IRAQ - Smuggling.

Iraq smuggles out negligible amounts of crude oil and larger volumes of refined products to Jordan, Turkey, the Gulf and Iran. Income from these sales and from the smuggling of other items is believed to go directly to a fund controlled by President Saddam Hussein. Since the UN sanctions against Iraq were imposed, following its invasion of Kuwait in August 1990, smuggling has been an important source of revenue to Saddam's regime. It is said that the fund, in turn, finances the smuggling into Iraq of goods or equipment affected by the UN sanctions. Saddam Hussein's first son, Uday, is said to be involved in smuggling on the Iraqi side.

Smuggled oil products from Iraq mainly involve gasoils. Most of these have been produced by the Basra refinery, which was hit badly by the US-UK air war on Dec. 16-20, 1998. Because the refinery has since been shut down for repairs, the amounts of smuggled oil products out of Iraq's other refineries has been small (see the refining sector in Downstream Trends).

In Turkey, the oil products are usually bought through Iraqi Kurdish intermediaries. The smuggling of oil products to Iran is said to have involved people associated with a son of ex-president Rafsanjani (see Iran who's who in Review No. 16). Smuggling to the Gulf is believed to involve both Iraqi, Romanian and UAE businessmen. To Jordan it is said to involve Iraqi and Jordanian traders with high connections.

The volume of gasoils and other fuels smuggled out of Iraq now is less than 30,000 b/d, compared to over 60,000 b/d in the past year. In 1998, Saddam's Hussein's special fund was said to have earned $300m from oil smuggling out of Iraq. It was said in the summer of 1998 that oil smuggling through the Gulf had increased, despite greater efforts by the US-led Multinational Interception Forces (MIF). According to MIF figures in mid-1998, Iraq's illegal oil exports through the Gulf since the beginning of the year had reached 167,000 tons compared to 87,000 tons in the first half of 1997.

Smuggling to Turkey has been tolerated by the UN. In late June 1998, the Turkish authorities legalised the oil smuggling, in an effort to control unfair competition from fuels imported by truck through Kurdistan. The authorities ordered the Turkish companies involved to form a joint-stock firm and rent oil storage depots from the state-owned oil refiner and distributor Tupras, a unit of Turkish Petroleum Corp. (TPAO). This firm was to be headquartered in the south-eastern Turkish town of Sirnak and was to transfer the fuels to legal distribution companies.

However, Iraq's gasoil and other fuels are of poor quality. In Turkey, they are sold at prices way below their counterparts from Turkish refineries or from legal imports. A logo was to be used by the Turkish ministry of industry and trade to show that the fuels were of Iraqi origin and of poor quality. These measures were to lower the amount of fuels being smuggled from Iraq.