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Hussein Received Billions of Dollars More In Illicit Money Through Illegal Trades Than The Oil-For-Food Program
Only recently have investigations begun to focus on the largest source of illicit revenue for Saddam Hussein - illegal oil trading with Iraq's neighbors. While much more attention has been placed on reports of Saddam Hussein's ability to manipulate the Oil-for-Food Program (OFFP), all of the investigative sources related to the Oil-for-Food Program agree that oil smuggling was a much greater source of illicit income for the Iraqi Government during the sanctions than OFFP.
On February 3, 2005, the Independent Inquiry Committee (IIC) led by Former U.S. Federal Reserve Chair Paul Volcker, which is examining the allegations against the OFFP, issued its first interim report on its findings. The Committee concluded that (1) oil smuggling was the largest source of illicit revenue for the Hussein regime during the UN sanctions period; (2) smuggling was outside the purview and oversight of the UN administrators of the Oil-for-Food Program; and (3) smuggling began years before the commencement of Oil-for-Food:
"What does appear clear is that the major source of external financial resources to the Iraqi Regime resulted from sanctions violations outside the Programme's framework. These illicit sales, usually referred to as 'smuggling,' began years before the Program started. Exports of Iraqi oil to both Jordan and Turkey and imports form those countries generally took place within the terms of trade agreements ('protocols') negotiated with Iraq. The existence, but not necessarily the amounts, of sales and purchases under these protocols was brought to the attention of the 661 Committee and at least in the case of Jordan, it was 'noted.' United States law requires that assistance programs to countries in violation of United Nations sanctions be ended unless continuation is determined to be in the national interest. Such determinations were provided by successive United States administrations for both Jordan and Turkey. In the later stages of the Programme, substantial Iraqi sales of oil were made to Syria and small sales to Egypt under similar 'protocols.'"
The importance of oil smuggling as a source of revenue for the Hussein-regime was also vigorously explored by Senator Carl Levin (D-MI) during a February 15, 2005 Hearing of the Permanent Subcommittee on Investigations into Oil-for-Food Program allegations. In his opening statement, Levin explained:
"It is clear that the whole world, including the United States, knew about Iraq's oil sales to Turkey, Jordan and Syria. In the case of the United States, we not only knew about the oil sales, we actively stopped the United Nations Iraq Sanctions Committee, known as the 661 Committee, from acting to stop those sales…Hundreds of millions of dollars went into the pockets of Saddam Hussein as a result."
Copies of the national security waivers issued by both the current Bush Administration and the Clinton Administration, mentioned in the IIC interim report and during this most recent hearing, confirm that the U.S. was aware that Iraq was trading oil in violation of the UN sanctions with its neighbors as far back as 1991. One such waiver, covering Jordan, signed by Deputy Secretary of State Richard Armitage on October 17, 2002, reveals Jordan had been in violation of the UN sanctions against Iraq since their implementation, and the U.S. waived requirements that cut off all types of foreign aid every year since 1991. Turkey's situation is less clear, but its illegal trades appear to go back to at least December 1998 when the Clinton Administration authorized waivers for both Turkey and Jordan. The Section 531 restrictions on U.S. foreign aid were adopted in 1991 to promote compliance with the UN sanctions on Iraq by requiring that U.S. foreign aid be terminated for any nations violating these UN sanctions.
In addition to Levin's statements, several other members of Congress have also called for a more thorough review of the role of the State Department. Represenattive Adam Schiff (D-CA) at a recent Congressional hearing stated that, "...why it was that when we were aware of a very large and illicit oil trade, that we acquiesced in this practice when we believed that the proceeds of such illicit trade may be used by Saddam Hussein to build up weapons of mass destruction. Some of those questions, indeed, we will need to answer to the American people. But we should follow the trail wherever it leads, even if some of the responsibility comes back to our own shores." Representative Robert Menendez (D-NJ) recently told CNN, "How is it that you stand on a moral footing to go after the U.N. when they're responsible for 15 percent, maybe, of the ill-gotten gains and we were part and complicit of helping him get 85 percent of the money?" Read Full Story Here. And Representative Tom Lantos (D-CA), the House International Relations Committee Ranking Member, stated that he was "stunned at the failure of our own State Department to put a halt to Saddam's larceny." Read Full Text Here.
Many observers believe successive U.S. Administrations allowed the illegal oil trades to continue, because stopping them could endanger the support of Iraq's neighbors for UN sanctions. As Harvard Professor John Ruggie told the House International Relations Committee in 2004:
"I remember watching clips on the evening news at the time showing trucks weighed down with Iraqi oil rolling into Jordan and Turkey; it was also public knowledge that oil was pipelined into Syria. Perhaps the United States thought the quantities involved weren't large enough to worry about. Or perhaps we realized that the Iraq sanctions had hit Iraq's neighbors particularly hard - as sanctions invariably do. And because some of them were our close allies, including in the struggle against Saddam, we may simply have chosen to ignore that illicit trade." Read Full Text Here.
In July 2005, a joint subcommittee hearing of the House International Relations Committee finally investigated the oil smuggling issue, but only chose to single out Syria, one of four nations that received oil in violation of sanctions, for censure. Rep. Gary Ackerman (D-NY) said that this selectiveness “makes us vulnerable to a charge of hypocrisy and does not serve our national-security interests.” Ackerman focused on the political considerations that shaped U.S. policy toward sanctions-violators: “[O]ther than ask nicely for Syrian cooperation, we do not seem to have made it clear to Syria that stopping the smuggling was in any way important to us -- and maybe that's because it wasn't very important to us…As near as I can tell, what was important to us was preserving the sanctions regime and mitigating the economic harm inflicted on our allies and Iraq's neighbors, specifically Turkey and Jordan. Syria was just an unintended beneficiary. Up until March of 2003, that was our policy. It seems as somewhat silly to be upset about it now in hindsight.”
Each of the investigations to date clearly demonstrate that the largest amount of illicit revenue accumulated by the Saddam Hussein regime during the twelve years of UN sanctions came from illegal oil smuggling with its neighbors, not from a subversion of the UN Oil-for-Food Program. According to the report issued by the Iraq Survey Group (the "Duelfer Report"), nearly three-quarters of the illicit revenue (or $9.2 billion) obtained by the Hussein regime during the sanctions period came from Iraq's illegal trade, primarily with Jordan, Syria, and Turkey (see chart). That report attributes $1.7 billion in illicit profit to OFFP.
Similarly, a Government Accountability Office (GAO) report issued in April 2004, entitled "Observations on the Oil for Food Program," also shows that most missing revenues were the result of smuggling ($5.7 billion compared with $4.4 connected to the Oil-For-Food Program). With the release of its interim report in February 2005, the IIC also issued a chart representing a "Comparison of Estimates of Illicit Iraqi Income During the United Nations Sanctions." This chart compares figures of illicit income derived from four different reports on the subject, including from the GAO, Duelfer Report, and the Permanent Subcommittee on Investigations. In every case, oil smuggling accounted for billions more in illicit income for Saddam Hussein than the OFFP - in some cases two to three times more.
Furthermore, the responsibility for preventing illegal oil trades did not belong to the UN. The UN Office of the Iraq Program, which administered OFFP, had neither the authority nor the resources to prevent smuggling. Patrick Kennedy, Ambassador to the UN for Management and Reform at the U.S. Mission to the UN, testified to this recently, stating that "Oil flowing out of Iraq through other means - smuggling, trade protocols and the voucher system - was outside the mandate of the UN Secretariat." During the same hearing, in response to questioning by Senator Levin, Kennedy also testified that the U.S. was aware of the oil sales with Jordan and Turkey ("…the sales - the trade - was going on and we were aware of it.").
The task of policing oil smuggling fell to the Multinational Interception Force (MIF), led by the Fifth Fleet of the U.S. Navy. The coalition making up MIF was initiated following the inception of the sanctions in 1990. The objective remained the same throughout its existence - to halt violations of United Nations Security Council Resolutions 661 and 665.
As the investigations into Iraq's acquisition of illicit revenue during the sanctions continues, it is important to be clear that illegal oil smuggling, not the Oil-for-Food Program, was Saddam Hussein's primary source of illicit funds.