[A-List] US/Russia tensions: Iraq

["Keaney Michael" <Michael.Keaney@xxxxxx>]

Russia 'giving illegal millions to Saddam for trade deals'

Nick Paton Walsh in Moscow
Tuesday August 20, 2002
The Guardian

Russian officials have given millions of dollars in illegal payments to
Saddam Hussein's regime to secure oil purchases from Iraq, according to
western diplomatic sources.

Emercom, the Russian government ministry which distributes aid in
emergency situations, signed a $270m deal last month under the UN
oil-for-food programme, enabling it to buy 12m barrels of Iraqi crude
oil.

But western diplomats have told the Guardian that they have seen
evidence that large "sweetener" payments were made to Baghdad to secure
the deal.

Such payments are illegal under international law, since security
council resolutions prohibit companies making deals with Iraq unless
they are supervised by the UN sanctions committee.

The oil-for-food programme allows companies to buy Iraqi crude oil at a
prices below the normal market value.

The companies pay the UN for the oil, and it then allows Iraq to spend
the money on approved goods, such as food or medicines.

Iraq has allegedly demanded that some companies pay a commission into
accounts not supervised by the UN.

Experts fear that such behind-the-scenes payments are used to finance
Iraq's procurement of weapons of mass destruction.

A spokeswoman for Emercom strongly denied the allegation, saying that it
had been awarded the contract because of its humanitarian work in the
area.

The revelation came 48 hours after Russia confirmed that it intended to
sign an economic and trade cooperation agreement with Iraq, worth an
estimated $40bn, with Iraq.

The deal is likely to complicate relations between Russia and the United
States, but White House officials sought to play it down, saying it
complied with the UN sanctions regime.

The Iraqi ambassador to Moscow, Abbas Haliaf, told the Russian media
that the deal might be signed in early September.

"We give Russians full priority" he said. "Over 200 Russian companies
are now working in our country."

The Emercom deal, approved by the UN on 11 July, is twice the size of
any other under the oil-for-food programme in the last three months.

"It was noticeably large," a western diplomatic source said.

"Iraq is having a problem attracting people prepared to break the
sanctions. When they find someone who is willing, then they give them
the biggest deal that they can."

He added that he had seen clear evidence of payments "within the last
few months".

"It clearly came from [Emercom]," he said. "The money is paid into bank
accounts in Jordan. Saddam can then spend it on whatever he wants - be
that weapons or palaces. These payments are illegal under international
law. There is no grey area here."

UN rules for oil deals permit companies to negotiate a commission of
about 5 cents for the Iraqi regime on each barrel of crude purchased.

But Iraq asks companies to pay between $25 and $40 commission on each
barrel: payments which are illegal if made outside the oil-for-food
programme.

The amount Emercom is accused of paying is thought to be millions of
dollars.

The Emercom spokeswoman said the ministry simply worked as an agent for
the oil companies, not buying crude oil directly, and all deals were
conducted according to international law.

She added that the total commission Emercom had received for acting as
an agent in the deal was significantly lower than the commission
allegedly paid to Baghdad - so such illegal payments would have made no
economic sense for the ministry.

Bank records clearly showed this, she said.

The UK and US first received intelligence that Russian officials might
be making illegal payments to Iraq a year ago, and immediately contacted
the Russian government, which held an inquiry.

This concluded that no impropriety had taken place.

Russia's cooperation with Baghdad in energy projects has grown
considerably in recent years, since Iraq is keen to repay the $8bn in
loans which it received from the Soviet government.

In March the two countries announced 67 new projects in the energy and
communications fields, worth an estimated $2bn.

Some analysts have dismissed this week's announcement of a $40bn
agreement as a simple attempt by Iraq to cultivate opposition to an
American invasion, as many doubt that the country can afford such a
deal.