The oil for palaces scam

NY Times:

"In its final years in power, Saddam Hussein's government systematically extracted billions of dollars in kickbacks from companies doing business with Iraq, funneling most of the illicit funds through a network of foreign bank accounts in violation of United Nations sanctions.

"Millions of Iraqis were struggling to survive on rations of food and medicine. Yet the government's hidden slush funds were being fed by suppliers and oil traders from around the world who sometimes lugged suitcases full of cash to ministry offices, said Iraqi officials who supervised the skimming operation.

"The officials' accounts were enhanced by a trove of internal Iraqi government documents and financial records provided to The New York Times by members of the Iraqi Governing Council. Among the papers was secret correspondence from Mr. Hussein's top lieutenants setting up a formal mechanism to siphon cash from Iraq's business deals, an arrangement that went unnoticed by United Nations monitors.


...

"Perhaps the best measure of the corruption comes from a review of the $8.7 billion in outstanding oil for food contracts by the provisional Iraqi government with United Nations help. It found that 70 percent of the suppliers had inflated their prices and agreed to pay a 10 percent kickback, in cash or by transfer to accounts in Jordanian, Lebanese and Syrian banks.

"At that rate, Iraq would have collected as much as $2.3 billion out of the $32.6 billion worth of contracts it signed since mid-2000, when the kickback system began. And some companies were willing to pay even more than the standard 10 percent, according to Trade and Oil Ministry employees.

"Iraq's suppliers included Russian factories, Arab trade brokers, European manufacturers and state-owned companies from China and the Middle East. Iraq generally refused to buy directly from American companies, which in any case needed special licenses to trade legally with Iraq."

Vouchers for oil contracts were used to bribe foreign political support.

"The vouchers had considerable value. With the major oil companies monopolizing most Persian Gulf oil, there was fierce competition among smaller traders for the chance to buy Iraqi oil. And as long as Iraq kept its oil prices low enough, traders could make a tidy profit, even after buying the voucher and paying the surcharge.

" 'We used to joke that if you get one million barrels, you could make $200,000,' Mr. Faraj, of SOMO, added, referring to a period when the vouchers sold for about 20 cents per barrel. 'And yet the ones who got it were those people who used to come here and praise Saddam for his stand against imperialism.'

...

"Last month, a Baghdad newspaper published the list of companies that got allocations, prompting a chorus of denials. The Russian Foreign Ministry, for example, blames politics for releasing the list, which contained 46 Russian companies and individuals, including the former Russian ambassador to Iraq, Vladimir Titorenko, and Nikolai Ryzhkov, a Parliament member."

The story also details some of the shoddy goods that were purchased at marked up prices under the program.


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