The Australian Federal Police has terminated its investigations into the actions of AWB limited in kicking back almost $300 million to the Saddam Hussein regime on the eve of the invasion of Iraq in 2003, and it is now clear that no-one will face criminal sanctions.
In her report Wheat scandal probe dropped in the Weekend Australian, 29-30 August, 2009 Caroline Overington comments:
It has hardly been a secret that the AFP investigation was under-funded and under-resourced, and it received little co-operation from AWB, which sees itself as a new entity, with all staff associated with the corrupt dealings having left.
Not only not a secret, but not a surprise. The Howard Government had no interest in getting to the bottom of this squalid affair and the current Government seems curiously reluctant to kick over rocks that might uncover the sins of its predecessors – perhaps looking ahead to the day when it in turn becomes a predecessor, but ill-serving the quality of national governance.
This episode is a national disgrace and the fact that no-one concerned faces the possibility of criminal sanctions is nothing short of amazing, as is the apparent opinion of senior barrister Paul Hastings QC who, according to Overington, advised the AFP, “It [is] not even clear that breaching a UN sanction is a criminal offence”.
This is a remarkable finding in view of the fact that advice to the Commission of Inquiry conducted by The Hon Terence Cole QC was that the United Nations sanctions were imported into our domestic law by means of Customs (Prohibited Imports) Regulation 13CA, and Customs (Prohibited Exports) Regulations 4MA and 4QA. It seems remarkable that one can apparently breach the Customs Regulations without committing a criminal offence.
The various excuses offered by the coalition for its scandalous inattention include the claim (voiced again in the last 24 hours by Senator Barnaby Joyce) that the whole episode was just a matter of the United States gunning for the single desk under which the former Australian Wheat Board, privatised as AWB Limited, controlled all exports of wheat from Australia.
In that vein, in a doorstop in 2000 then Deputy Prime Minister Mark Vaile responded to questions about why he had failed to take the matter seriously by saying that these were unsubstantiated allegations made by AWB’s commercial competitors. He might usefully have reflected on Henry Kissinger’s famous comment about Richard Nixon, “Even paranoids have real enemies”. We now know that even commercial competitors can raise concerns that warrant investigation.
In relation to the attitude of Prime Minister Howard (apparently supported at the time by the then Opposition) that allegations about AWB did not need to be followed up because “AWB was an organisation of total integrity and repute”, the words of Ronald Reagan in relation to arms control approaches to the Soviet Union come to mind – “Trust, but verify”.
The reference to Ronald Reagan’s approach to arms control is relevant to the AWB matter, because sanctions against Iraq were, from the time Security Council Resolution No. 661 was passed on 6 August 1990, about limiting the military capabilities of Iraq. One of the main means of doing that was to limit Saddam Hussein’s access to military supplies and, more importantly, to cash.
Accordingly, Section 3 of the Resolution required all States to prevent, inter alia:
(c) The sale or supply by their nationals or from their territories or using their flag vessels of any commodities or products, including weapons or other military equipment, whether or not originating in their territories, but not including supplies for medical purposes, and, in humanitarian circumstances, foodstuffs …
and Section 4 stipulated that
All States shall … prevent their nationals and any persons within their territories from removing from their territories or otherwise making available to [the Government of Iraq] or to any [commercial, industrial or public utility in Iraq] any [funds or any other financial or economic resources] and from remitting any other funds to persons or bodies within Iraq…
Nothing in Resolution 996 of 14 April 1995, which established the Oil-for-Food Program, set aside the above provisions of Resolution 661. What Resolution 996 did was to open a window for Iraq to finance the purchase of medicines, humanitarian food supplies and other essential civilian supplies through the sale of oil. In order to prevent the sort of financial funny business that might enable Saddam’s regime to syphon off cash, the Resolution provided that all sales were to be at fair market price, the full proceeds were to be deposited to an escrow account established by the Secretary-General, and that account ws to be externally audited. A further measure was a requirement that payment for goods could only be made from the escrow account on receipt by the Secretary-General of authenticated confirmation that the goods had arrived in Iraq (ie they could not be diverted and sold for cash).
Australia did more than simply sign up to the above arrangements. From September 1990 we had Australian sailors in harm’s way to enforce them. Under Operation DAMASK, the RAN at that time provided a three-ship task group to participate in the Multilateral Interception Force (MIF), a multi-national flotilla tasked with preventing both the entry of prohibited goods into Iraq and the conduct of any illegal export trade. As the above makes clear, the purposes of the MIF were to prevent Saddam from acquiring unaccounted cash, and from importing weapons that he might acquire with resources that slipped through the net. Needless to say the full cost of this RAN deployment ran to many millions of dollars.
This is the context in which AWB Ltd’s inflating of wheat prices in order to provide $290 million in rebates to Saddam Hussein must be viewed. These actions simply subverted a national security purpose for which the Australian Government had put service personnel into warlike operations and the Australian taxpayer was expending large amounts of treasure.
Another excuse that is often offered is the proposition that kick-backs are just part of the way of doing business in the Middle East. As it happens, the bribing of foreign officials has been a criminal offence under Australian law since 1999 – legislation introduced into the Parliament by no less a person than then Treasurer and would-be Prime Minister Peter Costello.
Aside from AWB’s disgraceful behaviour, what behaviour might we have expected of the Commonwealth Government in a situation in which, to use the words of then Foreign Minister Alexander Downer, it was “a big supporter of sanctions”?
It was certainly not good enough for the Government to adopt the position, as Messrs Vaile and Downer appeared to do, that when it came to the wheat contracts the enforcement of the sanctions was the business of the UN. The UN is a membership organization, and it cannot be more effective than its members permit and assist it to be. This was recognised by the provision of Resolution 661 that required the member states to prevent funds from reaching Iraq by any means – only the member states have direct control over their nationals and corporations.
Accordingly, a Government that was committed to the imposition of sanctions could have been expected to back its commitment (and its responsibilities under the relevant resolutions) by an early and thorough risk assessment of the types of behaviours that could lead to the sanctions regime being violated, and how any violations could be detected. Inflated prices and under the table rebates would be a prime target of any risk assessment – there is no shortage of commentators telling us that this is the way business has always been done in the Middle East.
The Customs Regulations provide the mechanism for oversight of export transactions and there is ample precedent in Australian Government administrative experience for exercising such oversight, as is clearly demonstrated by the history of export controls on minerals.
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