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Iraq Report: May 10, 2002

10 May 2002, Volume 5, Number 13

PERMANENT MEMBERS OF UN SECURITY COUNCIL 'AGREE ON NEW SANCTIONS.' White House spokesman Ari Fleischer said on 7 May that the UN Security Council�s five permanent members have agreed to a new system of sanctions against Iraq. He said it would be discussed by the full Security Council and voted on "this week." The changes being made to the sanctions, he said, would tighten controls over efforts by Iraq to acquire weapons of mass destruction and allow the freer flow of humanitarian aid to the Iraqi people. But Fleischer warned that the Iraqi people would not see the full benefit if President Saddam Husseyn "continued to manipulate" the oil-for-food program.

"The Washington Post" reported on 8 May that the new system may be adopted as early as 9 May. Under the new system, non-military goods will be cleared for export to Iraq more quickly than in the past. Companies seeking to do business with Iraq will submit a contract to the UN. Items not on a watchlist will be cleared for export. In the past, whole contracts have been held up because of difficulties over a single or just a few items. "There is a presumption of approval rather than a presumption of denial," "The Washington Post" quoted former weapons inspector Charles Duelfer as saying.

The new proposed sanctions regime does not cover Iraq's trade across its porous borders with Syria, Jordan, and Iran. Last year, Secretary of State Colin Powell included the question of uncontrolled imports across these borders as a major part of his proposed "smart sanctions" policy.

The new sanctions system is, according to "The Washington Post," being sponsored by all five permanent members of the UN Security Council -- the U.S., Russia, China, Britain, and France. All except Russia had agreed to the outline of the proposal by last summer. Since then, the newspaper reported, U.S. officials have been working through lists of potential imports with their Russian counterparts, identifying equipment and technology which could be used for military as well as civilian purposes. Moscow has been concerned about its historical ties with Baghdad and anxious to protect the commercial interests of Russian companies.

On 4 May "The Los Angeles Times" reported that during private meetings with Security Council members in the previous two weeks, U.S. officials had showed satellite photographs and documents providing fresh evidence of an Iraqi project to build missiles with a range far beyond the 100-mile (180 kilometer) limit now stipulated under the sanctions resolutions. (Simon Henderson)

BAGHDAD RESUMES OIL EXPORTS AFTER ONE-MONTH BREAK. The Iraqi cabinet voted on 5 May to resume oil exports from 7 May, having failed to win support for an oil embargo against the U.S. and other allies of Israel. A statement broadcast on Iraqi Television said the 8 April decision to suspend oil exports for 30 days "was not very well received by the Arab brothers, who have oil, and who failed to take similar steps and respond to the Iraqi initiative to ensure the success of all. However, it was enough for us to express the consciousness of the nation." The statement noted that "the Arab masses in all Arab countries expressed support for [stopping oil exports]."

President Saddam Husseyn had announced the Iraqi suspension as a move to force Washington and other allies of Israel to pressure Israeli Prime Minister Ariel Sharon, who had ordered military incursions into the occupied West Bank and had besieged Palestinian leader Yasser Arafat in his Ramallah headquarters after a series of suicide bombings in Israel. But other producers did not follow suit and Saudi Arabia publicly rejected the notion of using the oil weapon.

During April, with mounting tensions in the Mideast, prices for crude oil rose by about 30 percent because of fears that supply disruptions would spread. Strikes by oil workers in Venezuela also increased concern. On 6 May, the first day of oil trading after the announcement, world prices for oil fell marginally on the news.

The UN, according to the U.S. State Department, estimated that the suspension of oil exports resulted in an estimated loss of $1.3 billion for the humanitarian aid program in Iraq.

The original decision to stop oil exports had been taken by a joint meeting of the Revolutionary Command Council, the Iraq Command of the Arab Socialist Baath Party, and the cabinet. (Simon Henderson)

ILLEGAL OIL SURCHARGES EARN BAGHDAD EXTRA $300 MILLION. By evading UN rules, Baghdad is illegally siphoning off millions of dollars a year from its oil revenues, according to an investigation published in "The Wall Street Journal" on 3 May. The newspaper estimated that $300 million had been diverted since late 2000. Quoting U.S. and UN officials, the newspaper reported that Iraq had imposed illegal surcharges on every barrel of oil it has sold in recent years, using a maze of intermediaries to cover its tracks. Instead of going into a fund for humanitarian aid and war reparations, much of the money is funnelled into Saddam Husseyn's war chest. The rest goes in commissions to oil traders who are party to the scheme.

Explaining the method, the newspaper reported that Iraq sells oil at a UN-approved price to dozens of middlemen, mostly little-known overseas companies. But Iraq also demands a secret, additional fee for each barrel. The middlemen sell the oil on to big oil-trading companies at a price that absorbs the illegal surcharge. The oil traders pass on the surcharge to their customers, the giant refining companies. Meanwhile, the middlemen make legitimate payments, as required, into a UN bank account for humanitarian aid but transfer the surcharge into Iraqi-controlled bank accounts.

UN officials estimate the surcharges range from 20 cents to 70 cents on every barrel of oil sold through the oil-for-food program since late 2000. In addition, Baghdad receives an estimated $1 billion from Syria each year for exporting oil outside the oil-for-food program. Other oil is smuggled to Turkey and Jordan. In total, U.S. officials believe Saddam has access to $2.5 billion a year in illicit oil revenue. The newspaper quoted the officials as saying he uses this to develop weapons of mass destruction and consolidate his power.

The UN has been unable to properly police the oil-for-food program because divisions in the Security Council have given Iraq extraordinary control over its oil sales. Because Baghdad can choose its customers, UN officials have little power over that aspect of the program. Ironically, U.S. oil companies, led by ChevronTexaco, ExxonMobil, and Valero Energy are major purchasers of Iraqi oil, together accounting for nearly half of Iraq's oil exports. Successive U.S. administrations have encouraged participation in the oil-for-food program as a way to help the Iraqi people, "The Wall Street Journal" noted. The newspaper interviewed the director of the oil-for-food program, Benon Sevan, who conceded it has been easily exploited by Iraq and middlemen. U.S. companies said their contracts stipulate that no payments have been made directly to Iraq and they have no reason to investigate whether traders are passing on illegal surcharges. Iraqi crudes remain attractive for U.S. refiners for technical reasons. Iraq keeps the price of its oil low, making it attractive to refiners despite the surcharges. Although UN rules stipulate that the price of Iraqi oil has to be set in consultation with three UN oil-pricing experts and approved by the Iraq sanctions committee, the committee has tended to give its approval. The newspaper quoted the U.S.-based Petroleum Industry Research Foundation as estimating that Iraqi oil has been priced some 35 to 65 cents per barrel below competing crudes.

"The Wall Street Journal" reported that illegal surcharges started soon after the oil-for-food program officially began in 1996 but Iraq realized it could take advantage of the system by selling to oil-trading companies rather than big refiners. In late 2000, the Iraqi State Oil Marketing Organization (SOMO) declared it would charge a premium of 50 cents per barrel starting from 1 December. Iraq stopped supplying companies which indicated reluctance. Bidders for Iraqi oil since have included a British fashion firm, a Thai rice company, an Armenian tobacco company, and many Russian companies. The newspaper quoted from a SOMO document saying companies favored by SOMO at present "are those from Russia, China, Syria, and Qatar only." (Simon Henderson)

INCIDENT IN NORTHERN NO-FLY ZONE. On 2 May an Iraqi military spokesman said one Iraqi was killed and three others wounded in overnight raids by U.S. and British military aircraft. The previous day the U.S. European Command, which controls the allied patrols in the northern no-fly zone, said patrolling coalition aircraft had been fired at from anti-aircraft artillery sites near the Saddam Dam in northern Iraq.

On 6 May, Iraq Television reported that since "Conquest Day," 17 December 1998, (Operation Desert Fox, when coalition aircraft conducted several days of raids against suspected weapons factories and Special Republican Guard targets), there had been 12,179 sorties of U.S. and British aircraft from bases in Kuwait. It said the number of sorties of U.S. and British aircraft from bases in Turkey, Saudi Arabia, and Kuwait had been 38,177. (Distinguishing sorties from Saudi and Kuwaiti bases might be difficult as the Saudi government has been insisting that coalition aircraft operating from the kingdom must enter Iraqi air space via Kuwait air space.) (Simon Henderson)

TOP IRAQI WEAPONS EXPERTS AT THE UN. Expert-level talks focusing on the return of weapons inspectors to Iraq that began on 1 May continued until 3 May. UN Monitoring Verification and Inspection Commission (UNMOVIC) head Hans Blix led the UN side. The director-general of the International Atomic Energy Agency, Mohammad El-Baradei, was also at the talks. The Iraqi side was represented by Dr. Jaafar Dhia Jaafar and General Amir al-Saadi, both described as presidential advisers. Jaafar was the head of the Iraqi nuclear weapon program while Al-Saadi was a leader of the programs to make biological and chemical weapons before the 1990 Gulf war.

Parallel to these talks there was a meeting between UN Secretary-General Kofi Annan and Iraqi Foreign Minister Naji Sabri. On 5 May, Sabri returned to Baghdad and commented on his UN talks and an earlier meeting in Moscow with Russian Foreign Minister Igor Ivanov. He said Iraq had agreed to continue its dialogue with the UN. The date and venue of the next round will be fixed later. (Simon Henderson)

SADDAM REVIEWS UNSPECIFIED SCIENTIFIC AND TECHNICAL PROGRESS. Iraq Television reported on 4 May that Saddam Husseyn had chaired a meeting where he listened to briefings by "joint working teams" on unspecified scientific and technical questions. Iraqi TV broadcast the news in an unscheduled summary. Saddam was reported to have commended the efforts of the teams. He was quoted as saying: "My assessment of you is always 100 percent. My assessment of you as people, commanders, and fighters, is also 100 percent. Therefore we will defeat the enemy. This is our determination and confidence in our battle. Rely on God."

The meeting was also attended by Saddam's second son, Qusay, described as member of the Iraq Command of the Arab Socialist Baath Party and supervisor of the Republican Guard. Others attending were: Deputy Prime Minister and Minister of Military Industrialization Abdul-Tawwab Huwaish, Defense Minister Staff-General Sultan Hashim Ahmad, Minister of Industry and Minerals Muyassar Raja Salah, and director of the Atomic Energy Commission, Dr. Fadil al-Janabi.

The commander of the air force, the commander of air defense, the dean of the Military Engineering College, the vice chairman of the Military Industrialization Organization, and "a large number of fighters, researchers, and technicians in various specialities were also there.

On 2 May, Iraqi Radio said Saddam Husseyn had met with Minister of Industry and Minerals Muyassar Shalah and a group of researchers and engineers from the ministry and the Directorate of Military Engineering. He told them: "Your enemy is now at a complete loss as how to undermine your will." (Simon Henderson)

MINISTERS LEARN HOW TO FIRE KALASHNIKOV RIFLES. Iraq Television reported on 5 May that a training course in combat tactics and using arms had begun a day earlier for ministers, officials, and senior advisers. Ministry of Defense officials are conducting the course, which was ordered by Saddam Husseyn. During the first hour, the participants were introduced to the 7.62 mm Kalashnikov automatic rifle. During the second hour they were trained on taking it apart and assembling it again. (Simon Henderson)

BRITISH LABOUR POLITICIANS VISIT BAGHDAD... A small group of British parliamentarians from the governing British Labour Party visited Baghdad, led by George Galloway, who was due to meet Deputy Prime Minister Tariq Aziz and to address a conference of solidarity with the Iraqi people. It was Galloway�s second visit to Baghdad this year. Travelling with him were Kerry Pollard and Robert Wareing, both Labour members of parliament. Lord Rea, a Labour member of the British House of Lords, was also with them. (The "London Daily Telegraph" noted that Wareing had at one time been suspended from the British parliament for failing to declare his business interests in Serbia.) Iraq Television subsequently reported on 6 May that Aziz had met Galloway. It noted that Canadian members of parliament were also part of his delegation. (Simon Henderson)

...AT THE SAME TIME AS AUSTRIAN RIGHT-WINGER HAIDER. The "London Daily Telegraph" reported that while Galloway and his group were relaxing after their journey in the coffee shop of the Rashid Hotel, the most expensive in Baghdad, Joerg Haider, the far-right Austrian politician entered with five companions and occupied a table at the far end. According to the "Telegraph," one of the British party suggested they should emulate the scene in the movie, Casablanca, when patrons at Rick's cafe defy the Germans by rising to sing the Marsellaise, the French national anthem. Galloway, explaining he was tired by the long overland journey from the Jordanian capital, Amman, retired to his room. The "Telegraph" correspondent, a journalist attached to the Galloway party, asked Haider why was he in Baghdad. He replied: "I make holidays here."

A spokesman for Haider in Vienna said on 6 May that the Austrian political leader had returned from Baghdad after having talks with Iraqi Foreign Minister Naji Sabri. He had brought back with him two Iraqi children suffering from cancer, who were to be treated in Klagenfurt. Iraq Television carried an interview with Haider in which he said he would be returning in a few weeks to collect another 15 Iraqi children needing medical treatment. In an earlier visit in February, Haider held talks with Saddam Husseyn and shook the Iraqi leader's hand, sparking fierce criticism from the U.S., AFP reported. (Simon Henderson)

...AND SERBIAN LEADER MEETS VICE PRESIDENT RAMADAN. A delegation from the Serbian Radical Party led by its leader, Vojislav Seselj, met with Iraqi Vice President Taha Yassin Ramadan, Iraqi TV reported on 6 May. During their meeting, Ramadan gave Iraq�s view of its stand towards the "aggressive, terrorist U.S. threats." Seselj praised the development of Iraq "despite the embargo and aggressive U.S. stands." (Simon Henderson)

...AND RUSSIAN DELEGATION LED BY ZHIRINOVSKY ARRIVES. The conference on solidarity with Iraq was also attended by a Russian delegation led by the right-wing politician, Vladimir Zhirinovsky. Also in the group were former Defense Minister Igor Rodionov and former head of the Russian General Staff, Mikhail Moiseev. Zhirinovsky, the head of the Liberal Democratic Party faction in the Russian State Duma, said he hoped to meet Saddam Husseyn during his visit.

The solidarity conference, the seventh to be held, has traditionally been scheduled to take place prior to meetings of the UN Security Council on sanctions regarding Iraq. (Simon Henderson)

KURDS MEET IN EUROPE. On 3 May, UPI reported that Jalal Talabani, the leader of the Patriotic Union of Kurdistan (PUK), had chaired a meeting in London of the heads and officials of PUK delegations abroad. He then left for Tehran from where he was going to return to northern Iraq.

Earlier he had met the other main Kurdish leader, Masoud Barzani, in Germany where both men had been having medical check-ups, the news agency reported. (Simon Henderson)

KURDS 'AREN�T LOOKING FOR A FIGHT.' On 5 May, "The Washington Post" carried a report by one its correspondents who had visited the Kurdish area of northern Iraq. He reported that prospects for a war against Iraq by the Bush Administration were viewed with more apprehension than appetite. The Kurds were fearful that the U.S. would let them down and any attack would uproot UN Security Council Resolution 986, by which the Kurdish areas receive direct money from the oil-for-food program. The correspondent also noted that Kurds feared that Saddam Husseyn's replacement would be as bad as him. "If the Americans miscalculate at all, the cities (Dohuk, Irbil, and Sulamaniyah -- all close to the Iraqi frontlines) will be in Iraqi hands within hours. It could be "a repeat of 1991," the author of several books on Kurds, Gerard Chaliand, was quoted as saying. (Simon Henderson)

WHITE HOUSE BLOCKS FUNDS TO BOOST OPPOSITION. "Washington Post" columnist Jim Hoagland, writing in the "International Herald Tribune" on 6 May, reported that the White House had blocked a bid by the U.S. State Department to funnel $5 million to the Middle East Institute, a Washington think-tank, for a project to promote anti-Saddam Iraqi groups. The money was intended to fund a series of conferences.

The State Department had apparently failed to notice that Ned Walker, a former U.S. ambassador to the U.A.E., Egypt, and Israel, as well as a former assistant secretary of state for the Near East, had publicly scorned President George W. Bush�s "axis of evil" metaphor as "ridiculous."

Hoagland noted that the Middle East Institute receives funds from Saudi Arabia, which opposes the opposition Iraq National Congress (INC) specifically and Bush's approach to regime change in Iraq in general.

The previous week, on 2 May, Liberty TV, the INC satellite television channel beaming news, talk shows, and documentaries into Iraq, had lost its ability to broadcast after British companies sending content to the U.S. for rebroadcast discontinued their service because they were not being paid.

Liberty TV blamed the State Department for blocking necessary funds since February. The State Department said additional funding would be provided as soon as grant negotiations are successfully concluded. It cited "ongoing problems" with the INC's "financial management practices," according to a 4 May report in the Canadian newspaper, "National Post."

Liberty TV had been employing 30 personnel, producing programs for about $200,000 per month with another $10,000 for transmission expenses. It had had plans to produce incriminating footage of food queues, mass graves, and military movements secretly shot by agents with Sony digital cameras, the "National Post" reported.

On 2 May, the U.S. State Department revealed that apart from its funding of the INC, it had also provided about $11.6 million to other groups as "part of a broader effort to work towards our objective of achieving a different government for the Iraqi people. Much of the money, it said, had gone towards advancing a war crimes case against Saddam Husseyn and the Iraqi leadership. Among the recipients of the funds were INDICT, the Iraq Foundation, Iraq Press, AMAR, Washington Kurdish Institute, Iraqi Jurists Association, and the Alliance Internationale pour Justice. (Simon Henderson)

ARAB ALLIES WARN U.S. AGAINST ATTACKING IRAQ. King Abdullah of Jordan has warned the U.S. that an attack on Iraq would be "catastrophic" for the Middle East. Speaking in a BBC radio interview broadcast on 3 May in advance of his arrival in Washington to meet President George W. Bush, the king said: "If there is any sensitivity to what is going on in the Middle East, what is going on between Israel and the Palestinians, Iraq isn't really a subject that should even be discussed at this stage. I think with the emotions not only in Jordan but throughout the Middle East to then go and do something with Iraq, I think would be catastrophic throughout the Middle East."

The king and Queen Rania arrived later that day in Washington. Apart from meeting Bush, King Abdullah was to meet Vice President Dick Cheney, Secretary of State Colin Powell, and Defense Secretary Donald Rumsfeld.

On 2 May, Omani Minister of State for Foreign Affairs Youssef bin Alawi bin Abdullah told the London-based pan-Arab newspaper "al-Sharq al-Awsat" that Oman had ruled out cooperation with the U.S. in the context of the possibility of a military operation against Iraq. "We will not permit striking any Arab state from Oman," he was quoted as saying. He referred to Iraqi development of weapons of mass destruction as a pretext, adding that differences between countries are solved by negotiations and understanding. (Simon Henderson)

CZECH INTELLIGENCE STANDS BY ATTA-IRAQ CONTACT. After reports by Reuters and "Newsweek" that one of the 11 September hijackers, Mohammad Atta, had not been in Prague in April 2001 as previously reported by Czech intelligence, Prague's "Lidove noviny" newspaper reported that he indeed had been. The newspaper reported Interior Minister Stanislav Gross as insisting the meeting took place between Atta and an Iraqi intelligence agent attached to the local embassy who was subsequently expelled after carrying out surveillance of the RFE/RL building. The Reuters news agency had quoted an unnamed official in Washington as saying there was no evidence that Atta had met with the Iraqi agent, Ahmed al-Ani. "Newsweek" had described the report of the meeting as "an embarrassing mistake of the Czech intelligence service."

The Prague newspaper quoted Jan Klas, chairman of the parliamentary body overseeing the intelligence service as saying: "I would take those press reports, even though carried by such a renowned [magazine] as 'Newsweek,' with a pinch of salt." (Simon Henderson)

U.S. INVESTIGATES CIGARETTE SANCTION BUSTING. U.S. investigators have begun a criminal inquiry, tracking shiploads of cigarettes suspected of being diverted via Cyprus and other ports into Iraq despite the trade embargo. On 9 May the "International Herald Tribune" carried a "Los Angeles Times" report quoting papers filed in a U.S. District Court in Brooklyn as saying Winston cigarettes had flowed into Iraq continuously and illegally since August 1990, when sanctions were imposed.

The allegation had first emerged after a civil lawsuit was filed by the EU, alleging evasion of hundreds of millions of dollars in taxes on smuggled cigarettes. Reynolds, Japan Tobacco, and Philip Morris were named in the action. Japan Tobacco acquired the international cigarette business of Reynolds in 1999. A U.S. judge dismissed the EU suit in February.

If the U.S. pursues the criminal investigation, penalties could range as high as 12 years in prison and a $1 million fine. (Simon Henderson)