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Last Updated: Friday, 19 November, 2004, 12:07 GMT
Companies in 'oil-for-food scam'
By Mark Gregory
BBC World Service business correspondent

Saddam Hussein in an Iraqi court
Saddam allegedly embezzled billions by evading UN sanctions
The BBC has found evidence of corruption by companies around the world doing business with Iraq while it was under the sanctions regime.

Our investigation has found that many businesses were willing to pay Saddam Hussein's government illicit surcharges on oil-for-food contracts.

These abuses were found to have been widely known about at the time.

The oil-for-food programme was a scheme administered by the UN allowing Iraq to export oil despite the sanctions.

The revenue went into accounts controlled by the UN and was supposed to be spent on food and medicines to improve living conditions in Iraq.

Companies around the world have reason to be nervous about the outcome of all the investigations
BBC World Service business correspondent Mark Gregory

The scheme ran for seven years, ending with the fall of Saddam Hussein's government.

UN officials have been accused of either turning a blind eye to abuses, or in some cases of being corrupt themselves.

It has been described as the biggest financial scandal in history.

According to US senate investigators, Saddam Hussein embezzled $21bn by evading UN sanctions over a period of years.

That figure released earlier this week is double previous estimates.

Attention has focused on the kickbacks the former Iraqi leader's officials allegedly extracted from foreign companies doing business under the UN-administered oil for food programme.

'Common practice'

We travelled to Jordan, which is an important entry point for trade with Iraq, to check out some of the claims.

A former senior official at one of Jordan's major banks told us that his bank alone had processed at least $100m of fraudulent contracts.

Businesses trading with Iraq, he said, routinely paid hidden surcharges of about 10% of the value of the deal.

Iraqi oil pipeline at Basra, 1999
Businesses paid illicit surcharges to secure contracts
Most of the deals involved Russian and Middle Eastern firms
Corruption on contracts alleged to be worse in post-Saddam Iraq
The money allegedly went into accounts at the Jordan offices of the Iraqi national bank.

Some of the deals involved western firms, but most were with companies from the Middle East and Russia.

Jordanian businesses we spoke to confirmed that illicit commissions on trade with Saddam Hussein's Iraq were common practice - so common in fact they were barely concealed.

But intriguingly, one prominent businessman told us the corruption on Iraqi contracts had actually got worse since the former Iraqi dictator fell from power.

We also uncovered anecdotal evidence of collusion by international oil companies in sanctions busting.

In a small way, our inquiries confirm the picture of massive abuse of UN sanctions that is emerging from multiple investigations in the United States.

But we also found that the oil-for-food affair is far more complex than is often portrayed.

Splits among the diplomats on the UN security council and flaws in the design of the oil-for-food programme played at least as much a part in what happened as negligence by UN officials or collusion in corruption by foreign firms trading with Iraq.

And it is often forgotten that most of Saddam Hussein's illicit income came from oil smuggling, not kickbacks on UN contracts.

Listen to Mark Gregory's World Business Report investigation
"Companies wanting to buy Iraqi oil were obliged to pay kickbacks."


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