Saddam reopens pipeline to Syria, sells oil at half price

WASHINGTON — The Bush administration faces the first test of its policy on Iraq as officials acknowledged that Iraq has started pumping oil to Syria, reviving a moribund pipeline after 18 years. The officials said the Iraqi oil to Syria is not being supervised by the United Nations and is a violation of sanctions on Baghdad.

The officials said Iraq is selling oil at a 50 percent discount. They estimate the Iraqi-Syrian pipeline could bring in at least $800 million a year, making this a leading source of unauthorized revenue for the regime of President Saddam Hussein. The United Nations controls all official oil exports from Iraq.

The issue is being quietly dealt with, officials said, and messages have been relayed to Damascus. They would not elaborate, Middle East Newsline reported.

"I think the efforts of the government at this point, at least, are diplomatic in nature and not military," Pentagon spokesman Craig Quigley said.

Arab diplomatic sources said the United States believes that the pipeline will help restrain oil prices. Syria has never acknowledged the restoration of the oil pipeline and Iraqi officials said full operations of the pipeline have not begun.

"We have asked them [Syrians] to tell us exactly what it is," State Department spokesman Richard Boucher said on Tuesday. "As I said, there have been these reports that it has reopened for testing flows. The UN Sanctions Committee is looking into this further and we are as well. So at this stage, we are not able to characterize the activity. They have told us they haven't reached any agreements on the export of Iraqi oil."

The pipeline is expected to be a key topic during the forthcoming Middle East tour of U.S. Secretary of State Colin Powell. Arab diplomatic sources said Powell will begin his visit to the region on Feb. 26 and tour Egypt, Kuwait, Jordan, Israel and Saudi Arabia.

U.S. officials said Iraq and Syria appear to be coordinating on military issues as well. They confirm reports that the deployment of two divisions of Iraqi troops near the Syrian border had been approved by Syrian President Bashar Assad.

The officials said this appeared to be a warning from Damascus to Israel against any attack on Syrian positions in Lebanon.

The Iraqi troops were said to have been withdrawn amid pressure by Washington.