Iranian 'tollgates' cash in on Iraqi oil smuggling

Iran's recent policy change is expected to net Saddam Hussein $1 billion.

Iran's flip-flopping "policy" toward Iraqi oil smuggling - in violation of United Nations sanctions - is proving enigmatic even in diplomatic circles.

American officials say that after two months of strictly enforcing the UN embargo, Iran's Revolutionary Guards are now allowing, for pay, scores of sanction-busters to use Iranian waters to evade American and other craft monitoring the area.

"Nobody really knows who is in charge," says Mohammad Hadi Semati, a political scientist at the University of Tehran. "Like everything else in Iran, it is cat and mouse. It may have nothing to do with strategic gamesmanship, but a lot to do with [local] political games. It is part of the bizarre chaos of Iran's political process."

The UN is permitting Iraq to sell about $17 billion in oil this year and use the proceeds to buy humanitarian goods, including food and medicine.

The illegal trade - which also uses northern land routes to US-ally Turkey - is considered by Western diplomats to be Iraqi leader Saddam Hussein's personal cash stream that could net him up to $1 billion this year, and pay for everything from luxuries for loyal cronies to rebuilding weapons of mass destruction.

US policymakers heralded Iran's April crackdown on oil smugglers. At the time, it was seen as a carefully calibrated response to a March gesture by US Secretary of State Madeleine Albright easing restrictions on Iranian carpets, caviar, and pistachios.

The clampdown also occurred shortly after the US State Department leaked details of how Iraq was spending millions from these oil earnings on building a new military base east of Baghdad for thousands of heavily armed opponents of the Iranian regime, the Mujahideen e-Khalq.

Iran has many good reasons for stopping the flow, analysts say, though some hard-line elements like the Revolutionary Guard corps also have very good reasons for keeping it going.

But, as with most other political issues in the Islamic Republic, the power struggle between the popular, reformist President Mohamad Khatami and right-wing clerics is most likely in play.

Analysts point out that Mr. Khatami ordered a halt to the oil smuggling soon after assuming office in 1997, but hard-liners, who control the Guards corps, rekindled it shortly thereafter.

Diplomatic sources say that the Iraqis are selling oil at $15 to $16 per barrel, of which $5 to $6 per barrel is paid to cooperating Iranian forces.

Khatami has made clear that he wants to clean up Iran's reputation for terrorism and abide by international law. Early on, he also sent powerful signals that Iran wanted to break down the "wall of mistrust" that stood between Tehran and Washington.

"Certain people are afraid of Iran opening to the US, because it could undermine their power," says a senior Western diplomat in Tehran. "So this could be part of the internal quarrel. Khatami doesn't need the American opening now for popular support."

And there may be less-direct reasons at play, such as Iranian anger over the strident US policy of shutting Iran completely out of a future Caspian oil pipeline. Washington has vowed to fund a vastly expensive line, which few in the petroleum industry say is economically feasible, to skirt Iran.

"This could be a move by Iran to tell the Americans: 'We can do it, to counter what you are doing in the Caspian,' just to show that they can mess up the US strategy in the Gulf," says Mr. Semati.

Among other issues, the US policy toward Saddam Hussein has its share of critics.

"There is a real constituency in Iran that believes the US does not want to get rid of Saddam Hussein, and that the US wants him to have this income," Semati says. "If the Americans know about it, why don't they stop it?"

Even though Iran and Iraq waged the bloodiest Mideast war in the 1980s - killing and wounding more than 1 million people - some calculate that earning a profit with an old foe makes more sense than complying with the UN Security Council.

"The US has wanted to push the Security Council to condemn Iran," says a senior Western diplomat in Tehran, noting the inconsistency. "We don't contest Iranian complicity, but other countries like the UAE [United Arab Emirates] play a fruitful part. Don't choose just one [to condemn] - that is more part of the US game on Iran."

(c) Copyright 2000. The Christian Science Publishing Society