Volume 1 - Iraq Watch

Annex FIraqi Oil SmugglingCaptured documents recovered shortly after OIFindicate that between 1992 and 2003 Iraq exportedcrude oil and other oil products to many countriesor their nationals, who wittingly breached UnitedNations sanctions. UNSCR 661 restricted all memberstates from importing any goods, including oil and itsderivatives, originating from Iraq.Case Studyfor weapons and dual-use materials, as well as manylegitimate day-to-day goods and supplies. In additionto dealing with oil, this company traded in itemssuch as construction materials, foodstuffs, and powergenerators to cover its real activity, which was coordinatingwith neighboring countries to facilitate thepurchase of illicit military equipment.• A former employee of more than 15 years ofthe IIS, Munir Al-Qubaysi, headed Al-Basha’ir.Because of the IIS connections, relations betweenAl-Basha’ir and the IIS were especially close. Inaddition to those ties with the IIS, the operation ofthe company was handled closely by the MIC.Regime Financeand ProcurementThe captured documents listed below indicate howIraq arranged the illicit transshipment of oil withbuyers by reference to signed contracts, letters, checkpayments and telex messages. This study includessummaries of contracts and letters exchanged betweencompanies, banks and individuals in various countriesincluding Iraq, Iran, Cyprus, France, Slovakia and theUAE. Additionally, these documents list some of theforeign companies and agents who were involved inthe smuggling activities.• Some of the Iraqi refineries were still operationalafter Desert Storm, and in spite of UN sanctions,continued to produce for export tons of gas oilthat was primarily used for firing electrical powerplants.Smugglers, using small oil transporters similar tothe one in the picture in Figure19, bribed RG navalunits on a regular basis in order to gain free passagethrough Iranian waters. To avoid Maritime InterdictionForce (MIF) patrols, these vessels would sailto the southern end of the Gulf and dart across thenarrow straights from Iranian waters to UAE territory.In the majority of these cases, the vessels wouldthen transfer their cargos of gas oil or fuel oil ontolarger tankers; it would then be transported to market.This money making scheme benefited the smugglers,Iraqis, Iranians, and oil recipients alike.The Al-Basha’ir Company was the largest frontcompany created by the MIC in 1991. The company’sname has been discovered on hundreds of contractsThe last chairman of Al-Bashair’s board of Directorswas the head of the MIC’s Administration andFinance Directorate, Raja Hasan Ali Al-Khazraji.Information from contracts found and data derivedfrom the records of the SOMO indicate that the Al-Basha’ir Company, in addition to being the largestfront company, was also a major broker in Iraqi oilsmuggling.The Jordanian Al-Basha’ir Company, the Jordanianbranch of Iraq’s most important military procurementfront company, signed contracts for the export of oilproducts from Iraq, according to SOMO records (seeFigure 20). These records indicate that Al-Basha’irsigned 198 contracts from November 1999 throughMarch 2003. We do not know if contracts were signedbefore this date. The contracts were for fuel oil, usuallysold at $30 per ton, and gas oil, usually pricedat $80 per ton. Almost all were for export by shipthrough the Arabian Gulf, although the destinationof two contracts was listed as “North,” which usuallymeans Turkey.• The value of the contracts totaled $15.4 million.This is the amount to be paid to SOMO. We do nothave information about the amount of money Al-Basha’ir earned from the trade.The following inset is a translation of a contract,signed 2 June 1992, between Al-Basha’ir TradingCompany and Al Walid Company for Export andImport. The contract states that Al Bashir agrees tosell oil to Al Walid, who was to transport the oil by221