Dave Eberhart
Monday, Dec. 10, 2001

Editor's Note: This is the first in a series of articles that will examine the potential targets of the anti-terror campaign.

Follow the money.

That dictum may be the best way to figure out why so many countries oppose U.S. efforts to target Iraq in the next phase of the war on terrorism.

Press reports chalk up the rhetoric against U.S. military intervention in Iraq to the simple reluctance of Arab coalition members to war against a sister Arab country.

But the money trail may give a more complete explanation for their recalcitrance, as well as that of non-Arab states that oppose targeting Iraq.

In recent years, Iraq has been carefully channeling billions of dollars in trade to its neighbors and potential foes under the U.N.-mandated "oil for food" program.

Apparently, members of the U.S. coalition against terrorism may not be so anxious to upset this multibillion-dollar trade to a recession-strapped Europe and Middle East.

Iraq's U.N. Ambassador, Mohammed Douri, perhaps said it best: "Politics is about interests. Politics is not about morals."

A large part of the disincentive to war: Baghdad's oil revenue has leaped from $4 billion in 1997 to $18 billion last year.

Much of that windfall goes to buying goods in the marketplace; even the brokering of the Iraqi oil generates millions of dollars.

The U.N. Security Council voted in late 1996 to allow Iraq to sell oil to purchase food, medicine and other humanitarian goods under the "oil-for-food" program.

Over time, all limits on the amount of oil that Iraq could sell were removed, though the revenue is funneled to a U.N. escrow account and Iraqi purchases are monitored by a Security Council committee.

According to U.N. records, Egypt signed more than $740 million in contracts with Iraq in the latter half of last year alone. The United Arab Emirates did $703 million in business. Syria purchases about $1 billion in oil from Baghdad each year.

All three countries strongly oppose any U.S. intervention in Iraq.

Before falling into disfavor because of its posture regarding sanctions against Iraq, France was a huge beneficiary of trade with the outlaw nation, cutting deals for over $3 billion worth of such goods as mini-buses, garbage trucks and communications gear.

Russia has done more than $2 billion in business with Iraq under the program. Not surprisingly, Russia recently rejected a U.S. plan to modify the oil-for-food program. It has also warned the U.S. it will withdraw its support for the war on terrorism if Iraq is attacked.

Russian oil giants earn large profits by trading Iraqi oil on world markets.

If and when sanctions are lifted, Russia's oil interests look forward to more business with Iraq, which has huge oil reserves.

Iraqi Oil in U.S.

And despite Iraq's ostensible refusal to sell its oil directly to the U.S., Japan and the United Kingdom, Iraqi crude has become the fastest-growing source of U.S. imports as it flows into the U.S. through middlemen.

Nearly 40 percent of Iraq's oil exports end up in U.S. refineries.

Larry Goldstein, president of the Petroleum Industry Research Foundation, has identified traders in Russia, China and Europe as buying discount Iraqi oil, re-styling it, and selling it to U.S. companies at bargain prices.

According to Goldstein, U.S. oil companies make billions of dollars in profit from this cheaper oil difference every year.

Department of Energy figures indicate the companies receiving the oil are Chevron, Exxon-Mobil, Valero, Clark and Marathon Ashland.

Even perennial U.S. ally the Netherlands has been lobbying the Security Council to lift the ban on foreign investment in Iraq's oil sector.

The Netherlands wants to obtain commercial contracts for its own firms, including the powerful Royal Dutch/Shell Group.

For its part, Baghdad knows full well the financial clout it packs.

When France got too cozy with the U.S. sanctions policy, Baghdad slashed its imports of French goods to $310 million in the second half of 2000, down from $616 million in the first six months of last year, according to the U.N.

Baghdad also rattled its financial saber in the face of neighboring Turkey and Jordan to discourage them from backing a U.S.-British proposal to stop Iraqi smuggling.

Turkey and Jordan, of course, are significant beneficiaries of Iraqi trade dollars.

"Iraq is using money and oil as a weapon against the international community," said James B. Cunningham, former acting U.S. ambassador to the United Nations.

"My government is accustomed by now to Iraq's cynicism toward its own people, and to its bluster and threatening policies. We find it harder to understand, however, why others would join in playing that game when the status quo is clearly not satisfactory."

The question remains if that clout will derail any U.S. notions of forcing the return of U.N. weapons inspectors to Iraq by military force, and holding Saddam Hussein accountable for his support of international terrorism.

Read more on this subject in related Hot Topics:
Saddam Hussein/Iraq
War on Terrorism