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More than 2,200 firms involved in the United Nations oil-for-food program paid $1.8 billion in illicit surcharges and kickbacks to Saddam Hussein's government, says a new UN-backed report.

The committee, led by former Federal Reserve chairman Paul Volcker , found that illegal surcharges were paid for humanitarian contracts and kickbacks for oil contracts.

"Iraq's largest source of illicit income under the program came from kickbacks paid by companies that had been selected to receive contracts for humanitarian goods under the program," the report said, adding that companies and individuals from 66 countries paid illegal kickbacks in the scheme.

"Available evidence indicates that Iraq derived more than $1.5 billion of income from the kickbacks."

The oil-for food program was launched after the United Nations imposed sanctions on Iraq following Saddam Hussein's invasion of Kuwait in 1990.

Under the program, Iraq was allowed to sell limited and then unlimited quantities of oil on the condition that most of the money would be used to buy humanitarian goods.

Saddam could choose the buyers of Iraqi oil and the sellers of humanitarian goods. But he awarded contracts to favoured buyers who supported his regime or opposed the sanctions.

For example, the report alleges the Brussels-based Volvo Construction Equipment paid $317,000 in extra fees to Iraq on a $6.4-million contract. The group is separate from Volvo automobiles, which is owned by Ford.

South Korea's Daewoo International and Siemans SAS of France were other companies that paid illegal surcharges, the report alleges.

Prominent politicians also made money from the program, the report said.

Jean-Bernard Merrimee, France's former UN ambassador, received $165,725 in commissions from oil allocations awarded to him by the Iraqi regime, the report found. He is now under investigation in France.

Other "political beneficiaries" included British lawmaker George Galloway and Roberto Formigoni, president of the Lombardi region in Italy.

Vladimir Zhirinovsky, who heads Russia's Liberal Democratic Party, received millions of barrels of oil he could turn around and sell for a profit, the report said.

Zhirinovsky has denied any wrongdoing.

The committee wrote in a letter to UN Secretary General Kofi Annan that its task had been to find mismanagement and evidence of corruption.

"Unhappily, both were found and have been documented in great detail."