Oil-for-Food Committee Probes U.S. Graft

UNITED NATIONS – Whether smuggled to Jordan (search) or sold to Russian politicians, millions of barrels of illicit Iraqi oil ultimately fueled the cars and heated the homes of ordinary Americans, according to a U.S. Senate subcommittee.

After accusing politicians from France, Britain and Russia of involvement in Saddam Hussein's Oil-for-Food (search) scheme, the committee focused on alleged American complicity in a report released Monday night.

The report claimed that Washington looked the other way as Texas oil company Bayoil bought Iraqi crude and sold it to American refineries. As a member of the U.N. Security Council (search), the United States allowed Saddam to pocket billions of dollars smuggling oil to Jordan, Turkey and Syria, it said.

Click here to read the report about Iraqi oil allocations to the Russian presidential council (pdf).

"We've got to look in the mirror at ourselves as well as point fingers at others," Sen. Carl Levin, D-Mich., told reporters in a conference call on Monday before the report was released.

The two issues were among several to be discussed at a day-long hearing Tuesday by the subcommittee of the U.S. Committee on Homeland Security and Government Affairs, chaired by Minnesota Republican Norm Coleman.

Coleman's subcommittee has released three reports since Thursday exploring how Saddam made billions in illegal oil sales despite U.N. sanctions imposed in 1991 after Iraq's invasion of Kuwait. British, French and Russian politicians took part, the committee claimed.

Among those scheduled to testify Tuesday was George Galloway, the outspoken British lawmaker whom Coleman's subcommittee has accused of taking vouchers under Oil-for-Food.

As he got off the plane in Washington on Monday night, Galloway again denied the allegations and said the evidence against him was forged.

"It's Mr. Coleman who's been all over the news and he's a lick-spittle, crazed neocon who is engaged in a witch hunt against all those he perceives to have betrayed the United States in their plan to invade and occupy Iraq," Galloway told Associated Press Television News.

The Oil-for-Food program, which ran from 1996-2003, was designed to let Saddam's government sell oil in exchange for humanitarian goods to help the Iraqi people cope with crippling U.N. sanctions.

But Saddam peddled influence by awarding favored politicians, journalists and others vouchers for oil that could then be resold at a profit. He also smuggled oil to Turkey, Jordan and Syria outside the program, often with the explicit approval of the United States and the rest of the U.N. Security Council.

Many of the allegations made by Coleman's subcommittee are not new. In April, for example, Bayoil USA owner David Chalmers was indicted in U.S. District Court for allegedly funneling kickbacks to Saddam. Chalmers has denied any wrongdoing.

But rarely had the allegations been spelled out with so much detail or scope. Coleman's investigators have interviewed former top Iraqi officials and businessmen, who provided a behind-the-scenes look at how Saddam's grand scheme worked.

Monday's documents, released by the minority Democrats on Coleman's subcommittee, studied two issues: Bayoil's involvement in Oil-for-Food and a single instance that saw Saddam's regime smuggle more than 7 million barrels of oil out of the Iraqi port of Khor al-Amaya, apparently with U.S. knowledge, in the weeks before the invasion in 2003.

The report found that Bayoil imported some 200 million barrels over two years starting in September 2000 and sold it to U.S. oil companies. That was at a time when Saddam was trying to tinker with the price of oil so that when he sold it, companies could be compelled to pay him kickbacks.

The report claimed that Bayoil paid "directly or indirectly" some $37 million in kickbacks to Saddam even at a time that the United States and other members of the council had realized what Saddam was doing and began ordering price hikes to quash the kickbacks scheme.

Bayoil then sold the crude to U.S. companies, though there is no evidence the companies knew about the kickbacks, the report said.

Chalmers' lawyer, Frank Spagnoletti, could not immediately be located for comment late Monday. The report said Bayoil officials had refused to cooperate with the investigation. But Chalmers himself has denied wrongdoing in court.

The committee singled out the U.S. Office of Foreign Assets Control, which the United Nations repeatedly warned about Bayoil's scheme. It cited an apparent misunderstanding in which U.S. authorities assumed the United Nations would monitor individual companies, while at the United Nations, Oil-for-Food officials thought that was the responsibility of national governments.

The report's focus on the single instance of oil smuggling, through Khor al-Amaya, was meant to illustrate how Saddam sold oil outside Oil-for-Food.

The committee cited an October report by U.S. arms inspector Charles Duelfer saying that while Saddam pocketed more than $225 million illegally under Oil-for-Food, he made some $8 billion in illegal oil sales outside the program.