Senate Report Ties
Russia's Stance
On Iraq War to Oil
By YOCHI J. DREAZEN IN WASHINGTON and ALAN CULLISON IN MOSCOW 
Staff Reporters of THE WALL STREET JOURNAL
May 16, 2005; Page A3
A new Senate report ties Russia's opposition to the U.S.-led invasion of Iraq in 2003, and its earlier efforts to ease international sanctions on the Saddam Hussein regime, to lucrative oil allocations given to top allies of Russian President Vladimir Putin.
The probe, by the Senate's Permanent Subcommittee on Investigations, also accuses the senior Russian officials of illegally sending millions of dollars in oil profits back to former Iraqi leader Saddam Hussein in the form of kickbacks to preserve their access to oil allocations. The allocations were granted as part of United Nations' oil-for-food program, which ran from 1996 to 2003 and was designed to allow Mr. Hussein to sell his country's oil and use the revenues for food and other humanitarian goods.
Allocations granted recipients the rights to distribute Iraqi oil; most charged a commission of up to thirty cents per barrel. The allocation system wasn't illegal, but the Senate report alleges that Iraq misused the system by secretly funneling oil to foreign politicians as part of an influence-purchasing scheme. Those politicians, the Senate report says, in turn violated international sanctions by sending part of their proceeds to Mr. Hussein as kickbacks.
The Senate charges echo some of the allegations made in other probes of the oil-for-food program against the Russian regime. Another probe, by a U.N.-appointed panel chaired by former Federal Reserve Chairman Paul Volcker, is finding that Russia had a larger and more dynamic role in the oil-for-food program than previously thought, according to people familiar with the matter.
The Senate report says Russian individuals and political parties received 30% of the oil allocations granted by Mr. Hussein's government, more than any other country. Among the named recipients is Alexander Voloshin, formerly Mr. Putin's top aide.
The report from the Senate, where several leading Republicans have harshly criticized the U.N. and its Secretary General, Kofi Annan, is likely to fuel international tensions over the program and could add to strains between Russia and the U.S. Many administration officials and prominent lawmakers have expressed growing unease about Mr. Putin's curbs on democracy.
The report, set to be formally released today in advance of a hearing tomorrow, was compiled by Senate investigators who traveled to Iraq to interview former members of Mr. Hussein's government and sifted through thousands of pages of documents here and overseas.
Along with France and Germany, Russia voiced strong objections to the U.S.-led attack on Iraq before it began in March 2003, and helped block Security Council approval for the invasion. While the Kremlin held doubts that Mr. Hussein's government harbored weapons of mass destruction, Moscow's critics in the U.S. maintained the opposition was mostly political, and due to Russia's close ties to the Iraqi regime.
The Senate report paints a vivid picture of a complex web of front companies and secret agreements between Russia and Iraq. It says the two countries worked with a U.S. oil firm whose top executives recently were charged with crimes in connection with the oil-for-food program to bypass sanctions on Iraq and exploit the U.N. program.
The report says the closely held U.S. firm, Bayoil USA Inc., played a key role in helping the Russians who received the allocations actually sell the oil and pocket their profit. The Senate investigators also accuse Bayoil of orchestrating an elaborate system for funneling secret kickbacks to the Hussein government.
Catherine Recker, an attorney for Bayoil and its owner, David B. Chalmers, said the firm stood by prior statements denying any illegal activities. It is unfair and inappropriate for the Senate to publicly ambush Bayoil and its employees with evidence we haven't seen and which is unavailable to us, she said.
Mr. Putin's political organization, the pro-Kremlin Unity Party that dominates Russia's parliament, and Mr. Putin's top aides in the Kremlin presidential administration received permission to buy sizable amounts of discounted Iraqi oil, the report says. Investigators say the Hussein regime allocated 90 million barrels of oil to a collection of several of Mr. Putin's top advisers.
The nexus for Iraq's oil-for-food dealings with Russia was Baghdad's embassy in Moscow, located on a pothole-ridden side-street near Russia's foreign ministry, investigators say. Iraqi ambassador Abbas Khalaf helped compile the list of Russians who would receive oil allocations, people close to the matter say. Other embassy officials helped arrange for the money to be flown to Baghdad on specially chartered flights. One former embassy employee interviewed by investigators said he personally saw $80 million to $90 million flown back to Baghdad.