The real Oil-for-Food scandal

by John Quiggin on April 5, 2006

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.

{ 14 comments }

1

Kevin Donoghue 04.05.06 at 7:46 am

Why doesn’t the Murdoch press like Downer? A quick glance at Wikipedia suggests he might have a bit too much in common with Prince Charles – posh accent, affinity with plants, that sort of thing. Is that it?

2

aaron 04.05.06 at 8:38 am

That’s old news.

I doubt it has anything to do with the lack of blog coverage. I saw that on blogs quite a while ago.

The real focus of right bloggers right now is fighting the false perception of losing the war. Actually it is the left that has shifted the focus away from the OfF scandal.

3

otto 04.05.06 at 8:44 am

This seems to be an example of a well-organised small constituency with intense preferences affecting public policy partly behind closed doors. Can such a thing exist??

4

abb1 04.05.06 at 8:55 am

This one sounds more like a criminal conspiracy than affecting public policy…

5

Tom Hurka 04.05.06 at 3:02 pm

Are the “Canadian wheatgrowers” referred to in the original post the Canadian Wheat Board? Some Canadian wheat farmers (mostly on the political right) want it abolished, while others (on the left) want it retained, one issue being that it in effect redistributes incomes in an egalitarian fashion. But maybe if the CWB were abolished Canadians too would pay bribes to the Saddams of the world.

6

Charlie Whitaker 04.05.06 at 3:46 pm

My suspicion is that the ‘Murdoch press’ just doesn’t care for corruption.

7

roger 04.05.06 at 7:34 pm

It apparently took Saddam Hussein almost a decade to steal the same amount of money the CPA and their cohorts were able to abscond with in a year and a half. The latter disappeared 8.8 billion dollars. Who said the Americans aren’t effecient? and apparently there is somewhere in the range of 20 billion from Iraq’s own funds, impounded by the American imperialist, which found a very murky destiny. And of course the Pentagon’s agency in charge of investigating abuse and fraud left a year and a half ago, since their job was to look the other way, and sometimes you run into mafia like fraud among the sleaze that ran Iraq for the Bushies even when you were trying hard not to.

To bad that money isn’t around now. Too bad Iraqi soldiers go out underprotected, underpaid, and underarmed, while U.S. contractors have benefited from Bush’s record tax cuts on dividends and such to truly enjoy pigs’ lives. Such is life, though. Meanwhile, we just keep helpin’ the Iraqis, anyway we can.

8

Kenny Easwaran 04.05.06 at 11:17 pm

the government knew all about the payoffs, except in the special sense of “know” that is considered relevant in such matters.

Oh no! Contextualist epistemology is being abused!

9

Ian Whitchurch 04.06.06 at 2:23 am

There is a second, related, corruption scandal relating to BHP’s actions regarding Tigris Petroleum , a $5m wheat shipment and Iraqi oil fields (google “BHP Tigris” for the details).

This Bloomberg headline sums it up really

“BHP’s Former CEO Prescott Denies Iraq Wheat Shipment Was Bribe”

10

John Quiggin 04.06.06 at 2:23 am

“That’s old news.”

Just shows you haven’t been following it. Most of the evidence on the Oz government’s role has only emerged in the past six weeks.

Alternatively, you may have meant that the government’s complicity was predictable from first principles, in which case it was indeed old news.

11

Tim Worstall 04.06.06 at 3:39 am

To get really decent amounts of corruption you have to involve governments. The private sector just can’t quite cut it.

12

John Quiggin 04.06.06 at 5:56 am

Best of all, Tim, is a quango (in the original quasi-NGO sense) – a private interest exercising state power, as with AWB.

There’s a quote about the prerogative of the harlot but I’ll leave someone else to Google it.

13

Tim Worstall 04.06.06 at 6:56 am

Why Google it? Should be imprinted on everyone’s minds. Power without responsibility isn’t it?

(One S. Baldwin if memory serves.)

14

abb1 04.06.06 at 7:10 am

It’s not power without responsibility. It’s government becoming an agent of corporate power; advancing corporate interests becomes their responsibility.

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