The Bayoil Indictment – the Real Scandal

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To: Paul Volcker
From: Jude Wanniski
Re: What crimes did it commit?

As if you don’t have enough trouble in preparing your final report
to U.N. General Secretary Kofi Annan on the so-called “Oil-for-Food
Scandal,” now the U.S. Justice Department has jumped the gun and
indicted Houston oilman David Bay Chalmers, Jr., and his Bayoil
U.S.A. company. For what? For paying “illegal kickbacks” to Saddam
Hussein in order to get permission from Saddam to export Iraqi oil
in the oil-for-food program. Clearly what is going on here, Paul,
is the White House has encouraged the U.S. Attorney General to get
out of the gate before you do. The idea is to establish in the public
mind that the United Nations presided over a corrupt mechanism that
lined the pockets of Saddam and his cronies in the American oil
industry at the expense of the poor people of Iraq. And Kofi should
hit the road.

Our press corps of course does not help by writing story-after-story
that funds paid to the Iraqi government, roughly 2 1/2% of that
charged to companies like Bayoil, were “kickbacks” and not legitimate
“fees.” If they didn’t pay the fees, they wouldn’t have gotten the
oil. I’ve been waiting for your final report to be published and
make it clear that Iraq not only had every legal right to charge
fees for the taking of the oil, it charged the fees to every company
in the world that was engaged in the program. After all, Paul, do
not forget that the oil belonged to the government of Iraq in custody
for its people.
That’s the way it works throughout the world.

In addition, every last barrel that came out of its oilfields could
not have been lifted without the cooperation and assistance of the
Iraqi government that delivered it to the Iraqi pipelines that,
in turn, delivered it to the companies that held permits. I’m surprised
Saddam only asked 2 1/2%.

Indeed, the neo-con team is brazenly acting as if Saddam did something
wrong in selling Iraqi oil in violation of the United Nations embargo
that we insisted be kept on for a dozen years after the 1991 Gulf
War. The U.N. resolution did not prohibit Baghdad’s sale of oil!!!
It prohibited its purchase by U.N. members. When it came to the
problems associated with the embargo that affected Jordan and Turkey,
both of which depend on Iraqi oil, by now every member of Congress
knows that both the Clinton and Bush administrations turned a blind
eye to the so-called “illegal sales,” or they would have had to
come up with the oil from other sources.

The record is also clear and getting more embarrassing with time,
that our government KNEW in 1991 that Iraq had abandoned its programs
to develop weapons of mass destruction. The UNSCOM inspectors quickly
made those discoveries and the events since have confirmed Iraq
fully complied with that 1991 U.N. resolution before the year was
out. But when the other members of the U.N. Security Council urged
a lifting of the embargo, we insisted they remain in place until
the Baghdad regime of Saddam was REPLACED by one friendly to the
U.S. (and to Israel).

All this brings further shame on our government, now using every
trick in the book to cover up the fact that it has waged an “illegal”
war, to use Kofi Annan’s term. This, after spending a dozen years
starving the people of Iraq by isolating it in the world through
our clout at the Security Council. By U.N. estimates, in those dozen
years 1.5 million Iraqi civilians, including 500,000 children, died
as a result of the embargo. Our former Secretary of State Madeleine
Albright famously told Leslie Stahl on “60 Minutes” that this loss
of life was “worth it” to keep Saddam bottled up. In the same interview,
she let the cat out of the bag that the Clinton administration had
no intention of lifting the sanctions as long as Saddam was in power.

If you think about it this way, Paul, you will have to acknowledge
that with what we know now, there should never have been an oil-for-food
program. Once it had been determined that Iraq was in compliance
they could have resumed oil sales, using the funds to import the
food and chemicals needed to repair the water and sanitation facilities
bombed out in the Gulf War. As I wrote earlier this year in “Who’s
behind the oil-for-food scandal”

rough reckoning, I find that if the sanctions had been lifted in
1991 (when they should have been lifted), Iraq would have earned
enormous amounts of money from the sale of their oil. At an average
of $10 a barrel of oil (bbl) over 14 years, they would have collected
$126 billion.

At a more reasonable average over the period of $15 to $20, the
Iraqi government would have been able to pay all its creditors and
at the same time enable the Iraqi people to return to the high living
standards they enjoyed before the Iran-Iraq war (during which, I
repeat, the US supported Iraq).
You should not
be surprised that the lawyer for Houston oilman Chalmers is quoted
as saying he will “vigorously dispute” the criminal charges. The indictment
is laughable.

Also note that Chalmers had been doing business with Iraq going back
to 1980, was well known to the government, and would certainly be
given a spot near the front of the line when Saddam’s oil ministry
began handing out the tickets for oil sales. Our newspapers, including
the NYTimes, continue to report as if the Iraqi oil belongs
to the United Nations and companies friendly to Baghdad should have
been shut out.

To tell you the truth, Paul, it’s hard for me to see how you will
wiggle out of the spot this latest move by the administration has
put you. The indictment of Bayoil by the New York feds is of course
being celebrated by The Wall Street Journal as proof, PROOF,
that Kofi Annan presided over a corrupt oil-for-food program and should
step down! If your report says otherwise, the neo-cons will have no
choice but to attack you for being in cahoots with Kofi. It would
be nice if you could put on the record your interviews with Saddam’s
oil ministers, who could clear all this up I’m sure. But like Saddam,
they are being held under lock and key by our puppet government in
Baghdad, still denied lawyers after almost two years in detention.
Our government did permit you and your team to interview the ministers,
didn’t it? There is a scandal, but I’m afraid it isn’t in Baghdad.
Good luck.

19, 2005

Wanniski [send him mail]
runs the financial/political advisory service

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