US gets tough on Iraqi sanctions

09 November 2001

US navy patrols in the Gulf are stepping up their vigilance of vessels suspected of illegally carrying Iraqi oil as Washington prepares to push for the implementation of the so-called smart sanctions once more. The move follows the first documented case of tanker overloading in breach of the oil-for-food programme - the latest in Iraqi attempts to illegally accrue revenue outside the UN scheme.

Over the past month, there have been several high profile incidents involving the US-led Maritime Interception Force, which enforces the UN oil restrictions on Iraq. In one of the most recent, two US servicemen are missing, presumed dead, after a ship they boarded, believed to be laden with smuggled oil, sank on 18 November. The following day, a crew of 10 jumped ship from another tanker in the area suspected of carrying illicit supplies.

The UN 661 committee, which monitors the sanctions, is awaiting further information on the case of a tanker discovered violating restrictions. In a letter submitted to the committee on 25 October, the executive director of the UN oil-for-food programme, Benon Sevan, said a total of 500,000 barrels of oil were illegally loaded onto the Essex tanker at Mina al-Bakr in May and August.

The contract holder for the oil was a French firm, which sold it on to the Netherlands-based Trafigura. The Essex travelled first to Texas, where it offloaded part of the its cargo, and was heading on to Curacao in the Netherlands Antilles when it was intercepted by the Dutch navy at the request of the US.

Trafigura says it 'asked for and received documentation from [the French firm] to confirm that the cargo was UN approved, including a copy of the UN allocation and a warranty from [the company] that the barrels were from the UN programme'. MEED was unable to contact the French firm in question.

The 661 committee has sent letters to the governments of France, the Netherlands and the US, where companies alleged to have been involved in the affair are based. The governments are being asked to investigate the claims, and pass the information back to the committee. If illegal oil is found to have been sold in a country, the responsible government must auction the oil, and deposit the revenue into a UN-controlled bank account for Iraq. UN sources say this has never been done before.

Industry analysts say illicit side deals are suspected to have been concluded between Baghdad and UN-approved lifters. These entail the lifter paying a heavily discounted price to the authorities - some suggest as low as $8 a barrel - then remitting a share of the profit to Baghdad through a series of banks and holding companies, mainly in Europe. The oil is loaded after UN agents have completed their inspection of the tanker.

This is not the first time that Iraq has tried to bypass UN oil sales for direct profit. In May, the Baghdad authorities announced that lifters would have to pay a surcharge of $0.40 into an account directly controlled by Baghdad. The arrangement contravenes UN sanctions, but analysts say the fee was widely paid by Iraq's customers before the UN moved to a retroactive pricing mechanism.

The present phase of the UN oil-for-food programme expires on 30 November.

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