By Dr George Venturini
Now it is time to progress to the libretto. That will show how little questions of morality matter with Howard and how much Howard and his ministerial cabal should be trusted over the cosy relationship they had with Saddam Hussein al-Tikriti.
Following the Iraqi invasion of Kuwait in 1990, the United Nations imposed a financial and trade embargo on Iraq. It was intended to weaken the Iraqi economy so that Saddam could not build up weapons for further wars. What it did weaken was the health of Iraqi children: it is estimated that about 150 children were starving to death every day because of the embargo. Throughout the 1990s Australian ships, aircraft and troops helped enforce the sanctions which caused widespread starvation in Iraq, leading to an estimated two million deaths. After 1996, once these sanctions were modified to permit profitable ‘Oil-for-Food’ deals, the Howard Government was among the first in line to collaborate with the Saddam Hussein government, through the Australian Wheat Board – A.W.B., even as it prepared to go to war against Iraq. U.N. Security Council Resolution 661 prevented all states and their nationals from making funds available to Iraq. These sanctions were widely effective, leading to food shortages and international condemnation as the humanitarian crisis became clear.
In response to this, the Oil-for-Food programme was begun. It allowed Iraq to sell oil to the rest of the world, provided the returns from this were kept in a U.N. bank account. This money could then be used by Iraq, with U.N. oversight, to purchase a strict list of humanitarian supplies.
The Oil-for-Food programme however in itself faced criticism, with many alleging that it was too expensive to administer and liable to abuse. The programme was discontinued on the lead-up to the invasion of Iraq.
Since 1948 an Australian statutory authority established in 1939 had been supplying Iraq with wheat. During the Oil-for-Food programme it became the single, largest supplier of humanitarian goods to Iraq. The authority was Australian Wheat Board, A.W.B. It was a veritable monopoly to control and prevent competition among wheat growers by purchasing and selling at a single price.
Beginning at mid-1999 officials of the cartel were informed that they would have to pay US$ 12 for each imported tonne, the resulting sum to be passed onto as ‘trucking fee’ to a bogus trucking company, Alia Transportation & Trading Co. of Amman, Jordan, purportedly as fees for transporting inland 8 million tonnes of Australian wheat. In fact, Alia did not cart a single grain of wheat. Alia, a front company majority-owned by the Khawam family – a powerful Iraqi clan living in Jordan – was established with 49 per cent of the shares owned by the Iraqi Transportation Ministry, and it simply took a cut and passed on the rest of A.W.B.’s payments to Saddam’s bankers. The odd thing was that Alia had no trucks.
A.W.B. accepted the condition, increased contract prices and began to send fraudulent information to the Office of the United Nations charged with supervising the enforcement of the sanctions. Under the sanctions regime third parties were prohibited from engaging with the Iraq Government unless they had Security Council approval. By having the party exporting goods – the ‘humanitarian’ supplier – to be the one to pay Alia, the Iraqi government was able to disguise the operation. Naturally, the U.N. Office expected that the Department of Foreign Affairs and Trade certify that the contracts were not in breach of the sanctions. The Minister in charge of Foreign Affairs was the Hon. Alexander John Gosse Downer, AC, with the co-operation of the Minister for Trade and Investment who was the Hon. Mark Anthony James Vaile AO – also Deputy Prime Minister. They both complied with numerous requests.
The ‘arrangement’ for paying extra money – by all definitions a bribe – went on for two years. The rate was increased, first by up to 50 per cent, until just before the invasion, when it was between US$45 and US$56 per metric tonne. The Australian Government was duty bound not to make any payment to Iraq. The bribes also breached the O.E.C.D Convention on combating bribery of foreign public officials in international business transactions, the Anti-Bribery Convention of 1997.
Under Australian law, all shipments to Iraq were banned unless the Foreign Minister – that is Downer – was “satisfied that permitting the exportation will not infringe the international obligations of Australia.” The contracts were never checked even though an officer of the Department of Foreign Affairs and Trade had rung an alarm bell as to possible breaches of sanctions. Satisfaction was continuously guaranteed – in “the national interest”? During a period of about four years A.W.B. ‘passed on’ to Iraq something like AU$290 million.
In April 2001 an officer of the Department of Foreign Affairs and Trade attached to the United Nations in New York sent a cable informing that A.W.B. had been asked by Iraq to pay ‘port fees’ of US 50 cents per tonne as ‘port fees’ and alerting that that was in breach of the U.N. sanctions. The addressees of the cable, Howard, Downer and Vaile would later declare that they had not seen the cable; senior ‘public servants’ in several other departments of the Howard Government were instructed to comply.
Howard would later insist that the cable did not actually prove that the government knew illicit payments were being made. In fact, Howard and his ministers had no intention of doing anything which could jeopardise lucrative Australian wheat sales to Iraq: again, “the national interest”?
“The national interest” – that is the fixing of the market – was the Howard Government’s paramount consideration in joining the Iraq war: securing the commercial, diplomatic and strategic interests of the Australian corporate élite which controlled it. And that could be done, first and foremost, by lining up closely with the United States. It meant taking advantage of the Operation Iraqi Freedom and in the process getting as close as possible to oil rights, construction contracts and agricultural markets. But the United States had similar undeclared interests, and more clout! When they got to Baghdad their XTF-75, Iraq Survey Group and similar organisations got down to work with a view – amongst others – to retrieve and preserve valuable contracts and commercial opportunities. The phony contracts guaranteeing the bribes fell into the hand of the pullulating American organisations.
Documents unearthed in the Iraqi ministries after the invasion had confirmed in detail the bribes paid to the Iraqi government and disguised as “trucking fees”, “port charges”, “after sales service fees” and “surcharges.”
In late May 2003 the Minister for Trade and Investment, Mark Vaile went to the United States at the head of a delegation of executives from ten major Australian construction, engineering, and oil and gas companies for talks with American officials and corporate executives.
Senior executives of the companies: Australian Power and Water, B.H.P., Clough Engineering, Multiplex, Santos, Woodside Petroleum and others, held discussions with American firms awarded reconstruction contracts from U.S.A.I.D., the United States Agency for International Development.
There could be agreement on many fields, but the Howard Government could not resist the pressure from Australian farming groups to ensure that the valuable Iraqi market was not lost to the United States. Before the first Gulf war, the United States exported almost one million tonnes of wheat annually to Iraq, but these shipments were cut off under the sanctions imposed on Baghdad. Australian growers then took advantage of the 1996 Oil-for-Food programme to recapture two-thirds of the Iraqi market, worth AU$839 million to Australia in 2002.
Behind the high-sounding words of ‘liberating Iraq’ and ‘exporting democracy’ the reality was brought to light with the establishment of the Coalition Provisional Authority. When words came to action, the American Administration nominated Daniel Gordon Amstutz, a government official and grain-trading industry senior executive of Cargill Corporation, the largest grain exporter in the world, and former president of the North American Grain Export Association, to lead the Authority’s agricultural section.
The Howard Government nominated two senior A.W.B. executives: chairman Trevor Flugge and senior executive Michael Long. They had both been compromised in the bribes paid to the Iraqi Government. Their view of “the national interest” was to guarantee contracts worth more than US$250 million which had been signed by A.W.B. before the invasion and to keep A.W.B.’s position in the Iraqi wheat market.
The last two contracts that A.W.B. signed before the invasion contained the biggest bribe of all, worth a total of about US$73 million on the basis of US$45.50 per metric tonne for “trucking fees” and another ten per cent “surcharge” of the whole value of the contract. In part, these contracts were designed to divert a further US$ 8.8 million from the U.N.-held funds, to be delivered to Tigris Petroleum, a company linked to B.H.P. and headed by Richard Baker, “a thoroughly disreputable man with no commercial morality.” (‘Tigris oil chief a ‘disreputable man’, The Age, 28 November 2006). The company had sent wheat shipments to Iraq in breach of U.N. sanctions in 1995, seeking to secure oil drilling concessions.
In September 2003 a report by the U.S. Defence Contract Audit Agency cited evidence that “illicit surcharges/kickbacks were standard practice for oil-for-food contracts.” The report named Australia and estimated “overpricing” in one A.W.B. contract at nearly US$15 million. The American wheat lobby then launched a letter-writing campaign to President Bush and other politicians, charging that “A.W.B. reaped an additional US$56 million gold mine at the expense of the Iraqi people, on top of their already excessive prices.”
Nevertheless, with the help of the Howard Government and its representatives in Baghdad, the A.W.B. managed to salvage its contracts.
In 2004 Iraqi daily Al Mada published a list of 270 persons and entities who were given oil vouchers for helping Saddam Hussein. The report alleged clear violation of the agreements of the Oil-for-Food programme established fourteen years earlier and ending the year before.
In response to this, the United Nations launched an independent inquiry into the programme, headed by former U.S. Federal Reserve Chairman Paul Volcker. Its terms of enquiry were “to collect and examine information relating to the administration and management of the Oil-for-Food Programme … including entities that have entered into contracts with the United Nations or with Iraq under the Programme”.
The final report was released on 27 October 2005. (Volcker Report: Manipulation of the Oil-For-Food Programme by the Iraqi Regime, Independent Inquiry Committee into the Oil-for-Food Programme).
The Volker Committee identified more than 2,200 international firms which, knowingly or unwittingly, paid a total of more than a billion dollars in ‘kickbacks’ to Saddam Hussein’s régime.
While the rollcall of global corporations included pharmaceutical giant GlaxoSmithKline, other well-known such as DaimlerChrysler, Volvo, Siemens and the Chinese state-owned industrial conglomerate SinoChem., were right near the top of the list, along with Australian Wheat Board. That was so not just a consequence of A.W.B. starting with an A. Sorting the list by the amount of money which made its way back into Saddam Hussein’s pocket one would find A.W.B. right at the top of the list.
The Volker Report disclosed that A.W.B. was responsible for ‘kickbacks’ totalling over US$250 million out of an estimated US$1.8 billion of illicit payments to Saddam Hussein’s régime during the US$35 billion U.N. Oil-for-Food programme in 1997-2003.
The Report accused almost half of the companies operating in Iraq during the time of the Oil-for-Food programme to have paid either bribes or illegal surcharges to secure Iraqi business. In special reference to A.W.B., it stated that “little doubt remains that A.W.B. made large numbers of payments to Alia, and these payments in turn were channelled to the Iraqi regime.” The Report named A.W.B. as the major abuser. It said that A.W.B. had covered 90 per cent of the Iraqi market before its practices were questioned in 2005, had sold 6.8 tonnes of wheat to Iraq for US$2.3 billion and had paid US$221.7 million – AU$290 million – in trucking fees, during the U.N. Oil-for-Food programme in 1997-2003. (http://www.iic-offp.org/story27oct05.htm).
The Australian Government repeatedly said “we knew nothing” but expert whistleblowers said that competent officials must have known.
From 2000 to 2005 Michael Joseph Thawley was Australian Ambassador to the United States of America. While Thawley was in the role, the Australia–United States Free Trade Agreement was established, ensuring greater access to the U.S. market for Australian products In 2004 he successfully lobbied to convince a U.S. Senate Committee to drop investigations into allegations that A.W.B. had paid ‘kickbacks’ to the Saddam Hussein régime in Iraq. (G. Polya , ‘Australian Corruption And 20,000 Iraqi Infant Deaths’, Countercurrents, 15 February, 2006).
The successor to Mr. Thawley, Mr. Dennis James Richardson – former head of the Australian Security Intelligence Organisation, would reassure the Americans that the Australian Government was not previously aware of the scandal. The Australian Government would insist that it simply did not know about the ‘kickback’ scandal.
In response to the U.N. Report, on 31 October 2005 the Howard Government appointed an Inquiry – not quite a Royal Commission – into the allegations, headed by the Hon. Terence Cole, Q.C., a former Judge of Appeal of the New South Wales Supreme Court.
Terence Rhoderic Hudson Cole and John Winston Howard had been together at the Law School of Sydney University in the 1950s. They both graduated in 1961. There, they had not been very close; they were both keen debaters. But while Cole captained the debating team with considerable enthusiasm, Howard was in the second-string line-up, cultivating in the process a sense of ordinariness which would characterise his life and define his public figure.
Even though the two men were not close, still they could be regarded as two tributaries of the same great river – pond? – which is the Westminster System, albeit of the sub-tropical version.
The Prime Minister’s oratory skills have improved since university, and he would have needed them if he were to be called and examined by counsel assisting the Inquiry, John Agius, S.C.
Cole was a ‘politically safe’ appointment. He had already been chosen as Commissioner of the 2000-2003 Royal Commission into the Building and Construction Industry.
This time the appointment was slightly different – perhaps a sign that a more confident Howard wanted to keep an eye on the proceedings.
This time it was Mr. Cole, not Commissioner Cole. The Inquiry was given very limited terms, exclusively to A.W.B.
It is said – with a considerable degree of certainty – that Prime Minister Howard himself had a hand in narrowly drafting the terms of reference.
By Letters Patent issued on 10 November 2005 Mr. Cole was asked to inquire into and report on “1) whether any decision, action, conduct, payment or writing of any of the three Australian companies mentioned in the Final Report (“Manipulation of the Oil-for-Food Programme by the Iraqi Regime”) of the Independent Inquiry Committee into the United Nations Oil-for-Food Programme, or any person associated with one of those companies, might have constituted a breach of any law of the Commonwealth, a State or Territory; and 2) if so, whether the question of criminal or other legal proceedings should be referred to the relevant Commonwealth, State or Territory agency.”
The stage was set.
The Inquiry would in time call to the stand many prominent members of the Government, including Howard – the first Australian prime minister to face a judicial inquiry in more than twenty years. Testimony and documents presented to the Inquiry revealed that in nearly twenty occasions A.W.B. executives had informed government ministers and/or their advisers about the payments. Silence!
On 16 January 2006 former A.W.B. chief executive Murray Rogers was the first witness at the Inquiry. Mr. Rogers denied any knowledge of how the ‘kickback’ payments were arranged or where the Iraq money was going.
But the Inquiry was told it was impossible to believe A.W.B.’s claims that it did not know that some AU$300 million of its money was being funnelled to Saddam.
A.W.B. was maintaining that it was the unwitting victim of an elaborate ruse and had no idea that inflated trucking fees it paid to a Jordanian company, Alia, were ending up with the dictator.
The Inquiry senior counsel John Agius, S.C. said that A.W.B.’s claims that its payments to Alia were for genuine transport costs were contradicted by evidence including documents. “Evidence will be called to the effect that A.W.B. always knew that Alia was a conduit for the payment of money to Iraq,” Mr. Agius told the Inquiry. “These matters were always known to A.W.B. to be in breach of the U.N. sanctions on Iraq.”
Mr. Agius repeatedly asked Mr. Rogers why no A.W.B. board minutes or financial reports spelt out the fees in the Iraq contracts and asked whether this was done deliberately. Mr. Rogers repeatedly answered “I cannot remember” or “I cannot recall.”
But Mr. Rogers confirmed that the first contracts containing the inflated transport fees – the ‘kickbacks’ – were discussed with Foreign Affairs officials in Canberra. He recalled that A.W.B. official Mark Emons and others “went to Canberra to talk to DFAT, and that’s about the only thing I can ever remember.”
Documents and witnesses uncovered by the Inquiry would clearly reveal that A.W.B. executives had misled the U.N.’s investigation into the Oil-for-Food scandal by suppressing documents.
Evidence had also emerged that officials from Austrade in Washington and the Australian U.N. mission in New York discussed with A.W.B. executives complaints by Canada’s wheat board that A.W.B. was paying ‘kickbacks’ in Iraq. The Australian Trade and Investment Commission, or Austrade, is the Australian Government’s trade, investment and education promotion agency. It is a statutory agency within the Foreign Affairs and Trade portfolio, with offices in overseas embassies and consulates, and representative arrangements in some other locations.
Mr. Agius also questioned Mr. Rogers on A.W.B.’s dealing with a company called Ronly. He produced a letter from an A.W.B. chartering manager, Michael Watson, to Ronly’s London office arranging for it to pay a fee directly to the Iraqi régime in violation of U.N. sanctions. In turn, A.W.B. agreed to pay Ronly US$300,000.
Mr. Rogers said that he was “very disappointed” by the letter but that he had never seen it before.
The Inquiry also raised fresh evidence about a deal between B.H.P. and A.W.B. over the sale of AU$ 5 million worth of wheat to Iraq on credit in 1995.
While B.H.P. was able to say that it was a ‘humanitarian gesture’, Mr. Agius indicated that the Inquiry would explore the deal because the credit was repaid to a B.H.P.-related company, Tigris Petroleum, through an inflated wheat contract between Iraq and A.W.B (M. Wilkinson, ‘Iraq scandal: heat shifts to Canberra’, The (Melbourne) Age, 17 January 2006).
Before the Inquiry, an A.W.B. spokesman in Melbourne, Peter McBride, said that the Wheat Board was “completely unaware of any corruption. Our contracts were completely under the terms provided by the UN.”
Mr. McBride said that the U.N. insisted that the Wheat Board’s contracts with Iraq include the use of a third party to provide “inland transport” – that is, trucks to get the wheat around Iraq.
Saddam’s Iraqi Grains Board provided the A.W.B. with the name of its “preferred company” and the A.W.B. used that company – a Jordanian trucking company – for all its contracts. Mr. McBride said that questions about the legitimacy of this company were “questions for the UN.”
The U.N. Security Council had named a three-person independent panel to investigate allegations that U.N. officials mishandled the Oil-for-Food programme, allowing Saddam to pocket billions of dollars illegally.
The allegation is that Saddam’s government used the programme to extract billions of dollars from companies which wanted to do business with Iraq, leaving his people short of food and medicines, while blaming the U.N. sanctions for those shortages.
One of Saddam’s schemes was to order vendors to inflate their prices by 10 per cent and ‘kickback’ the excess to his government.
One of the contracts which became available to Australian newspapers showed that, three months before the war, the A.W.B. signed a deal to provide 525,000 tonnes of wheat to Iraq for €280 (then A$455) a tonne.
U.S. wheat industry sources who examined the contract said that, in 2006, the price was about US$30 – equivalent to A$41 – a tonne higher than world wheat prices at the time.
Mr. McBride explained that the price “might [have] seem[ed]” high because it included the cost of paying a third party – the unnamed Jordanian trucking company – to transport the wheat to mills around Iraq.
Contracts which involved third parties were of particular interest to the Oil-for-food programme investigators, since an Iraqi Oil Ministry official, Faleh Khawaji, had told The New York Times that Iraq would make a deal with a supplier, then say: “Give us another 10 per cent.”
“The Western companies would say: “I can’t do it. I’ve got a board, how do I get around the auditors?” Mr. Khawaji said. “And somebody would tell them there are companies in Jordan willing to do this for you.”
Mr. McBride said that the A.W.B. had never agreed to ‘kickback’ money to Saddam’s régime, directly or indirectly. “We used a Jordanian trucking company to do that (transport wheat) on our behalf.” He said that he was “unaware of any relationship between them and the Saddam régime. I actually do not know what their relationship was. All we did was pay them a reasonable fee to transport the grain in Iraq.”
He said that the trucking company had “the approval of the UN.”
After Saddam was deposed, coalition forces examined outstanding Oil-for-Food contracts and asked many vendors to take 10 per cent off their prices.
Mr. McBride said that Australia had been asked to renegotiate some of its wheat contracts, “but they are commercial in confidence, so we don’t discuss (what happened to the) price.”
A.W.B. whistleblower Dominic Hogan, testified about A.W.B. corruption and that the Australian Government could have spotted the ‘kickbacks’ five years before simply by checking the price of wheat in any daily newspaper. The United States was charging US$140 a tonne, with freight bringing this up to US$170 a tonne – but Australia was receiving US$214 a tonne from the Iraqis (The (Melbourne) Age, 7 February 2006).
On 10 February 2006 on A.B.C. TV’s Asia Pacific Focus programme, Warren Reed – a former Australian Security and Intelligence Service, A.S.I.S. agent – and others were interviewed over the A.W.B. scandal (for the transcript of ‘Australian wheat exporter goes against the grain’ see: http://abcasiapacific.com/focus/).
Asked about the A.W.B. scandal, Prime Minister Howard’s fixed line would be: “I did not know. Mr. Downer [the Foreign Minister] did not know. Mr. Vaile [the Deputy PM and Trade Minister] did not know. And on the information that I have and based on the advice that I have received, I do not believe that anybody in the departments were told.” [Emphasis added]
However, when Warren Reed was asked whether it was possible that Australian ‘intelligence’ would not have known about the A.W.B. ‘kickbacks’ to Saddam Hussein, Reed replied: “Absolutely impossible … that they did not know. In fact, if you look at the core part of the governmental system in Canberra that has to do with our international survival, our role on the global stage, particularly trade-wise, Foreign Affairs, even eaves-dropping, the whole intelligence apparatus, that’s geared to knowing these things. There is no way, absolutely no way, those sorts of people didn’t know … So the Government did know. And I would defy the Prime Minister on oath to say he’d never heard anything about it, he had no knowledge at all that this could occur. If Mr. Downer [Foreign Minister], and Mr. Vaile [Deputy P.M. and Trade Minister] and our Prime Minister had not an inkling that this sort of thing was going on, then they should be shot at dawn. They are unfit to hold these positions. That’s the extent to which everybody would know about it.”
Warren Reed was further asked: “the Cole Inquiry has implicated the [Australian] Wheat Board … there has been talk of ‘kickbacks’ not only to Iraq but to Pakistan, to Indonesia, to Bangladesh… in your experience, 10 years out in the field, how widespread is the payment of kickbacks in the region?”
Warren Reed replied: “Oh, so widespread … I couldn’t think of one circumstance where they would not pay … It’s expected.”
While Australian politicians and media were concerned with the corruption aspects of the scandal – who did what, who knew what, who said what to whom – there had been very little concern expressed over the human cost of the potential diversion of hundreds of millions of dollars from humanitarian purposes in Iraq. Of course, Australian media and politicians would simply not report or acknowledge the horrendous civilian excess mortality in post-invasion Iraq.
Upper estimate of the human cost of Australian corruption in Iraq was 20,000 Iraqi infant deaths.
Using the widely-quoted Australian estimate of about US$225 million for the money diverted by Australians from the U.N. Oil-for-Food programme, one can estimate that the maximum amount of money diverted from medical expenditure would have been US$225 million/26.9 million Iraqis in 2003 = US$8.4 per capita.
Continued Wednesday – Our mate: Saddam Hussein al-Tikriti (part 3)
Previous instalment – Our mate: Saddam Hussein al-Tikriti (part 1)
Dr. Venturino Giorgio Venturini devoted some seventy years to study, practice, teach, write and administer law at different places in four continents. He may be reached at George.email@example.com.
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