Saddam's regime made $21 billion subverting sanctions

WASHINGTON -- Over more than a decade, Saddam Hussein's government raised more than $21.3 billion in illegal revenue by subverting U.N. sanctions against Iraq including the humanitarian oil-for-food program, congressional investigators estimated Monday.

That's double the $10 billion the Iraqi president previously was alleged to have siphoned off. The earlier estimate included only the oil-for-food program. The new, higher number includes illicit profits from efforts like the illegal smuggling of oil in the years of sanctions that preceded the humanitarian program that began in 1996.

"The magnitude of fraud perpetrated by Saddam Hussein in contravention of U.N. sanctions and the oil-for-food program is staggering," Sen. Norm Coleman, R-Minn., said Monday as his Senate Government Affairs permanent subcommittee on investigations began a hearing on the subject.

"This is like an onion -- we just keep uncovering more layers and more layers," he said.

New figures on Iraq's alleged surcharges, kickbacks and oil-smuggling are based on new documents obtained by the committee's investigative panel. The documents illustrate how Iraqi officials, foreign companies and sometimes politicians allegedly contrived to bring vast illicit gains to Saddam's government and how he tried to buy support abroad for a move to get the United Nations to lift sanctions, officials said.

Perhaps the biggest problem with the humanitarian program was that it allowed Saddam to decide who would get oil contracts, said Charles Duelfer, the last chief U.S. arms inspector in Iraq who also studied Saddam's efforts to subvert sanctions.

Giving the Iraqi president discretion over contracts "was the largest lever that we offered him," Duelfer told the committee.

Congressional investigators said they arrived at the figures released Monday partly by considering an expanded period, from 1991 to 2003, rather than counting only from the 1996 beginning of the oil-for-food program. That project was implemented to alleviate the humanitarian effect of the sanctions on average Iraqis.

Sanctions began Aug. 6, 1990, four days after Saddam's invasion of Kuwait.

The $21.3 billion included $3.9 billion from oil smuggling before the oil-for-food program and $17.3 billion from abuses during the program.

The $17 billion was broken down like this:

$9.7 billion from oil smuggling.

$4.4 billion in kickbacks on humanitarian goods contracts.

$241 million in illegal surcharges on oil sales.

$2.1 billion from accepting substandard goods and paying inflated prices for them.

$403 million from overseas investment of illicit income.

Coleman said the investigation is just beginning and criticized the United Nations for not providing documents and access to officials involved in the program.

Getting to the bottom of the allegations will, among other things, help countries design future sanctions programs better, said the subcommittee's ranking Democrat, Sen. Carl Levin of Michigan.

He also said that "for the most part," the decadelong sanctions "achieved their intended objective of preventing Saddam from rearming and developing weapons of mass destruction."

Saddam's military spending plummeted after sanctions were imposed to a fraction of what it had been, he said. He said three-quarters of the Iraqi president's illicit income was from publicly disclosed trade agreements with neighboring countries that the world well knew about "but winked at."

By comparison, he said, only 16 percent of his illicit funds came from his contravention of the humanitarian program.

Mark L. Greenblatt, the subcommittee's counsel, told the committee that Saddam tried to manipulate the oil allocation process to gain influence throughout the world.

Rather than giving allocations to traditional oil purchasers, Saddam gave them to foreign officials, journalists, even terrorist entities, who sold their allocations to oil companies in return for sizable commissions, he said.

The reference to terrorist groups referred to evidence that Saddam had allocated oil to such organizations as the Popular Front for the Liberation of Palestine and the Mujahadeen Khalq, a group seeking to overthrow the government of Saddam's enemy, Iran, Greenblatt said.

According to documents, the Iraqi government signed deals to import rotting food and other damaged goods with the full understanding of the exporting companies, who accepted payments for top-quality products while kicking back much of the price difference to the Iraqis.

Drawing from anecdotal information, the congressional investigators estimated that such substandard goods accounted for 5 percent of all goods imported under the oil-for-food program.

In addition to several congressional probes into the oil-for-food program, former Federal Reserve Chairman Paul Volcker heads a panel conducting an independent investigation.