|  | | PICTURE SPEAK | |  |  | | VOLCKER: Levelling charges | NATWAR:In a tight corner | | | On the face of it, the deal struck by the United Nations Security Council in 1996 permitting Iraq to trade oil to pay for essential goods was an ideal solution. While it would help mitigate the suffering of the people under an oppressive sanctions regime, it would also prevent the regime of Saddam Hussein from channelising petro-dollars into financing weapons of mass destruction. However, due to oversight or otherwise, the scheme had a perfect loophole. It vested Iraq with the right to select its buyers for oil. It no doubt empowered a wily Iraqi regime by allowing it to potentially dole out favours. It was a scam waiting to happen. | | A UN report lists Natwar as having been allotted four million barrels of oil by the Saddam government in 2001. | | The ruling Congress party is also named as a beneficiary in another allotment of four million barrels of oil. | | A Delhi company paid over $7,00,000 as illicit surcharge to the Iraqi regime for executing part of these allotments. | | Over 130 Indian companies also made illicit payments on contracts for supplying humanitarian goods. | | Right from the beginning, the Iraqi regime adopted the strategy of selling oil to individuals and entities that it considered "friendly". At the same time, it sought to cultivate new alliances. After the fall of Saddam in 2003, there were serious allegations that the UN oil-for-food programme, as it was known, was a conduit for massive amounts of illicit payments. Under snowballing international pressure in April 2004, UN Secretary-General Kofi Annan appointed an Independent Inquiry Committee (IIC) under the chairmanship of former US Federal Reserve chairman Paul Volcker who was assisted by two other members, Mark Pieth of Switzerland, an expert on money laundering in the Organisation for Economic Cooperation and Development (OECD), and Richard Goldstone of South Africa, former prosecutor of the International Criminal Tribunals for former Yugoslavia and Rwanda. | | SLICK DEALS | | | Illicit income received by Iraq under the programme | | WHY THE REPORT WAS COMMISSIONED
Under the UN Oil-for-Food Programme, Iraq was allowed to export crude oil at a fair market price and the proceeds of the sale were used only for humanitarian needs. Following serious allegations of kick-backs, the UN formed an Independent Inquiry Committee (IIC) in April 2004 that gave its report last week. | | Last week, the IIC submitted its final report after trawling through 10,000 boxes of papers, including detailed notings maintained by the erstwhile Iraqi government. It turned out to be a stunning indictment of a host of nations, their political leaders and business corporations. The IIC report revealed that Iraq sold oil worth $64.2 billion to 248 companies and in turn 3,614 companies sold humanitarian goods worth $34.5 billion to Iraq. To escape obvious scrutiny, the regime entered into these contracts through layers of individuals and companies and quietly tucked away funds through the age-old practice of manipulating the invoices. And, in no time, what started as a trickle turned into huge payments accruing to the Iraqi regime by way of illegal oil surcharges amounting to $229 million and $1.55 billion by way of kickbacks for supply of humanitarian goods destined for the Iraqi people. The IIC estimated that the illicit payments totalled a staggering $1.8 billion, most of it paid during 2000 and 2002. Finding mention in this humongous list of entities was the name of Natwar Singh, the external affairs minister, and the Congress party. Classified as a non-contractual beneficiary, Natwar, it is alleged, was alloted four million barrels of oil in 2001. Of this, nearly half was lifted and the entity associated with this transaction was Masefield AG, a Swiss energy trading company. There is no reference to Natwar directly entering into a deal with Masefield AG. But the IIC report lists a payment of illicit surcharge of $ 498, 518 to the Iraqi regime by Andaleeb Sehgal, a Delhi-based businessmen, and his company, Hamdan Exports, that appear to have executed the deal.(see graphic) More bad news was in store for the Congress when the IIC also named the party as having been allotted four million barrels of oil to be sold to contractors for a surcharge. While the person representing the Congress has not been named, Masefield AG is again mentioned as having lifted one million barrels in a contractual agreement with Hamdan on this allotment. In all, Sehgal and Hamdan paid a surcharge of $748,540 (Rs 3.38 crore) for the two deals. The cost of a barrel was on an average $23 and the surcharge paid was 24 cents. What is not known is the premium the oil barrels were sold to Masefield that would have made the deal profitable for Sehgal and his associates. Another politician, Bhim Singh, president of the Panthers Party and a friend of the regime, was allotted 7.3 million barrels by Iraq but did not avail of the favour. | | | | | | On the supply of humanitarian goods, the report lists 130 Indian public and private sector companies. Though constituting barely 5 per cent of the corporations involved in the supply of goods, Indian companies serviced contracts valued at over $4 billion. Some $2.2 million was paid out either as after-sales service fee or inland transportation charges by these companies, which the IIC report lists as illicit payments to the Iraqi regime. Many corporates named by the report were quick to point out that they had paid the fees openly and in the full knowledge of not just the Indian government but the UN agencies supervising the programme as well. Anil Agarwal, president of Assocham, whose trading company was also listed as one of the business houses involved, says, "There were no underhand dealings or illicit payments. Whatever fee was paid was in the know of everyone concerned and duly accounted for." | | INTERVIEW | NATWAR SINGH | | | "I Got No Chance To Explain"
With pictures of Sonia Gandhi placed all over his room, External Affairs Minister K. Natwar Singh, 74, makes no bones about where his loyalties lie. The die-hard Nehruvian found himself in troubled waters after the Volcker report was released last week. Associate Editor Saurabh Shukla met Singh for an exclusive interview. Excerpts:  Q. Q. Did the Volcker report come as a surprise?
A. I was appalled. I find it outrageous that no opportunity has been given to me to explain. Neither my name, nor the Congress figure in the main report. I will be making a suo motu statement in Parliament. Nothing is of more value than my good name at this stage of life. But I have strong nerves, because if you are in this game, you should know how to take on the heat. The foreign minister of Russia has said this is forgery, the French have said it.
Q. Did you visit Iraq between 1998 and 2002?
A. I went there as leader of the Congress party delegation with Shivshankar, A.R. Antulay, Eduardo Faleiro and Aniel Matherani. We were not the only ones, the NDA also led a delegation to Iraq. Even from the Congress Salman Khurshid led a delegation in 1997. Q. Did your son accompany you in 1999?
A. He was there, he met his counterparts from the Youth Congress. Is it a crime to go to Iraq? We had good relations with Iraq. Q. Do you know Andaleeb Sehgal, who owns Hamdan Exports, which has come under the scanner in the Volcker report?
A. He is a friend of Jagat and is known to us. Q. Did you discuss any deal relating to the oil-for-food programme in Iraq?
A. We had only gone there with the delegation to felicitate them. Once I went there for Saddam's birthday celebrations. I had a letter from the Congress president for him. Q. Have you ever asked anybody to favour Masefield AG or Hamdan Exports?
A. Never, with capital N, capital E, capital V, capital E, capital R. Q. Don't you think that it will be embarrassing for you to continue as foreign minister, especially when you deal with the UN?
A. So what? The report has made critical references about Mr Kofi Annan too. He has not resigned. None of the countries has sacked the people who have been named. Q. Why is it that only you have been named in the report? Others too went to Iraq. Is it because of your vocal stand on the Iraq issue?
A. Maybe yes, maybe not. But at 74 and a half I am branded as a chor (thief). All the big Indian companies have been named (in the report)-the Tatas, Reliance and Bajaj. Do you think they are all crooks? The Volcker report has the same validity as the report of the CIA director on WMDs in Iraq. Q. Do you think there is a political vendetta against you by your own partymen, among others?
A. Of course, there is. If I am no longer the foreign minister someone else will be appointed. There is a queue already. Q. It is being said that your party would have sacrificed you if it had not been named in the report.
A. The PM can sack any minister. But after being thrown out I would have asked, "Please tell me what I have done", because I am certainly not incompetent. | |
Index
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RICHARD GOLD-STONE 
MARK PIETH 
Apart from selling oil to companies, Saddam's regime also made special allocations to influential individuals of some countries.
