About 2200 companies in the UN oil-for-food programme, including corporations in the United States, France, Germany and Russia, paid a total of 1.8 billion US dollar in kickbacks and illicit surcharges to Saddam Hussein's government, a UN-backed investigation has said in its report.

The report on Thursday from the committee probing the 64 billion programme said prominent politicians also made money from extensive manipulation of the UN oil-for-food programme in Iraq.

The investigators reported that companies and individuals from 66 countries paid illegal kickbacks using a variety of ways, and those paying illegal oil surcharges came from, or were registered in, 40 countries.

There were two main types of manipulation: surcharges paid for humanitarian contracts for spare parts, trucks, medical equipment and other supplies; and kickbacks for oil contracts.

Among the companies that paid illegal surcharges were South Korea's Daewoo International and Siemens SAS of France. On the oil side, contractors listed included Texas-based Bayoil and Coastal Corp, and Russia's oil giants Gazprom and Lukoil.

Russian companies were contracted for approximately $19.3 billion in oil from Iraq, which amounted to about 30% of oil sales, by far the largest proportion among all participating countries.

No  comment

Germany-based automaker DaimlerChrysler, meanwhile, appears to have paid just 7000 US dollar on a contract worth 70,000. DaimlerChrysler said it was aware of the report but declined to comment because of ongoing investigations by the Securities and Exchange Commission and the Justice Department.

In July, DaimlerChrysler said it had been asked for a statement and documents regarding its role in the oil-for-food programme, according to documents filed with the Securities and Exchange Commission.

The report said, for example, that Brussels-based Volvo Construction Equipment paid 317,000 in extra fees to Iraq on a 6.4 million contract. Volvo Construction is part of Swedish-based Volvo Group, which referred all questions to Volvo Construction Equipment's headquarters in Brussels. The group is separate from Volvo automobiles, which is owned by Ford.

Beatrice Cardon, a Volvo spokeswoman, said she was unaware the company was listed in the UN report, or what the alleged payments were for. "This is the first I hear about it," she said.

The report alleged that Jean-Bernard Merrimee, France's former UN ambassador, received 165,725 in commissions from oil allocations awarded to him by the Iraqi government. He is now under investigation in France.

Merrimee "began receiving oil allocations that would ultimately total approximately six million barrels from the government of Iraq," the report said.

Other so-called "political beneficiaries" included British lawmaker George Galloway; Roberto Formigoni, the president of the Lombardi region in Italy, and the Reverend Jean-Marie Benjamin, a priest who once worked as an assistant to the Vatican secretary of state and became an activist for lifting Iraqi sanctions.

Millions of oil barrels

Vladimir Zhirinovsky, who heads Russia's Liberal Democratic Party, received millions of barrels of oil he could turn around and sell for a profit, the report said.

Iraqi Oil Ministry records show that 4.3 million barrels were allocated to Alexander Voloshin, who at the time was chief of staff in the administration of Russia's president.

Both Voloshin and Zhirinovsky have denied any wrongdoing.

Thursday's final report of the investigation led by former Federal Reserve chairman Paul Volcker strongly criticises the UN Secretariat and Security Council for failing to monitor the programme and allowing the emergence of front companies and international trading concerns prepared to make illegal payments.

In a letter to Secretary-General Kofi Annan, the committee said its task had been to find mismanagement and evidence of corruption, and "unhappily, both were found and have been documented in great detail".

It said responsibility should start with the UN Security Council, which is dominated by its five permanent members: Britain, China, France, Russia and the United States.

"The programme left too much initiative with Iraq," the letter said. "It was, as one past member of the council put it, a compact with the devil, and the devil had means of manipulating the programme to his ends."

The oil-for-food programme was one of the world's largest humanitarian aid operations, running from 1996-to 2003.

Humanitarian goods

It allowed Iraq to sell limited and then unlimited quantities of oil provided most of the money went to buy humanitarian goods. It was launched to help ordinary Iraqis cope with UN sanctions imposed after Saddam's 1990 invasion of Kuwait.

But Saddam, who could choose the buyers of Iraqi oil and the sellers of humanitarian goods, corrupted the programme by awarding contracts to - and getting kickbacks from - favoured buyers, mostly parties who supported his government or opposed the sanctions.

Tracing the politicisation of oil contracts, the report said Iraqi leaders in the late 1990s decided to deny American, British and Japanese companies allocations to purchase oil because of their countries' opposition to lifting sanctions.

At the same time, it said, Iraq gave preferential treatment to France, Russia and China, which were perceived to be more favourable to lifting sanctions and were also permanent members of the Security Council.

Volcker's previous report, released in September, said lax UN oversight allowed Saddam's government to pocket 1.8 billion in kickbacks and surcharges in the awarding of contracts during the programme's operation from 1997 to 2003.

According to the new findings, Iraq's largest source of illicit income from the oil-for-food programme was the more than 1.5 billion from kickbacks on humanitarian contracts.

Volcker's Independent Inquiry Committee calculated that more than 2200 companies worldwide paid kickbacks to Iraq in the form of "fees" for transporting goods to the interior of the country or "after-sales-service" fees, or both.

Detailed look

Tables accompanying the report give a detailed look at the value of each company's contracts and the amount of money it paid in kickbacks.

According to the findings, the Banque Nationale de Paris SA, known as BNP, which held the UN oil-for-food escrow account, had a dual role and did not disclose fully to the United Nations the firsthand knowledge it acquired about the financial relationships that fostered the payment of illegal surcharges.

The report chronicles Saddam's manipulation of the programme and examines in detail 23 companies that paid kickbacks on humanitarian contracts including Iraqi front companies, major food providers, major trading companies, and major industrial and manufacturing companies.

According to the findings, the programme was just under three-years old when the Iraqi government began openly demanding illicit payments from its customers. The report said that while UN officials and the Security Council were informed, little action was taken.

The report is the fifth by Volcker and wraps up a year-long, 34 million investigation that has faulted Annan, his deputy, Canada's Louise Frechette, and the Security Council for tolerating corruption and doing little to stop Saddam's manipulations.

The smuggling of Iraqi oil outside the programme in violation of UN sanctions poured much more money - 11 billion - into Saddam's coffers in the same period, according to the report.

PHOTO CAPTION

UN Secretary General Kofi Annan (L) and his chief of staff Mark Malloch Brown listen as Paul Volcker, committee chair for the Independent Inquiry Committee into the United Nations Oil-For-Food Programme, presents the committee's final report at the United Nations in New York, October 27, 2005. (REUTERS)