(MOSCOW TIMES) Russian government officials, political leaders and companies helped Saddam Hussein secretly amass $11 billion between 1996 and 2003 and pocketed an estimated $130 million, violating intricate UN sanctions on Iraq in the run-up to the U.S. invasion, a CIA report says.
Starting in 2000 at the latest, more than two dozen Russian officials and companies began funneling money to Hussein-controlled bank accounts in exchange for lucrative vouchers to sell Iraqi oil, which were then sold to traders approved to operate within the United Nations oil-for-food program, according to a 1,000-page report posted on the CIA’s web site late Wednesday.
According to “secret lists” kept by Iraq’s Oil Ministry and Hussein’s vice president, the Russian individuals who participated in the scheme included former Kremlin chief of staff Alexander Voloshin, former Federation Council Speaker Yegor Stroyev, former Fuel and Energy Minister Yury Shafranik, Communist Party chief Gennady Zyuganov, LDPR leader Vladimir Zhirinovsky and Kirsan Ilyumzhinov, the mercurial leader of the southern Buddhist republic of Kalmykia.
Other major benefactors included the Foreign Ministry, the Emergency Situations Ministry, the pro-Kremlin Unity party, Kremlin-controlled energy firms Gazprom, Zarubezhneft and Rosneft, state-owned trading company Machinoimport, private oil company TNK, and Alfa Eco, a subsidiary of the powerful Alfa financial-industrial group.
Under the oil-for-food program, which ran from 1996 to 2003, Iraq was allowed to sell a limited amount of oil to UN-approved traders and use the proceeds to buy humanitarian goods. But the Hussein regime abused the program by awarding vouchers for the right to purchase tens of millions of barrels of Iraqi oil at knockdown prices, and Iraq often got a cut of the difference when the vouchers were sold at market rates, the report says.
Under UN sanctions in place at the time, giving financial aid to the government of Iraq was illegal.
“Saddam personally approved and removed all names of voucher recipients,” the report says. “[These vouchers] provided Saddam with a useful method of rewarding countries, organizations and individuals willing to cooperate with Iraq to subvert UN sanctions.”
Most of the report, written by Charles Duelfer, a special adviser to the U.S. director of central intelligence, focused on the Duelfer-led Iraq Survey Group’s 16-month quest to find weapons of mass destruction, which it did not.
Duelfer’s report says Iraq generated an estimated $2 billion from illicit oil sales and other kickbacks from companies and individuals from numerous countries, mainly from UN Security Council permanent member countries Russia, France and China — in that order. Russia received 32 percent of all the oil-for-food contracts, twice as much as the next country, France.
During the seven-year oil-for-food program, Russian entities traded tens of billions of dollars’ worth of Iraqi crude — the majority of which appears to be legal.
In September 2000, however, Iraq instituted a mandatory 10 cent per barrel surcharge for oil allocations — money that would go to Hussein-controlled bank accounts in Iraq, Jordan and Lebanon, or delivered in cash to Iraqi embassies, the most popular of which was in Moscow, the report says.
Being named on the list does not necessarily indicate illegal activity, according to the report. But financially supporting the Hussein government was illegal, according to a senior Western diplomat.
“UN Resolution 661 states very clearly that member states and their nationals were prohibited from making any financial or economic resources available to the government of Iraq,” the diplomat told The Moscow Times on Wednesday. “The key thing is actually proving they were complicit in making funds available.”
In all, after the 10-cents-a-barrel charge was instituted, Russian entities pocketed about $130 million, according to Moscow Times calculations based on the report. The biggest recipients in this period, according to CIA estimates, were state-owned companies Zarubezhneft ($22.5 million) and Machinoimport ($17.3 million), and the pro-Kremlin Unity party ($14.9 million).
Those figures could be higher or lower, however, since the report gives only an average profit estimate.
According to the CIA, between December 2000 and the end of the program, Voloshin, the presidential administration, the Emergency Situations Ministry and the Foreign Ministry between them pocketed at least $39.1 million from trading 79.3 million barrels of Iraqi crude, for which they paid Hussein $6.7 million.
In total, after December 2000, 27 Russian entities earned an estimated $129.8 million and paid the Hussein regime $29.4 million, the report shows.
The list of companies the CIA says were involved in the voucher scheme includes Rosneft, Slavneft, Tatneft, Alfa Eco, Gazprom and Transneft.
But how alleged sanctions violators might ultimately be punished, and by whom, is not clear. The report explicitly “does not intend to analyze or assess the legal implications for non-Iraqis.”
A U.S. Embassy spokesman said governments should enforce the rules for their own citizens and companies. “There are no international penalties, per se, for those who may have violated sanctions, other than the national laws of each state,” he said.
The CIA list largely agrees with a list prepared for the Iraqi Governing Council and obtained by The Moscow Times. That report says Hussein “gained the indebtedness of the Russian Federation” through oil allocations, along with Russia’s “weight and leadership on the world stage as well as its permanent membership on the Security Council.”
With two notable exceptions, each of the dozen or so government bodies, companies, political parties and individuals contacted by The Moscow Times denied wrongdoing.
“All oil majors were involved in this,” an official from one of the oil companies listed in the report said. “The state played a large role. Almost all — no, not just almost all — all companies that took part in Iraq projects were connected to this,” said an official at one of the oil companies identified in the report.
“Revenues were not as high as the CIA report said,” a Communist Party official said on condition of anonymity.
Another company identified by the CIA, Rosnefteimpex, earned $1.3 million after September 2000, the report says. According to the Center for Political Information, state-owned Rosneft owned 56.7 percent of Rosnefteimpex’s voting shares in 2003, but Rosneft spokesman Dmitry Panteleyev would only say Rosnefteimpex is not a Rosneft subsidiary.
“We have no relation to any bribes, we did not give any,” he said. “We are a state company where control over expenses is 20 times greater than for any private company.”
The presidential administration declined to comment.
Voloshin, the former Kremlin chief of staff who is now the board chairman of electricity monopoly Unified Energy Systems, could not be reached for comment. A spokesman said he was travelling.
“Russia, like all countries, is interested in the results of this investigation being objective,” Foreign Ministry spokesman Alexander Yakovenko said, Interfax reported. “The investigation that is being conducted should result in an objective picture of possible irregularities that could have been committed under the oil-for-food program.”
Various government bodies are planning to make public a list of companies involved in trading Iraqi oil under the oil-for-food program, as well as the volumes traded and the duration of the contracts themselves, an official familiar with the situation said.
The official said the government had received a formal request for detailed data from a UN commission investigating the program, but that it would take time to compile.
A spokeswoman for TNK-BP, formed last year when TNK merged its assets with British oil giant BP’s Russian assets, declined to comment.
“We are now TNK-BP, and we don’t comment on the past actions of our heritage companies,” said Marina Dracheva.
Dracheva directed all further inquiries to the Foreign Ministry.
“If you ask why TNK was working for the Foreign Ministry it was because we were picked by the Foreign Ministry to work in the scheme,” she said. “If [the UN] admits that a surcharge was being paid, it’s … their problem,” she added.
A spokesman for Ilyumzhinov, the controversial president of Kalmykia who the CIA says earned $300,000 from illicit oil sales, also denied any impropriety.
“I would like to inform you that Kalmyk President Kirsan Ilyumzhinov, who is also the president of the International Chess Federation, did not participate in any financial, trade or other activities that would contradict international law, including the laws governing the UN oil-for-food program,” Buyancha Galzanov said in a statement.
“As for Ilyumzhinov’s visits to Iraq in the 1990s and early 2000s, they were dedicated to issues related to the organization of international chess tournaments or the economic issues of Kalmykia,” Galzanov said.