By an OGJ correspondent
NICOSIA, Apr. 15 -- Even as the US and UK raise the specter of economic sanctions against Syria, the Arab state has already been hit hard by the loss of substantial oil revenues following the end of its illicit supplies from Iraq.
US military forces have shut off a pipeline that carried "illegal oil" flowing from Iraq to Syria, US Defense Sec. Donald Rumsfeld said on Tuesday. "We have been told that they have shut off a pipeline," Rumsfeld told a Pentagon briefing.
"Whether it's the only one and whether that has completely stopped the flow of oil between Iraq and Syria, I cannot tell you. . . .I cannot assure you that all illegal oil flowing from Iraq into Syria is shut off. I just hope it is."
Rumsfeld said US forces did not destroy the pipeline . "We have preserved infrastructure in that country," he said.
Kuwait's Al-Rai Al-Aam newspaper last week reported that the pipeline between Kirkuk in northern Iraq and the Syrian port of Banias was blown up by US special forces, along with a railway link between the two countries that also carried Iraqi crude oil.
Syria's losses
Some analysts say the shutdown will cost Syria $500 million to $1 billion in estimated annual revenue from Iraqi oil illegally exported through the pipeline—a significant percentage of Syria's annual $7.5 billion budget.
Before the war, Syria was said to be receiving as much as 200,000 b/d of oil through the pipeline, paying as much as $1 billion/year to Iraq, making it the single largest source of revenue for Baghdad outside the UN's oil-for-aid program.
But the US action put an end to that arrangement, ending Washington's formerly benign policy towards Syria's illicit imports of Iraqi oil.
Pipeline history
Iraq's former Oil Minister, Lt. Gen. Amir Muhammad Rashid—now being pursued by coalition forces as a war criminal (OGJ Online, Apr. 14, 2003)—first announced on Aug. 7, 1997, that Iraq was prepared to pump its crude oil through the Iraq-Syria pipeline.
In August 1998, Rashid and Syria's Oil Minister Muhammad Mahir Jamal signed a joint protocol for the rehabilitation of the pipeline and the resumption of contacts to bolster future oil cooperation.
Work on Iraq's side was completed by August 1999, and Iraqi experts and technicians started repairs on the Syrian side. Baghdad's official Jumhuriya newspaper reported on Aug. 14 that "the part of the pipeline inside Syria needs some turbines, which will enable the pipeline to export 200,000 b/d (of oil)."
On Mar. 1, 2000, Iraqi radio announced "the completion of restoration work on the oil pipeline and the pumping stations in the crude oil exporting system via Syria to Baniyas terminal on the Mediterranean."
Shipments of oil began in November 2000 and the US Department of State soon expressed concern about the export of Iraqi oil to Syria, insisting that all shipments be made subject to UN sanctions on Baghdad.
While Syria said it was receiving only enough oil to "test" the pipeline, a senior State Department official said the shipments seemed to exceed what would be required for that purpose. "There's more happening than what we'd like to see," he said.
On Jan. 23, 2001, State Department spokesman Richard Boucher said US officials had talked with their Syrian counterparts about the reopening of the 552 mile pipeline.
Boucher said the US would be supportive if Syria asked to have its pipeline designated as an authorized route for exporting Iraqi oil under the UN oil-for-aid program. This would have ensured that revenues earned by Iraq could not be spent by President Saddam Hussein on rebuilding his military.
US plans interrupted
US Secretary of State Colin Powell said he was assured by Syria's President Bashar Assad during a meeting in February 2001 that Damascus would allow UN control over the pipeline that industry analysts then estimated was carrying 120,000-200,000 b/d of Iraqi crude. But Damascus never sought UN oversight.
Analysts estimated that the Iraqi oil, delivered to Syria at a discount of some $15/bbl, could generate $2-3 million/day of income for Iraq—all outside the UN oil-for-aid accounts and available for Baghdad's arms purchases.
At the time, the Bush administration also was working on a plan to overhaul sanctions on Iraq that called for posting UN monitors just outside the country's borders and at key foreign airports to prevent Hussein's regime from importing military goods.
As an inducement to cooperate, neighboring countries, such as Jordan, Turkey, and Syria, would be allowed to buy Iraqi oil at discounted prices. Some or all of their payments might be deposited into special accounts that Iraq could use only to buy imports from the neighbors.
Although the US was drawing a bead on the illicit trade between Baghdad and Damascus, the Sep. 11, 2001, suicide attacks on New York and Washington, DC, brought a significant change in the aim of the Bush administration—away from Iraq to the terrorists responsible for the attacks.
Although it remained on the State Department's list of state sponsors of terrorism, Syria stepped up its sharing of intelligence with the US concerning militant groups linked to Osama bin Laden, the leader of the Al Qaeda terrorist network blamed for the Sept. 11 attacks.
The Bush administration, seeking to nurture a growing intelligence relationship with Syria in the war on terrorism, refrained from confronting Damascus about its illicit imports of Iraqi oil. But with Al Qaeda largely out of the picture and Hussein deposed, the US changed its focus.
Even before Rumsfeld's announcement on Tuesday, Syrian officials acknowledged on Apr. 1 that supplies of Iraqi oil ceased with the ramping up of the US-led war against Baghdad.
Reuters news agency quoted a Syrian industry source as saying that the pumping of about 200,000 b/d of crude from Iraq's southern oil fields for export to Syria had stopped.
"The situation inside Iraq does not permit the continuation of the oil flow from a technical point of view," the Syrian source told Reuters.
Syria's ambassador to the US, Rostom Zoubi, summed up the end of the pipeline saga, saying "This is an old line and all of Iraq is being destroyed, so what's a pipeline? Nothing."
