Volume 1 - Iraq Watch

10 June 2000. The relationship probably acceleratedwhen al-Assad’s son, Bashar al-Assad, became Presidenton 17 July 2000. For Baghdad, the relationshipwas attractive because Syria could buy significantlymore oil at better financial terms than Iraq’s otheravailable illicit markets and Damascus was more willingthan any other neighboring state to allow militarygoods to be shipped to Iraq through its territory.• SOMO and the Syrian Oil Marketing Office negotiatedthe bilateral trade Protocol in Baghdad from27 to 29 May 2000. Contracts were written underthe Protocol from June 2000 through March 2003(see Annex A: Translations of Iraq’s Bilateral TradeProtocols).• Under the agreement, Iraq exported crude, gas oil,fuel oil, gasoline, base oil, LPG and asphalt to Syriaby pipeline and/or tanker truck.Iraq’s total earnings over the life of the Protocolwere about $2.8 billion (see Figure 11).• Iraq charged Syria roughly $6 less than the authorizedprice for crude under the UN OFF program.Gas oil was sold for $75 per metric ton and fuel oilwas sold for $20 per metric ton, both significantlydiscounted from world prices. These shipmentsallowed Syria to export its own crude oil at marketprices instead of having to use it for domestic consumption.• Under the Syrian Protocol, 60 percent of Iraq’searnings were deposited in a SOMO account in theCommercial Bank of Syria for use in buying Syriangoods or foreign-made items purchased throughSyria.• Iraqi sources’ statements concerning the dispositionof the remaining 40 percent cash payment arenot clear. The best information, however, seems toindicate the cash was first deposited in a CommercialBank of Syria cash account. Once this accountreached $1 million, the funds were transferred to anaccount at the Syrian Lebanese Commercial Bankin Beirut, Lebanon. One source states this accountwas in Lebanon, another in Damascus. SOMOeventually transferred the money to CBI accounts inBaghdad, possibly by courier.• According to SOMO records, $1.18 billion in contractswere written drawing on the SOMO (presumablycredit) account with Syria. If 60 percent ($1.68billion) of Iraq’s total earnings of $2.8 billion weredeposited in that account during the existence ofthe Protocol, there would be $500 million remainingin unspent funds at the end of the war. All ofthese contracts probably had not been completedbefore OIF. This, and the possibility of other smallaccounts, probably explains the $842 million intotal Iraqi funds remaining in Syria at the outbreakof OIF.Turkey Trade Protocol. Trade under the Turkey-IraqProtocol was a significant source of illicit incomefor Iraq from 2000 until OIF in March 2003. TheProtocol was a rationalization and expansion of preexistingIraqi-private-sector contracts. Iraq was ableto increase the volume of its exports and earnings.• The main details of the Turkish Protocol wereagreed to at meetings between Iraqi and Turkishdelegations in early 2000. Minutes of meetingswere signed on 16 January 2000, 29 February 2000,and 16 May 2000. The 16 January document wassigned by Amir Rashid Muhammad al-Ubaydi,MoO, Republic of Iraq, and by a Turkish trade official,Republic of Turkey. It was decided a joint teamof experts from the two sides would meet everythree months to review the progress of the implementationof the Protocol (see Annex A: Translationsof Iraq’s Bilateral Trade Protocols).• For 2000, Iraq agreed to export 2.75 million tons(54,247 bbl/d) of crude oil to four Turkish buyers:Oz Ortadobgu, Ram Dis, Tekfen, and the TurkishPetroleum International Company (TPIC) during2000. TPIC was the trading arm of the TurkishNational Oil Company and was granted the rightto contract for additional oil above the 2.75 millionmetric tons.• Contracts were written under the Protocol from July2000 to February 2003.Iraq’s total earnings over the life of the Protocolwere $710 million (see Figure 12).26