Wednesday, May 21, 2003

It was all about the money.

The United Nations calls it the oil-for-food program. The commander of U.S. forces in Iraq dubbed it the oil-for-palaces program. For some Russians, the U.N. program to aid the Iraqi people has been a once-in-a-lifetime business opportunity, a bonanza.
With a U.N. vote on a postwar Iraq resolution expected Thursday, the program appears certain to be shut down. That would close another chapter in the tight relationship between Russia and Saddam Hussein's Iraq - two countries where analysts said privileged groups benefited from the arrangement that allowed Baghdad to sell oil and buy food and other imports despite U.N. economic sanctions imposed after its 1990 invasion of Kuwait.

Russian companies got preferential terms for contracts to supply Iraq with products from rice to refinery equipment. They often received premium prices for goods that would have been far harder to sell if not for the political quid-pro-quo: Moscow's support in the U.N. Security Council, where Russia struggled for years to get the sanctions lifted.

"All these contracts were concluded mainly for political motives," Deputy Foreign Minister Yuri Fedotov acknowledged last week. "Iraqis perhaps would have been happy to acquire - for a lower price - more comfortable Italian tractors, with air conditioners practically, but they signed the contract with us."

Jim Placke, a senior associate with Cambridge Energy Research Associates in Washington, said that Iraqis he had spoken to had said, "'Sometimes we get a bunch of junk, and we're paying too much for it, but that's what the regime wants to do."'

From the outset of the oil-for-food program in 1996 through May 2000, Russia and France each received contracts for deliveries to Iraq worth about US$2 billion, more than any other country, according to a report released in September by the nonprofit Coalition for International Justice.

Russia also played a leading role in the other side of the program: Over five years of Iraqi oil exports, the bulk of the contracts went to Russian firms, the report said. Placke said that the Iraqis at first dealt with a broad range of countries but later narrowed the field.

"Essentially what they were doing was seeking leverage and currying favor and advantage with permanent members of the Security Council, principally Russia and France," Placke said.

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