The real Oil-for-Food scandal

You may have noticed that pro-war blogs have gone kind of quiet about the Oil for Food “scandal’ lately. But unless you follow the Australian press, you probably don’t know why. While the Volcker inquiry turned up lots of instances of oil export licenses given by Saddam’s regimes to various individuals and groups, presumably with some quid pro quo, the real revelation was that Saddam extracted corrupt payments from suppliers of food and other imports. By far the largest party to these dealings was an Australian quango, AWB Limited which, before its privatisation in the late 1990s, was the Australian Wheat Board. Although the story seems complicated, it’s actually fairly simple.

Under the Oil-for-Food scheme, Iraqi oil was sold through approved agents with the net proceeds going to a fund used to buy approved imports. The idea was that Saddam’s regime would not get any of the money. The regime got around this by offering to pay an inflated price, which was used to cover spurious charges for trucking, funnelled through a Jordanian front company called Alia. All imports to Iraq involved some charge of this kind. Suppliers who refused to pay, such as Canadian wheatgrowers were shut out.

Although this was referred to as bribery by AWB and other, it’s more accurate to see it as collusion in embezzlement. By trading wheat at prices well above those of the world market, AWB and the Iraqi regime ripped off the Oil for Food fund to the tune of around $300 million (far more than the commissions to favored oil buyers that have attracted so much attention). Saddam got the lion’s share of this sum, but there was plenty left over to pay huge salaries to the AWB insiders, and probably a little left over for Australian wheatgrowers, who got a better price than their wheat could have fetched on the Australian market.

All of this came out at the Volcker inquiry, upon which the Australian government announced itself shocked by the news, and set up its own inquiry, the Cole Royal Commission to examine any possible criminal action by AWB (however, the terms of reference preclude any finding of wrongdoing by the government).

As anyone familiar with Australian politics could have predicted it rapidly became apparent that the government knew all about the payoffs, except in the special sense of “know” that is considered relevant in such matters. The Canadians who were offered the same deal and refused, complained to the Australian government, but AWB denied it, and the government was careful not to press them.

The scandal has gone on longer than is usual in such matters, and has reached the point where the Foreign Minister and Trade Minister have been asked to make written statements. Still, it seems unlikely that anyone except maybe some hapless AWB executives will pay any sort of price for this.

The general public isn’t exceptionally excited by the whole deal. The typical position is one of cynical realism: we did what was necessary to sell wheat to Saddam, but of course we went to war against him when the US told us to. Ruthless pragmatism in trade matters and unquestioning obedience to the US in military matters have always been the central tenets of Australian policy.

It’s striking that, while prowar bloggers in Australia have generally been very quiet or actively excused the Australian governments complicity in providing Saddam with the funds to buy weapons that are now being used against us, the Murdoch press has gone in hard, even calling for the resignation of foreign affairs minister Alexander Downer.