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1,300 Oil Vouchers Begin to Tell Story

Hussein Courted A World of Nations, Firms, Individuals

By R. Jeffrey Smith and Colum Lynch
Washington Post Staff Writers
Friday, October 8, 2004; Page A30

The immense scope of an Iraqi effort in the late 1990s to curry political support for ending an international trade embargo is reflected in a list of more than 1,300 oil "vouchers" that then-President Saddam Hussein gave to more than a hundred corporations, foreign officials and political parties stretching from North America to Asia, according to a report issued on Wednesday by the CIA's Iraq Survey Group.

The vouchers, which provided selective rights to buy Iraqi oil at a discount and to resell it for a huge profit, were provided to both mainstream and opposition political parties in countries such as Belarus, Russia, Ukraine and Yugoslavia; to oil companies in Turkey, Japan, Belgium, Italy, Canada and France; to an arms conglomerate in China; and to individuals in Switzerland, Jordan, the Netherlands, Russia, Malaysia and Burma, among others.

Iraqi oil workers check the pumping of oil at the Kirkuk oil refinery in 2002. (Jassim Mohammed -- AP)

_____In Today's Post_____
Former U.N. Inspectors Cite New Report as Validation (The Washington Post, Oct 8, 2004)
Hussein's Aims, Capabilities Often Differed (The Washington Post, Oct 8, 2004)
U.S. Delaying Action on Violators of Iraq Sanctions (The Washington Post, Oct 8, 2004)
Privacy Act, Order Shielded U.S. Names on List (The Washington Post, Oct 8, 2004)
Many Helped Iraq Evade U.N. Sanctions On Weapons (The Washington Post, Oct 8, 2004)

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Each of the oil sales was approved by the United Nations, which was monitoring Iraqi oil transactions in an effort begun in 1996 -- known as the oil-for-food program -- to ensure that the resulting revenue was used for humanitarian projects. But Iraq saw the program differently, as a key part of a scheme to free itself from the impact of sanctions and, ultimately, to gain political support for their termination, according to the report.

Although Iraq had to forgo some profit for itself by selling oil to the voucher recipients at a deep discount, the individual concessions Iraq granted helped the country curry foreign political influence and win a series of illicit trade agreements with its neighbors that netted nearly $11 billion between 1990 and 2003.

Subversion of the oil-for-food program by itself produced at least $1.7 billion in revenue, the report said. More than $4 billion came from oil sales to Jordan, while trade with Syria, Turkey and Egypt provided most of the other earnings. In addition, Iraq earned millions of dollars from a "surcharge" that Hussein ordered voucher recipients to pay back to the regime.

The report said the recipients made the payments by carrying bags of cash to Iraqi embassies in Amman, Beirut, Moscow, Ankara, Geneva and Hanoi, among other places. The cash was then sent to Baghdad via diplomatic pouches.

"In the late '90s, we understood that lots of shenanigans were going on . . . under-the-table payments and so on, to curry favor and win support for eroding sanctions," said Robert Einhorn, a former assistant secretary of state. "We made various efforts to limit the scope of this," he added. But the report said that U.S. officials were blocked by Russia, China and France in 2000 and 2001 when they tried to clamp down on oil sales outside the oil-for-food program.

The names of U.S. companies and individuals who participated in the program were omitted from the report, because of what officials described as U.S. privacy law restrictions. But in June, three U.S. oil companies disclosed that they had received subpoenas in connection with a federal investigation into the program: Exxon Mobil Corp., ChevronTexaco Corp. and Valero Energy Corp.

Valero has said that it is cooperating fully, that the company had no direct contact with Iraq and that the subpoena does not imply any wrongdoing. Prem Nair, a spokeswoman for Exxon Mobil, said yesterday that the company did not violate any laws. "All purchases were documented as being in full compliance with all laws," Nair said. ChevronTexaco did not return a phone call.

Overall, 30 percent of the oil vouchers were issued to beneficiaries in Russia, including individual officials in the president's office, the Russian foreign ministry, the Russian Communist Party, members of the Russian parliament, and the oil firms Lukoil, Gazprom, Zarubezhneft, Sibneft, Rosneft and Tatneft.

Fifteen percent of the beneficiaries were French, including a former interior minister, the Iraqi French Friendship Society and the oil company Total. Entities in China received 10 percent of the vouchers, and entities in Switzerland received 6 percent, as did entities in Malaysia and in Syria.

The oil concessions to some countries evidently helped pave the way for imports of prohibited military gear. For example, a Serbian political party run by Mirjana Markovic, the wife of former Serbian president and current war crimes indictee Slobodan Milosevic, received Hussein's authorization to buy millions of barrels of oil and earn millions of dollars in profit, according to the report.

Between 1999 and 2002, government officials in Serbia and Montenegro -- which at the outset made up Yugoslavia -- provided jet engine components to Iraq and negotiated the sale of missile technology and equipment, as well as components for tank guns, according to the report and other sources. The trade was halted under U.S. and allied pressure.

Each of the oil voucher recipients was handpicked by Hussein, based on recommendations from his diplomats and intelligence service, according to the CIA report, which was written by Charles A. Duelfer, a diplomat who helped direct the investigation. Hussein "made all modifications to the list," the CIA report said.

U.N. Security Council members who were alleged to have abetted Hussein in his scheme to thwart the sanctions reacted sharply to the charges in the report, saying they unfairly smeared foreign governments and companies while letting the unnamed U.S. companies off the hook.

"We don't know whether the allegations are true or not, but we know some reputations are being tarnished and we know that these people were not contacted and that the governments were not contacted prior to the publication of the report," said Nathalie Loiseau, a spokeswoman for the French Embassy in Washington.

Syria's ambassador to the United Nations, Fayssal Mekdad, declined to comment on the report's assertions that Syria was a major player in Hussein's scheme, buying hundreds of millions of dollars in Iraqi oil outside the U.N. program and providing a banking center that allowed Iraq's commercial partners to deposit kickbacks and payoffs.

"Allegations are allegations," Mekdad said. He added that he will respond more fully after he has had a chance to read the report.

U.S. and British diplomats expressed a sense of vindication over the report's findings, saying that the document shows that Hussein had intentionally exploited the world's humanitarian impulses to steal money from ordinary Iraqis.

Staff writer Justin Blum contributed to this report. Lynch reported from the United Nations.

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