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
2. Glencore’s Contract with SOMO in Phase IX
Like Bayoil and Taurus, Glencore benefited from the scarcity of willing buyers for Iraqi crude oil
in Phase IX after surcharges had been imposed by the Government of Iraq. In total, Glencore
purchased over 40 million barrels during Phase IX. Half of the oil purchased by Glencore had
been allocated in the name of its agent, Mr. Abu-Reyaleh. Glencore succeeded in obtaining a
SOMO contract under its own name to purchase approximately 12 million barrels of the oil
allocated to its agent. It purchased approximately another 8.6 million barrels allocated to Mr.
Abu-Reyaleh under contracts signed by Petrogaz. 291
The main Glencore trader of Iraqi oil, Mr. Alvarez, acknowledged that he was notified of the
possibility of surcharges in December 2000, immediately before Phase IX began. According to
Mr. Alvarez, Ali Hassan Rajab, a senior SOMO official, advised him in a telephone conversation
that Iraq was “considering” a request for additional payments to be made to SOMO’s own bank
accounts. Mr. Alvarez stated that he made it very clear to SOMO that Glencore would not make
any such payments. But a month after this conversation, Glencore entered into a SOMO contract
1999 (mentioning that Mr. Shbeilat was a former president of Jordan’s engineers union and a pro-Iraqi
Islamist leader); Khaled Dawoud, “A choice and a prayer,” Al-Ahram Weekly, Feb. 25 to Mar. 3, 1999;
Murtaza Lakhani interviews (Oct. 18, 22, and 29, and Dec. 6-13, 2004) (discussing the relationship
between Mr. Abu-Reyaleh and Mr. Shbeilat and indicating that Mr. Shbeilat’s favorable speeches regarding
Saddam Hussein were the main reason for his receipt of oil allocations).
290 SOMO sales contracts, nos. M/06/62 (June 8, 1999) (contracting with Petrogaz for three million
barrels), M/07/69 (Dec. 21, 1999) (contracting with Petrogaz for two million barrels), M/08/91 (July 6,
2000) (contracting with Petrogaz for three million barrels); SOMO letter to Amer Rashid (Dec. 20, 2000)
(translated from Arabic) (increasing the quantity of oil sold to Petrogaz under contract M/08/91 by an
additional two million barrels); Petrogaz record, Glencore International AG and Petrogaz agreement (July
16, 1999) (regarding Petrogaz acting as agent for Glencore on contract M/06/62); Petrogaz record,
Glencore International AG and Petrogaz agreement, addendum no. 1 (July 7, 2000) (extending Glencore’s
agreement regarding Petrogaz acting as agent for Glencore on contract M/08/91); Luis Alvarez interview
(Sept. 13, 2005).
291 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
and company table, contract no. M/09/60; SOMO letters to Amer Rashid (Feb. 21, 2001) (approving
contract M/09/60 for two million barrels of oil for “Petrogaz Geneva (Talal Abu-Reyaleh)”), (May 13,
2001) (indicating that the contract with Petrogaz (Talal Abu-Reyaleh) was increased to nine million
barrels) (each translated from Arabic); Petrogaz record, Glencore International AG and Petrogaz agreement
(July 16, 1999); Petrogaz record, Glencore International AG and Petrogaz agreement, addendum (Feb. 19,
2001) (extending Petrogaz’s agency agreement with Glencore to cover contract M/09/60).
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