May 16, 2005
US Senate Points To Russian Officials In Iraq Scam
By REUTERS 
Filed at 9:16 a.m. ET
UNITED NATIONS (Reuters) - Saddam Hussein's government provided Kremlin officials with oil rights worth millions of dollars under the oil-for-food program in a quest to lift U.N. sanctions against Iraq, a U.S. Senate panel report concluded Monday.
The oil allocations were ``compensation for support,'' former Vice President Taha Yasin Ramadan was quoted in the report issued by the Senate Permanent Subcommittee on Investigations.
The report, based on interviews with Iraqi officials, including Tareq Aziz, the former deputy prime minister, follows a trail of money, leading to Alexander Voloshin, the former chief of staff to Russian President Vladimir Putin and former President Boris Yeltsin.
Another major beneficiary was ultranationalist legislator Vladimir Zhirinovsky, a regular visitor to Iraq.
There is no evidence Putin knew of the payments, Senate investors said.
Saddam's goal was the lifting of sanctions imposed after Iraqi troops invaded Kuwait in 1990. Under the oil-for-food program, which began in late 1996 and ended in 2003, Iraq was allowed to sell oil under supervision and buy goods to ease in the impact of the embargoes on ordinary Iraqis.
The Russian allocations had been disclosed in an October CIA report by Charles Duelfer, a former U.S. and U.N. weapons inspector. But the Senate report contains more documents and details.
It traces the transactions to the Russian Presidential Council that Voloshin headed via shell companies, particularly Haverhill Trading Ltd. in Cyprus, to Russian oil firms, such as Rosneft, and the Houston-based Bayoil Inc., whose executives were indicted by federal prosecutors last month.
RUSSIAN QUALMS
But diplomats noted that Russia, then Iraq's closest ally on the U.N. Security Council, had major qualms about the sanctions since 1992, mainly because Iraq owed Moscow billions of dollars for past weaponry and other items.
Zhirinovsky and his Russian Liberal Democrat Party were awarded the rights to sell 75.8 million barrels of Iraqi crude oil from June 1997 to December 2002, the report said. Those contracts probably netted $8.679 million in profits, it added.
The panel estimated at least $3 million was netted by the Russian Presidential Council, either through Voloshin or his confidant, Sergei Isakov. The transactions also resulted in $5.6 million in kickbacks or surcharges to Iraq.
Voloshin and Zhirinovsky previously denied the allegations and the Russian officials had said they would wait for a definitive report from Paul Volcker, appointed by the United Nations to conduct a independent inquiry into the program.
The Russian allegations are part of a Senate committee hearing Tuesday.
``The purpose of these hearings is to lay out in detail ... the massive volume of allocations to Russia when Russia is an oil-exporting nation,'' said Sen. Norm Coleman, the Minnesota Republican and chairman of the panel.
The $67 billion U.N. program began to be seriously abused in late 2000, when Iraq demanded ``surcharges'' on oil exports. This changed in mid-2001 when Britain and the United States set U.N. oil prices retroactively in a Security Council panel.
At the same time, the United States, Britain and France attempted to cut down the U.N. list of 700 oil buyers, many of them shell companies. But Russia refused.
Iraq would not sell directly to American firms so a Russian firm bought the oil on paper while Bayoil arranged for the lifting. The United States, through Bayoil and other oil companies, received two-thirds of Iraqi exports during the time the surcharge was being paid, industry sources said.
The Duelfer report estimates Iraq was able to pocket some $1.5 billion under the oil-for-food program. It earned another $8 billion from selling subsidized oil to neighbors Jordan, Turkey and Syria outside of the U.N. program, which Security Council members were knew about.