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Iraq: Syria Considering End To Oil Smuggling

Syria has expanded its ties to Iraq in recent months, notably by re-opening an oil pipeline which Baghdad is reported to have used to smuggle $2 million worth of oil daily. But during a visit last month to Damascus by U.S. Secretary of State Colin Powell, Syrian President Bashar al-Assad said he would place the pipeline under UN supervision, a move that would help re-energize sanctions on Iraq. RFE/RL correspondent Charles Recknagel looks at Syria's apparent turnaround.

Prague 7 March 2001 (RFE/RL) -- When Colin Powell returned to Washington from his first Mideast trip as U.S. secretary of state late last month, he brought some surprising news from Damascus.

Powell said that Syrian President Bashar al-Assad had three times assured him that Damascus is willing to help tighten sanctions on Iraq by putting a recently re-opened oil pipeline between the two countries under UN monitoring.

Powell told reporters later that al-Assad said the Syrians plan, in Powell's words, "to bring the pipeline and what is going through the pipeline, and the revenues generated in that pipeline [under] the same kind of control as other elements of the sanctions regime."

The pipeline runs from Iraq's northern Kirkuk oil fields to Syria's Mediterranean port of Baniyas. Since it was re-opened in November, oil experts say it has been carrying some 100,000 to 150,000 barrels per day into Syria. The trade is estimated to earn Iraq up to $2 million daily. That money bypasses the UN oil-for-food program, which requires that all Iraqi oil revenues be placed in a UN- supervised escrow account for spending only for humanitarian goods.

The smuggling is in Syria's interest because Iraq offers its oil to Damascus at a 50 percent discount. The Iraqi oil imports, which Syria consumes domestically, free up greater quantities of Syria's own oil for export, allowing Damascus to profit from the price difference.

The deal is also in Iraq's interest because the pipeline offers it a far easier oil smuggling route than the alternatives. These are principally by truck to Turkey and, less so, by ship down the Gulf along the coast of Iran.

Gerald Butt, an oil industry expert with the Middle East Economic Survey in Nicosia, Cyprus, says the pipeline to Syria is more profitable for Baghdad than is the land route to Turkey.

"We are talking about something like 150,000 barrels per day going through Turkey and about a similar amount going into Syria. The problem with the truck trade is that it is going through a number of different parties and they are all taking a cut of the price. From Iraq to Syria it is very straightforward, oil goes into a pipeline at one end and comes out the other and you can just arrange a price."

Butt says that Baghdad is currently seeking ways to expand the pipeline smuggling to include Lebanon as well in an attempt to draw more regional states into sanctions busting.

"The Iraqis would be very happy to keep the Syrian supply going and they are in talks with the Lebanese to set up a similar arrangement with oil being pumped to the northern port of Tripoli. The Iraqis would welcome it as much for making another hole in the sanctions wall as in terms of getting more money."

All this would make any Syrian placement of the pipeline under UN monitoring a major blow both to Iraq's ability to obtain revenues independent of UN control and to its plans for further weakening the sanctions regime in the future.

At the same time, any such action by Damascus would mark a significant shift in Syria's recent policy toward its neighbor, which in recent years has been characterized by attempts on both sides to warm relations after decades of animosity.

The two countries, ruled by rival factions of the Baath Party, cut diplomatic relations when Syria sided with Iran in the 1980 to 1988 Iran-Iraq war. Relations worsened further when Syria joined the coalition to drive Iraq from Kuwait in 1991.

Syria and Iraq have yet to restore full diplomatic relations, but recent years have seen accords to boost cross-border commerce and high-level official visits in both directions. This month, shortly after Powell left Damascus, the Syrian parliament approved establishing a free-trade zone with Iraq and called for greater economic cooperation with Baghdad.

Analysts say that Syria's conflicting signals toward Powell on the pipeline and toward Iraq for greater cooperation raise a host of questions as to whether al-Assad really intends to tighten sanctions on its neighbor.

So far, there has been no public word on the promises to Powell from Syrian officials. At the same time, oil industry analysts say the smuggled oil continues to flow through the pipeline. Gerald Butt says:

"There has been a deafening silence [from Syria.] I don't think it's made any specific commitment and certainly we have heard of none. As far as we [in the oil industry] know, at the moment, oil supplies are continuing as before."

That may mean Syria is deliberately leaving itself wide room for future negotiations over the pipeline. Powell himself alluded to that possibility when he said al-Assad did not go into details with him of how or when Syria would act.

If Syria's promise is indeed still only a tentative one, many analysts say that Damascus is not likely to stop the pipeline smuggling unless other regional states -- including U.S. ally Turkey -- move to curb oil smuggling through their territory as well.

In that case, Washington's attention will now turn increasingly to Turkey in hopes of coming up with just such a regional commitment to tighter sanctions. U.S. Assistant Secretary of State Edward Walker visited Ankara last weekend to meet Turkish officials and discuss sanctions issues. But there was no public disclosure of the details of U.S. proposals, nor of any new Turkish initiatives.

Turkey, while officially supporting the sanctions on Iraq, has often complained that they have cost the Turkish economy billions of dollars in lost trade with its neighbor. Many Turks see the illegal oil trade as necessary to alleviate that cost, particularly for the country's hard-hit southeastern regions on Iraq's border.