Iraqi middlemen foreign traders doing a brisk - lucrative business
Smuggling of Iraqi diesel oil has become widespread in the Gulf, with a market created by local and international shipping firms eager to buy cheap fuel to power their vessels, Gulf shipping sources said.
As Iraqi and United Nations officials continue to discuss the next stage of a Baghdad oil-for-food deal, Iraqi middlemen, foreign traders and shippers are doing a brisk and lucrative business that runs into hundreds of millions of dollars.
Although this trade has been rumbling on since UN sanctions were slapped on Iraq after its 1990 invasion of Kuwait, shippers said the activity had stepped up since the end of last year because of high diesel prices in the international market.
"The price of Iraqi diesel is 30 US dollars to 50 US dollars a ton below the international market price and when you want 4,000 tons or 5,000 tons for your ships it's very attractive," said one Gulf-based shipping executive who admitted to buying Iraqi diesel and wanted to stay anonymous.
Loaded at Iraq's southern ports with false or no paperwork, embargoed diesel is shipped to customers in barges and small vessels which hug the shallow coastal waters to avoid seizure by a US-led multinational naval interception force mandated to implement sanctions against Iraq.
The diesel is then transferred out to sea to the paying ship owner with rare interference from authorities, shippers said. Diesel is used by ship owners to run auxiliary and emergency power systems to back up main engines which run on fuel oil.
"It's going on throughout the Gulf, but mainly centered in Fujairah and close to Iran," another source said. Fujairah, a tiny emirate perched near the strategic Strait of Hormuz and part of the UAE, is the Gulf s leading ship fueling center.
"That's a willing and waiting market," said one shipper.
US officials at the UN last year presented documents alleging that Iraqi oil was being transported through Iranian waters in violation of sanctions. Iraq has denied breaking the embargo.