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
Figure: Glencore draft letter of credit request to BNP (Jan. 19, 2001).
Glencore did not have the oil delivered to the United States, as agreed in the contract, but instead
had it shipped to Singapore. Over 1.85 million barrels were lifted on Montega’s contract at a total
value of $45,502,470, using a United Nations pricing formula that took into account that the final
destination would be the United States. As a result of Glencore’s change in shipping destination,
Montega Trading, as the contracting company, owed millions of dollars to SOMO for the price
differential. 204
According to Mr. Hemphill, Montega Trading was not involved in the decision to ship the oil to
Singapore, and he requested and received a letter from Sopak confirming that the intended
destination had been the United States. Despite being Glencore’s wholly-owned subsidiary,
Sopak denied involvement in Glencore’s decision to change the destination of the oil under the
Montega Trading contract. Ultimately, Sopak and Montega Trading reached a settlement on their
dispute over liability for the increased costs of lifting the oil. While the dispute between the
parties was settled, the outstanding surcharges on the Montega Trading oil purchases were not.
According to Ministry of Oil records, a surcharge of approximately $464,632 ($0.25 per barrel)
was imposed on the oil that Glencore had lifted. As part of their agency agreement, Sopak agreed
to pay a fee to Montega Trading of $0.30 per barrel, which would have covered the surcharge as
(Mar. 7, 2001); Glencore letter to Strategic Fuel Fund Association (Jan. 28, 2002); Committee oil financier
table, contract no. M/09/06; Oil overseers approval of contract no. M/09/06, S/AC.25/2001/OIL/1330/
OC.05 (Jan. 2, 2001); Rodney Hemphill interview (July 4, 2005); Paul Major fax to Rodney Hemphill (Jan.
19, 2001) (addressed to “Rog Hempman” and regarding Montega Trading contract M/09/06); Oil
Inspections Limited fax to “Glencore UK Ltd Attn: Paul Major” (Feb. 7, 2001) (advising Mr. Major of the
status of the Ocean Jewel at Mina al-Bakr); Sandi Majali interview (June 30, 2005); Sopak record,
Montega Trading and Sopak sales agreement (Jan. 16, 2001), purchase agreement (Jan. 16, 2001), and
agency agreement (Jan. 29, 2001); Glencore draft letter of credit request to BNP (Jan. 19, 2001). Paul
Major is copied on other correspondence relating to the Montega. Lucy Collinson e-mail to BNP (Jan. 19,
2001) (regarding Glencore’s letter of credit backing Montega Trading and their guarantee of all obligations
on behalf of Montega Trading and copying Paul Major).
204 Committee oil company table, contract no. M/09/06; Sopak record, Montega Trading and Sopak sales
agreement (Jan. 16, 2001) and settlement agreement (Apr. 26, 2001); SOMO fax to Montega Trading (Mar.
2, 2001); SOMO fax to Montega Trading (Feb. 26, 2001); Rodney Hemphill interview (July 4, 2005);
Sandi Majali interview (June 30, 2005).
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