Syria secretly bought about $3.4 billion in Iraqi oil in violation of U.N. sanctions in the three years leading up to the 2003 U.S.-led invasion, and U.S. officials fear some of the money is being used to fund the insurgency in Iraq.
Officials from the State Department and the Internal Revenue Service (IRS) told Congress yesterday that the Commercial Bank of Syria, the country’s central bank, was a key financial conduit in Iraqi dictator Saddam Hussein’s drive to undermine the United Nations’ troubled oil-for-food sanctions program.
Although some accounts have been frozen by Syrian officials since the fall of Saddam, “some of that could definitely be now being used by insurgents” in Iraq against U.S. and coalition forces, said Elizabeth L. Dibble, deputy assistant secretary of state for Near Eastern affairs.
Oil smuggling was rampant and acknowledged under the seven-year U.N. oil-for-food program, which was supposed to tie such sales for the Saddam regime to the purchase of food and humanitarian aid.
Jordan and Turkey, two U.S. allies, also purchased Iraqi oil outside the U.N. sanctions regime, with the tacit acceptance of Washington.
Democrats on the House International Relations oversight subcommittee said yesterday that Syria was being singled out because of the Bush administration’s hard line against Damascus.
But Victor Comras, a former State Department official who tried to work out an accord with Syria in 2001 to shore up the crumbling U.N. sanctions program, said Syria was the only country that was not using the Iraqi oil to meet domestic energy needs.
Mr. Comras said at least a third of the money generated by Saddam through illegal oil sales outside the U.N. sanctions program was still unaccounted for and could be used to finance the Iraq insurgency.
“It’s a black hole,” he said.
Syrian Ambassador to the U.S. Imad Moustapha angrily rejected charges that his country was funding terrorists in Iraq. He said Syria went out of its way to work with U.S. and Iraqi investigations into Saddam-era bank accounts.
He said Syria had invited a team of State and Treasury Department investigators to Damascus for 10 days last year to examine bank accounts set up for Iraq.
“We were fully cooperative, but they use our cooperation as innuendo to imply we have done something wrong,” he said after the hearing. “They like to blame Syria for their own failed policies in Iraq.”
Dwight Sparlin, director of operations, policy and support at the IRS’ criminal investigation division, said the Commercial Bank of Syria held about $842 million in Iraqi funds in March 2003, but drew down about $578.5 million from the accounts to pay off what it said were legitimate contracts held by Syrian businesses.
Mr. Sparlin said the Syrian bank would not supply copies of the contracts for U.S. investigators to examine.
An account now holding $261 million in Iraqi government funds remains frozen at the Syrian bank. The Treasury Department in May 2004 accused the Syrian bank of money laundering because of its refusal to turn over the frozen funds to a development fund established to rebuild Iraq.