Commerce With Baghdad Grows Quietly as Washington Urges Regime Change
By Colum Lynch
Special to The Washington Post
Sunday, February 20, 2000; Page A23
UNITED NATIONS, Feb. 17—Four years ago, when he was director of central intelligence,
John M. Deutch headed up American efforts to overthrow Iraqi President Saddam Hussein.
Today, Deutch sits on the board of Schlumberger Ltd., a multinational company that is
helping Baghdad service its oil rigs.
As secretary of defense during the Persian Gulf War, Richard B. Cheney played a key role
in the U.S.-led military coalition that forced Iraq to retreat from Kuwait. But as chief
executive officer of Halliburton Co., a Dallas-based maker of oil equipment, Cheney
recently held a major stake in Dresser-Rand and Ingersoll-Dresser Pump Co., two American
players in the reconstruction of Iraq's oil industry. While the United States and Britain
wage almost daily airstrikes against military installations in northern and southern Iraq,
U.S. companies, executives and even some architects of American policy toward Iraq are
doing business with Saddam Hussein's government and helping to rebuild its battered oil
industry. Though perfectly legal, the growing U.S.-Iraqi commerce has been kept quiet by
both sides because it seems to fly in the face of Washington's commitment to "regime
change" in Baghdad and Saddam Hussein's claim to be defying the world's lone
superpower. The United Nations also helps both countries avoid embarrassment by treating
the business arrangements as confidential.
The trade is permitted under the "oil for food" deal, a humanitarianexemption
from the U.N. trade embargo imposed on Iraq after the 1990 invasion of Kuwait. It allows
Iraq to sell oil and use the proceeds, under U.N. supervision, to purchase food, medicine
and other humanitarian goods, as well as spare parts to keep the oil flowing.
Placing bids through overseas subsidiaries and affiliates, more than a dozen U.S. firms
have signed millions of dollars in contracts with Baghdad for oil-related equipment since
the summer of 1998, according to diplomats, industry officials and U.N. documents.
"The United States is the cradle of the international oil industry," said James
Placke, who tracks Persian Gulf oil production for Cambridge Energy Research Associates, a
consulting firm. "A lot of the equipment in Iraq's oil industry was originally made
in America, and if you want spare parts, you go back to the original supplier."
Most U.S. oil companies have been prohibited by Baghdad from directly purchasing Iraqi
crude since the United States bombed Iraq during Operation Desert Fox in December 1998.
But Iraq nevertheless has emerged in the past year as the fastest growing source of U.S.
oil imports, according to Larry Goldstein, president of the Petroleum Industry Research
Foundation.
American companies, he said, now purchase about 700,000 of the 2 million barrels of
oil exported daily by Iraq, mainly through foreign middlemen who load the Iraqi
crude and transport it directly to American ports, primarily in the Gulf of Mexico.
"The Chevrons and the Exxons of this world have to buy from the Russians, the French
and the Chinese traders," said Goldstein. But, he added, "the U.S. spare
parts industry is too dominant to ignore."
After approving the oil-for-food exemption in 1996, the U.N. Security Council gradually
raised the amount of oil Iraq was allowed to sell, and on Dec. 17 it removed the ceiling.
In June 1998, the 15-nation Security Council voted to allow Iraq to buy up to $300 million
in spare parts every six months. The council is considering a proposal to double that
limit.
According to U.S. government figures, American firms account for only a tiny share of the
nearly $10 billion in trade that has been conducted under the oil-for-food exemption. U.S.
citizens have received licenses to export about $15 million of oil-related spare parts and
$400 million of food, medicine and water treatment equipment to Iraq, according to the
State Department.
But those figures do not count most products purchased by Iraq from American subsidiaries
abroad. This indirect U.S.-Iraqi trade is tracked by the United Nations, which must
approve all the contracts. But little information about it has been made public.
The U.N. humanitarian program for Iraq maintains a Web site that lists contracts by
number, with a brief description of the goods involved and the country--but not the
company--selling them to Iraq. According to this, the United States has been responsible
for only 2 out of 2,080 contracts for oil spare parts submitted to the United Nations for
approval. France, China and Russia, by contrast, submitted a total of 746 contracts.
America's real share of this trade, while unclear, is certainly far greater. Until
recently, visitors to the Web site could search for a company name and then call up the
contract numbers associated with that company, allowing cross-referencing between
contracts and companies. The search engine was shut down last week after U.N. officials
learned that The Washington Post had used it to investigate U.S. companies doing business
with Iraq through foreign subsidiaries.
John Mills, spokesman for the U.N. Office of the Iraq Program, declined to comment on the
extent of U.S. trade with Iraq, saying it was proprietary trade information.
According to diplomats and the Web site, American firms that have done business with Iraq,
directly or through subsidiaries, include such petroleum industry giants as Halliburton,
the world's largest oil field service company; Schlumberger, the second largest oil field
servicer; the Fisher-Rosemount unit of Emerson Electric Co. in St. Louis; the Hamilton
Sundstrand unit of United Technologies in Windsor Locks, Conn.; and Baker Hughes Inc.
of Houston.
Deutch, the former CIA director who sits on the board of Schlumberger, and officials at
the firm's New York headquarters did not respond to requests for comment on their dealings
with Iraq. A Halliburton spokesman, Guy Marcus, confirmed that two of his firm's former
joint ventures--Dresser-Rand and Ingersoll-Dresser Pump--conducted business with Baghdad.
"The joint ventures sold spare parts to Iraq through European subsidiaries," he
said.
Marcus added, however, that Halliburton's share of both joint ventures was sold in the
last two months to Ingersoll-Rand of Woodcliff Lake, N.J., which now wholly owns them. He
also said that Cheney, the former secretary of defense, "was not involved in the
management of either joint venture and was not involved in the decision to make such
sales" to Iraq.
According to one diplomat at the United Nations, Dresser-Rand and Ingersoll-Dresser Pump
signed $29 million in contracts for spare parts with Iraq through affiliates in Austria,
France, Germany and Italy. Marcus said he did not know whether that figure was accurate.
Peg Hashem, a spokeswoman for Hamilton Sundstrand, confirmed that a French subsidiary,
Dosapro Milton Roy, sold pumps for Iraqi water treatment plants in a contract worth
"under $1 million." She said it was also possible that the firm had sold
additional equipment to Iraq.
Spokesmen for Dresser-Rand, Dresser-Ingersoll Pump Co. and Baker Hughes did not respond to
requests for comment on their ties to Iraq. But a Fisher-Rosemount spokesman, Walt Sharp,
acknowledged that it has sold equipment to Iraq. Although he was not sure of the value of
the contracts, he said, all the deals were approved by the Treasury Department and a U.N.
Security Council sanctions committee.
Indeed, Diplomats said Washington has been a greater obstacle for American businesses than
Baghdad. The United States has placed "holds" on more than 1,000 contracts
valued at $1.5 billion under the oil-for-food program, including some held by American
companies. A review of 22 Fisher-Rosemount contracts, for example, showed that the United
States had held up eight and approved seven; the remainder were pending or had been
canceled.
"We don't play favorites," said a State Department official.
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