URL: http://www.nationalpost.com/news/updates/story.html?f=/news/updates/stories/20010609/business-1166036.html

June 9, 2001

Iraqi oil trade flourishes, sanction-busting spans several countries

LOUIS MEIXLER Canadian Press

HABUR, Turkey (AP) - More than 100 flatbed trucks haul huge canisters of Iraqi fuel into Turkey almost every day, part of a massive operation that spans several countries and funnels an estimated $1 billion a year into Saddam Hussein's pockets.

The United States is pressing to crack down on that trade, which violates U.N. sanctions. But at the bargain price that Saddam is offering his buyers, the effort may be futile, Turkish oil transporters and analysts say.

"If they cut it one way, it will come out the other way," said Bulent Alirza, an analyst at the Washington-based Center for Strategic and International Studies. "It is almost impossible to nail the door shut."

Ending the trade would hurt U.S. allies like Jordan and Turkey and devastate the economy of an autonomous Kurdish enclave in northern Iraq, where the revenue is one of its only sources of income.

Washington has long regarded the Kurds, who have fought Saddam for decades, as key to any anti-Saddam coalition.

"The Americans are caught," said Ilnur Cevik, the editor-in-chief of the Turkish Daily News. "The U.S., while trying to stop the border trade to scuttle Saddam, has to allow the trade to help the Kurds."

If you cut the trade "you finish off the Kurds and the so-called opposition," Cevik added.

The importance of the sanctions-busting trade to Iraq was highlighted Monday, when Iraq announced that it was cutting off its U.N.-monitored oil exports but would continue to ship to neighbours who pay the government in violation of U.N. controls.

At Habur, the only border crossing between Iraq and Turkey, hundreds of trucks laden with Iraqi diesel waited Tuesday in a 3.2-kilometre-long line. In the first five days of June, 600 of the trucks crossed the border, said Abdullah Erin, the official in charge of the gateway. Each truck carries about 1,300 gallons.

"Iraq has a very successful program of sanctions-busting," said Toby Dodge of the Royal Institute of International Affairs in London. "It's partially how the regime gets its money."

Before the cutoff, Iraq sold some two million barrels per day under the U.N.-monitored program, which requires that the money be spent on humanitarian goods like food and medicine, and as reparation for Iraq's 1990 invasion of Kuwait.

Some 150,000 barrels a day flow through Syria, while another 100,000 barrels of oil per day go to Jordan and Turkey, estimates Nathaniel Kern, an analyst with Foreign Reports Inc., a Washington-based oil consultancy company.

Kern said Iraq charges around $16 US per barrel, a 30 per cent discount to the price that the nation charges through the U.N. program. Traders said the discount was not that great, but gave no figures.

The Turkish trade has been falling recently, but truckers and analysts say that is due more to Turkey's economic crisis and complaints from oil companies about unfair competition than due to any crackdown.

Syria denies that it is illegally importing Iraqi oil, saying that it is only bringing in Iraqi crude to test an old pipeline from Iraq. Oil analysts, however, say that Syria is importing Iraqi oil and masking those imports by using the oil at home and exporting an equal volume of its own oil.

Turkey emphasized its dependence on the trade, which is estimated to support some 45,000 truck drivers in the southeast, when Prime Minister Bulent Ecevit visited the region on Sunday and vowed to increase the trade.

"We know that the primary way to increase the region's income is the diesel trade," Ecevit said in Sirnak, an impoverished town near the Iraqi border where many of the truckers live. "We have decided to expand this, not narrow it," Ecevit added.

Turkey claims to have lost $30 billion to $40 billion US in trade since sanctions were imposed in 1990.

A new border gate is expected to be opened within two years, Foreign Minister Ismail Cem said Thursday.

"If they close the border, we will die of poverty," said Yasar Evim, a Turkish truck driver who hauls crude oil from an Iraqi refinery in Mosul.

He said he drives to Mosul each month to pick up the crude, which he must deposit at a refinery owned by the Turkish government. Turkish businessmen say they pay for the crude in bartered goods and not cash.

Diesel traders buy their fuel from the Kurds, who purchase it from Iraqi refiners. Turkish truckers pay the Kurds about 45 cents a gallon for the fuel, which they can sell at a government-owned depot for roughly $1.30 US a gallon.

U.S. warplanes that patrol a no-fly zone over northern Iraq are based in southern Turkey, and U.S. diplomats said that Washington is looking at ways to tighten the sanctions without jeopardizing the border trade and angering Turkey. The U.S. has tolerated the oil trade in the past because of its benefits to Turkey and Jordan.

-- Martin Thompson (mthom1927@aol.com), June 09, 2001