Russian Oil Firms Deny Oil-for-Food Graft

By Sergei Blagov | July 7, 2008 | 8:15 PM EDT

Moscow ( - Two of Russia's largest oil companies have denied allegations of graft in Iraq's Saddam-era oil-for-food program.

Representatives of oil giants Zarubezhneft and Tatneft said both had complied strictly with U.N. resolutions relating to the program.

Tatneft deputy CEO Khamit Kaveyev told the RIA news agency that the allegations of wrongdoing coincided with attempts by Russian oil companies to return to Iraq.

U.N. Secretary-General Kofi Annan is preparing to appoint an independent panel to investigate allegations of multi-billion dollar corruption in the U.N.-run program against governments and individuals.

Under the humanitarian program, Baghdad - which was subjected to sanctions - was allowed to sell specified amounts of oil in return for food supplies. The program was shut down last November.

Media reports from U.N. headquarters cite unnamed diplomats as saying that Russia and France - two of the strongest critics of the U.S.-led campaign to topple Saddam Hussein - are among Security Council members unhappy with Annan's probe proposal.

Zarubezhneft, the state oil company, worked in the Middle East since the 1970s and was Russia's leading oil player in Iraq, where it received U.N. permission to drill 45 exploratory wells in the northern Kirkuk oil field. Zarubezhneft also had a contract to drill some 100 wells in another field, North Rumaila.

The corporation continues to fulfill 10 oil-for-food contracts, worth a total of $72 million dollars, and due to be completed this year.

Tatneft, Russia's sixth-largest oil producer, had contracts to drill 33 wells in the Kirkuk fields and 45 wells in the Bai Hassan fields, also in the north. Last fall, Tatneft indicated its intention to revive its operations in post-Saddam Iraq.

Of the $18.3 billion dollars in oil-for-food contracts approved by the Security Council since the program began, some $4.2 billion dollars worth of contracts were with Russian companies.

Eleven Russian oil companies bought tens of millions of barrels of oil from Iraq under the deal; Zarubezhneft was tasked with coordinating oil purchases from Iraq.

An Iraqi newspaper, al-Mada, earlier this year published a list of more than 250 firms and individuals which it said were suspected of profiting illegally from the oil-for-food program.

Among 50 Russian entities cited were leading oil companies, government agencies, political parties, and even the Russian Orthodox Church.

Russia's foreign ministry dismissed charges, contained in media reports, that Russian oil companies took bribes from the former regime.

It said in a statement said that the reports were false and based on misunderstandings about the oil-for-food program.

All payments for oil were made to a U.N. account, not to the Iraqis, the ministry said, and questioned the motive behind the reports, which surfaced at a time Russian companies were trying to return to the Iraqi market.

Following publication of the list in the Iraqi paper, the Iraqi Governing Council began an investigation into the allegations.

Another probe into the oil-for-food program is being run by the U.S. General Accounting Office.

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