U.N. Oil-for-Food Program Chief Got Lucrative Oil Rights, Iraq Says
The Wall Street Journal
6 October 2004
Page A1
By Steve Stecklow
A confidential Iraqi government report alleges that the head of the United
Nation’s oil-for-food program received rights from Saddam Hussein’s regime
to acquire 13.3 million barrels of oil over a five-year period. The rights
were valued at an estimated $1.2 million, according to the report.
The assertion that Benon Sevan received oil allocations from Mr. Hussein’s
government surfaced in January. That is when a “Mr. Sifan” appeared on a
long list of alleged oil-allocation recipients that was leaked to a Baghdad
newspaper. The list indicated the individual had received an allocation of
one million barrels.
But the lengthy Iraqi report, dated Feb. 19 and prepared by Iraq’s State
Oil Marketing Organization, or SOMO, goes much further, identifying “Mr.
Banun Sifan” as “the former director of the Iraq Program in the United
Nations” and providing far more detail about the alleged oil allocations.
The spelling discrepancy apparently is due to the way some names are
transliterated between Arabic into English.
Mr. Sevan ran the U.N. program, under which Iraq was allowed to sell oil
under U.N. auspices and use most of the revenue to purchase humanitarian
aid, from 1997 until it ended after the U.S. invasion last year. Under the
program, Iraq was given a lot of leeway in structuring oil sales, and Mr.
Hussein’s regime at times awarded oil allocations — the SOMO report terms
them “quotas” — to favored individuals, political parties and other
organizations. The allocations gave the holders the right to buy specific
quantities of Iraqi oil. Recipients were free to sell these rights to
oil traders.
The report estimates that “the financial profit earned” from Mr. Sevan’s
alleged allocations could have totaled $1.2 million. It offers no evidence
that Mr. Sevan received any money. But it says that more than half of the
oil allegedly allocated to Mr. Sevan was taken, all of it by a company
registered in Panama.
The SOMO report, which has been marked classified by the U.S. State
Department, was reviewed by The Wall Street Journal.
Mr. Sevan didn’t respond to a phone message and an e-mail seeking comment.
He previously denied any wrongdoing.
The new allegations about Mr. Sevan come amid multiple probes of alleged
corruption in the oil-for-food program and are perhaps the most serious
charges leveled to date. At least five U.S. House and Senate congressional
committees are investigating the program, as well as a U.S. federal
criminal probe. The Central Intelligence Agency is expected to release a
report today listing hundreds of individuals and companies that allegedly
received oil allocations from the Hussein regime.
Investigators already have identified numerous ways Mr. Hussein’s regime
manipulated the program, including receiving hundreds of millions of
dollars in cash kickbacks from oil sales and humanitarian contracts.
Investigators also are probing the U.N.’s monitoring of the program,
including the awarding of a lucrative inspection contract to a company that
employed the son of Secretary-General Kofi Annan. An internal U.N. review
of the awarding of that contract, which found no conflict of interest,
lasted less than a day.
A U.N. spokesman said that an independent panel appointed by the U.N. and
headed by Paul Volcker, former chairman of the Federal Reserve, has been
“tasked with looking into, among other issues, allegations that Benon Sevan
may have personally profited from oil purchases while he was running the
oil-for-food program. Mr. Sevan is fully cooperating with this ongoing
inquiry, and until it is completed, and made public, we will not comment
further.”
Mr. Sevan, who currently holds no official title, remains with the U.N. in
New York on a $1-a-year salary to provide information as needed to the
Volcker inquiry, according to the U.N. spokesman.
Shamkhi Faraj, an Iraqi oil official who wrote the SOMO report in his
former job as SOMO’s director-general, said he is “absolutely confident”
that the report’s findings are based on authentic oil records, though he
declined to comment specifically on Mr. Sevan. “There is no doubt about it
whatsoever,” said Mr. Faraj, who still works at Iraq’s oil ministry. “It is
records, it is actual transactions.”
SOMO, Iraq’s marketing arm, has been the international face of the Iraqi
oil industry for years, and has continued that role in the post-Saddam era.
The report was intended to offer concrete evidence on the former regime’s
alleged manipulation of the oil-for-food program. Investigators have been
relying on SOMO documents in their various probes.
The SOMO report lists nine separate oil allocations that it says Mr. Sevan
received between 1998 and 2003, totaling 13.3 million barrels. Of the nine,
the report says, five were executed, with a total of 7.291 million barrels
actually loaded onto ships.
All 7.291 million barrels were taken by a company called African Middle
East Petroleum Co., the report states. The owner of the company has been
identified in South African government documents as Fakhry Abdelnour, a
Geneva-based oil trader. Reached by telephone yesterday, Mr. Abdelnour
declined to comment.
The SOMO report’s introduction says that between July 1997 and February
2000, the Iraqi regime gave away oil allocations to scores of people,
including politically connected individuals and media figures, who
“cooperated with it in one way or another.” The introduction makes no
specific reference to Mr. Sevan. His name appears in a lengthy list of oil
contracts and in a section on “estimates of the financial profits earned by
the beneficiaries.” Each time Mr. Sevan’s name appears on the list of
contracts, the letters “UN,” in parentheses, appear next to it.
A longtime U.N. employee, Mr. Sevan, 66 years old and a native of Cyprus,
first joined the U.N. in its department of public information in 1965.
Among his many assignments, in 1988 he was posted in Afghanistan, where he
monitored the withdrawal of Soviet troops. He also has served as a special
envoy for issues related to missing persons in the Middle East.
The report states that Mr. Sevan allegedly received his first oil
allocation of 1.8 million barrels during the oil-for-food program’s fourth
phase, which lasted from May 30, 1998, to Nov. 25, 1998. According to the
report, African Middle East Petroleum used the allocation to take the oil,
as well as an extra 36,000 barrels.
Mr. Sevan allegedly provided the Iraqi regime with some kind of
introduction to African Middle East Petroleum, according to a letter that
was found in SOMO records, says one person who is familiar with the
document. The letter, dated Aug. 10, 1998, and addressed to Iraq’s then-oil
minister, states that African Middle East Petroleum had asked to buy Iraqi
oil and that “Mr. Muwafaq Ayoub of the Iraqi Mission in New York informed
us by telephone that the abovementioned company is the company that Mr.
Sevan cited to you during his last trip to Baghdad.”
SOMO records indicate that African Middle East Petroleum received the oil
from Mr. Sevan’s first alleged oil allocation in November 1998, according
to a person familiar with the documents. Mr. Ayoub, who now works in
Baghdad, declined to comment. The former Iraqi oil minister, General Amer
Mohammed Rasheed, was captured last year by coalition forces in Iraq.
Asset Allocation
Iraq oil allocations allegedly given to Benon Sevan, former head of the
United Nation’s Oil-for-Food Program, and amount loaded onto ships, or
lifted, by African Middle East Petroleum Co.
— BARRELS IN MILLIONS —
TIME PERIOD ALLOCATED LIFTED
May 30, ’98-Nov. 25, ’98 1.8 1.84
Nov. 26, ’98-May 24, ’99 1.0 none
May 25, ’99-Dec. 11, ’99 2.0 2.01
Dec. 12, ’99-June 8, ’00 1.5 1.49
June 9, ’00-Dec. 5, ’00 1.5 0.95
July 4, ’01-Nov. 30, ’01 1.0 1.00
Dec. 1, ’01-May 29, ’02 1.5 none
May 30, ’02-Dec. 4, ’02 1.5 none
Dec. 5, ’02-June 3, ’03 1.5 none
Total 13.3 7.29
Source: Iraqi State Oil Marketing Organization report