Volume 1 - Iraq Watch

amounted to about $2 million. Because this was nothard currency income, it is not counted in the totalhard currency income mentioned elsewhere in thissection.SOMO lists its cash, barter, and dinar contracts asbeing destined for the “North,” “West,” or “South.”• Based on the buyer’s names, shipments to theNorth almost certainly were mostly destined forTurkey. One of the major purchasers paying withcash was the Asia Company, which bought almost11 million barrels for $174 million from May 1999through January 2003. According to Amir MuhammadRashid Tikriti Al Ubaydi, Iraq’s Oil Minister,Barzani, the leader of the Kurdish DemocraticParty, controlled this company. The dinar contractsprobably were destined for the Kurds in the threeNorthern Governorates. Some of the shipments tothe North could have found their way to Iran. Thetotal value of private-sector trade with the Northwas $538 million.• Based on the buyers listed, shipments for the Westwere destined at least for Jordan and Syria. Someof these shipments probably also found their wayto Lebanon. The total value of private-sector tradewith the West was $95 million.• Based on the buyers listed, shipments for the Southwere destined for export by small vessels throughthe Arabian Gulf, with most probably destinedfor the UAE and other nearby bunkering markets.Some probably wound up in India and perhapsother destinations. The total value of private-sectortrade with the South was $359 million (see inset).According to a number of Iraqi officials, the moneyearned from private sector border trade was primarilydeposited into accounts in Lebanon and Jordancontrolled by the CBI (see Figure 24).• The accounts were kept in US dollars, except forone account in Euros that was closed after onemonth.• One account was maintained in the Rafidian Bank,Mosul, Iraq branch. This account handled earningsfrom the private-sector trade through the North.• The “SOMO Office” in Basrah handled earningsfrom private sales through the South. ISG doesnot know if this means there was a correspondingRafidian Bank account to handle these earnings inthe South.Role of the SOMOIraq’s SOMO is the state-run monopoly that controlsall of Iraq’s crude oil exports. It is overseen by theIraqi MoO and functions as the Ministry’s marketingarm. SOMO maintained all records for sales underthe UN OFF program; cash border sales, salesthrough the Protocol agreements, and oil allocation(vouchers) arrangements.• According to the procedures agenda approved bythe UNSCR 986, SOMO was responsible for themarketing process of Iraqi oil and was eventuallypermitted to sell as much oil as it could. However,these sales contracts were only allowed to companiesregistered with the UN as approved buyersof Iraq’s crude oil. These companies were onlyto make payments to Iraq into the UN supervisedescrow account in the Banque Nationale de Paris inNew York.According to SOMO officials, Saddam demandedthat Iraq keep the price of its oil as low as possiblein order to leave room for oil traders to pay Iraq theillegal surcharges. A sales director at SOMO statedthat they were instructed by the government to get thelowest price. Under normal circumstances, SOMOwould have sought the highest price for Iraq’s oil, itsonly legal source of real revenue.Among the companies listed in SOMO’s recordsas having paid illegal surcharges are some of theworld’s largest refineries and oil trading companies.SOMO maintained detailed financial records listinginvoices and collections for each contract. These companies,when questioned about surcharge payments,deny they were the parties that made them.• For example, according to SOMO records, oneof the most active purchasers of Iraqi crude wasa Swiss-based company named Glencore. It paid$3,222,780 in illegal surcharges during the periodof the program. The company denies any inappropriatedealings with the Iraqi government outside ofthe UN OFF program.Determining who paid surcharges, and for what38