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Iraqi Oil Smuggling

Regime Finance and Procurement - Annex F

 

Captured documents recovered shortly after OIF indicate that between 1992 and 2003 Iraq exported crude oil and other oil products to many countries or their nationals, who wittingly breached United Nations sanctions. UNSCR 661 restricted all member states from importing any goods, including oil and its derivatives, originating from Iraq.

 

Case Study

The captured documents listed below indicate how Iraq arranged the illicit transshipment of oil with buyers by reference to signed contracts, letters, check payments and telex messages. This study includes summaries of contracts and letters exchanged between companies, banks and individuals in various countries including Iraq, Iran, Cyprus, France, Slovakia and the UAE. Additionally, these documents list some of the foreign companies and agents who were involved in the smuggling activities.

  • Some of the Iraqi refineries were still operational after Desert Storm, and in spite of UN sanctions, continued to produce for export tons of gas oil that was primarily used for firing electrical power plants.

Smugglers, using small oil transporters similar to the one in the picture in Figure19, bribed RG naval units on a regular basis in order to gain free passage through Iranian waters. To avoid Maritime Interdiction Force (MIF) patrols, these vessels would sail to the southern end of the Gulf and dart across the narrow straights from Iranian waters to UAE territory. In the majority of these cases, the vessels would then transfer their cargos of gas oil or fuel oil onto larger tankers; it would then be transported to market. This money making scheme benefited the smugglers, Iraqis, Iranians, and oil recipients alike.

The Al-Basha’ir Company wasthe largest front company created by the MIC in 1991. The company’s name has been discovered on hundreds of contracts for weapons and dual-use materials, as well as many legitimate day-to-day goods and supplies.In addition to dealing with oil, this company traded in items such as construction materials, foodstuffs, and power generators to cover its real activity, which was coordinating with neighboring countries to facilitate the purchase of illicit military equipment.

  • A former employee of more than 15 years of the IIS, Munir Al-Qubaysi, headed Al-Basha’ir. Because of the IIS connections, relations between Al-Basha’ir and the IIS were especially close. In addition to those ties with the IIS, the operation of the company was handled closely by the MIC.

The last chairman of Al-Bashair’s board of Directors was the head of the MIC’s Administration and Finance Directorate, Raja Hasan Ali Al-Khazraji.

Information from contracts found and data derived from the records of the SOMO indicate that the Al-Basha’ir Company, in addition to being the largest front company, was also a major broker in Iraqi oil smuggling.

The Jordanian Al-Basha’ir Company, the Jordanian branch of Iraq’s most important military procurement front company, signed contracts for the export of oil products from Iraq, according to SOMO records (see Figure 20). These records indicate that Al-Basha’ir signed 198 contracts from November 1999 through March 2003. We do not know if contracts were signed before this date. The contracts were for fuel oil, usually sold at $30 per ton, and gas oil, usually priced at $80 per ton. Almost all were for export by ship through the Arabian Gulf, although the destination of two contracts was listed as “North,” which usually means Turkey.

  • The value of the contracts totaled $15.4 million. This is the amount to be paid to SOMO. We do not have information about the amount of money Al-Basha’ir earned from the trade.

The following inset is a translation of a contract, signed 2 June 1992, between Al-Basha’ir Trading Company and Al Walid Company for Export and Import. The contract states that Al Bashir agrees to sell oil to Al Walid, who was to transport the oil by truck to the Turkish border. Although a valid contract during the duration of the UN sanctions on Iraq, it was to be reconsidered if the sanctions were lifted. The contact was scheduled to permit the shipment of approximately 132,000 US gallons per day (plus or minus 10 percent) and this figure could increase to around 198,000 US gallons per day, depending upon available supplies. The total quantity to be sold was approximately 14.5 million US gallons (plus or minus 10 percent) within a 90-day period, as from 15 June 1992 and might be renewed dependant upon both parties agreement. Monies were to be paid into an account at the CBI.

 


ISG Translation of an Oil Sale Contract signed June 1992

First Party:     Al-Bashair Trading Company Limited
Address / Baghdad / Al-’Adl District /Area 645 /Lane 8 /House 39
Telephone #: 8852379
Second Party:     Al-Walid Importing & Exporting Company Limited
Address / Baghdad / Jamilah District /Al-Talibiyyah /Safi-al-Din Street
P. O. Box 5223


In accordance with the second party offer and approved by the first party, it was agreed that the second party would buy the Iraqi gas oil products in order to export it out of Iraq by land through Turkey, according to the following conditions:

  1. Name of the Product: Iraqi gas oil
  2. Quantity:
    A) Approximately 132,000 US gallons per day plus or minus 10 percent. This quantity increased according to the availability of the product to 198,000 US gallons per day.
     
    B) The total agreed quantity was over 14.5 million US gallons plus or minus 10 percent
  3. Quality: The guaranteed specifications of the product are in accordance with the local marketing specifications in Iraq.
  4. Contract time period & implementation date: The contract is valid for 90 days starting on 15 June 1992, which is considered the starting date for carrying out the contract. On the condition of legalizing the contract one week from the contract’s signing date, the contract can be renewed to an extra time period according to the approval of the two parties.
  5. Freighting:
    1. A) Freighting will be by the foreign tank trucks that enter Iraq from the northern zone and are specified by the purchaser who has to inform the seller about them as soon as they enter Iraq.

       

      B) Freighting site is Hamam Al-’Alil store in Ninawa governorate or any other suitable site agreed by both parties.

       

      C) Freighting should be for the full capacity of the tank truck (tanker).

       

      Also safety & security conditions are in store for the capacity of the other tankers in case of emergency, except for the main fuel tanker truck.
  6. Final destination:  
    1. Turkey, through Iraqi borders.
  7. Price:
    1. A) 4 American Cents per liter freighted on the tank truck in the freighting store.

       

      B) The aforementioned price is fixed for freighting all the mentioned quantity in clause 2 of the contract, in accordance with the mentioned freighting procedures in above-mentioned clause 5.
  8. Payment:
    1. A) Purchaser has to pay for the freighted product every ten days in cash in US dollars to the bank account of the company (first party) in the Central Bank of Iraq or any other bank account the first party chooses, in accordance with the commercial list issued by the first party.

       

      B) Second party committed to pay the commercial list for the freighted quantities every ten days, within four days from date of issue, unlike the first party which has authority to stop freighting and/or apply delay interests on the second party in accordance to the ruling bank rate.
  9. Contract implementation guarantee: The second party has to offer bank guarantee of the sum of 300,000 Iraqi Dinars for the benefit of the first party in order to guarantee the payments and implementation.
  10. Implementation conditions:
    1. A) The contract valid only during the economic siege of Iraq only, hence the contract's clauses will be reviewed when the economic siege circumstances end.

      B) The first party will not bear any liabilities or responsibilities or expenses for the sake of transporting the product out of Iraq by the second party.
  11. The first party has the right to cancel the contract in case of breaking any condition by the second party without requiring notice or court judgment.
  12. Other conditions: Freighting executed in accordance to the general freighting conditions, operational instructions attached to the contract which are considered as an integral part of the contract.
  13. All communications & correspondence between the two parties should be in accordance to the official addresses that are mentioned in the contract.
  14. This contract must be legalized by the administrative board of the company within (7) days from the date of signing the contract.

Composed in Baghdad on 2 June 1992  


image of signature, first party

 


 

First Party
Al-Bashair Trading Company Limited

 

image of signature, second party

 

 


Second Party
Al-Walid Importing & Exporting Company Limited


 

Figure 21 is a summary of a letter from the Wadi Hajar Trading Company Baghdad to Scrufys Moro Holdings, Pediment Holdings, Occelus Company, Limassol, Cyprus. This letter refers the signed contract between the Pediment Company and the National Iranian Petroleum Distribution Company. The start date for delivery was specified as 15 December 1993 and the delivery was to the port of Bandar e Mahshahr. The Iraqi side gave guarantees of security.

Figure 22 is a contract between the national Iranian Petroleum Distribution Company Tehran, Iran and Pediment Holdings Tehran (registered in Cyprus) who was represented by a Mrs. Parvin Moeini Jazani. The subject of the contract was the delivery of 100,000 tons of gas oil by pediment Holdings. The place of delivery was given as the Oil Berth Jetty of Bandar e Mahshahr or Siri Island. The contract was signed on 06 December 1993.

The letter shown in Figure 23 is from Max Moini, who coordinated the shipment of oil products. Talks were held with various organizations including the National Iranian Tanker Company, National Iranian Oil Company, the Ministry of Intelligence (Iran) and the Foreign Affairs Ministry.

On 23 November 1993, A. J. Khazamipour, Managing Director of Rashi International, sent a letter (see Figure 24) to Mr. Goran from the Pediment Holding Company. Rashi International, a Dubai-based company and a subsidiary of I.O.S. group of companies, passed on to Goran a “tax” bill from the Iranians for using the “coordinated area” during this operation. The Iranians valued their support at 40 cents per ton plus 10 cents for the “coordination” expenses.

Soon after, A. J. Khazamipour and Rashi International sent another letter dated 29 November 1993 (see Figure 25) to Mr. Goran of Pediment Holding requesting that he pay $40,000 for a deposit for the project.

A copy of two checks (see Figure 26) made out to Mr. Moini for the “deposit concerning diesel operations.” One check is $40,000 for the deposit and the second for $6,250 covering the 25-percent commission fees. The signature in the check’s signature block resembles the signature of A. J. Khazamipour from the previous letters discovered from a named US company .
Figure 27 is a contract for petroleum products between the seller, Wadi Hajar Trading Company, Ltd., of Baghdad and the buyer, Pediment, Ltd., Limassol, Cyprus. The contract discusses the options of using barges or pipelines. Interestingly, it is specified that the transport of the oil products might be by road tankers. The contract stipulates that the buyer undertakes to issue a letter of guarantee for a value of $1million.

Figure 28 is a letter addressed to Mr. Muhammad Said Kuba from Pediment Holdings, Ltd., Cyprus. The letter states that Pediment is ready to buy petroleum products via the Iraq-Iran border pass at Zirbatia Mehran by using trucks. Payment for such was to be made by cash to an Amman Bank account.

The recovered contract shown in Figure 29 listed the seller, Al-Basha’ir Trading Company, Ltd., Baghdad, and the buyer, Unipack Paris Company. The contract was signed and dated 27 April 1993. The products mentioned include gas oil, kerosene, gasoline and fuel oil and it is indicated that the transport of the products will be by road tankers and will take place at Basra storages.

Next, Figure 30 shows a letterauthorizing the Czech Republic Company, Exim Praha, to procure crude light oil from the Iranian border.

Figure 31 is a telex from a French bank to a bank in Brussels that indicates that Vitol Geneva of Switzerland opened a letter of credit for Unipack of Belgium for an amount of $12,518,129.

Figure 32 shows a contract between Unipack of Paris and a Turkish company called Gonen Tasimacilik Gemi. The contract stipulates that Unipack pay an advance of $150,000 and in return Gonen would supply 60 standard road tankers with a capacity of between 20,000 to 35,000 liters. The Gonen Company is to transport kerosene, mazul, super benzene, crude oil and fuel oil, from Basra in Iraq to Bandar Humayni, Iran. A roundtrip of 250 km.

Next, Figure 33 is another Telex from Vitol Geneva, to a French Bank and copied to Unipack of Paris. It details shipments of oil for August and September 1993. Banks in Slovakia and the Union Bank Swiss Geneva are also mentioned.

On 15 October 1993, First Yu Swiss Bank Belgrade sent a letter of guarantee (see Figure 34) to Wadi Hajar Trading Company Baghdad. The letter refers to a contact between Ocellus Company Limited and Wadi Hajar Trading Company concerning the delivery of spare parts for agricultural machines worth $50,000,000.

Figure 35 is a letter dated 30 December 1993 to a Mr. Jamal Fariz, Manager of the Foreign Exchange Department at the Jordanian Investment and Finance Bank, who speaks of a contract that was concluded between Ocellus Company and a Mr. Hadi Talub Ibraheem, concerning the delivery of spare parts for agricultural machines for the amount of $50,000,000.


Posted: Apr 23, 2007 07:45 AM
Last Updated: Apr 23, 2007 07:45 AM