Volcker 5.0 October 28, 2005
The publication yesterday of Paul Volcker's fifth and final
report on the U.N.'s Oil for Food program tells us little we didn't know
about the broad outlines of the $100 billion scandal. But, oh, are the
details ever instructive.
The Volcker report confirms that Saddam Hussein demanded,
and got, some $1.8 billion in illegal surcharges, kickbacks and bribes
from companies doing business in Iraq. It confirms that he steered
billions in oil and humanitarian contracts to his politically preferred
clients, particularly Russia and France, and smaller sums to agents of
influence (or their associates) such as British MP George Galloway, French
Senator Charles Pasqua, and Oil for Food director Benon Sevan. It confirms
that Saddam did so under the noses, and frequently with the connivance, of
the U.N. agencies entrusted to monitor the program.
All this is useful, but where this doorstop of a report
really adds public value is its precise, comprehensive and
well-substantiated details of the individuals and companies involved in
the kickback schemes, and of the methods used to accomplish them. This
should keep assorted attorneys general, state prosecutors and
investigative magistrates in 60-odd countries busy for the next decade or
so.
The scale here is breathtaking. Under Oil for Food, Iraq
sold $64.2 billion in oil and purchased $34.5 billion in humanitarian
goods. Of the oil purchasers, the Volcker report finds that 139 out of 248
companies paid illicit oil surcharges, which ranged from 10 to 50 cents a
barrel. Among the 3,614 companies that provided humanitarian goods, 2,253
-- that's two thousand two hundred fifty-three -- companies paid some kind
of kickback, or "after-sales service," as the Iraqis dubbed it.
Many of these companies are little known, and some are
probably fronts. But others are giants: The construction equipment
division of Sweden's Volvo is alleged to have "knowingly" paid $535,000 in
kickbacks to push $11.8 million in construction equipment, while various
subsidiaries of Germany's Siemens paid a total of $1.6 million out of
$124.3 million in sales of electrical equipment. (For the record, Volvo
denies the allegation and Siemens "cannot confirm" it.) Other major
companies named in the report for paying kickbacks include Daewoo,
Australian food exporter AWB and Scottish engineering giant
Weir.
The report also provides a list, which runs to 60 pages, of
influential individuals or groups awarded lucrative oil allocations by
Iraq because they "espoused pro-Iraq views or organized anti-sanctions
activities." Here again, the range is astonishing. In addition to Messrs.
Galloway and Pasqua (each of whom was given oil allocations of 11 million
barrels), one finds the names of a pro-Iraq Vatican priest (2.5 million),
the Palestinian Liberation Front (nine million), the French-Iraqi Amity
society (11.8 million), Burma's forestry minister (27 million), the
Orthodox Church of Russia (two million), and the Presidential Office of
Russia (21.3 million).
Among the handful of Americans named by Mr. Volcker is
Shakir Al-Khafaji (12 million barrels), a well-connected Detroit-area
businessman who led a delegation of anti-war Congressional Democrats to
Baghdad in September 2002 and who funded an anti-sanctions documentary
produced by former weapons inspector Scott Ritter. Mr. Al-Khafaji's
financial involvement with Saddam was first documented in these pages by
our Robert
Pollock in March 20041.
Mr. Volcker's report also provides useful insight into the
role of BNP-Paribas, the French bank selected by the U.N. to handle the
escrow account through which Oil for Food monies were processed, and from
which the bank earned an estimated $173 million in fees. Due to the way in
which the program was set up, BNP was allowed to confirm letters of credit
from other banks. Yet it was not forbidden from issuing letters of credit
of its own, thereby creating a conflict between its disclosure obligations
to the U.N. and its secrecy duties to its private customers. The result,
writes Mr. Volcker, is that "BNP itself became an instrument for the
payment of millions of dollars in illegal surcharges while doing little to
detect or prevent such payments."
All of which reminds us again that the sanctions regime was
corrupted to its roots, and that this corruption ultimately tainted nearly
every branch and every leaf connected to it, including all the assorted
"peace activists" and champions of internationalism who were in the pay of
a despot. Of the Iraq war's many benefits to the international system,
exposing that corruption, and stopping it, must be counted among the most
significant.
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