Whose $300 million ?

As the AWB hearings go on, one important question doesn’t seem to have been asked[1]. If $300 million was paid as bribes to Saddam, whose money was it, and should they be repaid?

Although the AWB paid the money on behalf of Australian wheatgrowers, they got it back (and probably some more on top) in the form of inflated prices. So the money was in fact stolen from the UN, which in turn held it on behalf of the Iraqi people, who were supposed to be trading oil for food, bypassing the Saddam regime.

AWB, or failing that the Australian government, should repay this money to the Iraqi government, which is in dire financial straits now that US reconstruction funding has stopped.

fn1. There’s a similar question to do with misappropriation of Iraqi money under the Coalition Provision Administration, but I need to look into this one a bit more.

22 thoughts on “Whose $300 million ?

  1. Prof. Quiggin, if you are going to try to estimate the cost to Iraq (or to the Iraqi people, if you want to put it that way) of the monstrous injustices which have been done to them by an oil-hungry USA and its henchcountries you had better resign your current position and dedicate the rest of your life to it. You will need that long to develop an appropriately comprehensive calculus of misery. Maybe you could involve others who could try to estimate the cost of colonial exploitation and the slave trade to Africa, of the British Raj to India, of the Dutch and French in Indonesia and Indo-China, of the Spanish, Portuguese and Americans in South/Central America and the Caribbean, of the major European powers and Japan to China, and so on and on…

    Or you could take the point of view apparently espoused by Niall Ferguson in his recent book “Colossus”. I haven’t read it yet, but I understand it to be a recommendation of imperial policy by the USA on the grounds that such a policy does more good than harm. I am looking forward to discovering how he calculates that.

  2. Ignoring the issue of punishing the AWB for its misdeeds doesn’t the issue of compensation depend on who got most out of the bargain? If Iraq’s corrupt rulers had bargaining power perhaps they got most of the surplus and AWB got crumbs. Did they make a pile net of the bribes? I can only guess but wouldn’t the US also be angling for such deals – their recent pursuit of AWB reeks of sour grapes.

    If AWB didn’t make a lot it is doubtful they should pay ‘compensation’ though it should (on other grounds) perhaps be hammered for its immoral actions.

  3. I don’t see this at all, Harry. Both AWB and Saddam were party to the theft, and therefore they are jointly liable. But I agree that the US position reeks of hypocrisy/

  4. The transaction was essentially wheat for oil.

    In effect the kickback money, which ended up in the hands of Saddam and his clique, was the difference between the market price of the oil and the sum of money that the bank account run by the UN on behalf of the Iraqi people received for that oil.

    This Un administered bank account was the direct loser.

    Saddam’s stash of money was the direct winner.

    The AWB was merely a conduit between the UN administered bank account and Saddam’s stash. But they may have incited or connived in Saddam’s theft and thus may be accomplices before the fact.

    And the nett effect of these transactions on the world price of oil was to lower it, because otherwise less Iraqi oil would have found its way into the market.

    Thus petrol consumers were also nett beneficiaries of these underhand transactions.

  5. What “theft”? Surely there is no case to be made that anything was misappropriated, given that the original agreement being flouted was made under duress.

    Of course, there is a case to be made to justify that duress – but that’s a different question. It’s not as if the Iraqis ended up worse off because a deal was done; without it, there would have been no wheat imported (there were too many middlemen for any unrequited deal to be made at all, in that culture, in a time of exigent circumstances).

  6. If the Australian papers are reasonably accurate, the person who started the “pay us back” line was Chalabi. I can’t believe the irony.

    But, to be serious, the Iraqi government originally pulled oil out of the ground, and used it to pay for whatever they wanted, from food to ammunition. The UN said it could only be used for food. They got round the rules and used it for everything else. As I understand the transaction, it was not into the private hands of the thugs; it was used to keep the regime going.

    Given that Saddam ran the government of the time, it is difficult to see how a transaction carried out with the regime’s approval can be seen as a theft against the Iraqi people.

    If that is the case, then a regime’s debts should end with the regime – a relief which would be deeply appreciated in many of the world’s most crapulent places, but which the bankers in the First World do not accept.

    I suppose we could say that a finite amount of money which could have been spent on food was actually spent on food + weapons, but I don’t think there was an actual shortage of money. Was there?

  7. david,

    If that rule on the debts being extinguished applied, how fast do you think the supply of credit to the ‘crapulent’ places would dry up?

  8. One extraordinary aspect of this whole affair is that these payments were apparently being made while AWB was being prepared for sale.

    What does that say about due diligence standards in this country?

  9. Ian Gould: “What does that say about due diligence standards in this country?”

    It doesn’t tell us anything about the standards yet. ASIC’s response to the Cole inquiry is what needs to be watched. If there’s no prosecution, there’s your answer.

  10. “So the money was in fact stolen from the UN, which in turn held it on behalf of the Iraqi people, who were supposed to be trading oil for food, bypassing the Saddam regime. ”

    Yeah! Riiiiiiiiiiiiight! Is it any wonder with such warm, fuzzy thinking UN types about, there were so many Saddam types lurking around every corner cutting deals.
    You got that bit all you troglodytes who don’t believe in fairies at the bottom of the garden? The inscrutable UN was simply facilitating the free Iraqi people trading THEIR oil for precious food(and medicines), bypassing that nasty Saddam and his oil ministry and health ministry and his food ministry and his jobs for the boys ministry, death squad ministry, etc , etc and would you believe what the final outcome was?
    Err, you don’t think we might have a counter claim against the Iraqi people for their lack of due diligence in installing Saddam and Co in the first place do you Professor? Wouldn’t it be lovely if we could install a Gough or two quite regularly to fling the money from the balcony to us and when it all ends in tears, we flick the bastard out and cry foul with HIS debts?

  11. observa, the UN advised AWB more than once to lower their prices because they were too high, hence the UN was concerned their might be some kickbacks inflating the price. The Austn govt was told something fishy was likely, but chose to play dumb.

  12. Waratah, the very notion that somehow decent folk could deal fairly and squarely with tyrannical pond-scum like Saddam and his regime, boggles the practical mind. Here was an axis of evil country, porously bordering the same, or similar to varying degrees and somehow these UN economic sanctions were going to get Saddam to turn over a new leaf, from his bad old weapons inspector playing days. But don’t take George Bush’s or my word for it, because now you can get it straight from our esteemed leader of HM Opposition in parliament today. You see according to the Beazer, it should have been bleeding obvious to even economics professors, that Saddam would always use any cash he could lay his hands on, to support terrorism, in particular paying suicide bombers. Well of course that’s exactly what Howard and the other COW members worked out some time ago, while it took a lot longer for the penny to drop with your more gulli…, err, trusting types.

    As for we business types Waratah, you can imagine how we all lay awake nights, tossing and turning, absolutely dreading phone calls from public servants to inform us that somehow we are getting above market rates for our goods and services of late. You can imagine how quickly we’d marshall all hands on deck, to get to the bottom of such an alarming turn of events. If you were a large meat exporter to say Mexico, you might just assume, that your entreaty to Foreign affairs had been successful in getting the Mexican Presidents’s, second cousin’s brother-in-law, to drop some of the most outrageous charges and fees, he had been levelling locally on your export shipments lately.

  13. “Err, you don’t think we might have a counter claim against the Iraqi people for their lack of due diligence in installing Saddam and Co in the first place do you Professor? Wouldn’t it be lovely if we could install a Gough or two quite regularly to fling the money from the balcony to us and when it all ends in tears, we flick the bastard out and cry foul with HIS debts?”

    This approach of extracting a fine for collective guilt was tried less than 100 years ago by means of the Treaty of Versailles.

    Turned out quite badly. (Hitler, etc.)

    Most times victor powers have been prudent enough to accept the cost of the war in the interests of peace. They generally hope to recoup costs with the peace dividend of extra trade and investment opportunities.

    This acceptance of sunk costs also sometimes applies in peace time. The US taxpayer, as I recall, footed the bill for stabilising the Mexican financial system in the mid-1990s.

    A very complex calculation of threat and reward appears to be necessary when deciding whether to forgive or to punish.

  14. >Err, you don’t think we might have a counter claim against the Iraqi people for their lack of due diligence in installing Saddam and Co in the first place do you Professor?

    The CIA had a lot more involvement in installing Saddam than did “the Iraqi people”.

  15. SJ my use of the word standard in this context was ill-considered. what does this affair say about the quality of the due diligence that was performed on AWB?

    I wonder if the shareholders have any legal recourse against either the Australian government or the auditors and other experts who signed off on the float.

  16. “hence the UN was concerned their might be some kickbacks inflating the price”

    and who would know more about kickbacks than the UN?

  17. Just as well the blogosphere is totally unrepresentative of the wider community, or there would be real concerns for the future.. haha .. some of the viewpoints here would result in the extinction of the species, if actually put into widespread practice.

  18. This is a useful discussion on whether we now owe A$300 million (or more) to compensate the Iraqi people for smashing up their country. I say war reparations – bring it on – make it too expensive for our governments to ever do anything like this again.

    We are getting new information (we should have known) that says that bribery deals are normal and widespread, and no doubt the Americans and the Canadians are right in there as well. Read:
    Saturday 11 February, Melbourne Herald Sun: ‘Impossible’ for kickbacks to be secret
    http://www.heraldsun.news.com.au/common/story_page/0,5478,18111703%255E1702,00.html
    and Sydney Morning Herald’s Govt must’ve known about AWB: former spy
    http://www.smh.com.au/news/National/Govt-mustve-known-about-AWB-former-spy/2006/02/11/1139542431384.html

    What Warren Reid is saying is that bribery and corruption are routinely part of normal business, especially in Asia and integral to government and intelligence service concerns. There is no way that Howard government ministers could have failed to know about the AWB kickbacks and no way that Labor could deny that they too have experience of this when in power (Reid mentions Suharto and arms deals). This will cause more than a little hurt to anyone who still believes that the Labor Party have any princples.

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