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Democrats Say BayOil Played a 'Shell Game' in Iraqi Oil Deals

Posted on: Saturday, 29 October 2005, 03:01 CDT

By David Ivanovich, Houston Chronicle

Oct. 29--WASHINGTON -- Senate investigators on Friday accused Houston-based BayOil of illegally diverting millions of barrels of Iraqi oil, a strategy they say generated cash that may have been used to pay kickbacks to Saddam Hussein's regime.

Examining BayOil's dealings with Iraq during the Oil-for-Food program, Democrats on the Senate Permanent Subcommittee on Investigations contend BayOil profited by redirecting to Europe crude that was targeted to North America, and vice versa.

"BayOil was playing a trans-Atlantic shell game with Iraqi oil, using the Suez Canal oil pipeline to secretly load millions of barrels of oil onto unapproved ships sailing for unapproved ports," said Sen. Carl Levin of Michigan, the ranking Democrat on the subcommittee.

But BayOil attorney Catherine Recker said the Senate panel mischaracterized the company's business.

"Oil sent through a pipeline is fungible, comingled and ultimately accounted for," she said.

Under the rules of the Oil-for-Food program, Iraqi crude sold for delivery in North America cost less than oil destined for Europe. This price difference was supposed to make up for the higher cost of shipping oil across the Atlantic.

The investigators contended BayOil offloaded crude at the Egyptian port of Ain Sukhna, near the southern entrance to the Suez Canal in the Red Sea. The oil was then shipped though a pipeline to Sidi Kerir on the Mediterranean, where it was loaded onto another tanker, the investigators said.

The investigators argued the trans-shipments were used to mask the ultimate destination, allowing BayOil to sell the oil where it could earn the biggest profit, regardless of where the company said it was headed when it was purchased.

Senate investigators said BayOil diverted more than 4 million barrels and generated at least $7.5 million that should have gone to the U.N. to pay for food and medicine for Iraqis.

The alleged diversions came at a time Saddam was insisting that purchasers pay his government illegal surcharges.

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Source: Houston Chronicle

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