The Bayoil Indictment -- the Real Scandal Jude Wanniski April 17, 2005

Memo 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 Hussen 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 by 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":

By 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.