Oil companies, including one that employed an Iraq weapons supplier, paid hundreds of millions of dollars in illegal kickbacks to Saddam Hussein during the UN oil-for-food program, a UN report said today.
Saddam Hussein's government took in $228.8 million from surcharges in connection with oil contracts, the report said. That was nearly 13 percent of the $1.8 billion in surcharges Iraq received from more than 2,200 foreign companies during the oil-for-food humanitarian program of 1996 to 2003, the report charged.
Intricate webs of companies, individuals, and governments stretching from Europe to Asia took part in paying illicit surcharges to Saddam's government. Russia and France were the countries with the most companies involved in the oil-for-food program. The bulk of the illicit oil contract payments began when Iraq began leveling surcharges at the end of 2000.
The surcharges, which lasted until the end of 2002, caused Iraq's regular customers to balk, the report said. As a result, a group of four trading companies financed and lifted more than 60 percent of Iraqi crude oil in the market from December 2000 to mid-2001, Phase IX of the oil-for-food program.
Those trading companies were US and Bahamas-based Bayoil, and three Swiss companies: Taurus, Vitol, and Glencore, according to the report. All of the oil traders, executives and companies have denied knowingly making surcharge payments to Iraq. Bayoil President David Chalmers and his former business associate, Augusto Giangrandi, used a front company, Italtech, to solicit oil allocations in Iraq, the report said.
Chalmers met Giangrandi, who was involved in selling weapons to Iraq, in the late 1980s. Giangrandi secured cluster bombs for Iraq. Bayoil eventually paid more than $6 million in surcharges to the Iraqi regime through Al Wasel & Babel General Trading and Al-Hoda International Trading Co. Jordanian businessman Talal Hussein Abu-Reyaleh, a Glencore agent, paid the surcharges, and Glencore paid him, the report said. Vitol used Malaysian company Mastek to finance many of its oil deals with Iraq.
The report said Iraq's oil marketing company, SOMO, received nearly $10 million of the charges it levied on Mastek in an account at Jordan National Bank in 31 separate payments. Other companies, Dutch-based Trafigura and French oil services firm Ibex Energy, bribed UN-hired inspectors to buy more oil than was authorized under the oil-for-food program, the report from a U.N.-established Independent Inquiry Committee said.
Trafigura today denied it was knowingly involved in payment of bribes to purchase Iraqi oil. The oil-for-food program was introduced in 1996 as a way to ease sanctions levied in 1990 against Iraq after it invaded Kuwait.
It was designed to allow Baghdad to sell oil to pay for food and medicine for the Iraqi people. The 500-page report is the final one from the panel, led by former U.S. Federal Reserve Chairman Paul Volcker, which has investigated the now-defunct program for the past 19 months. The report aims to put into context the manipulation of the program by companies around the world as well as individuals, groups and governments.