Syria Has Opened a Pipeline for Iraqi Oil, Observers Say

In a major test for the Bush administration’s new foreign policy team, Syria has opened a key pipeline to Baghdad’s oil, a scheme that generates at least $2 million daily in illicit funds for the regime of Iraqi President Saddam Hussein, according to senior U.S. officials, Mideast diplomats and oil experts.

The smuggling operation, launched in mid-November, is now the largest source of independent income for Baghdad, according to oil experts. It also represents one of the most flagrant violations yet of U.N. sanctions imposed because of Iraq’s invasion of Kuwait in 1990.

On a broader level, the operation reflects ambitious political agendas in both Iraq and Syria, U.S. officials and Mideast diplomats say. By offering oil price discounts of up to 50%, Iraq is trying to lure neighboring countries such as Syria into secret pacts that would create a long-term economic dependency.

“This allows Saddam to expand his influence in the region in pernicious ways,” said a senior U.S. official. “Poorer countries get hooked on lower oil prices at a time they need help economically.”

Illegal oil shipments are already flowing by land through Turkey and Jordan and via Iran’s sea lanes, but they are “nickel-and-dime operations” compared with the Syrian route, the official said. The operations to Turkey and Iran are slow, logistically difficult and costly due to transfers on both land and sea and heavy bribery along the way, on top of price discounts, U.S., Mideast and oil sources say.

The 552-mile Syrian pipeline, which runs from Iraq’s northern Kirkuk oil fields to the Mediterranean port of Baniyas, is much more cost-efficient, thus allowing Iraq to pocket higher profits, oil analysts say.

Hussein’s plans have now lured to his side two of the most important countries that participated in Operation Desert Storm a decade ago. Syria dispatched troops and Turkey still provides a base for U.S. warplanes. But the illicit oil shipments have continued for so long and reached such volume that the Turks recently built a terminal on the other side of the border to receive the oil trucks, oil analysts say.

“These are important elements in Iraq’s effort to erode and ultimately bring about the collapse of U.N. sanctions, particularly U.N. control of Iraq’s oil revenues,” said James A. Placke, a former U.S. diplomat in Iraq now with Cambridge Energy Research Associates. “Saddam wants to get his hands on the money to show that U.N. oversight isn’t working and isn’t worth the effort.”

The new Syrian operation is already carrying about 150,000 barrels per day, producing income that goes straight into Hussein’s pockets rather than to the United Nations “oil for food” program, the sources report.

The capacity of this section of the pipeline is 200,000 barrels per day, which, if fully used, could produce at least an additional $500,000 a day for Iraq. But there are questions about whether the pipeline, which was damaged during the 1991 Persian Gulf War, can transport at full capacity.

To cover the Iraqi origins of the oil, Syria has begun using much of the Iraqi oil for domestic consumption and exporting more of its own, oil analysts say.

Besides getting cheaper oil--a boon to its troubled economy--Syria has its own political motive, related to the Arab-Israeli peace process. U.S. officials and Mideast diplomats believe that authorities in Damascus, the Syrian capital, want to send a message to the outside world, particularly the United States, about abiding by U.N. resolutions: Syria shouldn’t be expected to comply with sanctions on Iraq while the world is doing little about an earlier resolution that calls for Israel to withdraw from the Golan Heights, the strategic plateau that Israel captured from Syria in 1967.

The new smuggling operation was detected after an unusual increase in Syrian exports. When pressed by the United States and the United Nations, Damascus claimed that it was simply getting the pipeline ready for eventual export, U.S. and U.N. officials say.

Baghdad and Damascus signed a memorandum of understanding in 1998 to reopen the pipeline, which was closed in 1982 because of disputes between the two, but like other agreements Iraq has signed with European and Asian countries, it was not to take effect until after U.N. sanctions were lifted. The Clinton administration condemned the agreement at the time and warned Damascus that use of the pipeline would be a major violation of U.N. sanctions.

After Syria opened the pipeline, the Clinton administration approached Damascus about getting U.N. approval for its use under the oil-for-food program, U.S. officials say.

That program allows Iraq to export oil, but all income is channeled through the United Nations and can be spent only on approved humanitarian supplies, reparations for Kuwait and aid to the Kurds in northern Iraq.

The joint Syrian-Iraqi sanctions-busting operation is particularly odd because of deep animosity between the longtime rivals. Two decades ago, Baghdad was linked to an assassination attempt against the late Syrian President Hafez Assad. Diplomatic relations were finally severed and the pipeline shut down in 1982. Assad died last June and was succeeded by his son, Bashar.

U.S. officials are concerned that the new income, which could top $700 million this year, may contribute to Iraq’s efforts to rebuild and expand both its conventional military capability and weapons of mass destruction, which are no longer under U.N. supervision since the departure of U.N. weapons inspectors and U.S. and British bombing raids in 1998.

During the past two years, the United States has monitored Iraq’s steady efforts to rebuild many factories involved in dual-use materials that are critical to commercial products as well as chemical and biological weapons. In a report released Jan. 10, the Pentagon concluded that key facilities are now completed, although it has no hard evidence yet to prove that the plants west of Baghdad are actually producing the world’s deadliest weapons, U.S. officials said Monday.

The Bush administration has pledged to hold Iraq to its commitments--and to hold firm on sanctions until it does.

“It’s quite clear from Secretary [Colin L.] Powell’s testimony [at his Senate confirmation hearing], from the statements that President Bush has made, that there will be a lot of attention to this matter, that Iraq will be held to its international obligations, and that we will work with our allies to re-energize the sanctions,” State Department spokesman Richard Boucher said Monday.

But so far, neither the United States nor the United Nations has been able to convince Turkey, Jordan or Iran. And Syria may be a hard sell as well in light of serious economic problems, including large foreign debt, falling exports, low investment, an overvalued currency and a foreign currency shortage--all at a time when its population is rising at about 4% per year, according to the U.S. Department of Energy.