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 big discounts.
Traders said Iraq was selling the oil for as little as $8 a barrel, compared with 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.
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.
The United States has steadfastly refused to consider lifting the U.N. sanctions, saying Iraq has failed to comply with resolutions passed by the Security Council during the Persian Gulf conflict.
xTC