Iraqi oil smugglers eluded U.S. patrols

It looked like nothing more than a working fishing boat, and that's what it was before the crew pulled out the freezer containers and the air compressor, inserting an oil tank in their place.

They filled it with 1,000 tonnes of diesel fuel purchased from Saddam Hussain's state oil enterprise. Then they pulled away from this port at the top of the Gulf and headed for open water.

A few miles south, they were confronted by a U.S. warship, on patrol to enforce trade sanctions aimed at depriving Saddam of the wealth fetched by his oil. But all the sailors saw was a big boat pulling nets, followed by hungry seagulls.

"We even threw dead fish into the water for effect," recalled Ali Lafta Ali, the pilot aboard the tanker-in-disguise on that trip last year - one of thousands he and other smugglers completed from this Iraqi port to secret points elsewhere.

"The Americans didn't even board our ship. They just let us go."

Between the Gulf War in 1991 and the U.S.-led invasion of Iraq this year, it proved impossible to completely cut the flow of Iraqi oil and choke off the regime's finances.

There were simply too many routes through which Saddam could get oil over borders, too many traders eager to buy it, and too many Iraqis willing to take risks.

Interviews in southern Iraq with two dozen state oil company managers and lower-level workers, as well as five people involved in illegal exports, confirmed widespread reports that Saddam relied on oil smuggling for revenue.

The trade here in the southern part of the country relied on a network of mostly Iraqi merchants, according to those involved in the smuggling. Most of the merchants also worked out of unmarked offices in the Jaza'ar Hai neighbourhood of Basra, a wealthy quarter of the city full of soaring houses hidden behind gates and patrolled by guards.

There were two ways for the merchants to buy oil from Saddam's state companies. Outside of the United Nations-authorised oil-for-food programme, they sometimes traded foreign shipments of food such as rice and beans for letters from the Ministry of Oil that authorised them to claim equivalent sums of heavy fuel oil or diesel. But mostly they paid cash, sometimes by wire transfer, and sometimes in sacks. They deposited the funds at the Al Batra Bank in Jordan, in an account under the name of the State Organisation for Oil Marketing, or SOMO, according to Ali and three oil industry executives.

Once the funds reached the bank account in Jordan, a SOMO agent there notified the oil ministry in Baghdad, which informed a SOMO branch in Basra. There, in an office now occupied by the newly named leader of South Oil Co, a special agency set up to handle smuggled oil released the needed letters of authorisation.

The merchants easily procured old and relatively small tankers, said Ali. They had no difficulty finding people to operate them. Ali was still working for the Iraqi Overseas Tanker Co, but much of its fleet had been destroyed in Kuwait by American bombs. The remainder was mothballed because of the sanctions. He was in Yemen, aboard a stranded tanker as a security guard, when he heard about a smuggling opportunity in 1995.

Hussain Abdul Kadir, 50, was a jobless engineer when, in 1995, he bumped into Saad Bahar, an Iraqi trader who was looking for a crew to smuggle oil.

The ship was a 350-foot tanker called the Reem. It carried the Honduran flag, though it wasn't legally registered anywhere. It lacked lifeboats, life vests or insurance, said Kadir, who signed on as a crew member. Some of the dozen crew members - mostly Iraqis, but a few Asians - had no passports. But Bahar was offering $1,500 a month, plus bonuses up to twice that for successful shipments. In the first years after the Gulf War, the smugglers favoured departing from Abu Flous, a port on the Shatt Al Arab waterway. Two pipes connected the terminal there to the prodigious fields of Zubair and a refinery in Basra, bringing in heavy fuel and diesel. They pulled their tankers up to the hoses, presented their letters of authorisation and filled out a single sheet of paper marking the total. Then they were free to go.

With the dictator gone, the once legitimate sailors-turned-smugglers wonder when they can go legitimate again, resuming shipments out of Iraq in the open, free of interception.


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