DFAT 'approved' Iraqi wheat deal

By Robin Pash
November 03, 2005

AUSTRALIA'S wheat exporter won Government approval to pursue deals that later funnelled $300 million to Saddam Hussein in a massive evasion of UN sanctions against Iraq.

Evidence to a parliamentary committee today revealed Department of Foreign Affairs and Trade officials failed to investigate two key warnings that AWB was funding the despot's regime under the United Nations oil-for-food program.

The officials quickly signed off on AWB's request to seek deals which later saw it pay inflated transport costs to a company which was a front for the Iraqi Government.

As the Opposition stepped up calls for a royal commission into the scandal, Foreign Minister Alexander Downer accused Labor of making a "monstrous" implication that his staff were involved in corruption.

"These officers were not corrupt," Mr Downer told Parliament during a fiery exchange with his Labor counterpart Kevin Rudd.

But Mr Rudd said DFAT's evidence before the Senate estimates committee showed "inexcusable negligence" by the Government.

DFAT today laid responsibility for policing the corruption-ridden oil-for-food program squarely with the UN.

In October 2000, AWB, the former Australian Wheat Board, asked DFAT if it was allowed to have dealings with unnamed Jordanian trucking companies under the terms of the sanctions regime against Iraq.

AWB's letter was prompted by a sudden demand by the Iraqi Government for it to pay trucking costs to Amman-based company Alia – a situation DFAT was not aware of.

Dealing with a Jordanian transport company would solve its problems with unloading grain at the port of Um Qasr, AWB said.

"While we believe the proposed solution will eloquently solve our problem, the purpose of writing is to ensure that DFAT is comfortable with AWB proceeding with the suggested approach," the exporter wrote in a letter tabled at the committee hearing.

Within three days, DFAT had sought legal advice and wrote back to AWB telling the company it could proceed.

What DFAT did not know was that AWB had actually been paying Alia for transport costs since December 1999.

Alia, it turned out, was part owned by the Iraqi transport ministry, provided no trucking services and channelled AWB's money to the Iraqi Government.

DFAT defended its approval of AWB's approach to trucking companies.

"It was a general inquiry (by AWB) about whether Jordanian companies were able to be dealt with and our advice was yes, because the (UN) resolutions prohibited contact with Iraqi entities, not with non-Iraqi entities," DFAT deputy secretary Gillian Bird told the committee.

The UN, in fact, had already decided in June 2000 that any dealings with Alia would have been a breach of sanctions.

That advice was contained in an internal UN memo which was not passed on to the Australian Government.

But DFAT also failed to fully investigate another serious warning that AWB's money was ending up in Saddam's hands.

In January 2000, a UN customs expert warned Australian diplomats that the Iraqi Government was demanding $US700,000 from the Canadian Wheat Board to cover transport costs in Iraq.

The money was to be deposited into an Iraqi Government account held in Jordan.

There were further allegations from the Canadian Government that AWB was involved in a similar arrangement.

But DFAT denied the report that should have alerted it about AWB's deals, saying the matter was investigated by the UN.

"The case was closed – they didn't pursue it with us," Ms Bird said.

DFAT asked AWB about the allegation but the company denied there was any truth to the Canadian report, she said.

Ms Bird insisted DFAT had no knowledge of Alia's involvement.

"It's a matter of deep regret what has happened, but we were not aware of the role of Alia in this context," she said.

An international investigation has found AWB unintentionally propped up the Iraqi Government with kickbacks, but the company should have known the Alia money was ending up in Saddam's hands.

Prime Minister John Howard is expected to announce details of an independent inquiry into the affair within days.

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