Iran Opens Key Isle to Iraqi Oil Smugglers, U.S. Says

To aid Iraq’s largest sanctions-busting operation, Iran has opened its strategic Qeys island for secret transfers of illicit Iraqi oil to ships that can evade a United Nations blockade, according to Clinton administration officials.

Traffic has become so heavy in recent weeks that the regime of Iraqi President Saddam Hussein is smuggling as much as 100,000 barrels of oil a day, netting as much as $42 million a month that is being used in part to rebuild Iraq’s weapons of mass destruction, U.S. officials say.

“Saddam Hussein is very dependent on this illicit trade,” said a senior administration official who requested anonymity. “It’s his biggest source of income not under U.N. control.”

The oil transfers in the waters around Qeys, a small tourist haven off Iran’s southern coast, represent a substantial escalation of Iran’s collusion in Iraq’s smuggling operations. In the transfers, slow barges and tugboats offload their cargo to ships that disguise the origin of the oil and can carry loads five to seven times larger and at much faster speeds.

The use of Qeys as a transfer point has enabled Hussein to expand the volume of contraband traffic to as many as 200 small ships leaving Iraq monthly, U.S. officials say.

Without Iran’s assistance--which it seems to be offering mainly for money--many of the smaller smugglers would have difficulty evading the international blockade. But the Qeys island operation, overseen by Iran’s Revolutionary Guards, allows an estimated 90% of the smugglers to sail through the Persian Gulf without being stopped, according to U.S. officials.

“Qeys has become the central rendezvous point for smuggling operations,” said a well-placed administration official, also speaking on condition of anonymity. It covers up the transactions “between the people who take oil out of Iraq and those who take it on to the United Arab Emirates for resale. That creates a tremendous problem for enforcement.”

Under a U.N.-authorized “oil-for-food” program, Iraq is allowed to export up to $18 billion worth of oil this year. But the revenue is tightly controlled by U.N. officials and must only be used to acquire humanitarian aid such as food and medicine.

Hussein turned to oil smuggling in the mid-1990s to generate a separate stream of income he could use for any purpose, U.S. officials say. Since then, Iran has sporadically allowed ships carrying contraband Iraqi oil to use its waters in order to avoid detection by the U.N. Multinational Interdiction Force, which maintains the blockade.

The pace of the smuggling has picked up significantly in the last two years, U.S. officials say. But opening up Qeys as a transfer point is a big leap that supports Iraq’s most flagrant violation to date of the international sanctions imposed after its 1990 invasion of Kuwait.

“The use of Qeys marks a huge surge,” said a third U.S. official who closely monitors the gulf.

U.S. officials say the United Arab Emirates, a key U.S. ally in the gulf, also is assisting Iraqi smuggling by making at least two of its ports available as transfer points. They say some oil-laden ships, after sneaking through Iranian waters along the coast, dash across international waters to the safety of Fujaira and Dubai, ports in separate parts of the fragmented Emirates.

“The little Emirates are reverting back to their role as pirate posts during the early 19th century,” said the senior administration official.

The Emirates leg is important because the two ports allow Iraqi oil to enter the legitimate international market. Fujaira, located on the Strait of Hormuz, the gateway to the gulf, is particularly valuable as a place to blend contraband oil with oil from legitimate sources, U.S. officials say.

The blatant use of Qeys, which began last winter and has escalated rapidly in recent weeks, means Iran can no longer credibly deny abetting Iraq’s smuggling, U.S. officials contend. Last month, the Iranian Foreign Ministry acknowledged that Iraqi oil smuggling had resumed in May after a brief hiatus but said that was because Iran’s navy alone couldn’t stop all of the ships that pass through its waters to avoid the U.N. blockade.

Although Tehran appealed to the United Nations for help, it has not allowed ships of the interdiction force to enter its waters, which extend 12 miles out from the Iranian coastline.

U.S. officials no longer speculate--as they once did--that Iran’s involvement could be a rogue operation run by the Revolutionary Guards without the approval of the Iranian government. The use of Qeys, which has created an angry backlash on the island because of oil spillage and pollution problems, signals that senior officials in Tehran must be involved.

“They’re very complicit. This wouldn’t be going on unless people high in the government were aware of it and condoning it,” the well-placed official said.

At the same time, he said it is not clear whether the reform bloc headed by President Mohammad Khatami supports the smuggling. Under Iran’s Islamic government, the president is not commander in chief and does not have direct control over the Revolutionary Guards.

“We’re convinced Khatami knows about it,” the official went on. “What we don’t know is whether he doesn’t act because he doesn’t care or because he’s unable.”

For the United Arab Emirates, as for Iran, the main incentive for assisting Iraq appears to be economic--although the Emirates have been sympathetic to Baghdad’s efforts to relieve the pressure of a decade of sanctions.

Iran’s Revolutionary Guards make an average of about $20 million a month from Iraqi smuggling, U.S. officials say. A Guards post known as Arvand One--located near where the Shatt al Arab waterway, through which the small smugglers begin their journeys, flows into the gulf--charges smugglers $50 for every metric ton of oil ferried out of the Iraqi port of Abu Flus, they say. The most recent U.S. estimate is that 400,000 metric tons of illicit oil are now being shipped out of Iraq each month, or about 95,000 barrels a day.

The trade is so lucrative to all involved that owners of ships seized and then auctioned off by the U.N. Multinational Interdiction Force still make enough profits to buy them back--and then start up again, U.S. officials say.

What baffles Washington the most is Iran’s willingness to facilitate an operation that has become Hussein’s largest source of independent income.

Baghdad has used smuggling proceeds not only to develop the kind of weapons of mass destruction used against Iran during the 1980-88 Iran-Iraq War, but also to arm the Moujahedeen Khalq, the deadliest Iranian opposition group, which is based in Iraq.

Iraq recently built a new headquarters for the Moujahedeen at Fallujah, 40 miles west of Baghdad, that will accommodate 3,000 to 5,000 members and includes barracks, training fields, administrative buildings, farms and even lakes.