Iraq’s Oil Industry Rocked By Two New Corruption Scandals

By Simon Watkins

Iraq oil field

Barely a month goes by without yet another corruption scandal emerging or developing in Iraq. Whether it be the Barzanis’ industrial-scale corruption in the semi-autonomous region of Kurdistan or the endemic multi-level corruption in the south it is little wonder that Iraq ranks as one of the very worst countries in the world for bribery and corruption. The last month or so has seen dramatic developments in two new massive corruption scandals: one in the Kurdistan region and the other in the south. Ironically, both tangentially benefit the de facto ruler of Iraq, Moqtada al-Sadr.

The most recent development comes in the latest news on the US$1.6 billion-plus lawsuit being brought by Iraqi firm, Dynasty Company for Oil & Gas Trading Limited (Dynasty), against two defendants: firstly, the entire government of Iraq’s Kurdistan region (the KRG), and secondly – extremely unusually for such an action – personally against the former Minister of Natural Resources, Abdullah Abdul Rahman Abdullah (commonly known as Ashti Hawrami). He was recently ‘redesignated’ as Assistant Prime Minister for Energy Affairs in Prime Minister Masrour Barzani’s newish government. The original lawsuit was filed on 14 August at the U.K. Royal Courts of Justice and alleges, among others: ‘Conspiracy to injure Dynasty by unlawful means’, ‘Unlawful interference’, and ‘Unlawful intimidation’.

Hawrami is personally being sued because, OilPrice.com understands, he was allegedly the main architect of the intimidation against Dynasty, which itself resulted from Dynasty’s refusal to pay a bribe to Hawrami in order to conclude a deal already agreed with Spanish oil giant Repsol. Specifically, this deal involved Dynasty purchasing Repsol’s outstanding share capital of Talisman (Block K39) B.V. and Talisman (Block K44) B.V. through a standard sales and purchase agreement (SPA). Once the deal had been agreed between Dynasty and Repsol – as it had been – then, according to the KRG’s Production Sharing Contract’s (PSC) own Article 39.7, then the process of completing the deal was essentially one of just rubber-stamping it. According to the terms of the PSC, a change of control consent cannot unreasonably be withheld or delayed by the government.

However, at that point OilPrice.com understands, it was signalled to Dynasty that an illegal payment was expected to be paid to an account controlled by Hawrami and when Dynasty made it clear that it would not pay then the intimidation began for Dynasty to drop the deal with Repsol, as Hawrami would make no money from it. Amongst a number of intimidatory tactics was Qubad Talabani, the Deputy Prime Minister of the KRG from June 2014, and member of the Regional Council for Oil and Gas Affairs of the Kurdistan Region, allegedly making a call to Hiwa Awat Ali, executive chairman of Dynasty, threatening that if he did not cancel the SPA with Repsol then ‘they’ (implying the KRG and Hawrami) would not let Ali set foot in Kurdistan again. This was allegedly followed by Ali being summoned to see the Head of Intelligence Operations of the Patriotic Union of Kurdistan (PUK) political party and KRG in Sulaymaniyah – Lahur Shex Jangi Lahur – at which Hawrami was conference called in, and during which Hawrami told Lahur to use force to make Ali cancel the SPA (a request that Lahur refused). From that point until last week, OilPrice.com understands, Hawrami had been assuring the ruling Barzani family that the Dynasty case had ‘gone away’.

However, in an even more dramatic turn of events, at the end of October, Hawrami was personally served at London’s Heathrow Airport with a ‘Claim Form’, ‘Particulars of Claims’, and a ‘Response Pack’. In response to this, OilPrice.com understands, Hawrami ‘Acknowledgement of Service to Court’ documents, meaning – as the name implies – that he acknowledges receipt of those Court papers and will now need to participate in the U.K. High Court process. Legal experts spoken to by OilPrice.com anticipate that one of the tactics Hawrami is likely to use to delay these legal proceedings is to file for a ‘change of jurisdiction’ away from ‘the independent judiciary of London and towards somewhere that will be more favourable towards the KRG and Hawrami’.

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In the meantime, the full ‘Particulars of Claim’ from Dynasty – the specific and explicit details of the account information used for such alleged fraudulent transactions, including the bank name, swift code, currency for transactions, coded account name, IBAN number, account number, and US dollar correspondent bank and branch – have all been filed at the Royal Courts of Justice. In any event, at some point it seems that Hawrami is going to have to tell the Barzanis that the case – far from going away – is in fact centre stage in the U.K. High Courts and that the KRG still faces still face a US$1.6 billion-plus lawsuit that will be held in open court.

Matters are no better south of the Kurdish border either. According to court documents, brothers Cyrus Ahsani and Saman Ahsani – have pled guilty in the U.S. to facilitating the payment of millions of dollars in bribes to officials in nine countries, including Iraq, to secure deals for the clients of Unaoil, of which they were chief executive officer and chief operating officer, respectively. The activities by these two scions of a wealthy family from Monaco (and also Iranian nationals) are a violation of the U.S.’s Foreign Corrupt Practices Act (FCPA) and sentencing is due on 20 April next year. Steven Hunter, a 50-year-old British resident and former business development director, pled guilty in August to one count of conspiracy to violate the FCPA. According to the court papers, not only did the two brothers pay cast sums in bribes to individuals in a range of oil and gas rich countries – including as well Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iran, Kazakhstan, Libya and Syria – but also they laundered the proceeds of their bribery scheme in order to promote and conceal the schemes and to cause the destruction of evidence in order to obstruct investigations in the U.S. and elsewhere. Hunter participated in the conspiracy to violate the FCPA by, among other things, facilitating bribe payments to Libyan officials between about 2009 and 2015.

Up until July of this year, the Unaoil case was also being examined by the U.K.’s Serious Fraud Office (SFO) before the charges against the Ahsanis were dropped without any explanation. This was doubly peculiar as only a short while earlier the SFO had actually increased the charges being brought in the case. These allegations were that Unaoil and one of its Iraqi business partners, Basil Al Jarah, arranged the enormous bribes for a veritable ‘Who’s Who’ of major clients at the time including, allegedly: Rolls-Royce, Petrofac, Clyde Pumps, Weatherford, Cameron/Natco, KBR, FMC Technologies, Saipem, SBM Offshore, MAN Turbo, Rosetti Marino, ABB, The Shaw Group, Core Labs, Leighton Offshore, Weir, and Hyundai, plus some major international oil companies (IOCs), although none had been charged with any offence.

Amongst the Iraqi public officials allegedly implicated in the case were not just the former Oil Minister, and later Education Minister, Hussain al-Shahristani, but also Abdul Kareem al-Luaibi (another former Oil Minister), Kifah Numan (Director General of the South Oil Company, SOC), and Dhia Jaffar (also a Director General of the SOC and a Deputy Oil Minister). Some of the key projects around which bribery allegedly played a major part include the development of some if Iraq’s biggest oil fields, including Zubair and Garraf. As far as the U.K. case went, Unaoil persistently declined to comment, although much earlier in the case’s development it had said that it “vigorously” denied allegations that “certain individuals” paid bribes to assist other companies to win business (and Shahristani did the same).

This appalling level of corruption was a key reason why Iraq found itself owing around US$27 billion to international oil companies by the end of 2015, and why it has only avoided bankruptcy by multi-billion dollar cash injections from the U.S. Ironically, though, all of this plays to the advantage of the de facto leader of Iraq, the radical cleric Moqtada al-Sadr and his Sairoon (‘Moving Forward’) alliance. “A key part of al-Sadr’s popular appeal is that he wants Iraq to develop its natural resources and its economy without the interference of any of other country and its corporate agents and without the sort of shady business practices that have characterised dealings in the country for so long,” a senior oil and gas industry source who works closely with Iraq’s Oil Ministry told OilPrice.com. “He sees a lot of these practices reflected in the administration of the previous prime minister, Haider al-Abadi, and al-Abadi was in charge when the Unaoil scandal broke so the fact that it is gathering extra impetus right now will help al-Sadr prove that he is the new clean skin, politically speaking,” the source concluded.

By Simon Watkins for Oilprice.com

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