Iran opens faucet for smuggled Iraqi oil; Gulf transit picks up from a trickle in May


WASHINGTON - After a stiff, two-month crackdown on illegal Iraqi oil shipments in the Persian Gulf, Iran is allowing renewed smuggling activity, puzzling U.S. officials who had hoped to extinguish a key financing source for Saddam Hussein's weapons programs.

"The activity's picked up again in the last two weeks," said U.S. Navy Cmdr. Jeff Gradeck, a spokesman for the gulf-based allied naval force that is enforcing the United Nations trade sanctions against Iraq. "Why [Iran has] opened it up and to what extent I don't know."

Iranian complicity is crucial for the shipment of illegal Iraqi oil through the Persian Gulf. By staying within Iran's 12-mile-wide territorial waters along the gulf's northern and eastern shoreline, smugglers are safe from allied ships seeking illegal cargo.

Tehran's exact role in the renewed shipments was unclear yesterday. But the fresh activity after a two-month lull has worried U.S. officials.

"Of course that concerns us," said P. J. Crowley, spokesman for the White House National Security Council. "We have conveyed our concern ... to Iran that it is their responsibility to enforce the sanctions regime that is in place."

U.S. officials were still analyzing the new activity yesterday and were uncertain as to whether it is likely to continue. But any increase in smuggling is disturbing, they said, because it bolsters the pariah regime of Iraqi leader Saddam Hussein.

"This is a critical influx of capital that he would rely on," said a State Department official. "It allows him to take part in all his illicit activities: funding terrorism, pursuit of weapons of mass destruction, building his own palaces."

Earlier this year, Iraq was shipping upwards of 3 million barrels of illegal oil per month, most of it through Iranian territorial waters, according to Pentagon officials. But smuggling fell to only 1.1 million barrels during May after Iran closed its coastline to smugglers.

"It slowed to a trickle" in May and picked up again only in the past 10 days, as allied ships boarded 29 vessels and found that four were carrying illegal oil, Gradeck said.

Iran denied that it has relaxed its vigilance and said in explanation of the renewed flow of illegal oil that it is unable to stop every illegal vessel.

"There has not been any change in policy in Iran's position regarding the implementation of United Nations sanctions on Iraq," said Hossein Nosrat, a spokesman for Iran's mission to the United Nations in New York. "We, to the best of our ability, will continue to take all necessary measures in this regard."

Iraq has denied that illegal oil shipments take place. A spokesman for the country's mission to the United Nations said yesterday that Iraq would have no immediate comment on reports of renewed illicit sales.

Smuggling enables Iraq to collect oil revenues without going through a strictly controlled U.N. program that requires the proceeds to be spent on food and medicine for the Iraqi people. U.N. sanctions, imposed after Iraq's invasion of Kuwait in 1990 and adjusted several times since then, prohibit sales that don't go through this "oil for food" program.

The proceeds from illegal shipments are spent on weapons development, terrorism and the repressive internal measures that help maintain Hussein's hold on power, said U.S. officials and Middle East policy analysts.

Smuggling in the Persian Gulf skyrocketed last fall and continued at a high level through March, according to U.S. officials, as Iraqi leader Hussein took advantage of rising oil prices. Hussein was on track to reap more than $1 billion this year from smuggling, U.S. officials said.

But two months ago, illegal shipments plummeted as Tehran announced it would mount "intensified operations" to stop smugglers. The amount of smuggled oil through the gulf dropped by almost half in April and by two-thirds in May, officials said.

"The Iranian government decided not to support that trade," said Leo Drollas, deputy director at the London-based Center for Global Energy Studies. "They thought the spotlight was on them, and they wanted to draw back from it. Plus, the U.S. Navy has been more active in the gulf."

In an official Iranian government radio broadcast - "Voice of the Islamic Republic" - in April, an announcer said Iranian naval forces had seized 10 ships carrying 45,000 metric tons of illicit Iraqi oil and noted that "some middlemen" were profiting from the trade. The broadcast did not mention that the middlemen include the Iranian Revolutionary Guards, who pick up an estimated $50 per metric ton as a passage fee from the smugglers, Pentagon officials said.

Iraq would receive $95 per metric ton from the smugglers, Pentagon spokesman Kenneth Bacon estimated in April. About $60 per metric ton would go into the pockets of the smugglers by the time the oil was sold for $205 per metric ton in the United Arab Emirates, India or Pakistan. A metric ton equals 7.3 barrels of oil.

As recently as May 25, the Iranian crackdown was still in force as Revolutionary Guards halted a Belize-registered tanker carrying 1,400 tons of fuel oil at the entrance to the gulf, Iran's official news agency reported, saying the Guards would continue its patrols "to implement U.N. resolutions."

The State Department took credit for the change in Iranian policy, saying Tehran moved after the United States produced evidence suggesting that smuggling was having a destabilizing influence on Iran. "It was made clear to Iran that this smuggling was being used by Saddam Hussein for his own purposes, including funding for ... a terrorist group which targets Iran," said a State Department official.

But the seesaw fortunes of Persian Gulf oil smugglers may also reflect changing relations between Tehran and Baghdad or political developments inside Iran, Middle East specialists said.

"One of the things to keep in mind is that the government of Iran is really different from the government of Iraq," said Jon B. Alterman, a Middle East analyst for the U.S. Institute of Peace, a government-funded think tank. "The government of Iraq is tightly controlled from the center. The government of Iran is made of many parties who don't have the same views and sometimes work at cross-purposes."

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