The Hindu : National : Individual beneficiaries were influential and espoused pro-Iraq views, says report

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Sunday, Oct 30, 2005

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Individual beneficiaries were influential and espoused pro-Iraq views, says report

Kesava Menon and V. Sridhar

Chennai: An international investigation into the United Nations-administered Oil-For-Food Programme reveals that several Indian entities, among them Union Minister for External Affairs K. Natwar Singh, were allotted oil quotas by the former Iraqi regime headed by Saddam Hussein. The report of the Independent Inquiry Committee, headed by the former chairman of the United States Federal Reserve Board, Paul Volcker, shows that Mr. Singh was assigned a quota of 4 million barrels of crude oil in Phase Nine of the Programme, which ran between December 2000 and July 2001. The Congress Party is listed separately as another "non-contractual beneficiary." The party was allotted a quota of 4 million barrels between Phases 10 and 13. Phase 10 of the Programme began in December 2000 but Phase 13, which was to be between July and December 2002, tapered off as the standoff between the U.N. and Iraq over weapons' inspections intensified. However, only 1 million barrels of the Congress' quota was actually lifted. The report explains that "non-contractual beneficiaries" are entities other than named contracting parties which directly dealt with the then Iraqi Government by lifting oil for sale in world markets.

The report observes that "special" allocations were made to "not only to companies, but also to individuals and their representatives." It also notes: "These individuals were influential in their respective countries, espoused pro-Iraq views, or organised anti-sanctions activities. They included present and former government officials, politicians and persons closely associated with these figures, businessmen, and activists involved in anti-sanctions activities. Iraq also allocated oil to political parties and organisations." The report observes that beneficiaries were not required to provide specific favours in return.

Allocations pertaining to both the Congress Party as well as to Mr. Singh were assigned to Masefield AG, a Swiss entity, which was the primary contracting company that dealt with the State Oil Marketing Organisation (SOMO) of Iraq. Mr. Singh was assigned two separate contracts for two million barrels each. The first, Contract M/09/120, was not consummated; of the second, Contract M/09/54, only 1.94 million was actually lifted. Only one of the four allocations to the Congress Party actually was actually taken up. Masefield lifted 1 million barrels on Contract M/10/57. Of a total allocated to the Congress and Mr. Singh, Masefield lifted 2.94 million barrels. The total value of these contracts amounted to $63.03 million, implying a price of $21.44 per barrel.

The only Indian corporate entity that figures in the list of non-contractual beneficiaries is Reliance Petroleum Ltd. The company was allocated 19 million barrels over Phases 9, 10 and 11. Alcon Petroleum was the primary contracting party for these transactions in which a total of 15.78 million barrels were lifted. One Bhim Singh was allocated a total of 7.3 million barrels over six phases but his quota remained unutilised.

Reliance Petroleum also figures in the list of contracting parties, which dealt directly with SOMO. It struck two contracts for a total of 5 million barrels but lifted only 2.82 million barrels. Indian Oil Corporation Ltd. also figures in this list. It entered into 10 contracts for a total of 48.01 million barrels of which it lifted 42.58 million barrels.

The Oil-For-Food Programme was conceived as a mechanism to provide humanitarian relief to the sanctions-hit people of Iraq.

It allowed Iraq to export oil and use resulting revenues to buy food, medicines and other essentials. The oil revenues were to be channelled into an U.N.-administered escrow account. This was meant to facilitate monitoring of oil revenues as well as payments for humanitarian assistance. The U.N. decided on what was a "fair price" for Iraqi oil.

Given the nature of a global oil market, the Iraqi Government could initially extract a premium on the oil it exported. Later, in 2000, Baghdad decided to monetise the premium by imposing a surcharge on oil exports. The Volcker report notes that the surcharge, which it regards as illegal, was about 10-30 cents a barrel at first.

Later, Iraq was said to have tried to raise this to 50 cents a barrel. The report notes that Indian Oil was among those that paid the "illicit" surcharge.

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