US charged with aiding illegal Iraq oil exports under UN program
New York (Platts)--17May2005
In a scathing new report on the role of the US government in illicit oil shipments by Iraq under the UN's oil-for-food program, Senate Democrats Monday charged that the government facilitated the shipment of about 7.7-mil bbl of crude oil from Iraq's Khor al-Amaya oil port outside the UN program, possibly escorting some of the seven oil tankers through the Persian Gulf in direct contravention of the policing effort meant to thwart such shipments. The report was prepared by the minority staff of the Senate's Permanent Subcommittee on Investigations, which has been investigating the scandal-plagued former UN program. In addition to the latest revelations on the tanker shipments, which have been the subject of speculation since they were made on the eve of the US invasion of Iraq in 2003, the staff report also provided new details on the role of US-based trader Bayoil in Iraq's illegal surcharges effort. According to the report, the 7.7-mil bbl of crude lifted from Khor al-Amaya on the eve of the war was sold to a company controlled by the Shaheen Business Investment Group, which was fronting for the Jordanian government. The Shaheen group also has a license to build and operate a 60,000 b/d refinery in Jordan. Citing a committee staff interview with an unnamed interviewee familiar with the crude sale, the report said that Iraq sold the oil delivered through Khor al-Amaya "for a price between $7 and $9/bbl". The sale was approved by senior Iraqi officials. The Democratic staff report noted that at the time of the deal, benchmark WTI crude oil was selling at around $30/bbl, while crude grades comparable to Iraq's Basrah Light, which was lifted from Khor al-Amaya, were selling at around $23/bbl. Khor al-Amaya was at the time not on the UN's list of approved export sites for Iraqi crudes. Less than 1-mil bbl of the total 7.7-mil bbl sold to Jordan appears to have made it there. The report was unable to determine where the oil eventually wound up. The report said the charterer and ship owner were each concerned enough about the legality of the shipments to notify the US, but that they were told the US would not intervene. Senator Carl Levin, the ranking Democrat on the Investigations Subcommittee, told reporters in a phone briefing that, "we explicitly knew that ships were being used to deliver" the oil. "Those ships were allowed to pass through our controlled screening...We may have even escorted some of those ships." A staffer told reporters that State and Defense have thus far failed to allow their officials to be questioned by the Subcommittee on those assurances. A staff source also said that while some have sought to link the Khor shipments to the oil needs of Jordan's economy on the eve of the war, the country had already secured sufficient oil supplies, including from Saudi Arabia, and that it even exported around 1-mil bbl of crude during that time. The report also provided further details regarding the alleged illegal surcharges paid to Iraq by US oil trading company Bayoil, whose owner David Bay Chalmers Jr has previously been indicted in the US in connection with that kickback scheme. The minority staff report, using both SOMO and Bayoil documents, calculated that during the period of Iraq's illegal surcharge effort, Bayoil paid "either directly or indirectly, illegal surcharges on Iraqi oil purchases of at least $37-mil". It said that during that period, the minority staff report also documented a wide range of US refiners who were soaking up the Iraqi oil from Bayoil, but noted that it had found no evidence that those refiners had been complicit in the surcharge scheme.
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