Saddam Hussein received $1.8 billion in bribes from more than 2,200 companies in the scramble for lucrative contracts under the United Nation's Oil-for-Food programme, investigators claimed today.
Russia harboured the most companies involved in the programme, followed by France, according to the inquiry led by Paul Volcker, a former chairman of the US Federal Reserve Board.
Many of the firms which benefited were obscure front companies which had been set up specifically to manipulate the UN programme. But the report also includes major names, including Volvo, Siemens and DaimlerChrysler.
Mr Volcker emphasised that because of the complex nature of Oil-for-Food, these may not have known that they were involved in a corrupt scheme.
George Galloway MP is named among four "political beneficiaries". The report says he directly and indirectly received allocations of 18 million barrels in total. He denies the allegation
The other three named "political beneficiaries" include Jean-Bernard Merrimee, France’s former UN ambassador, said in the report to have received $165,725 in commissions from oil allocations of around six million barrels awarded to him by the Iraqi regime. He is now under investigation by the French authorities.
Roberto Formigoni, the president of the Lombardi region in Italy, and the Reverend Jean-Marie Benjamin, who once worked as an assistant to the Vatican Secretary of State, are also named.
The report says that there were two types of manipulation: surcharges paid for humanitarian contracts for spare parts, trucks, medical equipment and other supplies; and bribes for oil contracts.
Among the companies named as paying the surcharges were South Korea’s Daewoo International and Siemans SAS of France. On the oil side, contractors listed include Texas-based Bayoil and Coastal Corp, and Russian oil giants Gazprom and Lukoil.
Russian companies were contracted for approximately $19.3 billion in oil from Iraq, which amounted to about 30 per cent of oil sales, by far the largest proportion among all participating countries.
In a news conference, Mr Volcker stopped short of blaming the companies or individuals named, saying that corruption changed the nature of the scheme.
"By the year 2000 the imposition of kickbacks and surcharges by the Iraqi regime of Saddam Hussein brought about the emergence of front companies and international trading concerns prepared to engage in these illicit payments," he said.
"This irrevocably changed the nature of the programme. The identification of a particular company in the report does not necessarily mean that that company as opposed to an agent ... made unauthorised [payments] or even knew about illicit payments."
Iraqi officials' records of every transaction are published in the 623-page report. It says, for example, that Brussels-based Volvo Construction Equipment paid $317,000 in extra fees to the Iraqi government on a $6.4 million contract.
A spokeswoman said she was unaware that the company was listed, or what the alleged payments were for: "I have no clue. This is the first I hear about it."
DaimlerChrysler, the German car-maker, is alleged to have paid $7,000 on a contract worth $70,000.
In its report, the Independent Inquiry Committee explains that bribes were paid in the form of "fees" for transporting goods to the interior of Iraq, or "after-sales-service".
In a chapter headed: "Oil transactions and illicit payments." the report says of Mr Galloway: "A total of over 18 million barrels of oil were allocated either directly in the name of George Galloway, a member of the British Parliament, or in the name of one of his associates, Fawaz Abdullah Zureikat, to support Mr Galloway's campaign against the sanctions.
"Mr Zureikat received commissions for handling the sale of approximately 11 million barrels that were allocated in Mr Galloway's name.
"Both Mr Galloway and Mr Zureikat have denied that Mr Galloway was involved in obtaining the oil allocations or receiving any proceeds from the oil sales."
In his e-mail of response, sent on October 17, Mr Galloway says that the summary is: "untrue, unjust and misleading".
He writes: "I had nothing to do with any oil deals done by Mr Fawaz Zureikat or anyone else. He and other companies involved were trading on their own behalf and not on mine.
"That Mr Zureikat was both a benefactor of the Mariam Appeal and a businessman trading in all manner of things in Iraq and elsewhere was well known and deliberately advertised by us for the very avoidance of later smears such as these.
"To now imply that I was somehow collectively guilty of paying more than a million dollars to the Saddam Hussein regime is simply preposterous and cannot be justified."
Mr Galloway, the MP for Bethnal and Bow, has challenged American senators to charge him with perjury over their, separate, claims that he solicited money from the programme and lied about it under oath.
The UN asked Mr Volcker to investigate claims of wrongdoing in the $64 billion programme, which was supposed to be a method for Iraq to raise money to buy food and medicines abroad.
Iraq was first allowed to sell limited and then unlimited quantities of oil, provided that most of the money went to buy humanitarian goods. It left Saddam free to choose the buyers of Iraqi oil, and the sellers of humanitarian goods. He manipulated the programme by accepting bribes from favoured buyers and awarding contracts to them.
Despite international sanctions, the scheme turned into a corrupt free-for-all with 4,500 companies competing for a slice of the business.
As the entire system grew politicised, Iraq decided to deny American, British and Japanese companies allocations to purchase oil, because of their countries’ opposition to lifting sanctions on Iraq.
At the same time, the report says, Iraq gave preferential treatment to France, Russia and China which were perceived to be more favourable to lifting sanctions, and were also permanent members of the Security Council.
The report strongly criticises the UN Secretariat and Security Council for failing to monitor the programme.
Mr Volcker’s previous report, released in September, said that lax UN oversight allowed Saddam’s regime to pocket $1.8 billion in the way contracts were awarded. According to the new findings, Iraq’s largest source of illicit income from the programme was the more than $1.5 billion from bribes on humanitarian contracts.
Today's report concludes a year-long, $34 million investigation that has criticised Kofi Annan, the UN Secretary-General, his deputy, Louise Frechette, and the Security Council itself for tolerating corruption.
In a letter to Secretary General Kofi Annan, the committee said its task had been to find mismanagement and evidence of corruption, and "unhappily, both were found and have been documented in great detail."
It said responsibility should start with the UN Security Council, which is dominated by its five permanent members: Britain, China, France, Russia and the United States.
"The program left too much initiative with Iraq," the letter said. "It was, as one past member of the council put it, a compact with the devil, and the devil had means of manipulating the program to his ends."
