SHANGHAI (Interfax-China) -- The state-owned oil trader Sinochem has been accused of "knowingly violating" the rules governing the United Nations Oil-For-Food Program by paying kickbacks, surcharges and service fees to the Iraqi government.
The Independent Inquiry Committee into the United Nations Oil-For-Food Program released its report on Thursday, and said that China was among the nations favored by the Saddam Hussein regime as part of its attempts to gain political influence on the UN Security Council, which had voted to impose sanctions on Iraq in 1990. If the trading of Sinochem's London subsidiary is included, China was the second largest recipient of Iraqi oil under the program, with total sales of $4.9 billion
The Oil-For-Food program was launched in 1996, allowing Iraq to sell as much oil as it wished as long as the proceeds were spent on humanitarian purposes via an escrow account supervised by the UN. However, the Iraqi government was made responsible for distributing oil allocations, and it used this concession to earn illicit funds and gain political influence.
Much of the allocations were granted to permanent Security Council members Russia, France and China in the early phases of the program. While payments for the oil were then paid into an escrow account run by the UN, kickbacks and surcharges were frequently paid to the Iraqi government by the companies and individual traders involved.
Sinochem, says the report, executed a total of 26 humanitarian contracts with a total value of $20.6 million, supplying Chinese-made pipes and accessories to Iraq. Documents indicate that Sinochem promised to pay $364,000 (EUR 300,000) to Iraq's North Oil Company as part of a $4 million (EUR 3.3 million) contract to supply valves. The company also paid a total of $669,107 to the Iraqi government in the form of after-sales service fees and an undetermined amount in the form of inland transportation fees.
Meanwhile, Sinochem's London-based subsidiary, Sinochem International Oil London Co. Ltd., purchased 114.1 million barrels of Iraqi oil, paying nearly $2.2 billion into the UN escrow account. However, records from Iraq's State Oil Marketing Organization show that the subsidiary paid an additional $5.1 million in surcharges to the Iraqi government.
The Committee says that Sinochem has not been cooperating with the inquiry.
The vice-president of the Sinochem International Corporation, Pan Yuexin, told the Committee in a letter that the company's chief representative in Iraq, Fu Zhifeng, had already died, that its traders involved in the Oil-For-Food Program had already left the company, and that "due to the Iraq War, we have lost all the relevant files and records relating to the sales, which had been stored in our Baghdad representative office."
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