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Hussein Used Oil to Dilute Sanctions

Report Says He Gave Valuable Vouchers to Those Who Helped Iraq

By Robin Wright and Colum Lynch
Washington Post Staff Writers
Thursday, October 7, 2004; Page A01

Saddam Hussein made $11 billion in illegal income and eroded the world's toughest economic embargo during his final years as Iraq's leader through shrewd schemes to secretly buy off dozens of countries, top foreign officials and major international figures, according to a new report by the chief U.S. weapons inspector released yesterday.

Oil "vouchers" that could be resold for large profits were given to officials including Indonesian President Megawati Sukarnoputri, French Interior Minister Charles Pasqua and former Russian presidential candidate Vladimir Zhirinovsky as well as governments, companies and influential individuals in Europe, the Middle East and Africa, the report said.

_____Iraq Survey Group_____
Comprehensive Report of the Special Advisor to the DCI on Iraq's WMD
Key Findings (PDF)
Excerpts from the Report
Comparison: Administration Claims and the Report
Dana Priest MSNBC Video: The Post's Dana Priest talks about details of Saddam Hussein's personality contained in the report.
AP Report: The top U.S. arms inspector said Wednesday he found no evidence that Iraq produced any weapons of mass destruction after 1991.
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Inspector Is Known as Tough, Thorough (The Washington Post, Oct 7, 2004)
Timing of Report Called Inspector's Decision (The Washington Post, Oct 7, 2004)
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Another recipient was Benon Sevan, the former top U.N. official in charge of humanitarian relief. Sevan ran the former oil-for-food program designed to benefit the Iraqi people in the face of economic sanctions intended to cripple Saddam's regime, the report says.

The report, written by chief U.S. weapons inspector Charles A. Duelfer, indicated that some of the oil vouchers were used legitimately by the recipients. Not all were fully cashed in, and some were not used at all. Companies or individuals from at least 44 countries received vouchers, the report said.

Russia, France and China -- all permanent members of the U.N. Security Council -- were the top three countries in which individuals, companies or entities received the lucrative vouchers. Hussein's goal, the report said, was to provide financial incentives so that these nations would use their influence to help undermine what Duelfer called an "economic stranglehold" imposed after Iraq's 1990 invasion of Kuwait.

"At a minimum, Saddam wanted to divide the five permanent members and foment international public support of Iraq at the U.N. and throughout the world by a savvy public relations campaign and an extensive diplomatic effort," the report said.

Hussein's effort to thwart the embargo and divide the nations that supported it has long been known, but the Duelfer report reveals the lengths to which he went in attempting to defy the United Nations. The details could buttress Washington's contention that important players were preventing the U.N. program from squeezing Saddam, forcing the United States to launch a war to topple him.

Several American companies on the list, compiled from 13 documents kept by Hussein's vice president and oil minister, were given vouchers to purchase billions of dollars of oil at discounted prices. The U.S. companies are not named in the report because of privacy laws, U.S. officials said.

The voucher system was particularly clever because the documents were negotiable and could be resold to oil companies or other buyers at profits of 10 to 35 cents per barrel. A voucher for 10 million barrels could generate between $1 million and $3.5 million to the holder.

The report notes that Indonesia's president was the recipient of a voucher that allocated her 6 million barrels. The former French interior minister received a voucher for 11 million barrels. The Russian foreign ministry received a voucher for 55 million, while Zhirinovsky got one for 53 million barrels and the Russian Communist Party's voucher totaled 110 million barrels.

An Iraqi newspaper said earlier this year that Sevan, whose activities are now under investigation for the by former Federal Reserve chairman Paul A. Volcker, received vouchers to purchase millions of barrels of Iraqi crude through several companies. The Duelfer report says that Sevan was allocated 13 million barrels of oil, of which 7.3 million were cashed in.

Sevan has denied the charges and claimed to friends that he is the victim of a smear campaign.

Hussein's multi-pronged strategy also included secret deals with neighboring countries to circumvent U.N. sanctions by smuggling oil, which reaped profits for both sides, and illicit government-to-government trade agreements. The subsequent success in turn "emboldened" Hussein to pursue programs related to weapons of mass destruction as well as conventional arms, the Duelfer report says.

"Despite U.N. sanctions, many countries and companies engaged in prohibited procurement with the Iraqi regime throughout the 1990s, largely because of the profitability of such trade," Duelfer reported. In turn, Hussein sought to make the embargo a "paper tiger," the report says.

Companies in countries closely allied with the United States, including France, Italy, India, Turkey, Jordan and Romania, may have sold Hussein dual-purpose equipment that could be converted for production of unconventional weapons.

Hussein survived the most comprehensive embargo ever imposed by subverting the very U.N. program introduced in 1996 to help the Iraqi people survive it. Hussein's government made an estimated $1.7 billion between 1996 and 2003 by shrewdly but secretly manipulating the U.N. oil-for-food program, the report says.

The humanitarian program was backed by the United States as a means of controlling Hussein's oil revenue, which had to be channeled through the United Nations. The world body then had to approve the spending of profits on basic necessities for the Iraqi people. But the former Iraqi leader ordered his regime to come up with an array of plans to sell oil under the table so he could spend the money as he saw fit.

The number of countries and companies involved in the schemes to undermine or challenge U.N. sanctions increased dramatically from the time the oil-for-food program was introduced until Hussein's removal from power last year, the report added.

The Duelfer report concludes that Baghdad exploited the program "to give individuals and countries an economic stake in ending sanctions." Hussein introduced a system of rewards for illegally dealing with Baghdad, while also playing on international sympathy and "successfully arguing its case that the sanctions were harming the innocent."

The success of Hussein's regime in circumventing the U.N. embargo is "grossly obvious," the report says. "It is also grossly obvious how the sanctions perverted not just the [Iraqi] national system of finance and economics, but to some extent the international markets and organizations."

The Bush administration sought yesterday to highlight this aspect of the Duelfer report to counter the finding that Hussein probably had produced no new weapons of mass destruction since 1991, after the U.S.-led coalition forced Iraq to retreat from Kuwait.

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