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
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,
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