Saddam's illegal oil sales no secret

Ken Guggenheim
Associated Press
12 December 2004

WASHINGTON _ Saddam Hussein was dead broke, the result of U.N. penalties. Or so it was thought. So where did the Iraqi president find the money to pursue missile technology from North Korea, air-defense systems from Belarus, and other prohibited military equipment? The CIA's top weapons inspector in Iraq said Saddam carried out much of that trade with proceeds from illegal oil sales to Syria, one of three Iraqi neighbors that bought oil from Baghdad in defiance of the United Nations.

Trade with Syria, Jordan and Turkey was the biggest source of illicit funds for Saddam, more so than the much-maligned United Nations oil-for-food program, according to investigations of Saddam's finances. Though considered smuggling, most of the trade took place with the knowledge _ and sometimes the tacit consent _ of the United States and other nations.

With Republican-led congressional committees investigating allegations of oil-for-food corruption, some Democrats are pressing for answers about why the U.S. did little to stop the smuggling. The issue is part of a series of broader questions these legislators have about what U.S. officials knew of Saddam's overall illicit finances. "I am determined to see to it that our own government's failures and oversights or mistaken judgments and decisions should also be exposed," said Rep. Tom Lantos, D-Calif. Some Republicans are promising to hold hearings on the matter next year.

In the years between the two Iraq wars, Saddam's oil sales were supposed to be limited to those under the U.N. oil-for-food program. From 1996 to 2003, the $60 billion program let Iraq sell oil and use proceeds to buy food, medicine and other necessities. That program has come under scrutiny because of allegations that Saddam received kickbacks and bribed U.N. and foreign government officials. Besides the congressional inquiries, U.N. Secretary-General Kofi Annan has appointed former Federal Reserve Chairman Paul Volcker to head an investigation.

The report by CIA weapons inspector Charles Duelfer found that oil-for-food corruption generated $1.7 billion for Saddam. It said illegal oil contracts generated about $8 billion: $4.4 billion from Jordan, $2.8 billion from Syria and $710 million from Turkey. A short-lived agreement with Egypt generated $33 million. Overall, Saddam had $10.9 billion in illicit revenue from 1990 to 2003, Duelfer said.

The Senate Governmental Affairs investigations subcommittee, using a different methodology, came up with a $21.3 billion overall estimate, including $13.7 billion from oil smuggling. The panel did not break that figure down by nation, and it includes some smuggling related to the oil-for-food program. Lawmakers frequently lump together estimates of Saddam's illicit income from smuggling and from the oil-for-food program, blaming the United Nations for the full $21.3 billion. Critics of the United Nations say a surge in smuggling was made possible by the general lawlessness caused by oil-for-food corruption.

But Democrats say Annan cannot be held accountable for smuggling they say the U.S. condoned. "When three-quarters of the money ... is something that we specifically acquiesced in, it just sort of highlights how wrong it is to put it at Kofi Annan's doorstep," said Sen. Carl Levin, D-Mich. Former State Department officials said the United States had little choice but to allow some of these sales to Iraq's neighbors.

Jordan was desperate after the 1991 Gulf War. The U.N. penalties against Iraq had cost Jordan a major trading partner. Iraq owed Jordan money, but could not repay without selling oil. Jordan needed oil, but could not import from other producers angry that Jordan supported Iraq in the war. "We realized that the Jordanian economy and the Jordanian state would collapse" if it didn't get access to oil, said David Mack, deputy assistant secretary of state for Near East affairs at the time.

The United Nations formally acknowledged Jordan's oil dealings with Iraq in May 1991, without approving or disapproving of it. Turkey had an important role in containing Saddam: Its Incirlik air base was used by U.S. military planes that patrolled a no-fly zone over northern Iraq. "With Turkey, [the oil sales were] plain illegal. It was smuggling, but everybody just said, 'Oh well, geez, it was too hard to try to do anything about that," Mack said.

The shipments to Jordan and Turkey were not concealed. Trucks carrying oil were frequently seen entering those countries from Iraq. The Clinton and Bush administrations annually issued waivers that allowed the two countries to continue receiving U.S. aid despite their violations of the Iraq penalties.

Syria was another matter. Allen Keiswetter, deputy assistant secretary of state for Near Eastern affairs in 2000-2001, said U.S. officials were aware that Syria was importing oil from Iraq through a pipeline. "We objected to it mightily and often, but there did not seem any good way to stop it, short of military action," he said. Syria's oil-purchase agreements with Iraq lasted from 2000 to 2003. Iraq's proceeds were deposited in bank accounts in Syria, and Saddam used them to buy conventional weapons and items that could be used for civilian or military purposes, Duelfer's report said. During that period, Syria was the main source of illegal exports to Iraq.

More than with Jordan or Turkey, Duelfer tied the proceeds from the Syria-Iraq trade agreement to Iraq's illegal weapons trade with various countries. While Duelfer found no weapons of mass destruction in Iraq _ President Bush's main justification for the Iraq war _ Duelfer has argued that Saddam's ability to subvert the U.N. penalties likely meant that the embargo eventually would collapse, giving Saddam an opportunity to pursue chemical, biological or nuclear weapons.

Citation: Ken Guggenheim, "Saddam's illegal oil sales no secret," Associated Press, 12 December 2004.