UNITED NATIONS, December 27, 2004 (AP) - The head of an independent investigation into alleged corruption in the UN oil-for-food program said most of the money illegally obtained by deposed Iraqi president Saddam Hussein came from smuggling, much of which the UN Security Council knew about but didn't stop.

In an interview being aired Tuesday on Alhurra, the U.S. government-backed television station tailored for Arab audiences, Paul Volcker questioned the reliability of reports Saddam diverted amounts ranging from $1.7 billion to $21 billion US from the $60-billion oil-for-food program.

The former U.S. Federal Reserve chairman said there was a lot of confusion made between money Saddam earned from smuggling and money obtained illegally under the oil-for-food program. He refused to give any estimates, saying his investigation is still under way.

"The big figures that you see in the press, which are sometimes labelled oil-for-food - the big figures are smuggling, which took place before the oil-for-food program started and it continued while the oil-for-food program was in place," he said, in a transcript obtained Monday.

The UN Security Council authorized the oil-for-food program to help Iraqis cope with UN sanctions imposed after Saddam's 1990 invasion of Kuwait. Launched in December 1996, it allowed the former Iraqi government to sell oil provided the money went primarily to buy humanitarian goods and pay reparations to victims of the 1991 Persian Gulf War.

Saddam's government decided on the goods it wanted, who should provide them and who could buy Iraqi oil - but the Security Council committee overseeing sanctions monitored the contracts.

In a report in October, top U.S. weapons investigator Charles Duelfer said Saddam was able to "subvert" the oil-for-food program to generate an estimated $1.7 billion in revenue outside UN control from 1997-2003. In addition, Iraq brought in over $8 billion in illicit oil deals with Jordan, Syria, Turkey and Egypt through smuggling or illegal pumping from 1991-2003 when sanctions were in place, he said.

U.S. congressional investigators reported in November that Saddam made more than $21.3 billion in illegal revenue - over $13 billion from smuggling and about $7 billion by subverting the oil-for-food program.

"Without question, (there were) problems in the oil-for-food area," Volcker said.

"But when you look at those $10-billion figures, or $20-billion figures, most of those numbers are so-called smuggling, much of which was known and taken note of by the Security Council but not stopped."

Volcker refused to speculate on why the council didn't stop the smuggling but indicated the issue would likely be addressed in his reports. An initial report is expected in January and a final report in the summer, he said.

Volcker stressed his inquiry is focused on "what went wrong or right inside the UN" in managing the oil-for-food program.

The investigation isn't just focusing on whether UN officials may be guilty of corruption, he said but on other issues: did UN officials follow proper procedures? Was there "bad administration rather than corrupt administration?" What were the directions from the Security Council, and what was its responsibility?

But Volcker said the investigation can't avoid the question of smuggling, including why the Security Council didn't take action to stop it and the responsibility of the five permanent veto-wielding members - the United States, Britain, France, Russia and China.

He said co-operation with his investigators has generally been good, though it varies by person and country, especially when it comes to financial matters.

Volcker said his investigators have interviewed Saddam's associates and plan to interview more - but they have not asked to interview Saddam, though "maybe we should."

Asked whether he thought Saddam managed to buy UN support by distributing vouchers to purchase Iraqi oil, Volcker said: "I think that's a very complicated question, probably very difficult to find the answer to. But you're just going to have to wait until we're able to report more fully."

With serious allegations against the United Nations as an institution, and U.S. congressional calls for UN Secretary General Kofi Annan's resignation over the oil-for-food allegations, Volcker said an investigation is needed "to clear the air."

"And if there were mistakes made, that ought to be revealed. If there was corruption, malfeasance, that ought to be revealed. And my hope is that that will strengthen in the end confidence in the institution because it will have to reform," he said.