Wednesday, May 03, 2006

Oil for fools

The Australian academic Paul Chadwick wrote a book in 1988 called "FOI – How to use the Freedom of Information Laws". It's a handbook for journalists and interested citizens on how to get information out of heeldragging, suspicious bureaucrats and politicians. The law was drafted in the early 1980s by the Fraser Liberal government and passed by the Labor Hawke Government elected in 1983. There are several groups that don't have to comply with FOI, they include the usual suspects like the security organisations ASIO and ASIS. But there is also a less obvious group immune from prying eyes. This group is the "single desk" export bodies such as the Egg Board, the Dairy Corp, the Meat and Livestock Board and the Australian Wheat Board, now known more simply as the AWB.

The principle of “single desk” was, and still is, to prevent Australian primary producers from being played off against each other by large corporate customers. In AWB’s case those competitors were the US conglomerates Conagra and Cargill.

It was rather prescient that the Australian Wheat Board (AWB) be included on this list because they are now the subject of what is commonly called the Cole Inquiry (named for Terence Cole QC, an ex-appeal judge in the NSW Supreme Court). This inquiry is more properly known as the Inquiry into certain Australian companies in relation to the UN Iraqi Oil-For-Food Programme.

Previously a low profile organisation, the AWB made headlines in late 2005 when it was alleged that it had knowingly paid kickbacks to the Iraq Government, defrauding the UN and violating sanctions. The allegations were made by the Voelker report commissioned by the UN. Kofi Annan, the UN secretary-general asked Australia to investigate the allegations in a statement issued in October 2005.

The Australian government limited the terms of reference of the Cole inquiry to investigating the role of three Australian companies (AWB was the main player but there were supporting roles for the little known companies Alkaloids of Australia plc and Rhine Ruhr plc) in paying kickbacks to Saddam Hussein.

Saddam’s regime had been the subject of UN sanctions since the time of the 1991 Gulf War. The sanctions did not particularly hurt the government but they caused a humanitarian crisis. Clinton’s response was Oil for Food.

And so in December 1996 the UN allowed Iraq to begin selling limited amounts of oil for food and medicine. The program was escrow (a legal arrangement where an asset is delivered to a third party to be held in trust pending fulfilment of a contract.) The people that bought Iraqi oil put it in a BNP Paribas account. BNP is trusted by both sides because the major shareholder is Anglo-Iraqi business man Nadhmi Auchi. He didn’t do too badly either. The bank received more than $700 million in fees under the program. Auchi is listed as Britian’s 7th wealthiest man according to the Guardian and 10th richest according to Forbes. In 2003 he was jailed for two years for paying out bribes to expand his empire.

The oil for food program was ended shortly before the 2003 invasion of Iraq. However, it is alleged that, due to corruption on both sides, very little food and medicine was actually delivered to the Iraqi people. In the 2004 a US Subcommittee on investigations claimed that the Iraqi government paid $600,000 of kickbacks from the oil fund. They accused British maverick politician George Galloway as one of the recipients.

AWB became the single biggest seller of wheat to Iraq in the last years of Saddam's regime. Under UN Security Council Resolution 661, Australia was responsible for seeing that no cargo left its shores in breach of sanctions.

The Cole Inquiry held closed hearings in December 2005 and January 2006. Public hearings started in January. As each of the leading AWB executives were interviewed, they all produced a litany of excuses such as memory loss, inability to locate diaries and notes and loss of hearing (the latter being gun-toting ex-chairman Trevor Flugge’s problem.)

In February this year Cole added the activities of BHP Billiton into the terms of reference of the inquiry. The bribes were side payments made from falsely inflated contracts. The money was all coming out of the escrow account. The only problem was how to get the cash into Iraq undetected. The solution was a Jordanian company “Alia for Transportation and General Trade.” Alia was well connected in Iraqi political circles and had proved to be very well informed about key issues inside Baghdad during the last few years of the Saddam regime.

Under the oil-for-food program, no wheat could leave without a tick from the Department of Foreign Affairs, headed by minister Alexander Downer. Downer was called in to give evidence as to what he knew about the scandal.

Here are the unexpurgated statements he made to the Cole enquiry in precisely the order he made them:

"It could have been It may have been I don't specifically recall I can't precisely remember I don't recall I don't recall I couldn't rule out It is possible I don't know I'm not sure I have only a very distant recollection I don't recall I don't think I did I'm pretty sure I didn't make a note I don't recall I could have done I don't recall it….” and on and on it went for 80 different statements of forgetfulness. In fact his testimony has been set to music.

Downer doesn’t have too much to worry about. His boss John Howard, who was also interviewed by Cole (and also didn’t see any evidence of wrongdoing) made sure he set the terms of the inquiry so that AWB will take the rap not their political masters.

Which will probably happen when Cole hands down his findings in June. Australia’s wheat farmers will also suffer. They will see their Iraqi market share heading off into the eager hands of Conagra and Cargill.

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