It also benefitted the French and Germans, and UN officials, no wonder
they wanted us to leave Saddam alone.
Oil-for-Food Benefited Russians, Report Says
Iraq Sought to Influence U.N. Through Moscow
By Justin Blum and Colum Lynch
Washington Post Staff Writers
Monday, May 16, 2005; A01
Top Kremlin operatives and a flamboyant Russian politician reaped
millions of dollars in profits under the U.N. oil-for-food program by
selling oil that Iraqi leader Saddam Hussein allowed them to buy at a
deep discount, a Senate investigation has concluded.
The allegations -- which also include descriptions of kickbacks paid
to Hussein -- are detailed in hundreds of pages of reports and
documents made public last night by the Senate Permanent Subcommittee
on Investigations in advance of a hearing tomorrow.
The documents outline a trail of oil and money that leads directly
from Iraq to the Kremlin and the former chief of staff to Russian
President Vladimir Putin and former president Boris Yeltsin. The
report said Iraq sought to influence and reward the Russian government
because it sits on the powerful U.N. Security Council that oversaw
sanctions against the Hussein government. Russia repeatedly sided with
Iraq on issues before the Security Council.
Yevgeniy V. Khorishko, a spokesman for the Russian Embassy in
Washington, said it had received the Senate reports but could not yet
discuss the findings. "We are looking into them," Khorishko said.
"It's too early to give any comment."
A CIA report last year said that Hussein granted top political leaders
from around the world the opportunity to buy Iraqi oil at a discount.
But the Senate report presents more detailed evidence, alleging that
Russian officials took up the offer and profited handsomely under the
program.
In addition, the reports allege that Russian politician Vladimir
Zhirinovsky, several Russian entities and a Houston-based oil trading
company, Bayoil, "paid millions of dollars in illegal, under-the-table
surcharges to the Hussein regime in connection with these oil
transactions." U.S. officials say Hussein used illicit proceeds from
oil sales to buy weapons, among other things.
"This is the way Saddam used oil-for-food: to line his own pocket and
curry political favor," said Sen. Norm Coleman (R-Minn.), chairman of
the investigations subcommittee that released the reports.
Iraq's U.N. ambassador, Feisal Amin Istrabadi, said Russia was one of
dozens of countries that took advantage of Iraq's oil wealth. "There
were certainly commercial and political interests involved, and Russia
behaved like any other state in looking after itself," he said.
The documents were provided to reporters Friday on the condition that
articles about them not be published until today.
These are the latest allegations dealing with the scandal-plagued U.N.
program established in December 1996 to provide Iraq a partial
exemption from international economic sanctions, allowing it to sell
oil to buy food, medicine and humanitarian goods.
The program succeeded in limiting Hussein's acquisition of weapons of
mass destruction and improved humanitarian conditions for ordinary
Iraqis. But it provided an economic lifeline for Hussein, who siphoned
off more than $2 billion in illicit profits by charging kickbacks to
companies that traded with Baghdad, U.S. investigators have said. The
problems have caused some U.S. lawmakers, including Coleman, to call
for the ouster of U.N. Secretary General Kofi Annan.
While the latest disclosures do not directly implicate Annan, they are
likely to contribute to the perception that he mismanaged the United
Nations' largest humanitarian program.
Under the program, Iraq bypassed traditional oil traders, giving
influential businessmen, politicians, dignitaries and terrorist groups
the right to buy millions of barrels of oil, U.S. investigators have
said. These individuals would then sell their rights at a profit of 3
cents to 30 cents a barrel to oil traders supplying major refineries
in the United States, Europe and Asia. Hussein eventually started
charging a kickback of 10 cents to 50 cents a barrel, which was
deposited in secret bank accounts.
The Senate documents quote an unidentified senior official in
Hussein's government as saying "the whole point" of providing the
allocations to individuals was to allow them to profit personally.
The Senate reports, based in part on interviews with former Iraqi
officials and hundreds of pages of documents, said Russia topped the
list of Security Council members whose support Hussein sought. More
than 30 percent of Iraqi oil allocations ended up going to Russian
officials, political parties and businessmen.
One of the new Senate reports said Hussein granted oil allocations --
the opportunity to buy discounted oil -- to a group identified as the
Russian Presidential Council, made up of advisers appointed by the
Russian president to devise presidential policy, draft presidential
decrees and coordinate policy among agencies.
Two people were listed as receiving allocations on the council's
behalf -- Alexander Voloshin, the highly influential chief of staff to
Putin and Yeltsin, who also headed the council, and Voloshin's friend
and confidant Sergey Issakov.
The report said the pair hired companies to handle the transactions
and estimated that they made profits of almost $3 million total
between 1999 and 2003.
Voloshin, known as one of the most powerful Kremlin officials,
resigned in 2003 over a scandal involving Russian oil giant Yukos.
Voloshin managed Putin's first campaign and helped to create the
pro-Kremlin Unity Party. The report said the party also received oil
allocations, along with the country's Ministry of Foreign Affairs, the
Communist Party and the Liberal Democratic Party.
The Senate report said that Issakov was deputy chairman of Vnukovo
Airlines and traveled regularly to Iraq to reestablish airline service
between Moscow and Baghdad.
A second Senate report said that Zhirinovsky, a former presidential
candidate who espouses an ultranationalist agenda, also received
allocations that he cashed for profits of as much as $8.7 million
between 1997 and 2002.
Senate investigators obtained letters signed by Zhirinovsky that
discussed the oil allocations and documents from Iraq's oil ministry
that linked him and his political party, the Liberal Democratic Party,
to the allocations.
In 1997, Zhirinovsky wrote to Iraq's ambassador to Russia describing
how his party "stood firmly against the enforcement of the United
Nations economic sanctions" and had used its influence to persuade the
Russian Duma, or parliament, to facilitate more economic cooperation
with Iraq. It went on to request contracts under the oil-for-food
program.
A spokeswoman for Zhirinovsky said he did not have any immediate
comment and would respond after he has an opportunity to read the
report. Voloshin did not respond to a request for comment, and Issakov
could not be located for comment.
The Senate documents said Hussein personally approved the Russian oil
allocations to curry favor or provide "compensation for support."
At one point, Hussein ordered that Russians be rewarded for
threatening in 2000 to veto a Security Council resolution to restrict
illicit trade at Iraq's borders, the Senate reports said. The veto
threat killed the resolution before it was formally considered,
prompting more oil allocations for Russia as well as contracts for
humanitarian goods, the documents said.
The oil transactions involved a complex web of financial arrangements
and middlemen, all of whom received a piece of the profits.
Bayoil played a key role in a number of transactions, the report said.
The company had conducted an "aggressive campaign" to buy Iraqi oil
under the oil-for-food program, but its efforts were stymied by a
Hussein policy forbidding direct contracting with U.S. or British
companies. Iraq also required the company that purchased the oil to be
in the same country as the recipient of the allocation.
The report described cases in which Bayoil orchestrated transactions
between Iraq and Zhirinovsky. The company arranged for a Russian
entity to purchase the oil and, without ever taking possession, sell
it to Bayoil. A letter from Bayoil described how the company paid an
"agreed premium" to Zhirinovsky for his allocation.
The report also described Iraqi documents showing that surcharges, or
kickbacks, amounting to more than $4 million were paid to Iraq in
connection with Zhirinovsky's transactions. The documents say Bayoil
"facilitated" surcharge payments of more than $2 million to Hussein.
Catherine M. Recker, a lawyer for Bayoil and its founder, David B.
Chalmers Jr., said she could not comment before seeing the report.
"Bayoil and David Chalmers stand by their previous statement that they
have done nothing illegal and will vigorously defend against these
reckless accusations," Recker said in a statement.
In April, a federal grand jury in New York indicted Chalmers, his two
companies -- Bayoil USA Inc. and Bayoil Supply & Trading Ltd. -- and
two foreign associates on charges that they funneled millions of
dollars in kickbacks through a foreign front company to an
Iraqi-controlled bank account.
Told of details of the Senate reports, Russia specialists said the
findings reflect deep government corruption.
"It's another piece of evidence showing how the Russian leadership
operates and how corruption is endemic within the Russian leadership
-- even within the highest levels," said Celeste A. Wallander,
director of the Russia program at the Center for Strategic and
International Studies in Washington.
Correspondent Peter Finn in Moscow contributed to this report.
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