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U.S. report cites Russians in oil-for-food probe

Senate panel points to top Kremlin officials before hearing

From Phil Hirschkorn

• Interactive: Who's who in Iraq
• Interactive: Sectarian divide

(CNN) -- A U.S. Senate report released Monday accuses top Russian politicians, including advisers to President Vladimir Putin, of engaging in illicit transactions with Iraq during the U.N. oil-for-food program.

The report was made by the Senate Homeland Security and Governmental Affairs Committee's Permanent Subcommittee on Investigations. The subcommittee, one of several congressional panels investigating the now-defunct program, plans a hearing on its findings Tuesday.

Former Iraqi Vice President Taha Yasin Ramadan told investigators that Iraq believed the Russian allocations provided "compensation for support" shown, especially at the United Nations, where Russia sits on the Security Council.

"This is how Saddam Hussein used oil for food -- to line his own pockets and and curry favor with politicians," said U.S. Sen. Norm Coleman, R-Minnesota, chairman of the subcommittee.

Coleman said Iraq abused the program "to take care of its friends ... and throw money at [U.N.] member states."

The report found that Saddam's regime allocated 76 million barrels of crude oil to Vladimir Zhirinovsky, Russia's deputy parliament speaker, and his political party between 1997 and 2002.

The report estimated that Zhirinovsky profited by about $9 million in commissions after assigning rights to companies that could sell the oil on the open market.

It also said top Russian officials -- including Alexander Voloshin, a former Putin adviser and one-time Kremlin chief of staff -- and the United Russia party, a pro-Putin group, received oil allocations for 90 million barrels between 1999 and 2003.

Those allocations yielded profits of $3 million once the shipments were steered through Russian companies, the report concluded.

The subcommittee didn't seek rebuttals from Zhirinovsky and Voloshin.

But Zhirinovsky told a Moscow radio station that he hadn't received any money from Iraq.

"I didn't sign any contracts, and I didn't see any oil," Zhirinovsky said, according to a translation by Russia's Interfax news agency.

Zhirinovsky said that no one from the Senate subcommittee had spoken to him.

The deputy parliament speaker said that he would have been happy to get money from Iraq but that the country had none.

"They have 400 children dying per year, and 1.5 million Iraqis have died," he said, referring to the impact of international economic sanctions imposed during Saddam's regime.

Zhirinovsky said he lobbied the United Nations to approve greater oil for food exports by Iraq, and the world body did increase the amount of oil the country could export.

"There's an awful lot of those who are after Iraqi oil," he said. "I did some lobbying for the interests of our country."

Report: Allocations used to buy influence

Not a drop of Iraqi oil entered Russia, which is a net exporter of oil, investigators found. Instead, the crude was shipped to the North American and European markets.

Since Saddam controlled the choice of oil buyers under the U.N. program, the regime thought of it as the "Saddam Bribery System," the subcommittee said.

Another official said the allocations were a way of "buying influence," the report said.

Tariq Aziz, Iraq's deputy prime minister under Saddam, said the Unity Party, which is now part of the United Russia faction, received a large number of allocations because Russia took positions favorable to Iraq on the Security Council, where is it one of five permanent members.

Like Ramadan, Aziz is awaiting trial before a special tribunal in Iraq.

Saddam once instructed his officials to "show gratitude" to Russia when it threatened to use its veto to thwart a U.S.-British plan to toughen sanctions in 2000, the report said.

The oil-for-food program was launched in 1996 to help Iraqis hurt by sanctions put in place after the Persian Gulf War.

Individuals or companies from Russia, China and France received a majority of the Iraqi oil procured through the U.N. program between its launch and its demise in 2003.

A U.N. escrow account collected $64 billion for 3.4 billion barrels of oil sold, doling out two-thirds of the money to vendors who sold food, medicine and supplies approved by the Security Council to Iraq.

The rest of the oil-for-food cash paid for program costs, weapons inspections and reparations to Kuwait, whose 1990 invasion by Iraq prompted the economic sanctions. Iraq fought hard to roll back the sanctions -- in part, the report said, by steering oil contracts to countries sympathetic to its view.

Ties to Texas oil company alleged

Iraqi Oil Ministry records cited by the subcommittee allege that Zhirinovsky and Voloshin hired the Texas oil company Bayoil to take possession of allocated oil and sell it for a share of the proceeds.

Some payments to Bayoil went through a company in Cyprus called Haverhill, the report said.

Bayoil and its chief executive, David Chalmers, and two of his oil brokers face federal indictments in New York on accusations of paying Iraq illegal surcharges for the oil. Chalmers has denied any wrongdoing.

Documents cited by the Senate subcommittee revealed for the first time that Bayoil's alleged illegal transactions involved Russian oil deals.

Starting in 2000, Saddam extorted several billion dollars by imposing a 10- to 30-cent-per-barrel surcharge on buyers who willingly paid it to bank accounts he controlled, according to U.S. officials.

Saddam also extracted kickbacks on payments for humanitarian goods.

Russia got about a third of the oil sold under the program.

According to the Senate report, Russian individuals and companies that paid surcharges to Saddam delivered cash to the Iraqi Embassy in Moscow.

When the cash stored in an embassy safe reached $3 million to $4 million, the report said, it was taken to Baghdad in a diplomatic pouch.

Zhirinovsky once complained that he was unable to pay his surcharges, and his allocations then were suspended, according to documents cited by the report.

"Pay or get nothing," Ramadan told him, according to an interview cited in the report. In lieu of cash, Zhirinovsky offered to give Iraqis a school building he owned in Moscow, Ramadan said, according to the report.

British, French officials also accused

The Russian oil deals as well as parallel deals the subcommittee alleged last week in a report about British Parliament member George Galloway and former French Interior Minister Charles Pasqua will be the subject of Tuesday's hearing.

Galloway and Pasqua have denied the allegations.

Coleman sent a letter to Galloway on Friday inviting him to this week's hearing. "I'll be going there to give them hell," Galloway said last week. (Full story)

Coleman and Sen. Carl Levin of Michigan, the committee's ranking Democrat, told Galloway last week to "be prepared to provide sworn testimony."

Coleman said Saddam used his illicit oil profits to rebuild his military capacity, echoing a conclusion by former Iraq weapons inspector Charles Duelfer.

Duelfer's report for the CIA last year was the first to detail oil allocations to Russian and other political figures around the globe.

CNN's Liz Neisloss contributed to this report.

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