Iraqi Trade Rolls Along Despite U.N. Embargo : Mideast: Truckers, smugglers move goods. Officials say there is no broad violation by Jordan of sanctions.

A convoy of heavy trucks, their cargoes shrouded by tarpaulins, lined a road in the fenced duty-free zone east of the Jordanian refinery center at Zarqa recently. Many of the big rigs bore Iraqi license plates.

On the Baghdad-Zarqa-Amman highway, tankers rolled westward through the desert, bringing in Iraqi crude oil. Diplomats in the Jordanian capital report that Iraqi trucks have been spotted around the southern port of Aqaba. Businessmen from Baghdad are frequent visitors to Amman, hotel operators say.

Appearances are not deceiving. The U.N. economic blockade has not shut down the flow of trade to and from Iraq. The Jordanian border leaks, and so by eyewitness accounts do the Turkish and Iranian frontiers.

But Jordanian officials and Western diplomats insist that here, at least, no broad violation of the sanctions is taking place. A combination of age-old border smuggling and some misunderstanding of the U.N. rules is sending up some smoke, but there is no fire of noncompliance, they say. Jordan’s King Hussein has throttled the economic lifeline of President Saddam Hussein, the large-scale movement of goods from Aqaba on the Red Sea to Baghdad, 20 hours of hard driving across the desert.

“The (Jordanian) government is committed to enforcement of the U.N. sanctions,” said a Western diplomat. “They want to get back on the good side of Washington and the other coalition powers.”

The diplomats say that, to their knowledge, the king has not been in touch with the Iraqi strongman since the Persian Gulf War ended. Hussein’s perceived tilt toward Iraq--he contends that he was neutral and sought only a peaceful solution--chilled relations with the United States. The White House has been largely reconciled, but congressional opponents still question Jordanian policy and have blocked resumption of military aid.

With its desperate need for Western financial support, Amman flinches at every report of a blockade violation. But the truck traffic on the Amman-Baghdad highway keeps the talk going.

A look at rumors and reality, according to diplomats, U.N. officials and Jordanian spokesmen:

* The tanker trucks hauling Iraqi oil to the Zarqa refinery provide the majority of Jordan’s energy and are legal under a U.N. blockade exemption that recognized Amman’s inability to get adequate supplies elsewhere at prices it could afford. The shipments continued with only a brief interruption during the war. One factor favoring the deal was that most of the cost of the oil is counted against Iraq’s debts to Jordan, meaning the Baghdad government does not receive cash. However, a recent Reuters news agency report, quoting diplomatic sources, said the Iraqis are also trucking refined oil products into Jordan for transshipment to world markets, which would be a violation of the U.N. sanctions. Baghdad and Amman have denied the report, which said the refined products--diesel fuel and kerosene--were being sold to dealers in Lebanon and Turkey to raise funds for food imports.

* Shipments of Jordanian food, both locally grown and imported, are entering Baghdad in a steady flow. “There’s lots of stuff in there, plenty,” said a Baghdad-based U.N. official interviewed outside the country. The trucks in the duty-free zone outside Zarqa could well have been loaded with Jordanian wheat, barley or packaged goods. The question is whose cargoes they are. Under the sanctions rules, Iraq can legally import food and medicine for humanitarian purposes, but the Hussein regime is broke. Its assets abroad are frozen and the sanctions prohibit its unrestricted sale of oil. Jordanian officials say there are no government-to-government food sales, for cash or credit. According to diplomats, the vast majority of food moving from Jordan to Iraq is privately purchased by Baghdad entrepreneurs who have been making a killing on black-market goods. Prices have risen 1,500% or more from prewar levels. If a Baghdad shopper has U.S. dollars or lots of Iraqi dinars, almost anything is available.

The government, meanwhile, deals out its diminished food stocks in a fixed-price rationing system designed to keep the lid on economic unrest. But while the price is steady, shelves are often bare.

* Weapons are the most sensational subject of sanctions-busting rumors, but little evidence exists to support even speculation. The only concrete trade in weapons occurred just after the war and involved shipments moving from Iraq to Jordan, not the other way around. Jordanian officials moved quickly to put down the sale of automatic rifles and other small arms to Bedouin groups along the frontier, where smuggling in all sorts of goods is traditional and occasionally violent.

Diplomats say the Jordanian government does not have large stores of heavy weapons and ammunition, even if it did want to sell some to Saddam Hussein’s military. Furthermore, if Baghdad is dealing with international arms peddlers and hoping to ship the material in through Jordan, it still would have to figure a way through the U.N naval blockade. With most American and European troops withdrawn from the Persian Gulf, the wartime coalition presence is less visible, but American and other warships are still patrolling the Gulf and the Red Sea, looking for sanctions busters. Cargo ships are hailed, boarded and inspected.

The economic blockade of Iraq has hurt Jordan almost as much as the target nation. The country’s export economy had been designed to service its bigger neighbor during the 1980-88 Iran-Iraq War, and the Gulf War sanctions have crippled the Jordanian shipping and transport industries, along with manufacturing and pharmaceutical sectors that geared their products to the oil-rich Iraqi market.

Nevertheless, diplomats in Amman say, King Hussein appears committed to backing the sanctions in the course of mending his political fences with the West.

Border smuggling is another matter, one Western envoy remarked, adding: “What there is is small scale and it’s a paid deal. Nobody’s giving credit to the Iraqis.”