A couple of weeks ago The Sydney Morning Herald reported that Sen. Norm Coleman,
R-Minn., stopped his Homeland Security and Governmental Affairs
Permanent Subcommittee on Investigations from looking into the role of
AWB Ltd, the Australian wheat exporter monopoly, in the UN Iraq Oil
for Food scandal in 2004 after then-Australian Ambassador Michael
Thawley had told him there was no substance to the charges.

The next day, Coleman wrote to Thawley, “You emphasised that the reports
about AWB’s illegal payments were simply the smear tactics of a rogue
journalist and perhaps an insidious trick by a US wheat marketing

As the person that Crikey calls
“the rogue journo who broke Wheatgate,” I believe the AWB scandal has
the potential to change the dynamics of the World Trade Organisation
Doha round agriculture negotiations, become an issue in the 2008
re-election campaign of Coleman and, ultimately, determine how historians
view the Bush administration’s relationship with Australia in the war
in Iraq.

On Oct. 22, 2003, I reported that two 2002 contracts between AWB Ltd,
and the Iraqi Grains Board showed that Iraq had paid AWB about twice
the US price for wheat at that time. An AWB spokesman said the price
“may seem a bit high,” but that it reflected the cost of business and
the cost of transporting the grain from Iraqi ports to mills. Alan
Tracy, president of US Wheat Associates, a farmer-run wheat marketing
group, said that even if the contract did include a provision for
inland transportation and war insurance, the price would still have
been so high that “the contracts appear to confirm that the AWB played
along with Saddam’s corrupt regime.”

Tracy said the situation proved how AWB could use its
government-sanctioned monopoly to compete unfairly and that he was
worried about what tactics AWB would use to try to keep the Iraqi wheat
market after the war. Australia had been an ally with the United States
in the war in Iraq. After the overthrow of Saddam, the Coalition
Provisional Authority put former AWB Chairman Trevor Flugge in charge
of Iraqi agriculture rehabilitation and named Michael Long, AWB’s
global sales chief, as trade adviser to the Iraqi government.

Bipartisan groups of senators led by then-Minority Leader Thomas
Daschle, D-S.D., and Senate Agriculture ranking member Tom Harkin,
D-Iowa, urged the Bush administration to address the charges. The
Australian Embassy went on the attack to defend AWB, calling Daschle’s
charges “reprehensible” and saying that US Wheat Associates was only
trying to damage a competitor.

The Bush administration left the issue to UN investigators. Last
October, the UN commission headed by former Federal Reserve Chairman
Paul Volcker reported that AWB had made $221.7 million in “side
payments” to Hussein’s allies through Alia, a Jordanian trucking
company. The Australian government established a royal commission to
investigate the charges. Current and former AWB officials have
testified that AWB officials knew Alia was paying kickbacks. One
testified the Australian Department of Foreign Affairs and Trade knew
about the deal, but officials in the conservative government of Prime
Minister John Howard have denied it.

The impact of the scandal may soon be felt in the WTO negotiations in
Geneva. If Australia decides on its own to end AWB’s monopoly or comes
increasing pressure from the United States and the European Union to
give it up, then it might argue more vigorously against farm subsidies
in other countries – or it could lose interest in the round.

The Bush administration, which has already lost other members of the
Coalition of the Willing on Iraq, is still trying to stay away from the
scandal. A spokesman for Agriculture Secretary Johanns told The
newspaper last week that the White House saw nothing in the
scandal that would affect the strong US-Australian relationship. “We
wouldn’t expect this to be any irritant to that relationship,” he said.

Coleman said this week he would not reopen his inquiry “at this stage”
and that he hopes the Australian government inquiry “will help
strengthen the already strong U.S.-Australian relationship.”

Those words could come back to haunt Coleman, who engaged in an
extensive campaign to link U.N. Secretary General Kofi Annan, a
graduate of Macalester College in St. Paul, to the Oil-for-Food scandal
and oust him while he ignored the pleas of his wheat farmers to
investigate AWB. But it’s with historians that AWB and the Howard and
Bush governments may pay the price for ignoring the situation. Tracy, a
Republican who was a political appointee at the Agriculture Department
in the Reagan administration, told his U.S. Wheat Associates board last
week: “Folks, this is serious stuff. A wheat company was the largest
source of kickbacks to Saddam Hussein’s regime under a humanitarian
program. Kickbacks that NBC reported could be funding insurgent attacks
against our soldiers. And Australian soldiers.”