Editorial: The scandal grows

May 23, 2005
Oil. Money. Geopolitics. Now theater.

Oil. Money. Geopolitics. Now theater.

The scandal over abuse of funds from the Iraqi Oil-for-Food Program opened a stormy new act on the international stage last week. A US Senate subcommittee investigating corruption of the program, which allowed oil sales for humanitarian purposes while Iraq was under international sanctions, reported bipartisan allegations of misbehavior at officials from the UK, France, and Russia. Democrats on the subcommittee added accusations of misconduct by a US trader and of official mismanagement. And the British target of the investigation used an appearance before his accusers to excoriate US policy toward Iraq.

Deposed Iraqi President Saddam Hussein is known to have abused the Oil-for-Food Program to enrich himself and buy international influence. An independent panel commissioned by the United Nations, which managed the program, is investigating lapses at the UN and has so far issued two interim reports (OGJ, Feb. 14, 2005, p. 17; Apr. 4, 2005, p. 19). Most of the Senate subcommittee allegations focus on specific deals, especially those in which Iraqi officials dispensed lucrative oil-sale allocations to friendly foreigners.

The allegations

The allegations appear in staff reports for a May 17 hearing of the Permanent Subcommittee on Investigations (PSI), part of the Senate Committee on Homeland Security and Government Affairs. They are based heavily on interviews of incarcerated members of the Hussein government and on documents from the former regime.

One report says illicit oil allocations went to Charles Pasqua, former French minister of the interior, and George Galloway, a member of the British Parliament. It says Pasqua, a long-time politician who has been under judicial investigation for money-laundering and arm sales to Angola, received three allocations for a total of 11 million bbl of Iraqi oil. Pasqua has strongly supported restoration of French economic ties to Iraq. The report says an assistant to Pasqua, Bernard Guillet, received three allocations totaling 5 million bbl. Pasqua denies the allegations.

Galloway won reelection to Parliament on May 5 after having been expelled from the Labour Party last October for his outspoken criticism of the UK’s military involvement in Iraq. The PSI says he received six allocations covering 20 million bbl of Iraqi oil. At the May 17 hearing, Galloway called the PSI’s investigation the “mother of all smokescreens,” fiercely denied the allegations, and said the investigation lacks credibility outside Washington, DC.

A separate PSI report says nine illicit allocations for a total of 90 million bbl of Iraqi oil went to a high-level Russian advisory group called the Russian Presidential Council, headed at the time by Alexander Voloshin. It says former officials of the Hussein regime told investigators they considered Russia crucial to winning favor for Iraq on the UN Security Council. Voloshin, the report says, has declined to comment on the allegations.

Another report says nationalist Russian politician Vladimir Zhirinovsky, whom it describes as “a tireless and vocal supporter of Saddam Hussein’s regime,” and his political party received 11 allocations for a total of 75.8 million bbl of oil. Zhirinovsky, according to news reports, has denied the allegation.


A report by Democratic staff members of the PSI examines illegal surcharges through which Hussein is suspected of having raised $228 million and illegal oil sales through the Iraqi port of Khor al-Amaya worth more than $8 billion. The minority report highlights the role of Bayoil (USA) Inc., Houston, as a major buyer and seller of Iraqi crude. It accuses Bayoil of buying Iraqi oil while others were refusing to do so because of surcharges and of facilitating at least $37 million of the illegal payments. The bipartisan reports on Zhirinovsky and the Russian Presidential Council also cite the activity of Bayoil. The firm and David B. Chalmers Jr., described as its sole shareholder, are under federal indictment for alleged involvement in a kickback scheme involving Iraqi oil. An attorney denied wrongdoing by Bayoil, Chalmers, and associates named in the indictment and called the PSI allegations “reckless.” The minority report also faults UN and US officials for “oversight failures.”

Time will tell who’s right, who’s wrong, and who’s lying. Sooner or later, theatrics will yield to facts. Two elements of this scandal, oil and money, are coming into focus. Sorting out the geopolitical element might take more time.