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 controlled accounts may not correspond to surcharges assessed on an entire contract or may be applied to surcharges owed on a number of lifts under more than one contract. Iraq’s unrealistic expectation that the market would bear a $0.50 surcharge in Phase IX caused an oil exporting crisis in Iraq. At that time, the oil overseers also warned traders and companies that it was illegal to pay surcharges or otherwise make payments to Iraq outside the United Nations escrow account. Customers dropped out of the market. The Minister of Oil made personal efforts to persuade oil traders and companies to help Iraq by promising them substantial oil contracts. Ultimately, 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 Supply & Trading Limited (“Bayoil”), the Taurus Group (“Taurus”), Glencore International AG (“Glencore”), and the Vitol Group (“Vitol”). None of these traders had been given the significant direct access to oil contracts that they sought under the Programme. In Phase IX, these companies purchased substantial amounts of crude oil through intermediary entities: Bayoil mainly through Italtech SAR, an Italian-based company; Taurus mainly through Fenar Petroleum Ltd. and Alcon Petroleum Ltd, Liechtenstein-based companies; Glencore through its own Swiss-based company, and Petrogaz Distribution S.A.; and Vitol mainly through Mastek Sdn Bhd, a Malaysian-based company, among others. REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 12 OF 623
INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS Chart B – Top Financiers of Oil Purchases in Phase IX 8 Glencore 11.54% Oil purchased mostly through Glencore Int’l AG & Petrogaz Distribution S.A. registered in Switzerland Other 38.59% Vitol 13.21% Oil purchased mostly through Mastek Sdn. Bhd. registered in Malaysia Taurus 17.81% Oil purchased mostly through Italtech SRL registered in Italy Bayoil 18.85% Oil purchased mostly through Alcon Petroleum Ltd. & Fenar Petroleum Ltd. registered in Liechtenstein Iraq’s decision to value illicit income over political influence in Phase IX altered the typical distribution of Iraqi oil to companies which had been principally based on nationality in prior phases. The four traders and the companies they used to purchase oil were not from the countries most favored by Iraq. As illustrated above in Chart A, Liechtenstein, Italy, Malaysia, and Switzerland replaced countries like France and China. Surcharges were assessed and paid on contracts financed by Bayoil, Taurus, Glencore, and Vitol in the surcharge phases. All four traders had some of the surcharges paid to Iraqi-controlled bank accounts through other entities and agents. Taurus and Vitol also paid certain surcharges directly to Iraqi-controlled bank accounts. All of these oil traders and companies deny knowingly making surcharge payments to the Government of Iraq. Certain practices developed to cope with the surcharges. Companies used a disclaimer in their contracts providing that the party to the contract was not involved in paying surcharges. The inclusion of the disclaimer did not appear to prevent the payment of surcharges. In one instance, an agent for Bayoil admitted to including the disclaimer in fabricated, after-the-fact agreements created to disguise the payment of surcharges. Companies sometimes attempted to disguise 8 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 Report. REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 13 OF 623
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report on programme manipulation - Independent Inquiry Committee

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