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Chevron may settle on Iraq oil deal

Janet Babin May 8, 2007

KAI RYSSDAL: The oil giant Chevron is said to be ready to make a deal with U.S. prosecutors. But it’s not going to fess up to breaking any laws.

The company’s under investigation for its involvement in the Iraq Oil for Food scandal. The United Nations program was supposed to benefit the Iraqi people, but it also wound up lining Saddam Hussein’s pockets.

Marketplace’s Janet Babin has more on today’s development from North Carolina Public Radio.

JANET BABIN: Oil for Food was supposed to be a way for the Iraqi people to pay for humanitarian supplies, despite a U.N. embargo. It was also supposed to keep Iraq’s big whigs from using oil money for Ak-47s or Chanel suits.

But the program initially allowed Iraq to choose the buyer — and set the price. Tom Wallin with Energy Intelligence says that led to corruption:

TOM WALLIN: The Iraqis would demand a surcharge. It started out initially as a fairly small surcharge, like ten cents a barrel.

But the surcharges grew, and so did Saddam Hussein’s bank account — by $2 billion according to some accounts.

The New York Times reports that Chevron is now close to acknowledging that it should have known it paid the kickbacks in exchange for Iraqi oil. But the company’s not expected to admit to wrongdoing.

And Stephen Leeb with Leeb Capital Management says he doesn’t think Chevron did do much wrong. At least not the top managers. He says the global oil market is complicated — kind of like doing business in our Wild West.

STEPHEN LEEB: Most of our oil, or most of the incremental oil now, almost all of it, comes from countries that are in some way either politically volatile or economically disadvantaged. And it’s very easy to do things that are wrong.

The New York Times says Chevron could face up to $30 million in fines. But to a company with $200 billion in revenues each year, that fine will probably end up as a footnote in Chevron’s financial statements.

I’m Janet Babin for Marketplace.

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