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Oil-for-food probe implicates 2,000 firms

Posted on: Thursday, 27 October 2005, 11:32 CDT

By Evelyn Leopold and Irwin Arieff

UNITED NATIONS (Reuters) - More than 2,000 of the foreign companies that did business with Iraq in the U.N. oil-for-food program made illicit payments to Saddam Hussein's government, a report on the program said on Thursday.

The U.N.-established Independent Inquiry Committee led by former U.S. Federal Reserve Chairman Paul Volcker reported that Saddam diverted some $1.8 billion in kickbacks and surcharges.

The 500-page report is the final one from the panel, which has investigated the now-defunct program for 19 months.

It detailed the manipulation of the program by companies around the world as well as individuals, groups and governments and made clear that nearly half of all the companies that took part in the program made illegal payments.

"By the year 2000 the imposition of kickbacks and surcharges by the Iraqi regime of Saddam Hussein brought about the emergence of illicit payments," the report said. "This irrevocably changed the nature of the program."

The program, which began in December 1996 and ended in 2003, was aimed at easing the impact of U.N. sanctions imposed in 1990 after Baghdad's troops invaded Kuwait. It achieved considerable success in feeding Iraqis, and allowed Iraq to sell oil in order to pay for food, medicine and other goods.

The report said companies in 66 countries paid kickbacks on selling Iraq humanitarian goods and companies from 40 countries paid surcharges on oil contracts but the U.N. Security Council took little action, the report said.

Preferential treatment was given to companies from France, Russia and China, all permanent members of the Security Council, who were more favorable to lifting the 1990 sanctions compared to the United States and Britain.

The oil sale surcharges, kickbacks and smuggling schemes provided Saddam with access to hard currency. Iraq was allowed to write its own contracts and choose the contractors.

The largest single kickback came from the Malaysian firm Mastek, the report said.

Iraq's oil marketing company, SOMO, took more than $10 million in illegal surcharges from Mastek in 2001-2002. The report said that the Swiss trading firm Vitol financed 33 million barrels of crude through Mastek during that period.

Analyzed in the report were the activities of France's BNP-Paribas, which held the escrow account for the $64 billion program. The panel said BNP failed to act against corruption and did not disclose "fully the first hand knowledge it acquired of the true nature of financial relationships that fostered the payment of illicit surcharges."

(Deepa Babington, Tim Gardner and Daniel Trotta contributed to this report)

Source: REUTERS

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