Saddam Oil Makes Bulgaria's Socialist Party Slip

By Mitko Mandjukov, Alexei Lazarov & Nikolai Staikov

There are several certain things around the scandal with the Iraqi oil and the Bulgarian Socialist Party (BSP). For long years, a member of BSP leadership, Zahari Zahariev, had kept contacts - both political and business - with the regime of Saddam Hussein. He worked as a "consultant" for a company owned by Petar Mandjukov, a businessman the only thing that can be said for, in an effort to prove his financing the socialist party, is that he is the publisher of the Leftist newspaper Duma.

The relationships between those embroiled in the scandal are multifarious. They are linked with the way the political parties get financed, and with the trade of oil and arms - fields of business in which confidentiality is a sine qua non. Additional heat to the scandal is put by the fact that the incumbent Bulgarian President Georgi Parvanov (he was chairman of BSP in the period 1997 - 2002) turned out to be involved in it; Parvanov was chairman of BSP at the time when the Iraqi oil developments took place.

What Happened?

In the week starting January 26, 2004 the Iraqi daily Al-Mada published a list of 270 oranisations, firms and persons who were given millions of barrels of Iraqi oil by Saddam's regime in return for political support for his rule. Several European political parties are also on the list, among them the Bulgarian Socialist Party. Across its name on the list the words "12 million barrels" could be read. This one line, published in an Iraqi newspaper which comes out in 10,000 copies, gave rise to a political storm in Bulgaria.

Understandably, both the BSP leader, Sergei Stanishev, and President Parvanov flatly denied immediately to have received whatever aid in whatever form, either from Iraq, or from Saddam personally. Both of them ordered that probes be started, within the party and by the intelligence services, respectively.

Three days after the publication, the BSP chairman announced he had found some explanation about how BSP got on the list. This explanation was based, almost exclusively, on the confessions of Zahari Zahariev, a member of BSP supreme council. He, in his capacity of chairman of the Slavyani foundation, was a member of the Baghdad forum, an international NGO. Zahariev had taken part in the forum's meetings on several occasions and had been in close contact with Iraqi authorities.

A Little Bit of History

Zahari Zahariev was an unpaid aide of Bulgaria's communist-era state security service in the period 1969-1984. In 1997, the U.S. newspaper Washington Times linked Zahariev to an affair with illegal arms exports to Iraq. According to the newspaper, a group of Bulgarian arms dealers together with Czech military officials were having talks with Iraqi representatives for the sale of $375 mln worth of five radar stations Tamara. The newspaper claimed that a great deal of Russian-made arms had been prepared for sale, all camouflaged with the origin reference "Made in Bulgaria". Zahariev flatly denied the accusations. The Washington Times quoted unnamed intelligence sources as saying that also the then BSP leader Georgi Parvanov was acquainted with the deal. The President dismissed the allegations and said he would sue the newspaper.

What is certain, however, is that Zahariev has good connections with Iraq. Moreover, he is among the founders of the Association for Friendship between Bulgaria and Iraq. Zahariev has not concealed this fact and added his connections dated before 1989. In 1994, he was a member of a Bulgarian delegation to Baghdad that negotiated about the repayment of the debt Iraq owes to Bulgaria. In 1997, Zahariev told a Bulgarian daily that Iraq was ready to extend a $300 mln worth of a grant in oil and oil products. The idea had been discussed back in 1996 during Zahariev's visit to Baghdad when he met with Iraqi foreign minister Tariq Aziz and the vice president Taha Yassin Ramadan. It was in 1998 when Zahariev was informed that the matter had been discussed at a meeting of Iraq's Revolutionary Command Council and that a decision had been made in principle. The Iraqis said there would be no problem for such a deal; it would not have fallen under the UN embargo, since it was about humanitarian aid. Zahariev said the $300 mln would be outside the Iraqi debt to Bulgaria.

"This would be a step with a certain political resonance for Iraq and they [the Iraqis] will also get some dividend," he added mysteriously. Asked if during his meeting with Aziz he had received proposals to cooperate with the Iraqi regime against reception of some grants, he flatly denied.

BSP Turns Away

During a special news conference occasioned by the scandal, BSP leader Stanishev announced that a letter had been found in BSP archives written by the party's international relations secretary, Kristian Vigenin, and dated July 1, 2002. In the letter, Vigenin told the Iraqi mission that "Zahari Zahariev has been given no authority to represent BSP leadership as well as that the party has signed no protocol for cooperation with the Ba'ath party, headed by Saddam Hussein." Unfortunately, BSP had not found the Iraqi Embassy's letter that caused this response and could not tell what the initial occasion was about. The party called Zahariev immediately and asked for an explanation. He told his party that from the beginning of 2001 until the end of 2002 he worked as a consultant for Machinoexport, a company that he claimed had got a licence from the Bulgarian government at the end of 2001 to do business with Iraq under the Oil for Foods programme.

Meanwhile, the Ministry of Economy issued an official information that the Bulgarian authorities had never been authorised to issue either licences or permits for participation under the programme. The contract Machinoexport had worked on was for metal-processing machinery; it was concluded in 2002 and was executed in early 2003, right before the start of the war. Before BSP, however, Zahariev said that Machinoexport had received not 12 million barrels of oil, but only one million.

BSP's investigation provides an explanation to the flagrant discrepancies in the dates. According to its information, the Al-Mada-published list referred to oil that was shipped in the period 1998-2002. However, the daily strictly limits the time only for 1998, and not for a longer period. BSP representatives said Zahariev's statements that he had not involved BSP during his talks in Baghdad were doubtful. Zahariev told Stanishev he was known in Baghdad as a former BSP deputy and a member of its supreme council and this cannot have led to any confusion. BSP sources said it was plausible that Zahariev used the name BSP to make Machinoexport a more reliable partner for the Iraqis and ultimately win the contract. Should this be the case, the question remains about the 11-million-barrels-of-oil difference.

A majority owner of Machinoexport is PM Group, a company which is owned by Petar Mandjukov's family. Mandjukov told a news conference that Machinoexport had got a 2.5 million barels of oil export quota, of which one million had been utilised with a profit of less than $30,000. It must be noted here that the delivery of metal-processing machinery that Machinoexport did to Iraq and the oil exports are, most probably, two separate deals under the Oil for Foods programme. The money were transferred to a company which is also currently crediting Machinoexport with some $500,000. At the same time, Mandjukov dismissed all allegations that he had funded BSP election campaigns as well as Georgi Parvanov's running for president in 2001. Sergei Stanishev also said BSP had not got any money from Machinoexport. Nevertheless, Mandjukov has always been close to BSP. At the end of 2001, he bailed out the party newspaper Duma, renting the trade mark and assuming the entire publishing process.

Mandjukov and Zahariev Speak

According to Mandjukov, some two years ago Zahariev shared with him he was going to travel to Iraq and Mandjukov had asked him if he "could help for getting a quota" from the Iraqi authorities. Zahariev replied in the affirmative and was given a job at Machinoexport.

Mandjukov went on to say that Zahariev executed his task through "certain consultation" and "pure lobbying". He rejected to have involved the name of BSP in any way.

Zahariev told Capital he had never abused the name BSP and that he was merely a consultant and had not taken part in any negotiations with the Iraqis. At the moment, when he was employed at Machinoexport, the talks had already been underway and that a key role in the deal was played by Hristo Hristov who, Zahariev said, also had considerable connections in Iraq.

Hristov is one of the most prominent communist-era financial experts. For five years he was Bulgaria's deputy trade representative in London. According to his former colleagues, he was the man who had established contacts with Robert Maxwell, a British businessman who cooperated with the secret services so that Bulgaria could bypass the embargo on technological goods for the communist countries. After his return from London, Hristov headed the "relations with developed capitalist countries" department at the Ministry of Foreign Trade. Later, he was minister of Foreign Trade in three communist cabinets.

The real scandal, however, is not in the fact that businessmen close to BSP have used their relationships with party politicians and former communist functionaries to do business with their pals from Saddam's regime. The question is whether any new members of BSP leadership have taken part in these schemes and whether the party has received illegal aid from Saddam and why. The truth can come out, however, only following a thorough investigation in the Iraqi archives. Something that could take place quite very soon.