International Handbook on the Economics of Corruption, Volume Two
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International Handbook on the Economics of Corruption, Volume Two

Edited by Susan Rose-Ackerman and Tina Søreide

A companion volume to the International Handbook on the Economics of Corruption published in 2006, the specially commissioned papers in Volume Two present some of the best policy-oriented research in the field. They stress the institutional roots of corruption and include new research on topics ranging from corruption in regulation and procurement to vote buying and private firm payoffs.
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Chapter 13: Conflict and Corruption in International Trade: Who Helped Iraq Circumvent United Nations Sanctions?

Yujin Jeong and Robert J. Weiner


1 Yujin Jeong and Robert J. Weiner 1. Introduction Trade sanctions are a widely used weapon in international conflict, despite controversy about their effectiveness. Although trade takes place through firms, little is known about the role of business in the implementation or evasion of sanctions. We examine conflict and corruption in international trade, using the United Nations (UN) Oil-for-Food Programme (OFFP) as a natural laboratory. Under the OFFP, the Iraqi government requested ‘surcharges’ (bribes) from companies exporting oil in order to evade sanctions. Circumvention of UN sanctions through bribery was widespread, and later became the subject of official inquests, which produced detailed investigative reports. These reports provide public information on bribery unlike any in the literature – transaction specific, detailed, and geographically comprehensive. We use this unique information to investigate determinants of private sector bribery in international trade. Our chapter contributes to two recent streams of research – economic sanctions and corruption. The international petroleum industry provides a fertile ground for examining conflict, corruption, and sanctions, for several reasons. The central role of oil in the economy has been the basis for trade embargoes against both exporting countries, for example, Iraq (see discussion below) and importing countries, for example, South Africa under apartheid (Hengeveld and Rodenburg, 1995), Japan in the 1940s, and the USA in the 1970s (Vernon, 1976). Oil rents have fueled corruption and conflict (Collier and Hoeffler, 2005; Fjelde, 2006), phenomena termed the ‘resource curse’ (Auty, 1993). The geographic concentration of petroleum reserves prevents multinational companies from focusing investment and...

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