Hussein Made $11 Billion Off Illicit Oil Sales, CIA Reports

Ousted Iraqi President Saddam Hussein had successfully subverted an elaborate U.N. sanctions program to amass money, goods and leverage that could have helped him rebuild his weapons programs, a CIA report issued Wednesday says.

In just a few years, Hussein systematically targeted influential government figures and even U.N. officials with favors and bribes to help undermine international support for the sanctions.

Companies from Russia, France, China -- and even the United States -- dodged restrictions by paying illegal surcharges on oil or smuggling in goods between 1996 and 2003.

Hussein also personally approved oil vouchers that prominent political leaders and others could turn into cash.

By the end of 1999, Iraq was within “striking distance” of a de facto end to limitations on trade and oil exports. Hussein had amassed nearly $11 billion and managed to obtain some conventional weapons, the report says.

Central to Hussein’s efforts to get the sanctions lifted was a divide-and-conquer strategy aimed at the U.N. Security Council’s permanent members, pitting the U.S. and Britain against China, France and Russia. The report says Hussein offered the vouchers and other sweetheart deals to top government officials, hoping to persuade them to end sanctions. After a decade, the support of China, France and Russia for broad-based sanctions had eroded, and the three pushed to ease trade restrictions on Iraq.

The U.N. imposed sanctions on Iraq after Hussein’s invasion of Kuwait in 1990. In 1996, the U.N. devised a program allowing Iraq to sell oil to buy food and medicine to lessen the embargo’s impact on Iraqis.

Hussein quickly realized that the “oil-for-food” program could be exploited to acquire money and material to rebuild arms programs. Baghdad, however, never actually rebuilt the programs, the report says.

Iraq Survey Group chief Charles A. Duelfer told Congress on Wednesday that Hussein “had an exquisite sense of the use of power and influence.”

The report includes a list, provided by a high-level Iraqi Oil Ministry official, of political leaders, private firms and others Hussein chose to receive the oil vouchers, which they could use to buy oil below market price and then resell it at a profit. The head of the $64-billion oil-for-food program, Benon V. Sevan, is the only U.N. official on the list. He denied receiving vouchers after the charges first emerged in December in an Iraqi newspaper.

The report alleges that Sevan received oil allocations through companies he recommended to the Iraqi government soon after the program started in 1996. The vouchers, for a total of 7.3 million barrels of oil, were never collected by Sevan, and there is no evidence that he received any money. But the report says that more than half of the oil allocated to Sevan was taken by the African Middle East Petroleum Co. Sevan stood by his denials Wednesday and declined to comment further.

The list includes dozens of other public figures and parties, including former French Interior Minister Charles Pasqua, Indonesian President Megawati Sukarnoputri, Russian ultranationalist Vladimir Zhirinovsky, the Russian presidential office and Foreign Ministry, and the son of Lebanese President Emile Lahoud.

The report cautions that being listed does not confirm the receipt of illegal benefits. Many of those listed have denied wrongdoing. Some of the designees never converted their allocations into contracts or collected the oil. In some cases, the transactions had been approved by the oil-for-food program.

The report says the oil-for-food strictures were circumvented on a nation-to-nation basis as well, through formal trade agreements with countries such as Jordan, Syria, Turkey and Egypt. The arrangement with Jordan was the most lucrative, accounting for more than $4.4 billion of the $10.9 billion in illicit Iraqi revenue between 1991 and 2003, the report says. In exchange for oil, Iraq received trade credits from Jordan, arms transshipments through Syria, and various goods and services from Turkey.

All told, Iraq’s earnings under such agreements outside the U.N. program amounted to $8 billion over 12 years -- or 73% of the nearly $11 billion in illegal gains.

U.S. companies and individuals made at least $30 million in profit by participating in the illegal oil voucher scheme, according to figures in Duelfer’s report. The names of two, and perhaps three, U.S. citizens and an unspecified number of U.S. companies appeared on 13 “secret lists” maintained by the Iraqi Oil Ministry to keep track of payouts.

Duelfer said that U.S. law prevented him from listing the names of the companies and individuals in the report, though he said the names had been turned over to appropriate authorities. He said he had argued strongly for releasing the names, but government lawyers had stopped him.

“I am not a lawyer, and so if someone tells me I’m going to go to jail for something ... I listen carefully,” he said.

The exclusion of the U.S. companies drew outrage from Sen. Ben Nelson, a Nebraska Democrat.

“Isn’t it interesting that we print the names of petty criminals in the police blotter sections in weekly newspapers across the country, but somehow the names of these companies don’t get in?” Nelson asked during the hearing.

At least four U.S. companies have received subpoenas in connection with an investigation of the U.N. program by the U.S. District Court for the Southern District of New York. Exxon Mobil Corp., ChevronTexaco Corp., El Paso Corp. and Valero Energy Corp. have not been named as targets of the investigation.

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Rationale for going to war: two views

Bush administration statements in 2002, 2003 and early this year on the rationale for going to war in Iraq were contradicted by conclusions of the CIA’s Iraq Survey Group report Wednesday. Among key points:

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Issue: Whether aluminum tubes imported by Iraq were for use in a nuclear weapons program

Administration statement: National security advisor Condoleezza Rice said in September 2002 that aluminum tubes sought by Iraq were ‘only really suited for nuclear weapons programs, centrifuge programs.’

Iraq Survey Group Report: Concluded, as had an earlier Senate report, that the tubes were for use in conventional rockets.

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Issue: Whether Iraq sought to buy uranium from Niger

Administration statement: President Bush said in his 2003 State of the Union address that ‘the British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa.’

Iraq Survey Group Report: Concluded that there was no evidence Iraq was seeking to import uranium after the 1991 Persian Gulf War.

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Issue: Whether Iraq was reconstituting its nuclear program

Administration statement: Vice President Dick Cheney said in August 2002: ‘We know that Saddam has resumed his efforts to acquire nuclear weapons.’ Bush on Oct. 7, 2002, said Hussein’s regime ‘is seeking nuclear weapons.’

Iraq Survey Group Report: Hussein ended his nuclear program in 1991, after the Gulf War, and there was no evidence he tried to restart it. Senior Iraqi officials believed he would restart a nuclear program if U.N. sanctions imposed after the Gulf War were ended.

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Issue: Whether Iraq had biological weapons laboratories

Administration statement: Secretary of State Colin L. Powell, in his speech to the United Nations on Feb. 5, 2003, said that the administration had ‘firsthand descriptions of biological weapons laboratories on wheels and on rails.’ Cheney said in a radio interview in January 2004 that two large trucks found in April 2003 in northern Iraq were ‘conclusive’ proof that Hussein had a biological weapons program.

Iraq Survey Group Report: Concluded there was no evidence that Iraq had biological weapons production systems mounted on trucks or rail cars.

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Issue: Whether Iraq had stockpiles of biological weapons

Administration statement: Bush, on Sept. 28, 2002, said: ‘Each passing day could be the one on which the Iraqi regime gives anthrax or VX nerve gas or, someday, a nuclear weapon to a terrorist group.’ Powell, appearing before the U.N. on Feb. 5, 2003, said: ‘There can be no doubt that Saddam Hussein has biological weapons and the capability to rapidly produce more, many more.’

Iraq Survey Group Report: Baghdad abandoned its biological weapons program in 1995 out of fear it would be discovered. Such a discovery would have made it harder for Iraq to free itself of U.N. sanctions. There was no evidence of any biological weapons work after 1996. Iraq destroyed its hidden biological weapons stocks in 1991 and 1992. However, it kept a few samples that would have been useful in starting a biological weapons program.

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Sources: Iraq Survey Group report, Times reports