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Robert Cozine seems to be running a series of article on Iraq for the FT (he had one in yesterday's as well). His contention that "petroleum smuggling is conservatively estimated to be worth several billion dollars annually" seems wide of the mark to me (at least if the figures in Middle East Economic Survey are right). Will post more about this if get time. Gabriel %%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%% Financial Times Smugglers avoid Iraq sanctions Robert Corzine - 22 Feb 2000 05:02GMT Step into almost any of the numerous warehouses at the vast Central Commission for Customs compound west of Baghdad and it is hard to believe that Iraq is into its tenth year of one of the strictest international sanctions regimes imposed on a sovereign state. On any day a steady stream of Iraqi, Syrian and Jordanian trucks arrives and departs with a wide selection of goods, only some of which enter the country as part of the United Nations oil-for-food and humanitarian aid programme. One warehouse contains an Aladdin's cave of electronic equipment. Recently trucks carrying containers full of IBM computers and US-made NashuaTec photocopiers, with Jordan prominently marked as their destination, disgorged their cargoes. Elsewhere brand-new Toyota LandCruisers were parked in rows. In central Baghdad the shops which line busy thoroughfares are brimming with domestic appliances and electronic goods, while the traditional souks are a cornucopia of cheap consumer items from China and elsewhere in Asia. The emphasis on cheap goods is a reflection of the tight wallets of most ordinary Iraqis. Government officials are coy about how successful the regime of President Saddam Hussein has been in undermining sanctions. "There is no way Iraq will expose any of the facts," says Nizar Hamdoon, the deputy foreign minister. "It would be counter-productive to uncover them at this point." Some merchants are willing to speak more openly about how bribes grease the path of illicit cargoes through the border, especially with neighbouring Jordan, which is largely dependent on supplies of cheap or even free Iraqi oil, and where a good deal of Iraqi-bound trade passes through the port of Aqaba. Another favourite route is from the United Arab Emirates further down the Gulf: "Sometimes it seems as if half of Dubai [the UAE's main commercial member state] is in Baghdad," says one western diplomat in the Iraqi capital. "You can order any computer you want and get delivery within two weeks." But the Dubai connection - which is serviced by boats - can be problematic, according to some merchants. "We prefer Amman [the Jordanian capital] because launches from the Emirates can sink," says one merchant in Mosul, the ancient trading centre in northern Iraq. "And since there is no insurance, if the goods are caught and then sold by the Iranians or the UN, then we lose everything." In the north, Turkish and Iranian goods pour into Iraq through the borders of the autonomous Kurdish areas that are outside the direct control of Baghdad. Revenues earned by the smuggling from Iraq of oil and refined petroleum products underpins the return trade in illicit goods. The seizure earlier this month of a Russian tanker alleged to be carrying Iraqi oil by US warships in the Gulf highlighted the extent of the trade. Although no accurate figures are available, petroleum smuggling is conservatively estimated to be worth several billion dollars annually. But the widespread availability of goods does not mean the average Iraqi can afford them. Nor does it mean the economy is not being "hollowed out" by sanctions. Many of the industrial and commercial spare parts that do reach Iraq are of an inferior quality. This has reduced the reliability of machinery, from the dilapidated cars and buses that clog Baghdad's congested streets, to industrial plant that is increasingly prone to breakdown. Political pressure, especially from the US - and the mandatory, multinational nature of the embargo - has so far prevented any large breaches, in spite of concerted efforts by Baghdad to tempt more sympathetic countries, such as Russia and China, to test the limits of the sanctions in a public way which might drive a wedge through the embargo. This can be seen most clearly in the oil sector, where Lukoil, Russia's biggest oil company, and state-owned CNPC of China, both signed oilfield development deals in the 1990s which suggested that they might begin preliminary work in spite of sanctions. The lack of activity by the two companies has clearly disappointed Iraq. "We're not satisfied with them," says a senior oil ministry official who has dealt with the issue. "We say to them: 'You signed an agreement. Now honour it.' " Both China and Russia have told the Iraqis that as permanent members of the UN Security Council they cannot allow their companies to openly violate sanctions: "But then why did they sign the contracts?" asks the ministry official. Leonid Fedoun, Lukoil vice-president, says the Russian company "will never violate sanctions", although he thinks the Russian foreign ministry "should have a more active attitude to this problem". Iraqi officials say that even though both companies have done preliminary work, such as geological modelling, they were in effect prevented from making any progress on the ground both by political factors and by practical difficulties, such as the inability to transfer money to Iraq, or to ship in the large amount of equipment needed for such projects. -- ----------------------------------------------------------------------- This is a discussion list run by the Campaign Against Sanctions on Iraq For removal from list, email firstname.lastname@example.org Full archive and list instructions are available from the CASI website: http://welcome.to/casi