Quotes of the Day

The suits who sell wheat globally on behalf of Australia's farmers are known professionally for their hubris and sharp elbows. After former U.S. Federal Reserve chairman Paul Volcker fingered AWB Ltd. for funneling $A290 million in bribes to Saddam Hussein, Australia's monopoly wheat merchants lost some of their swagger. Since Jan. 16, AWB executives have squirmed and stuttered through testimony in Sydney during Commissioner Terence Cole's inquiry into the activities of local companies involved in the U.N. Oil-for-Food Programme. Last week, while counsel-assisting the inquiry John Agius was drilling for truth in a barren headspace, a matron in the public gallery was grimly calculating the value of her stock portfolio. Her AWB holdings have been thrashed by 25% in the past three weeks. For once, the stock market is running some way behind popular sentiment.

Cole, a retired judge, has heard testimony from former and current AWB managers - and scooped up a truckful of documents - that goes far beyond what Volcker's investigators were able to gather. In 1999, when it was operating as the government-owned Australian Wheat Board, the Iraqis demanded "inland transport fees." The Australians cooked up a scheme to pay up, thus violating U.N. sanctions. According to former AWB executive Mark Emons, "There was no doubt in my mind that in some form or other that money was going to be received by an Iraqi."

Other scams involved paying Jordanian company Alia (owned by Iraq's Ministry of Transport) trucking fees and "loading up" the value of wheat contracts to recover a debt once owed to BHP-Billiton. AWB executive Michael Long described the fluid and intimidating environment of working in Iraq. Although he could not be certain whether trucking fees to Alia were legitimate, Long told the inquiry he was driven by higher motives: feeding Iraq's hungry people, protecting Australian taxpayers and getting a good deal for 35,000 wheat farmers. After being shown documents by Agius outlining the scams, Long, who came to be seconded to the Coalition Provisional Authority in Iraq in 2003, had an epiphany in the witness box: "I now fully understand that it was a clever ruse by the Iraqi government to enact an elaborate scheme of deception."

The picture emerging from the Cole Inquiry is a "whatever it takes" culture at AWB and a "don't ask" policy by Canberra. It's true that kickbacks are part of the way of doing business in the Middle East. Yet nobody at official levels was curious enough to ask whether some of this k-commerce was going to Saddam. To move grain into the Iraqi market, AWB proved to have the deepest pockets in paying bribes to a pariah regime - propping up Saddam's kleptocracy and breaking U.N. sanctions - as Australia and its closest allies were muscling up for war in the Gulf. AWB's fate is terminal. To the glee of its international competitors, who have long whined about Australia's selling power, AWB's single-desk wheat marketing arrangement will come under review. Executives could also face criminal charges. On Friday, Cole announced that BHP-Billiton's actions would also be examined.

Understandably, there's an overwhelming desire by those in Canberra who have had dealings with AWB - John Howard and his senior ministers, the Department of Foreign Affairs and Trade, various agents who have vouched for it - to contain the fallout to the rogue company and its managers. So far, the paper trail and testimony to Cole is not conclusive enough to do serious political damage to the government. But each day elicits a fresh twist and new questions. Why did Ambassador Thawley lobby the U.S. Congress to drop its investigations into AWB, a private company? What did DFAT officials know about the wheat exporter's activities in Iraq? What - and when - did they tell their political masters? The cumulative effect of the revelations is a sense of how could the Howard government and its officials not know. Then again, the paradox of this government has been its ability to micro-manage all aspects of policy while retaining a plausible degree of ministerial deniability.

Of late, Howard's information irrigators have been strangely quiet and humble; the AWB scandal is tumbling beyond their comfort zone. With Parliament resuming this week, Labor leader Kim Beazley has vowed to act as a counsel-assisting Cole by interrogating Howard and his ministers in a way neither he nor his party has been able to manage in a decade. Lines like "Aussie dollars for Iraqi bullets" from the prolix Beazley might prove to be potent and portentous. This scandal will hurt Australia's reputation at the U.N. and in some friendly lands. Wheat farmers might soon find the going tough - as will the Howard executive, which is now traveling in hostile, and completely unfamiliar, territory.

• Tom Dusevic
• The Oil-for-Food scandal will harm Australia - and the Howard government