Iraqi oil smuggling on the rise, and profitable, officials say

WASHINGTON - Iraq is using an obscure Iranian island in the Persian Gulf as a transfer point in an operation that has substantially increased revenues from oil smuggling in recent months, U.S. officials say.

The officials, speaking on condition of anonymity, say the Iraqis have earned between $25 million and $40 million a month, perhaps twice the amount the illicit transactions yielded two years ago.

Meanwhile, Iran's Revolutionary Guards, with minimal sacrifice, are netting an estimated $20 million a month for their role in allowing the vessels to pass through Iranian waters.

''The Iranians don't have to do anything but ensure safe passage,'' one official said.

The recent increases in the price of oil make the contraband activity all the more profitable.

An average of about seven small oil-laden vessels a day depart Iraq and rendezvous with larger vessels off tiny Qais Island, a tourist center just off the Iranian mainland in the Persian Gulf, the officials said.

Once the transfer of cargo takes place, these vessels can head for almost any destination in need of oil.

The activity is illegal under U.N. resolutions. Sanctions imposed on Iraq in 1990 after its invasion of Kuwait remain in place.

Iraqi commercial activity is largely banned except for an ''oil-for-food'' program that is designed to meet the humanitarian needs of the Iraqi people. Oil exports under the program are expected to reach $18 billion this year.

A U.N. interdiction force has operated in the Persian Gulf for some time to enforce the embargo. But often, there is little that it can do because it can operate only in the relatively small area of the Persian Gulf in international waters. Vessels carrying Iraqi oil can elude the force simply by staying within Iran's 12-mile territorial limit.

The Iran-Iraq collusion adds up to a mutually beneficial enterprise for two countries which fought a bloody war during the 1980's and remain extremely wary of one another.

Iraq allows a deadly Iranian opposition group use of Iraqi territory for training and other activities directed against the Islamic government in Tehran. Indeed, a base constructed by Iraq for these rebels can accommodate up to 5,000 militants.

There is no reason Iraq cannot use its windfall from smuggled oil to rebuild its weapons arsenal, perhaps for use some day against Iran, the officials say. But Iran nonetheless has been a willing partner in the forbidden activity.

At times, the cooperation between the two neighbors breaks down for reasons which are not entirely clear. For example, no smuggling operations were detected for a lengthy period this past spring, according to the officials.

At the time, Iran's Islamic Revolution Guard Corps detained a tanker for allegedly smuggling Iraqi oil. An Iranian Foreign Ministry spokesman said, ''Iran's policy is to counter oil smuggling and to observe United Nations sanctions against Iraq.''

Despite obstacles, the U.N. force has been stepping up enforcement of the embargo.

In all of 1999, oil from 17 ships was confiscated but that figure was exceeded during the first few months of this year, according to officials. They said the increase reflected the sharp rise in smuggling activities this year. The confiscated oil is sold partly to offset the costs of maintaining the anti-smuggling problem.

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On the Net: State Department: http://www.state.gov/www/regions/nea/index.html

Library of Congress country notes: http://lcweb2.loc.gov/frd/cs/cshome.html

U.N. oil-for-food program site: http://www.un.org/Depts/oip/