The Hindu : National : How Saddam's political rewards system worked

Online edition of India's National Newspaper
Sunday, Oct 30, 2005

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How Saddam's political rewards system worked

Special Correspondent

Chennai: When during the period of sanctions Iraq had to sell its oil only under the United Nations-mandated Oil for Food Programme, it could obtain a premium above the officially fixed selling price which it collected and accumulated as surcharges that were hidden from the U.N. monitoring system. This system, which was operated between 2000 and 2002, was also used to reward political friends who were supportive of Iraq's position.

The Volcker report on the U.N. Oil-for-Food Programme notes, "Special allocations were given to individuals, organisations and political parties considered to be `friends' of Iraq or perceived as holding political views supportive of Iraq. Sometimes, to cover all bases, oil allocations were granted to members of the opposition parties as well as the ruling party." A "Command Council" headed by then Iraqi Vice President Taha Yassin Ramadan and including Deputy Prime Minister Tariq Aziz and the Ministers for Oil and Finance determined the distribution of contracts to companies and individuals of interest.

The political beneficiary was not required to provide a specific favour in exchange for the oil allocation. "Often, it was sufficient that the beneficiary express support for Iraq or political positions favourable to Iraq," the Committee notes. The beneficiaries normally sought the allocations from an Iraqi leader but sometimes even an individual who had not requested an allocation was granted one.

The political beneficiary would then have to nominate an intermediary who would enter into a contract with the Crude Oil Department. The beneficiaries often used little known intermediaries who then sold the oil to an established oil company or trader. The oil companies and traders were willing to pay a premium above the U.N. official selling price and this premium was used by the intermediary to pay the beneficiary.

The premium per barrel varied between 10 and 30 U.S. cents. Iraq's attempt to raise it to 50 cents created a crisis in the market, with many of the regular buyers turning away and Iraq was forced to reduce it to 30 cents for oil bound for North America and 25 cents for oil bound for other destinations. By the time it was forced to abandon the surcharge in 2002, the premium had been reduced to 15 cents.

In India, the Volcker report names four "non-contractual beneficiaries": the Congress Party, External Affairs Minister Natwar Singh, Bhim Singh and Reliance Petroleum. The list of beneficiaries worldwide includes three Russian political parties (the Communist Party of the Russian Federation, the Liberal Democratic Party of Russia and the Party of Peace and Unity), the Russian Orthodox Church, Jean-Bernard Merrimee of France (who was then a special adviser to the U.N. Secretary General), former French Interior Minister Charles Pasqua, British Member of Parliament George Galloway, Indonesian leader Megawati Sukarno, Burmese Minister for Forests and the Liberal Democratic Party of Belarus.

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