The Iraqi oil scam: Involvement of Congress and an ex-foreign minister Natwar Singh

As the discussion over European and Indian purchases of Russian energy continues, an older story concerning the Congress party’s role in a global oil scam during an energy crisis deserves to be highlighted. We are talking about the Iraqi oil-for-food scam.

What was the oil-for-food scam?

During Saddam Hussein’s rule in Iraq, the oil-for-food scam involved illegal oil deals. The United Nations Security Council introduced the Oil-for-Food programme in 1996 to allow Iraq to sell enough oil to pay for food and other essentials for its population, which was suffering as a result of strong UN sanctions imposed following the first Gulf War. Saddam Hussein, on the other side, benefitted from the initiative, amassing $1.7 billion in bribes and surcharges and $10.9 billion in fraudulent oil smuggling.

According to the Volcker report, which was published in October 2005, roughly half of the 4,500 participating firms paid bribe money and unlawful surcharges to secure significant contracts, allowing Saddam Hussein to accumulate $1.8 billion at the expense of Iraqis suffering under UN economic sanctions.

Since its inception in April 2004, the Volcker committee released four interim reports. According to the report, Kojo Annan, son of UN Secretary-General Kofi Annan was also involved in the scam indirectly. Between 1995 and 2004, Kojo got $400,000 from Swiss-based Cotecna Inspections SA. The final report also stated explicitly that “India’s Congress party” and Natwar Singh’s family were non-contractual beneficiaries of the Oil for Food programme.

How was Congress involved?

The Volcker Committee report cited Kunwar Natwar Singh, former External Affairs Minister, and the Congress Party as “non-contractual beneficiaries” of Iraqi oil sales under the United Nations Oil-for-Food Programme scam in 2001.

Singh, who was then the head of the Congress’ international affairs cell, led the Congress delegation to Baghdad through Jordan in January 2001, while the party was in opposition. Former Union Ministers P. Shiv Shankar and AR Antulay, as well as Aniel Matherani, joined him. He was joined by two other people: Jagat Singh, his son, and Andaleeb Sehgal, a Delhi exporter who is also linked to the family, a detailed report in India Today stated.

This journey was followed by a series of illegal oil transactions to Natwar and the Congress under Saddam Hussein’s regime’s oil-for-food program, as detailed in the Volcker Committee Report.

Matherani, who became the Ambassador to Croatia after the Congress Party took power in 2004, stated that Singh used the 2001 trip to lay the groundwork for Jagat and Sehgal to secure deals under the oil-for-food programme.

He added that the planning began on November 27, 2000, when then-Iraqi Vice President Taha Yassin Ramadan visited India and invited a Congress delegation to Iraq. Natwar, according to Matherani, then planned for his son to accompany him because “it would be a difficult journey” for someone of his age.

Matherani said that when they met with Ramadan and Tariq Aziz, Iraq’s then-deputy prime minister, Jagat and Sehgal followed them and were introduced as members of the delegation. He said that by having them in the meeting, Natwar signalled to the Iraqis that they were his representatives and could be lent whatever commercial favours given to him by the regime.

Sehgal and Jagat then negotiated with Iraqi officials to register Sehgal’s company Hamdan Exports to do business in Iraq. Following that, Hamdan registered with the Iraqi Grain Board to supply wheat on January 30, 2001, and Sehgal continued to visit Iraq to follow up on the wheat tenders.

However, interestingly, Sehgal was never given a wheat tender by the Iraqi government. Nevertheless, according to the Volcker Report, Sehgal initially paid what seems to be an advance surcharge of $60,000 (Rs 27 lakh) for a transaction to lift two million barrels through Masefield AG, a Swiss oil trading business.

Natwar and the Congress were both mentioned as “non-contractual beneficiaries” of the Saddam government’s illegal oil allotments in the Volcker committee’s 630-page report. Natwar is said to have got four million million barrels of oil, while the Congress party received the other four million.

Also, nearly three million barrels were lifted, including two million of the four million barrels allotted to Natwar and one million barrels from Congress allotments. On the records of Iraq’s State Oil Marketing Organization, Sehgal’s firm, Hamdan Exports, was shown as having paid the premium levied by the Iraqi government for transferring such oil allotments in both cases.

What followed next?

When the Congress Party assumed power in 2004, Natwar Singh was appointed as the Minister of External Affairs under Prime Minister Manmohan Singh. However, following the publication of the Volcker report, he was compelled to resign from his position as minister and was subsequently suspended from the party. Two committees were appointed to investigate the Volcker report and all of the allegations: a judicial inquiry led by former Chief Justice of India RS Pathak and a fact-finding mission led by former diplomat Virender Dayal.

In August 2006, the RS Pathak Committee delivered its report to the Prime Minister, in which Congress was cleared of all accusations. The Enforcement Directorate slapped summons on Natwar Singh and his son in September 2006.

The Enforcement Directorate, which probed Natwar and Jagat under the Foreign Exchange Management Act (FEMA), continues to maintain that shreds of evidence point to the Singhs and Sehgal’s connection. As per a report by India Today in 2014, ED found Natwar received foreign money totalling $898,027 (Rs 5.4 crore) in violation of FEMA.

Natwar Singh claimed innocence in the Oil-for-Food scam that ended in his shameful political departure in his autobiography, One Life is Not Enough. Singh argued that if one looks at the Volcker report’s annexure, it indicates that the Congress was named in 1997 and that the name was inserted in March 2005 because Sonia Gandhi said he needed to be ‘fixed’. He further claimed that Justice RS Pathak, who investigated Volcker’s charges, cleared him in the report of the investigation committee. However, the report, which was presented to then-Prime Minister Manmohan Singh, has not yet been made public.