27 July 2005
Congress Explores Syrian Role in Subverting Iraq Sanctions
Iraq-Syria trade reportedly generated $3.4 billion in illicit revenues
By David Shelby
Washington File Staff Writer
Washington -- The Syrian government and the Commercial Bank of Syria had key roles in subverting U.N. sanctions against Saddam Hussein’s regime and facilitated the export of prohibited military items to the former Iraqi regime, according to witnesses testifying before the House International Relations Subcommittee on the Middle East and Central Asia July 27.
While acknowledging that the Iraqi government found partners in dozens of countries that were willing to help it circumvent the U.N. sanctions and subvert the Oil-for-Food Program, Subcommittee Co-chair Ileana Ros-Lehtinen said, “[I]t was in the Syrian regime that Saddam found perhaps his most favored and profitable collaborator.”
Iraq and Syria established a bilateral trade protocol in June 2000 enabling Iraq to obtain goods, services and cash outside of the Oil-for-Food Program set up by the U.N. Security Council, according to Deputy Assistant Secretary of State for Near Eastern Affairs Elizabeth Dibble.
This relationship became a lucrative source of trade for both countries following the unauthorized reopening of the oil pipeline from Kirkuk, Iraq, to Banias, Syria, in November 2000. According to former State Department official Victor Comras, that pipeline, at full capacity, could pump up to 250,000 barrels per day and generate revenue in excess of $1 billion a year.
Director of Operations for the Internal Revenue Service Criminal Investigation Division Dwight Sparlin explained the structure of the illicit transactions. He said that 60 percent of the revenues from the sale of Iraqi oil were placed in a “trade account” at the Commercial Bank of Syria (CBS) while the remaining 40 percent was placed in “cash accounts” with CBS and its affiliates.
“Under the Syrian protocols, the former Hussein regime was required to use the money in the trade account to purchase goods from vendors and businesses in Syria,” he said. “The Iraqi government would negotiate contracts with Syrian companies to provide merchandise; once the merchandise was received in Iraq and verified, SOMO [the Iraqi State Oil Marketing Organization] would direct the CBS by letter to pay a specific amount to a Syrian supplier from the trade account.”
He said that funds in the cash accounts periodically were withdrawn and redeposited into Iraqi banks, including the Central Bank, the Rasheed Bank and the Rafideen Bank.
According to Dibble, this arrangement generated $3.4 billion from the illicit sale of Iraqi oil between June 2000 and July 2003.
The subcommittee members expressed particular concern over the way that these ill-gotten revenues were spent.
“[T]he pipeline agreement not only revealed the true intentions of both Iraq and Syria – to ignore U.N. sanctions and circumvent Oil-for-Food mechanisms – but provided them with the financial resources to engage in policies threatening global security,” Ros-Lehtinen said.
Comras confirmed that Iraqi security and military agencies used the Iraq-Syria trade protocol to procure weapons and munitions strictly prohibited under the U.N. sanctions. He said that one Syrian firm in particular, SES International, owned by a cousin of Syrian President Bashar Al-Asad, received $187 million in defense and security contracts from the Iraqi regime.
Dibble said that CBS still holds $266 million from the protocol accounts and associated Iraqi government accounts, and she added that the United States has repeatedly urged the Syrian government to transfer these funds to the U.N.’s Development Fund for Iraq (DFI) in accordance with the requirements of Security Council Resolution 1483, which governs the treatment of funds belonging to the former regime. She said, however, that despite public commitments by the Syrian government to return the funds, it has not yet done so.
She said the U.S. Treasury Department has designated CBS and its subsidiary, the Syria-Lebanese Commercial Bank in Beirut, Lebanon, as “primary money laundering concerns” as a result of their role in the illicit sale of Iraqi oil and their failure to transfer the remaining proceeds to the DFI.
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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