• 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 Wanniski.com.

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