UNITED NATIONS -- In February 2003, a Dutch oil expert monitoring Iraqi crude exports for the United Nations received a troubling tip: A cluster of supertankers had been spotted loading tons of the stuff at the unauthorized port of Khor al-Amaya.
Michel Tellings immediately alerted U.N.-based diplomats from Britain and the United States, which then commanded an international fleet of vessels charged with stopping Iraqi oil smuggling through the Persian Gulf. But the tankers sailed on, unmolested by the flotilla from the Maritime Interdiction Force.
Diplomats and oil brokers now say that the tankers were part of an illicit Iraqi scheme to supply Jordan with hundreds of millions of dollars' worth of oil each year, and that the United States turned a blind eye to it.
While a series of U.N., federal and congressional investigations are probing allegations of mismanagement and corruption in the U.N. oil-for-food program, this episode illustrates how the United States and other Security Council members acquiesced in Saddam Hussein's efforts to sell billions of dollars' worth of oil outside that program -- in violation of U.N. sanctions.
The United Nations imposed sanctions on Iraq to punish it for invading Kuwait in 1990. In 1996, after those measures had effectively crippled Iraq's economy, the United Nations established the oil-for-food program to allow tightly monitored sales of Iraqi oil to fund purchases of food, medications and other humanitarian goods.
Hussein's government earned at least $2 billion from illicit trade through the oil-for-food program, according to a report by CIA adviser Charles A. Duelfer, who has compiled the best-documented figures available. But the government earned more than $8.5 billion outside the oil-for-food program from trade agreements with foreign governments and from oil smuggling to Jordan, Syria and Turkey and others, the report says. Trade with Jordan, Baghdad's largest revenue source, provided Iraq with $4.4 billion.
"These sources of money were enormously lucrative for Saddam, and a much bigger source of corruption for him than the oil-for-food program," said Carne Ross, a former British diplomat who oversaw his government's sanctions policy on Iraq at the United Nations. "The point is, why isn't the Congress investigating why the United States and the U.K. agreed to allow this trade to go on when it was sustaining Saddam's regime?"
Several Republican-led congressional committees investigating the oil-for-food program have shown little interest in pursuing the smuggling allegations. Staff members on those committees said they were focusing on U.N. failures in managing the program to prevent them from recurring.
Democrats on the Senate's Permanent Subcommittee on Investigations are looking into whether the United States or other countries were told that Iraq was trading oil with neighboring countries in violation of the sanctions, a minority investigator said. The minority staff will also look specifically into the shipments from Khor al-Amaya, the investigator said, speaking on the condition of anonymity, citing a committee policy prohibiting staff members from giving on-the-record interviews.
Reports of shipments from Khor al-Amaya were published in February 2003. But the Financial Times and the Italian business daily Il Sole 24 Ore first reported last month that U.S. officials had been notified of the activity.
Bush administration officials have not explained why they did not stop the exports from Khor al-Amaya, but they were fully aware of Jordan's oil trade with Iraq. Both the Clinton and Bush administrations repeatedly notified Congress that they were waiving U.S. restrictions on assistance to Jordan and Turkey for importing Iraqi oil in violation of sanctions, according to documents supplied by congressional investigators.
State Department spokesman Richard Boucher said earlier this month that the department had passed the United Nations' warning on to the Maritime Interdiction Force and is "still looking into" the smuggling allegations.
Jordan declined to comment through its U.N. mission.
Jordan has relied almost entirely on Iraqi crude since the 1991 Persian Gulf War, when its main oil supplier, Saudi Arabia, cut off shipments because of Amman's support of Hussein. After the war, the government of Jordanian King Hussein asked the Security Council for an exemption from the trade sanctions.