report on programme manipulation - Independent Inquiry Committee

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INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS Otherwise, like Bayoil and Taurus, Glencore’s opportunity to purchase Iraqi oil directly occurred during the Iraqi oil exporting crisis in Phase IX. 284 During Phase IX, Glencore purchased a total of approximately 40 million barrels which amounted to over 11.5 percent of the Iraqi oil assigned to Phase IX contracts. For the first and only time during the Programme, Glencore also succeeded in obtaining a SOMO contract under its own name to purchase some of the oil that it lifted in that phase. The oil had been allocated in the name of Talal Hussein Abu-Reyaleh, a Jordanian businessman who was a Glencore agent. In subsequent surcharge phases, Glencore purchased another 82 million barrels of Iraqi oil assigned to contracts during those phases. 285 Millions of dollars in surcharges were assessed on the oil lifted by Glencore during the surcharge phases. Glencore’s agents, Mr. Abu-Reyaleh and Murtaza Lakhani, paid many of the surcharges assessed on oil financed and lifted by Glencore. Mr. Lakhani disclosed that he paid surcharges on behalf of Glencore. Mr. Abu-Reyaleh has refused to address the issue of surcharges with the Committee. 286 Glencore has denied any knowledge or involvement in the payment of surcharges to the Government of Iraq and it has stated that it acted in full compliance with United Nations regulations. 287 284 Luis Alvarez interview (Sept. 13, 2005) (indicating that Glencore purchased Iraqi oil from other companies that received oil allocations); Committee oil financier table; SOMO sales contracts, nos. M/04/43 (July 1, 1998), M/09/44 (Feb. 1, 2001). 285 Committee oil financier table, contract nos. M/09/02, M/09/06, M/09/29, M/09/34, M/09/37, M/09/44, M/09/60, M/09/76, M/09/77, M/09/91, M/09/100, M/09/105, M/09/122; SOMO sales contract, no. M/09/44 (Feb. 1, 2001) (contracting with Glencore International AG); Committee oil company table, contract no. M/09/44; SOMO letter to Amer Rashid (Feb. 27, 2001) (translated from Arabic) (identifying “Talal Abu- Reyaleh” as the individual associated with contract M/09/44); Saddam Z. Hassan fax to oil overseers (Mar. 9, 2001) (increasing oil allocated under contract M/09/44 to 12.6 million barrels); Committee oil financier table (showing that Glencore financed and lifted 32 million barrels in Phase X, 31 million barrels in Phase XI, and 18 million barrels in Phase XII from other companies). 286 Committee oil company and financier tables, contract nos. M/08/91, M/09/44, M/09/60, M/10/26, M/11/22, M/11/81, M/11/112 (showing that surcharges were levied on contracts financed by Glencore); Luis Alvarez interview (Sept. 13, 2005) (indicating that Mr. Lakhani and Mr. Abu-Reyaleh were agents of Glencore); Committee note-to-file (Aug. 30-31, 2005) (detailing the review of Glencore International AG and Murtaza Lakhani agency agreement (Jan. 23, 2001)); Committee note-to-file (Aug. 30-31, 2005) (detailing the review of Glencore International AG and Al-Khaled Engineering agreement (Dec. 7, 1999)); Murtaza Lakhani interviews (Oct. 18, 22, and 29, 2004); Talal Hussein Abu-Reyaleh interview (May 9, 2005). Mr. Abu-Reyaleh paid approximately $7,335,868 in surcharges for oil financed and lifted by Glencore. Committee oil surcharge and financier tables, contract nos. M/08/91, M/09/44, M/09/60, M/10/26. Mr. Lakhani paid approximately $1,048,830 in surcharges for oil financed and lifted by Glencore. Committee oil surcharge and financier tables, contract nos. M/09/37, M/11/22, M/11/81, M/11/112. 287 Glencore counsel letter to the Committee (Oct. 21, 2005). REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 144 OF 623
INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS 1. Before the Surcharge Phases In the earlier phases, Glencore solicited Iraqi crude oil from companies holding SOMO contracts. Luis Alvarez, the main Glencore trader for Iraqi crude oil, stated that, early in the Programme, Glencore purchased between four and six million barrels of oil per phase. One company from which Glencore purchased oil during these early phases was Delta Petroleum Products Trading Company (“Delta Petroleum”). Mr. Bibi, discussed in Section VI.C above in connection with Taurus, was the Delta Petroleum representative who dealt with Glencore. According to Mr. Alvarez, Mr. Bibi mentioned to Glencore that French companies were highly regarded by the Government of Iraq in awarding oil contracts. Mr. Bibi offered to have Delta Petroleum help a French subsidiary of Glencore obtain a contract. Pursuant to an agency agreement, Delta Petroleum procured a SOMO contract for Glencore France S.A. (“Glencore France”) in Phase IV. Glencore paid Delta Petroleum a premium of $0.09 per barrel for its assistance. According to Mr. Alvarez, the Iraqis soon realized that Glencore was not a French company and declined to enter into subsequent contracts. 288 In 1999, Glencore developed a business relationship with Mr. Abu-Reyaleh to purchase Iraqi crude oil. According to Mr. Alvarez, Mr. Abu-Reyaleh approached Glencore to see if the company was interested in purchasing Iraqi crude oil. According to Ministry of Oil records, the oil offered to Glencore, and later purchased, had been allocated in the name of Leith Shbeilat, the leader of a Jordanian Islamic group who was connected to Mr. Abu-Reyaleh. Under an agreement with Glencore, Al-Khaled Engineering Est., a Jordanian company represented by Mr. Abu-Reyaleh, would act as an advisor to Glencore for the purpose of obtaining oil contracts to be signed by either Petrogaz Distribution S.A. (“Petrogaz”) or Glencore France. A related agreement provided that Petrogaz would act as an agent for Glencore on the contracts for a $0.02 per barrel commission. 289 Under this arrangement, Petrogaz signed contracts for approximately ten million barrels of oil that were financed and lifted by Glencore in Phases VI through VIII. 290 288 Luis Alvarez interview (Sept. 13, 2005); SOMO sales contracts, nos. M/01/29 (Feb. 17, 1997) (contracting with Delta Petroleum), M/04/43 (July 1, 1998) (contracting with Glencore France for two million barrels of crude oil); SOMO oil allocation table for Phase V (Nov. 28, 1998) (noting that “Glencore (a French entity)” had been allocated two million barrels in Phase IV but no barrels in Phase V). 289 Luis Alvarez interview (Sept. 13, 2005); SOMO oil allocation table for Phase VI (May 27, 1999) (indicating an allocation of three million barrels of oil for Mr. Shbeilat, instead of Mr. Abu-Reyaleh); SOMO letters to Amer Rashid (June 12, 1999) (approving contract M/06/62 and referring to “Mr. Leith Shbeilat” as the allocation holder), (Dec. 29, 1999) (approving contract M/07/69 with Petrogaz and referring to “Mr. Leith Shbeilat” as the allocation holder), (July 8, 2000) (approving contract M/08/91 with Petrogaz and referring to “Mr. Leith Shbeilat” as the allocation holder) (each translated from Arabic); Iraq official interview (stating that Mr. Abu-Reyaleh was connected to Mr. Shbeilat); Committee note-to-file (Aug. 30-31, 2005) (detailing the review of Glencore International AG and Al-Khaled Engineering agreement (Dec. 7, 1999), which stipulated that the premium paid to Al-Khaled Engineering would be $0.20 per barrel of oil lifted if the contract was signed with Petrogaz and $0.22 per barrel of oil lifted if the contract was signed with Glencore France); Petrogaz record, Glencore International AG and Petrogaz agreement (July 16, 1999); “Aziz meets Main Jordanian Opposition Figure,” Agence France Presse, Jan. 5, REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 145 OF 623
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report on programme manipulation - Independent Inquiry Committee

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