While Natwar, Jagat and Sehgal deny that any such deal was cut or such allocations were made, curiously, another Indian, Bhim Singh, president of the Panthers Party, admits that he was also offered an allotment during the same period. According to Bhim Singh, who claims to be a friend of Saddam's regime, during his visit to Iraq in 2001 an official of the Iraqi State Oil Marketing Organisation (SOMO) approached him with a contract letter approved by Ramadan for an allotment of 7.3 million barrels of oil. He says he spent the night wrestling with his conscience and the next day when he met Aziz, he told him that his "friendship with Iraq is not for barter". The Volcker Report also indicates that no barrels were lifted by Bhim Singh. But surprisingly, it shows that the 7.3 million barrels were not allotted in one go but were split into six orders made from 1999 to 2002. Bhim Singh offers no explanation for the discrepancy between the report and his claim. Yet what it does establish is that such allotments were made to political representatives whom the regime considered useful or friendly to them. This is backed by the fact that the Volcker Report indicates over 400 such non-contractual beneficiaries and also lists the modus operandi of the allocations which roughly tallies with Bhim Singh's descriptions.

COURTING TROUBLE

Aniel Matherani's proximity to power has taken him places but the Volcker Report threatens to end his dream run   PICTURE SPEAK MATHERANI: Caught on the wrong foot this time There is still a dispute over whether Natwar was given a chance by Volcker to respond to the charges against him. The letter A seems to have brought bad fortune to Natwar Singh. If one A-Andaleeb Sehgal- was not enough, the other A that spelt trouble for him was his personal favourite in the Foreign Office, Aniel Matherani. A regular on Delhi's cocktail circuit, Matherani was a member of the Congress delegation to Iraq in 2001. The role he may have played in facilitating the oil deals is under the scanner. A former secretary of the AICC's Foreign Affairs Cell, Matherani, a junior Congress functionary by his own admission, had a meteoric rise from a hotel staffer to a political functionary. "I am a junior functionary, ask the seniors," he told India Today about his trip to Iraq. He was catapulted from ushering in foreign dignitaries to meetings at 10 Janpath to the post of India's envoy to Croatia by Natwar in December last year. The appointment was dubbed scandalous by the mea when it was made with charges flying all around South Block. Even within the Congress there were several voices of dissent citing some unpleasant incidents that had dogged him in his previous jobs. Matherani made it a point to always flaunt his 10 Janpath and Natwar connections. Once he even gave 10 Janpath's fax number as his personal contact number to diplomats. Diplomatic sources say trouble had started within months of his appointment when serious complaints were lodged against Matherani's conduct. However, it was all brushed under the carpet because of his proximity to the foreign minister. Matherani denies the charges. "I have not been asked any question about my conduct or any anomaly by the ministry," he told India Today from Croatia. Matherani is a classic case of how rules are bent for a political appointee. He stayed in India for more than half of his 10-month stint as the Indian envoy to Croatia and drew a salary of $4,000 while staying in Delhi. In official records, his visits were justified by being shown as made for consultation or temporary duties. His first trip to Delhi was for 22 days, the second for 70 days and he was again in the capital from September 4 to November 4. While Matherani claimed he was unwell, ministry records do not corroborate it. Strangely, while Natwar himself cleared his successor's appointment which was also endorsed by the President four months back, his papers have not yet been processed. Not only this, Matherani is believed to have made a trip to the US without informing the ministry. He denies this charge too, saying, "I have done nothing without informing the ministry. The whole thing has been concocted by my rivals to create a bad impression of me." Matherani adds that his tenure is for a period of two years and that he has not been told anything to the contrary. But with suspicions about his links in the Iraq oil deals surfacing, he may soon have to face the fate of his mentor. -By Saurabh Shukla

There is another set of allocations, with the Congress being named as the beneficiary. No individual is named as the beneficiary. In all, starting from the latter half of 2001 and ending in December 2002, four allotments of one million barrels each were made at regular intervals coinciding with the start of a new phase of the oil-for-food programme. Of the total four million barrels that were allotted, only one allotment, M/10/57, made in the latter half of 2001, was fulfilled. No prize for guessing who executed the deal. The report says Hamdan made an initial deposit for surcharge of $59,808 on November 6, 2001, for the contract with Masefield again lifting the oil barrels. The balance surcharge of $190,214 was paid on December 19, 2001, when the deal was completed. In that year, another Congress delegation led by the present Haryana Governor A.R. Kidwai and including Matherani travelled to attend Saddam's birthday celebrations on April 27 and 28. "I went to Iraq for only two days and there is nothing to discuss about it," Kidwai told India Today. Sehgal returned again in July 2001 and stayed in Baghdad for three days. Around the same time, Jagat was also in Jordan and then went to Baghdad by road.

The report shows that some other entities like the Indian Oil Corporation (IOC) and Reliance Petroleum also lifted oil from Iraq during this period. IOC lifted 42 million barrels of oil from 1996 to 2000. But in 2000 a SOMO official conveyed the Iraqi government's decision to levy a surcharge of 10 cents per barrel to be paid in cash to designated banks. IOC being a public-sector company refused to pay the surcharge and conveyed its recommendation to the Ministry of Petroleum which upheld it. Sarthak Behuria, IOC chairman, told India Today: "With the Iraqis refusing to sell us the oil without a surcharge we stopped importing oil from them till after the war." Reliance Petroleum lifted 2.83 million barrels in 2002 but the report shows that it also did not pay surcharge. Reliance officials did not respond to India Today's queries but said on other media platforms that the company had committed no illegality in the deals.

What remains murky is exactly how much money could have been made by the beneficiaries. On the face of it, the deal made in most of the allotments was fairly simple. A non-contractual beneficiary, usually a political representative, after being given an allotment by the Iraqi government, used a shell company to execute the deal. This company negotiated with an oil trader to lift the barrels at the UN-designated price. This price was usually lower than the market price for Iraqi crude and the money was made by selling it at a premium varyinganything from 40 cents to $1.5 a barrel. After paying the surcharge to the Iraqi government that varied from 10 to 30 per cent, the allottee could make a handsome profit without having to do much.

PICTURE SPEAK

DRIFTING AWAY: Sonia was unhappy with Natwar's defiance The problem for the probe is proving that the oil allocations were made, the monies paid and commissions pocketed.

If the Volcker Report is to be believed, when Hamdan and Masefield lifted two million barrels purportedly allotted to Natwar, they paid a price of $23.87 per barrel. The open market price for Basra Light was $25.45 per barrel-a difference of $1.58. After paying the surcharge the profit would have been $1.33 per barrel or in all $2.54 million which, going by the 2001 exchange rate, comes to Rs 12.05 crore (see graphic). The second lift of one million barrels to the Congress earned a lower commission because by then market prices had crashed in the oil market and the premium per barrel after deducting surcharge was 61 cents. The profits netted by it totalled $610,546 (Rs 2.93 crore). So in just two lifts the beneficiaries collected close to Rs 15 crore.

So how much would an oil trader like Masefield take as its cut? In New York, experts said that in a simple trade deal, where the trader does not take possession of the commodity- and thereby absorb the risks of holding it when prices constantly fluctuate-the commission is very small. David Hurd, head of research, oil and gas (Asia), for Deutsche Bank, says, "The commission would work out to about 1-1.5 per cent." By this calculation and assuming the rate of $23 per barrel of oil, the commission accruing to a trader like Masefield would work out to somewhere between 23 and 35 cents. The balance would be made by the beneficiary or his representatives.

The real problem for the probe, though, is proving that these allocations were made, the monies paid and the commissions pocketed. Shashi Tharoor, UN under secretary-general, clarified that the Volcker Commission was a fact-finding panel and didn't have the time, resources or mandate to probe the cases mentioned in the annexures where Natwar and the Congress figure. He says, "We believe it is in the interest of everybody, including those named in the report, to have such a probe." There may still be documents that Volcker had not made public which could be accessed by Dayal, the special envoy, and the UN has agreed to facilitate the probe. It is not clear whether Natwar was informed by Volcker of the charges and given an opportunity to respond as has been done in other cases. The report itself is ambiguous. It shows that Masefield was sent queries but did not respond. As regards Natwar, Volcker admitted that he did not even know he was the foreign minister of India. More grist came when Nirupam Sen, India's envoy to the UN, met Volcker on behalf of the Indian Government and said later: "The impression he gave us is that the notice was not, in fact, sent. But this is not a definitive thing, because they would have to check their documents again." Strangely, in September 2004, a CIA report named Natwar as a beneficiary too.

India's mission in Baghdad was asked to verify it but came up with no answers.

Even if the allocations are correct the question is which law have Natwar and Sehgal violated by transacting the deal. Income tax experts say that paying of surcharge could be considered legitimate if it is levied and recorded by the concerned government, which is Iraq in this case. What they can be charged with is non-disclosure of income. This invites a concealment penalty of three times the taxes due on that income and also prosecution that carries with it a maximum of two years in prison and a fine. They can also be charged with violations of the FEMA that could fetch a fine and imprisonment. Proving that money was actually paid to a beneficiary is going to be a mammoth task-few agencies have succeeded in traversing the so-called last mile of the money trail. While that may be cold comfort for the minister without portfolio, Natwar's political career is in the doldrums. As a Congress functionary said: "Natwar now belongs to history but history does not belong to him."

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