The Man Who Bought the Oil From Iraq
Published: October 19, 2004  (must register to view original article)

HOUSTON, Oct. 18 - Billions of dollars of Iraqi oil had been sold under a United Nations program - and food and other goods bought with the proceeds - when Saddam Hussein decided in 2000 that he personally wanted a bigger cut of the action. Documents now suggest that at least one United States company acceded to that demand, paying surcharges that kept the oil flowing.

The action by the Coastal Corporation, which was founded by the Texas entrepreneur and oilman Oscar S. Wyatt Jr., is detailed in a formal Iraqi government tally of secret payments made from September 2000 to December 2003, when steps were taken by American and British officials to stop the surcharges.

Coastal, the only publicly traded American oil company on the list, is shown as having paid $201,877 in surcharges. It is a small piece of the $228 million in surcharges on oil sales that Mr. Hussein collected, largely from Russian companies, according to a Central Intelligence Agency report released last week.

Mr. Wyatt, a former drill-bit salesman in South Texas who built a hydra-headed energy empire, said through a spokeswoman Monday that he had no knowledge of Coastal's paying any surcharges. A spokeswoman for the El Paso Corporation, which acquired Coastal in 2001, declined to comment, citing a grand jury subpoena the company received from a federal court in New York.

The inclusion of Coastal on the list - prepared by postwar officials from the State Oil Marketing Organization of Iraq - is one indication of the special relationship that Mr. Wyatt and Coastal had with Iraq, dating back three decades.

Mr. Wyatt, 80, acknowledged Monday through the spokeswoman that he had traveled to Baghdad as recently as early 2003, as the United States was preparing for war, to meet with officials in Mr. Hussein's government. Mr. Wyatt - once called in Texas Monthly magazine "the most hated oilman in Texas" - met Mr. Hussein in 1972, just after Iraq's oil industry had been nationalized, and eventually became one of the biggest United States importers of Iraqi oil.

The two met again in 1990, after Iraq invaded Kuwait and Mr. Wyatt flew to Baghdad on a company jet to help negotiate the release of nearly two dozen American oil workers whom Mr. Hussein had turned into "human shields."

The relationship was so close that when the United Nations authorized Iraq in 1996 to begin selling oil again, under the Oil for Food program, Mr. Wyatt and Coastal secured the first tanker shipment to leave the country.

After Coastal was sold to El Paso, Mr. Wyatt is listed personally as the recipient of an Iraqi oil allocation and Coastal was no longer listed. United States companies were not allowed to have any direct contact with the Iraqi government outside of the official Oil for Food program, and any money that went to Mr. Hussein's government was supposed to be used only to pay for food, medicine and other approved items.

Mr. Wyatt said in an interview earlier this year that he was aware that it was a common practice within the Iraqi oil industry for companies to pay surcharges, generally 10 to 35 cents a barrel.

Regarding Coastal's shipments, Mr. Wyatt said in the interview that company executives had no doubt that a broker, but not the company, had to pay a surcharge. Mr. Wyatt said Coastal officials also told him that "there was always a charge at the port" as well.

The years of effort on Mr. Wyatt's part to court Iraqi officials and build a venture to export Iraqi oil to the United States produced ample rewards: he and companies that he has been linked to earned an estimated $23 million in profit in the seven years of the Oil for Food program, according to sales and profit estimates included in the C.I.A. report by Charles Duelfer; Mr. Wyatt disputes that figure.

The unusually close ties with Mr. Hussein's Iraq and the inclusion of Coastal on this list of entities that paid the surcharges have drawn Mr. Wyatt into a maelstrom of inquiries, including efforts by committees in Congress and officials at the Treasury Department and the United States attorney's office in Manhattan.

"If you did not pay, you did not play," said a spokesman for the House International Relations Committee, which is investigating the Oil for Food program, including the operations of Mr. Wyatt and other oil traders. "We have an obligation to find out what happened."

Explaining his affinity for dealing with Iraq, Mr. Wyatt once compared his approach as an independent oil trader with that of the largest American oil companies like Exxon Mobil and ChevronTexaco. These multinational concerns had a hold on the easily accessible markets in the Persian Gulf and although they also imported Iraqi crude under the United Nations program, they are thought to have dealt in much smaller quantities than Mr. Wyatt.

"The majors controlled the Saudi Arabian oil; most of Abu Dhabi crude was contracted to Asia," Mr. Wyatt said in the interview earlier this year. "So those that didn't have contracts had an opportunity with the Iraqi sour crude."

By the late 1980's, Coastal was importing as much as 250,000 barrels of oil a day from Iraq. As these oil imports became more and more important to Coastal's operations, Mr. Wyatt became more outspoken in his opposition to any threatened or standing trade sanctions by the United States in the Middle East, including a move by Congress to impose restrictions on trade with Iraq after Mr. Hussein used poison gas against the Kurds.

It was Mr. Wyatt's surprise trip to Baghdad in December 1990, however, that finally brought his relationship with Iraq into the spotlight. He met then with Mr. Hussein to negotiate the release of American hostages. The effort was opposed by the administration of George H. W. Bush, but Mr. Wyatt came home a hero and he wept at a meeting of the released hostages and their families.

"It was not a stunt," said Bobby Parker, a drilling rig electrician who had been held for 128 days before being rescued. "Oscar Wyatt is just not that type of person."

The hostages were safe, but ultimately, Mr. Wyatt's goal had not been fully achieved. He had hoped to prevent a military move by the United States on Iraqi-occupied Kuwait, a war that, he said, the United States had no reason to start.

It would be more than five years before Mr. Wyatt's ties to Iraq again raised eyebrows, when the first tanker laden with crude oil sailed out of Mina al-Bakr, Iraq's main export oil terminal, in December 1996, in Iraq's legal return to global oil markets.

The ship had been chartered by one of Mr. Wyatt's companies.

This was the start of the Oil for Food program, which ultimately would result in the export of 3.4 billion barrels, earning $65 billion for the Iraqi government over the next seven years, money that was used to buy food and medicine, maintain oil fields and pay reparations from the first gulf war, among other spending.

To maintain at least a hint of sovereignty, the United Nations allowed Mr. Hussein to pick the customers he would sell oil to and those contractors he would buy goods from, although the United Nations was supposed to monitor every sale or purchase and had the right to reject any proposed contract.

From the start, Mr. Hussein was apparently looking for ways to defraud the system, federal investigators say. First, investigators said, he was smuggling oil out of Iraq beyond the limits imposed by the Oil for Food program. He was also demanding payments from contractors that wanted to sell goods to Iraq. And finally, during part of the program, he was demanding that companies or individuals who intended to purchase oil, pay a surcharge for that right, the report by Mr. Duelfer says.

In total, the actions earned Mr. Hussein an estimated $11 billion in improper profits, the report says.

Mr. Wyatt declined, through his spokeswoman, to explain exactly what motivated his trip to Iraq in early 2003, in the final months of the Oil for Food program. He again was listed among the parties who were offered an allocation by the government, the 13th time in of the program's 13 phases that his name or Coastal's appeared on the allocation list.

But in this instance, no one ever picked up the final allotment that was granted.

The spokesman for the House International Relations Committee said that even if Mr. Wyatt or any other United States citizens or businesses did not pay surcharges, the committee members want to know how they ended up on Mr. Hussein's allocation list.

Mr. Wyatt, listed through Coastal or as an individual, is the only American who was granted allocations that resulted in oil being acquired in each of the periods in which the surcharges were being assessed, according to the Duelfer report.

During the ninth phase of the exports, from January 2001 to June 2001, "since many existing customers refused to pay said surcharge," the State Oil Marketing Organization "was instructed to sign contracts with any company willing to pay the surcharge," the report said.

Mr. Wyatt's name is on this list as having taken eight million barrels of oil.

But Mr. Wyatt said, through his spokeswoman, that he never held a contract or directly purchased oil from Iraq, even though his name and his company's name were listed repeatedly in the report of Iraqi oil contractors by the C.I.A.

Records maintained by the State Oil Marketing Organization of Iraq, which coordinated the Oil for Food program, say that Coastal paid $201,877 in surcharges on about one million barrels of oil, while two other companies that Mr. Wyatt is associated with in the Iraq records - Nafta Petroleum of Cyprus and Mednafta Petroleum of Cyprus - are listed as having paid a total of $7 million in surcharges. In total, Iraq collected $222.6 million in surcharges. Mr. Wyatt said through the spokeswoman that he had no ownership interest in Nafta and Mednafta.

Molly Millerwise, a spokeswoman for the Department of Treasury enforcement division, would not address questions specifically about Mr. Wyatt or Coastal. But she did say that an investigation of the program was under way.

"As a government, we established a policy that allowed U.S. companies to purchase petroleum, to supply pipeline parts and equipment and to supply humanitarian goods to Iraq,'' she said. "The Office of Foreign Assets Control is reviewing the licenses and if they find any circumstances of wrongdoing, they will move forward with appropriate enforcement."

Within Texas, where the men who built its petroleum industry are noted for brash actions and braggadocio, Mr. Wyatt continues to loom large.

"He is still wheeling and dealing, going 90 miles an hour," said Bill Greehey, who worked for Mr. Wyatt in the 1960's and 1970's and, on occasion in the years since, had legal battles with him as chief executive of Valero Energy, a refining company in San Antonio. "He is not afraid of the devil."

Simon Romero reported from Houston for this article and Eric Lipton from Washington. Susan Sachs, in Istanbul, contributed reporting.