Australia - Iraq Wheat Bodies Agreed to Inflate Prices 
By Reuters
January 18, 2006
The New York Times
Original Source: http://www.nytimes.com/reuters/business/business-australia-iraq-wheat.html

SYDNEY (Reuters) - Australian monopoly wheat exporter AWB Ltd. agreed with Iraq to inflate wheat prices to recover an US$8 million debt owed to Australian oil interests, an oil-for-food inquiry heard on Wednesday.
The government inquiry also heard that the AWB discussed manipulating wheat prices to Iraq to settle quality issues and that Russian and Pakistani firms may have used similar measures.
AWB Managing Director Andrew Lindberg on Wednesday released a statement confirming the 2002 oil debt deal.
The debt was originally owed to Australia's then major oil firm BHP for the supply of wheat by the AWB in 1995 in exchange for oil exploration rights. The debt was later assigned to Tigris Petroleum, a firm set up by former BHP executives.
An agreement was reached in 2002 between AWB and the Iraqi Grain Board that the price for a million tons of wheat ``would be artificially inflated to include the amount due to Tigris,'' according to a statement by inquiry counsel John Agius.
The money was to be paid ``through the mechanism of a trucking fee,'' said the statement to the Australian government inquiry.
The inquiry started on Monday to determine whether the AWB, a privatized board which holds a monopoly on wheat exports and is mainly owned by farmers, broke any Australian laws.
A UN report last October accused the AWB of channeling US$221.7 million to http://topics.nytimes.com/top/reference/timestopics/people/h/saddam_hussein/index.html?inline=nyt-per \o More articles about Saddam Hussein. Saddam Hussein's government through illicit oil-for-food payments.
On Wednesday the inquiry released an AWB executive leadership report dated May 2003 updating the Tigris repayment arrangements.
``They (Tigris) intimated a number of influential people will need to start receiving funds and that further delays may cause difficulties going forward,'' the AWB report said.
Inquiry Commissioner Terence Cole asked Lindberg whether the document addressed ``the need to pay monies to Tigris so that a bribe could be paid?''
``I don't know whether I read this document or not,'' Lindberg replied, adding he didn't know who the ``influential people'' were. 
EXTRA PAYMENTS
Under the now-defunct UN oil-for-food program, Iraq sold US$64.2 billion worth of oil to 248 companies to pay for imports of food and humanitarian supplies.
The companies involved came from 66 nations and included large corporations in the United States, Russia, France and Germany. The biggest seller to Iraq was Australia's AWB, which sold US$2.2 billion worth of wheat to the country under the deal.
In his statement, Lindberg said the AWB was told by Iraq that trucking fees demanded from 1999 and a 10 percent service fee demanded from 2001 were approved by the United Nations.
``AWB now accepts that it would have been better to have sought confirmation directly from the UN that the service fee had been approved,'' he said.
Lindberg said the extra payments were initially openly included in wheat contracts, but later details were dropped.
``AWB itself did not make payments to the Iraqi government,'' he said, but he added no one knew exactly where the money went.
Lindberg told the Australian inquiry on Wednesday that during a trip to Baghdad in 2002 he reached a deal to pay Iraq an extra US$2 million to settle a contamination issue and that the money would be included in an increased wheat contract.
Iraq rejected shipments of Australian wheat in August 2002 claiming they were contaminated by iron filings.
Lindberg said the deal was demanded by the Iraqi government and was to involve AWB including the extra payment in ``trucking fees,'' which would have inflated the price of a contract by around $US6.00 ($A8.00) per ton of wheat.
An AWB document released at the inquiry showed the AWB was considering hiding the extra payment from the United Nations, which managed Iraq's oil-for-food funds.
The AWB said it had circumstantial evidence Russian and Pakistani companies had solved ``quality problems in a similar way'' and it was unlikely their national governments nor the United Nations were consulted.
AWB shares fell as much as 6.8 percent on Wednesday, before recovering some ground to stand 4.2 percent ending at A$5.77. Since hitting a high of A$6.41 on January 12, AWB shares have fallen about 9.5 percent.