Exporters named in oil scandal

In its fifth and final report the UN-established Independent Inquiry Committee, led by former US Federal Reserve Chairman Paul Volcker, detailed how the UN program was hijacked by corruption and political favouritism, amid a lack of United Nations oversight.

It found more than 2,200 companies, including DaimlerChrysler, Siemens and Volvo, paid kickbacks totalling US$1.8 billion (A$2.36 billion) to Saddam’s government during the UN oil-for food program from 1996 to 2003.

The Australian Wheat Board paid more than US$221 million (A$291 million) to a Jordan-based collection agent for the Iraqi government under the program, the report said.

But Mr Volcker, stopped short of attributing any direct culpability to the companies.

“The identification of a particular company in the report does not necessarily mean that that company as opposed to an agent … made, authorised or even knew about illicit payments,” Mr Volcker told reporters.

The report said kickbacks were often disguised as transport fees and “after sales service” payments.

The Australian Wheat Board has denied knowingly paying kickbacks.
The program, which began in December 1996 and ended in 2003, was aimed at easing the impact of UN sanctions imposed in 1990 after Baghdad invaded Kuwait.

It allowed Iraq to sell oil as long as the proceeds were used to pay for food, medicine and other civilian goods.

The report said under the program, Iraq sold a total of US$64.2 billion of oil to 248 companies, of which 139 paid illicit surcharges.

In turn 3,614 companies sold US$34.5 billion of humanitarian goods to Iraq and the report said 2,253 companies paid kickbacks.

Iraq made a total of US$1.8 billion from the companies, which were registered in 66 countries.

Mr Volcker said this was far less than the nearly US$11 billion Saddam made in smuggled oil sales outside the program.

Some of this was with the knowledge of the UN Security Council which was supposed to supervise the operation.

The report blamed UN officials for a lack of oversight and said Security Council members took little action when UN oil experts passed on their concerns.

But it absolved former UN Secretary General Boutros Boutros-Ghali of knowingly receiving proceeds from oil sales.

In addition, the BNP-Paribas bank, which held the escrow account for the program, did not disclose evidence of corruption in its possession.

“Although there is no evidence that BNP knew of, or approved of the use of its facilities to pay illegal surcharges, BNP was uniquely positioned to probe such payments — but failed to do so,” the report said.

Political favouritism

The report also named politicians in Russia, France, Britain, Italy and other nations who were given favours by Saddam in his quest to get the UN sanctions lifted.

Among those named as receiving oil vouchers that could be sold for a commission were British lawmaker George Galloway, former French UN Ambassador Jean-Bernard Merimee, former French Interior Minister Charles Pasqua and Russian ultranationalist leader Vladimir Zhirinovsky.

Iraq gave preferential treatment for contracts to companies in France, Russia and China, all permanent Security Council members who were thought to be more favourable to lifting sanctions on Iraq, compared to the US, Britain and Japan, who were allegedly denied oil allocations at one point because they opposed the lifting of sanctions.

Russian companies purchased almost one-third of the oil sold under the program, with French companies the second largest purchasers.

Top European companies like Germany’s DaimlerChrysler AG and Siemens, Britain’s Weir Group and the Brussels-based branch of Volvo Construction Engineers were among those reported to have paid kickbacks to Iraq.

DaimlerChrysler was said to have paid US$7,134 in kickbacks on a contract with Iraq and Volvo paid US$535,000

According to the Volcker report, the imposition by Iraq of “surcharges” had become mandatory by the year 2000, causing some of the larger oil buyers to step back and halt purchases.

“Then other companies stepped in and middlemen stepped in, and front companies were made up,” Mr Volcker said.

“That point was where there was a real failure. That’s where the program got corrupted. There should have been a reaction and there wasn’t,” he said.

Wheat board denies

The Australian Wheat Board has defended its part in the program.

It says it did not “knowingly” pay, or enter into any arrangements to pay, monies to the former Iraqi government.

The Board says it relied on the United Nations to supervise and regulate the program.

And it says its use of a transport company to deliver wheat to inland Iraq was included in all contracts approved by the UN.

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