PARIS -- Iraq has set up a secret system over the past year to export crude oil and refined products to bypass the U.N. sanctions barring such sales, senior oil industry executives and traders said yesterday.
The executives said the illicit sales had generated $700 million to $800 million in revenue for the Iraqi economy, crippled by sanctions imposed by the United Nations after Iraq's invasion of Kuwait in 1990.
That figure is less than 6 percent of the $12.7 billion Iraq would earn if it were still exporting 2.5 million barrels a day, as it did before the Persian Gulf war. Nonetheless, the income is significant for a country that has little other source of revenue.
The executives, some of whom are directly involved in the sales, said that Iraq was relying on a growing network of oil traders motivated by the big discounts given on their purchases.
Traders said Iraq was selling the oil for as little as $8 a barrel, compared to a current market price of about $14 a barrel for Middle Eastern oil of that type.
Hundreds of trucks are carrying the oil through Kurdish territory in Iraq's northern region into Turkey or to Iran, countries in which the oil can quickly be sold at a profit without being re-exported.
The advantage for the Iraqi Kurds or for Iran, normally adversaries of the Baghdad government, is financial profit, said the traders, whose accounts were confirmed by senior oil executives in France and Britain.
Baghdad allows Kurdish rebels in northern Iraq to collect a tax on each truck passing through the region, with much of the revenue funneled to Kurdish politicians who have fought against the Iraqi army.
And the Iranian government in Tehran has financial links to many of the middlemen who operate along Iran's long border with Iraq.
Dozens of small tankers also are sailing from the Iraqi port of Umm Qasr, south of Basra and near the Kuwait border, to the Persian Gulf area near Dubai, where the oil is reloaded onto other tankers bound for markets in the Mediterranean.
The profits realized by the traders far outweigh the danger of occasional interception by U.N. vessels, mostly U.S. warships, patrolling the Persian Gulf, the oil traders say.
"They are selling their oil at $8 to $10 per barrel," one oil trader based in London said. "That's a big discount, which explains why many of us are willing to take risks to move that oil."
The oil smuggling network, largely managed by senior government officials related to President Saddam Hussein, including his son, Uday, and his brother-in-law, Industry Minister Hussein Kamil, shows every sign of expanding further.
Oil executives and the Iraqis say exports have expanded with the tacit support of Turkey, Iran, Jordan and others in the region that believe the sanctions against Iraq have been in place too long and are costing them too much in lost trade with Baghdad.
Meanwhile, dozens of international oil concerns, including companies from France, Italy, Russia, Britain, Spain, Canada, Asia, and Latin America, are said by executives to have concluded talks with Baghdad about plans to produce and export Iraqi oil once the sanctions are lifted. The goal would be to boost Iraq's production over the next few years to 5 million barrels a day.
To advance such talks, Baghdad is planning a major international oil conference on March 11 and 12. Titled the "Future of the Oil Markets 2000-2010," the conference is expected to attract scores of representatives of the oil industry.