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US stance on Hussein's oil sales eyed

WASHINGTON -- Saddam Hussein was dead broke, the result of UN 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 Hussein 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 Hussein, more so than the much-maligned UN oil-for-food program, according to investigations of Hussein'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 United States did little to stop the smuggling. The issue is part of a series of broader questions these lawmakers have about what US officials knew about Hussein'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 Representative Tom Lantos, Democrat of California.

Some Republicans are promising to hold hearings next year. "I believe the smuggling issue is huge," said Christopher Shays of Connecticut, chairman of the House Government Reform subcommittee on national security.

During the dozen years between the two Iraq wars, Iraq's oil sales were supposed to be limited to those under the UN oil-for-program. From 1996 to 2003, the $60 billion program allowed Iraq to sell oil and use proceeds to buy food, medicine, and other necessities. That program has come under scrutiny because of allegations that Hussein received kickbacks and bribed UN and foreign government officials.

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

The Senate Governmental Affairs investigations subcommittee, using a different method, came up with a $21.3 billion estimate, including $13.7 billion from smuggling.

Lawmakers frequently lump together estimates of Hussein'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 that they say the United States 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 Senator Carl Levin, Democrat Michigan.

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 Persian Gulf War. The UN 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.

Turkey, which had trade agreements with Iraq from 2000-2003, also said it was hurt because of the UN penalties.

Turkey had an important role in containing Hussein: Its Incirlik air base was used by US military planes that patrolled a no-fly zone over northern Iraq.

"With Turkey, it was 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 Clinton and Bush administrations issued waivers that allowed Jordan and Turkey to receiving US 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 US officials were aware that Syria was buying 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.

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