that was completely under the control of Saddam Hussein. Since the Iraqi ruling establishment could not be expected to share the vision of the international community, such as it is, insofar as what is in the long-term interests of the Iraqi people, it was a classic case of the problem of `agency costs' — the phenomenon of an agent working at cross purposes to that of the interests of the principal — that management literature is replete with.

A close reading of the events leading up to the controversial programme would clearly reveal that the seeds of the UN's predicament lay in its policy of imposing an economic sanctions regime on the Iraqi people without fully factoring in the `agency cost' consequences, measured in human welfare. The regime would rather see its public suffer than give in to the international community's demand that it vacate the seat of power. When the UN could no longer wish away the tragedy of hunger- and malnutrition-related deaths that its policy had triggered as mere partisan propaganda, it chose to put in place a framework for a public welfare programme that showed that it had not learnt any lessons from its earlier experiment. The results are there for all to see.

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