report on programme manipulation - Independent Inquiry Committee

INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME
REPORT ON PROGRAMME MANIPULATION
CHAPTER TWO
OIL TRANSACTIONS AND ILLICIT PAYMENTS
VI.
OIL TRADERS AND THE PHASE IX CRISIS
A. INTRODUCTION
Four traders and companies financed and lifted over 60 percent of the Iraqi crude oil during the
exporting crisis in Phase IX. The top financiers of Iraqi crude oil in that phase were Bayoil,
Taurus, Glencore, and Vitol. 217
B. BAYOIL
Bayoil and Bayoil (USA) Inc. (hereinafter “Bayoil”), oil trading companies based in the Bahamas
and the United States, respectively, received only two direct allocations of oil in the initial phases
of the Programme. After the Government of Iraq imposed a general ban on selling crude oil to
companies from the United States, Bayoil did not obtain another Programme contract to purchase
Iraqi crude oil. Nonetheless, Bayoil was responsible for lifting over 403 million barrels of Iraqi
oil sold under the Programme. In the initial eight phases, Bayoil purchased most of its oil from
Russian companies. Later, David B. Chalmers, Jr., President of Bayoil, and a former business
associate, Augusto Giangrandi, used a front company, Italtech SRL (“Italtech”), to solicit oil
allocations in Iraq. 218
When the Ministry of Oil initially faced strong resistance to the imposition of surcharges
immediately preceding Phase IX, it turned to oil traders to keep exports flowing. The
Government of Iraq allocated nearly 30 million barrels of oil within the first three months of that
phase to Italtech. Through Italtech, Bayoil managed to finance 8.1 percent of the Iraqi oil sold in
Phase IX. Although attempts were made to avoid the payment of surcharges imposed in that
phase, Bayoil and Italtech eventually paid over $6 million in surcharges to the Iraqi regime
through the Al Wasel & Babel General Trading LLC (“Al Wasel & Babel”). Bayoil also used the
Al-Hoda International Trading Co. (“Al-Hoda”) as a conduit for paying some of the surcharges
owed on other Iraqi oil contracts during the surcharge phases. 219 Bayoil employees denied
Committee requests for formal interviews.
217 Committee oil financier table. Some companies lifted the oil contracted under previous phases in phase
IX. This chart reflects only contracts executed in Phase IX, as opposed to the quantity of oil lifted in Phase
IX, as mentioned in other parts of the <strong>report</strong>.
218 Committee oil company and financier tables, contract nos. M/01/07, M/02/04; Committee oil financier
table. Bayoil Supply & Trading Limited is based in Nassau, Bahamas. Bayoil record, power of attorney
agreement (Sept. 7, 1999).
219 Committee oil company and surcharge tables, contract no. M/09/07; TaR (Dec. 1996 to Mar. 2003).
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