[b]Oil-for-Terror? There appears to be much worse news to uncover in the Oil-for-Food scandal. [/b]

April 18, 2004, 11:36 p.m.

By Claudia Rosett

Beyond the billions in graft, smuggling, and lavish living for Saddam Hussein that were the hallmarks of the United Nations Oil-for-Food program in Iraq, there is one more penny yet to drop.

It's time to talk about Oil-for-Terror.

Especially with the U.N.'s own investigation into Oil-for-Food now taking shape, and more congressional hearings in the works, it is high time to focus on the likelihood that Saddam may have fiddled Oil-for-Food contracts not only to pad his own pockets, buy pals, and acquire clandestine arms but also to fund terrorist groups, quite possibly including al Qaeda.

There are at least two links documented already. Both involve oil buyers picked by Saddam and approved by the U.N. One was a firm with close ties to a Liechtenstein trust that has since been designated by the U.N. itself as "belonging to or affiliated with Al Qaeda." The other was a Swiss-registered subsidiary of a Saudi oil firm that had close dealings with the Taliban during Osama bin Laden's 1990's heyday in Afghanistan.

These cases were reported in a carefully researched story published last June by Marc Perelman of the New York-based Forward, relying not only on interviews, but on corporate-registry documents and U.S. and U.N. terror-watch lists. It was an important dispatch but sank quickly from sight. At that stage, the U.N. was still busy praising its own $100-billion-plus Oil-for-Food program, even while trying quietly to strip out the huge graft overlay from the remaining $10 billion or so in contracts suddenly slated for handover to the U.S.-led Coalition Provisional Authority (CPA). That was shortly before the records kept in Baghdad by Saddam began surfacing in such damning profusion that Secretary-General Kofi Annan was finally forced last month to stop stonewalling and agree to an independent investigation though just how independent remains to be seen.

As it now appears, Oil-for-Food pretty much evolved into a BCCI with a U.N. label. The stated aim of the program, which ran from 1996-2003, was to reduce the squeeze of sanctions on ordinary Iraqis by allowing Saddam to sell oil strictly to buy food and other relief supplies. As Oil-for-Food worked in practice, however, the program gave Saddam rich opportunity not only to pad his own pockets, but to fund almost anything and anyone else he chose, while the U.N. assured the world that all was well. (For the full saga, see my article in the May issue of Commentary, "The Oil-for-Food Scam: What Did Kofi Annan Know and When Did He Know It?").

For a sample of the latitude enjoyed by Saddam, there's Treasury's announcement last week that the U.S., in its latest round of efforts to recover Saddam's loot, is asking U.N. member states to freeze the assets of a worldwide group of eight front companies and five individuals that were "procuring weapons, skimming funds, operating for the Iraqi Intelligence Service, and doing business in support of the fallen Saddam Hussein regime." The list includes a Dubai-based firm, Al Wasel & Babel General Trading, a major contractor under the Oil-for-Food program that turned out to be a front company set up by Saddam's regime specifically to sell goods (and procure arms) via the program right under the U.N.'s approving eye. Indeed, Al Wasel & Babel's website boasts that the company was set up in 1999 especially to "cater to the needs of Iraq Government under 'Oil for Food Program.' "

HOW SADDAM GOT HIS WAY In this context, which suggests just how easily money might also have been passed right along to terrorists, Perelman's tale of terrorist links deserves a reprise. We will get to that below. The details are complex, which in matters of terrorist financing tends to be part of the point. Complications provide cover. So before we dive into a welter of names and links, let's take a look at how Oil-for-Food was configured and run by the U.N. in ways that left the program wide open not only to the abuses and debaucheries by now well publicized, but also to the funneling of money to terrorists if Saddam so chose.

And though this avenue remains to be explored, it is at least worth noting that the explosive growth of Oil-for-Food from a limited program for Iraqi relief introduced in 1996 to a kickback-wracked fiesta of fraud and money-laundering by the late 1990s and beyond coincided neatly with the period in which al Qaeda really took off. It was in 1998 that Oil-for-Food began to expand and more fully accommodate Saddam's scams. If allegations detailed in a Wall Street Journal story on March 11 prove correct, 1998 was also the year that Saddam may have begun sending oil to a Panamanian front company linked to the head of the program, Benon Sevan. And it was in 1998 that Osama bin Laden issued his fatwa, specifically denouncing U.S. intervention in Iraq and urging Muslims to "Kill the Americans and plunder their money wherever and whenever they can find it."

To be sure, there is no evidence of a causal connection. But there is certainly room to wonder whether Saddam, a master of manipulation, on record as sharing bin Laden's sentiments at least in regard to U.S. involvement in Iraq, would not have been tempted to involve himself in the terrorist boom of the next few years. In principle he was still under sanctions, but Oil-for-Food gave him loopholes through which billions of dollars could pass.

As Oil-for-Food worked in practice, there were two glaring flaws that lent themselves to manipulation by Saddam. One was the U.N. decision to allow Saddam to choose his own buyers of oil and suppliers of goods an arrangement that Annan himself helped set up during negotiations in Baghdad in the mid-1990s, shortly before he was promoted to Secretary-General. The other problem was the U.N.'s policy of treating Saddam's deals as highly confidential, putting deference to Saddam's privacy above the public's right to know. Even the Iraqi people were denied access to the most basic information about the deals that were in theory being done in their name. The identities of the contractors, the amounts paid, the quantity and quality of goods, the sums, fees, interest, and precise transactions involved in the BNP Paribas bank accounts all were kept confidential between Saddam and the U.N.

With Saddam allowed to assemble a secret roster of favorite business partners, the only hope of preserving any integrity under Oil-for-Food was that the U.N. would ferociously monitor every deal, and veto anything remotely suspect. Instead, the Security Council looked for weapons-related goods; the Secretariat looked for ways to expand the program (while collecting its three-percent commission on Saddam's oil sales); and Saddam looked for and found ways to pervert the program.

To grasp just how easily the U.N. let Saddam turn Oil-for-Food to his own ends, it helps to see his lists of contractors, which the U.N. kept confidential. Luckily, some lists have leaked, and in paging through the wonderland of Saddam's U.N.-approved clientele, including many hundreds of oil buyers and goods suppliers, what one finds is a vast web of business partners that had the U.N. followed any reasonable policy of disclosure should have set off major alarms from beginning to end of the program. Why, for instance, was Saddam allowed to peddle oil (especially under-priced oil yielding fat profits) to clusters of what were clearly middlemen in such financial hideouts as Cyprus, Liechtenstein, and Panama? Was it wise to let him kick off the program by including among the first 50 or so oil buyers a full dozen based in Switzerland? Did nobody at the U.N. wonder about his choice of business partners such as a holding company in the Seychelles; the Burmese state lumber enterprise; and the Center for Joint Projects at the executive committee of the Belarus-Russia Union?

On the suppliers' list, the entries are no less intriguing. To take just one typical example: On the vague and generic lists provided by the U.N. to the public, you can see that Saddam bought both milk and oil-industry equipment from Russia. Once you see the in-house spreadsheet, however, what emerges is that Saddam bought not only oil equipment, but more than $5 million worth of milk from a Russian state oil company, Zarubezhneft. What look like diverse suppliers in various countries in some cases track back to fronts elsewhere, or to parent companies that in the graft-rich environment of Oil-for-Food clearly had enough of an inside track with Saddam to garner hundreds of millions worth of business hidden at least to some extent from both their competitors and the wider public, which was asked to trust the U.N.

In other words, Saddam did pretty much what he wanted, and the U.N. role seems to have consisted largely of occupying one more slot and not a terribly vigilant one on his patronage payroll.

AIDING AL QAEDA? Which brings us to back to terrorist ties, and Perelman's story of June 20, 2003, for which the reporting checks out. In brief (hang on for the ride): One link ran from a U.N.-approved buyer of Saddam's oil, Galp International Trading Corp., involved near the very start of the program, to a shell company called ASAT Trust in Liechtenstein, linked to a bank in the Bahamas, Bank Al Taqwa. Both ASAT Trust and Bank Al Taqwa were designated on the U.N.'s own terror-watch list, shortly after 9/11, as entities "belonging to or affiliated with Al Qaeda." This Liechtenstein trust and Bahamian bank were linked to two closely connected terrorist financiers, Youssef Nada and Idris Ahmed Nasreddin both of whom were described in 2002 by Treasury as "part of an extensive financial network providing support to Al Qaeda and other terrorist related organizations," and both of whom appear on the U.N.'s list of individuals belonging to or affiliated with al Qaeda.

The other tie between Oil-for-Food and al Qaeda, noted by Perelman, ran through another of Saddam's handpicked, Oil-for-Food oil buyers, Swiss-based Delta Services which bought oil from Saddam in 2000 and 2001, at the height of Saddam's scam for grafting money out of Oil-for-Food by way of under-priced oil contracts. Now shut down, Delta Services was a subsidiary of a Saudi Arabian firm, Delta Oil, which had close ties to the Taliban during Osama bin Laden's heyday in Afghanistan in the late 1990s. In discussions of graft via Oil-for-Food, it has been assumed that the windfall profits were largely kicked back to Saddam, or perhaps used to sway prominent politicians and buy commercial lobbying clout. But that begs further inquiry. There was every opportunity here for Saddam not solely to pocket the plunder, but to send it along to whomever he chose once he had tapped into the appropriate networks.

Are there other terrorist links? Did Saddam actually send money for terrorist uses through those named by the Forward? Given the more than $100 billion that coursed through Oil-for-Food, it would seem a very good idea to at least try to find out. And while there has been great interest so far in the stunning sums of money involved in this fraud, there has been rather less focus on the potential terrorist connections. While Treasury has been ransacking the planet for Saddam's plunder, there is, as far as I have been able to discover, no investigation so far in motion, or even in the making, focused specifically on terrorist ties in those U.N. lists of Saddam's favored partners.

Indeed, the whereabouts of the full U.N. Oil-for-Food records themselves remain, to say the least, confusing. By some official U.N. accounts, they were all turned over to the Coalition Provisional Authority; by others they were not. A U.N. source explained to me last week that some of the records might be in boxes somewhere on Long Island; yet another says they were sent over to the U.S. Mission to the U.N. Especially crucial, one might suppose, would be the bank records, which should show into which accounts, and where, the Oil-for-Food funds were paid. But what is clear is that no one has so far sat down with access to the full records and begun piecing together the labyrinth of Saddam's financing with an eye, specifically, to potential terrorist ties.

If there is a silver lining to all this, it is that those contract lists and bank records could be a treasure trove of information an insider tour of what Saddam's regime knew about the dark side of global finance. There are plenty of signs that the secret U.N. lists became, in effect, Saddam's little black book (papered over with a blue U.N. label). Though perhaps "little" is not the correct word. The labyrinth was vast. The wisest move by the U.N., the U.S., or any other authority with full access to these records, would be to make them fully public thus recruiting help from observers worldwide, not least the media, in digging through the hazardous waste left by Oil-for-Food. The issue is not simply how much Saddam pilfered, or even whether he bought up half the governments of Russia and France but whether, under the U.N. charade of supervision, he availed himself of the huge opportunities to fund carnage under the cover of U.N. sanctions and humanitarian relief. We are way overdue to pick up that trail.