If that seems backwards, it's because it is. Iraqis have never been awarded reparations for any of the crimes they suffered under Saddam, or the brutal sanctions regime that claimed the lives of at least half a million people, or the US-led invasion, which the UN secretary general, Kofi Annan, recently called "illegal". Instead, Iraqis are still being forced to pay reparations for crimes committed by their former dictator.

Quite apart from its crushing $125bn sovereign debt, Iraq has paid $18.8bn in reparations stemming from Saddam Hussein's 1990 invasion and occupation of Kuwait. This is not in itself surprising: as a condition of the ceasefire that ended the 1991 Gulf war, Saddam agreed to pay damages stemming from the invasion. More than 50 countries have made claims, with most of the money awarded to Kuwait. What is surprising is that even after Saddam was overthrown, the payments from Iraq have continued.

Since Saddam was toppled in April, Iraq has paid out $1.8bn in reparations to the United Nations Compensation Commission (UNCC), the Geneva-based quasi tribunal that assesses claims and disburses awards. Of those payments, $37m have gone to Britain and $32.8m have gone to the United States. That's right: in the past 18 months, Iraq's occupiers have collected $69.8m in reparation payments from the desperate people they have been occupying. But it gets worse: the vast majority of those payments, 78%, have gone to multinational corporations, according to statistics on the UNCC website.

Away from media scrutiny, this has been going on for years. Of course there are many legitimate claims for losses that have come before the UNCC: payments have gone to Kuwaitis who have lost loved ones, limbs, and property to Saddam's forces. But much larger awards have gone to corporations: of the total amount the UNCC has awarded in Gulf war reparations, $21.5bn has gone to the oil industry alone. Jean-Claude Aimé, the UN diplomat who headed the UNCC until December 2000, publicly questioned the practice. "This is the first time as far as I know that the UN is engaged in retrieving lost corporate assets and profits," he told the Wall Street Journal in 1997, and then mused: "I often wonder at the correctness of that."

But the UNCC's corporate handouts only accelerated. Here is a small sample of who has been getting "reparation" awards from Iraq: Halliburton ($18m), Bechtel ($7m), Mobil ($2.3m), Shell ($1.6m), Nestlé ($2.6m), Pepsi ($3.8m), Philip Morris ($1.3m), Sheraton ($11m), Kentucky Fried Chicken ($321,000) and Toys R Us ($189,449). In the vast majority of cases, these corporations did not claim that Saddam's forces damaged their property in Kuwait - only that they "lost profits" or, in the case of American Express, experienced a "decline in business" because of the invasion and occupation of Kuwait. One of the biggest winners has been Texaco, which was awarded $505m in 1999. According to a UNCC spokesperson, only 12% of that reparation award has been paid, which means hundreds of millions more will have to come out of the coffers of post-Saddam Iraq.

The fact that Iraqis have been paying reparations to their occupiers is all the more shocking in the context of how little these countries have actually spent on aid in Iraq. Despite the $18.4bn of US tax dollars allocated for Iraq's reconstruction, the Washington Post estimates that only $29m has been spent on water, sanitation, health, roads, bridges, and public safety combined. And in July (the latest figure available), the Department of Defence estimated that only $4m had been spent compensating Iraqis who had been injured, or who lost family members or property as a direct result of the occupation - a fraction of what the US has collected from Iraq in reparations since its occupation began.

For years there have been complaints about the UNCC being used as a slush fund for multinationals and rich oil emirates - a backdoor way for corporations to collect the money they were prevented from making as a result of the sanctions against Iraq. During the Saddam years, these concerns received little attention, for obvious reasons.

But now Saddam is gone and the slush fund survives. And every dollar sent to Geneva is a dollar not spent on humanitarian aid and reconstruction Iraq. Furthermore, if post-Saddam Iraq had not been forced to pay these reparations, it could have avoided the $437m emergency loan that the International Monetary Fund approved on September 29.

With all the talk of forgiving Iraq's debts, the country is actually being pushed deeper into the hole, forced to borrow money from the IMF, and to accept all of the conditions and restrictions that come along with those loans. The UNCC, meanwhile, continues to assess claims and make new awards: $377m worth of new claims were awarded last month alone.

Fortunately, there is a simple way to put an end to these grotesque corporate subsidies. According to United Nations security council resolution 687, which created the reparations programme, payments from Iraq must take into account "the requirements of the people of Iraq, Iraq's payment capacity, and the needs of the Iraqi economy". If a single one of these three issues were genuinely taken into account, the security council would vote to put an end to these payouts tomorrow.

That is the demand of Jubilee Iraq, a debt relief organisation based in London. Reparations are owed to the victims of Saddam Hussein, the group argues - both in Iraq and in Kuwait. But the people of Iraq, who were themselves Saddam's primary victims, should not be paying them. Instead, reparations should be the responsibility of the governments that loaned billions to Saddam, knowing the money was being spent on weapons so he could wage war on his neighbours and his own people. "If justice, and not power, prevailed in international affairs, then Saddam's creditors would be paying reparations to Kuwait as well as far greater reparations to the Iraqi people," says Justin Alexander, coordinator of Jubilee Iraq.

Right now precisely the opposite is happening: instead of flowing into Iraq, reparations are flowing out. It's time for the tide to turn.

·Naomi Klein is the author of No Logo, and Fences and Windows