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Iraq: Making a Killing Without Taxes and Tariffs

by Rory McCarthyGuardian (London)
December 8th, 2003

All day long, televisions, fridges and crates of food are heaved by crane from the ship's overflowing hold to be packed into trucks waiting to race north to the markets of Basra, Baghdad and the northern Kurdish cities. Further along the dockside, a line of cars newly arrived from Dubai rolls off another ship.

Dozens of ships crowd the docks each day at Abu Flus, on the Shatt al-Arab waterway of southern Iraq, and offload vast cargos of food and consumer goods from the Gulf. There are no taxes, no tariffs and only the most cursory customs checks but for now this is quite legal in the new open market of Iraq. Fortunes are there to be made.

By night the docks open for their clandestine customers. Bribes silence the policemen and unlock the gates to allow en terprising young men to deliver tanker-loads of Iraqi fuel which are loaded on to rusting hulks to be smuggled back out to the Gulf. Thousands of dollars exchange hands every trip.

For years under Saddam Hussein's regime the large concrete docks at Abu Flus - the name means "father of money" - were desolate and used only for the occasional oil export.

Today few scenes in postwar Iraq capture so powerfully the exuberance and the lawlessness that has accompanied America's invasion and its promises of free trade and open markets.

One rainy afternoon at the port, duty manager Ali Hussein, 29, was watching a crew of dockworkers unloading Samsung 29-inch televisions from the Odin, a large, rusting white tanker which flies an Iraqi flag but carries the name of the North Korean port Wonsan on its stern.

Under Saddam's regime, Mr Hussein earned 3,500 Iraqi dinars (1.20) a month. Now he takes home 100,000 dinars.

"Every day we get two or three ships," he said. "They bring food, electrical goods, cars with Dubai number plates, anything. It costs $300 (177) a day to dock the ship but they don't pay any tax on anything they unload. We're getting more ships every day and each one is packed fuller than the last."

On the dock Ali Abdul Hussain, an agent for the powerful Kubba business family, is checking off an inventory that runs into tens of thousands of dollars and, as well as the televisions, includes beans, spare engine parts, clothes, nuts and dozens of second-hand fridges.

"Before, it used to be hard for businessmen to go outside Iraq. Now there's a really good opportunity to bring things in," he said. His only worry is security on the roads up to Baghdad - one Dubai-registered car bought by his firm had been stolen by bandits outside the town of Nassiriya that morning.

Free trade was one of the pillars of the neo-conservative vision for the new Iraq: a progressive, secular democracy with one of the most open, tariff-free markets in the world.

"The key message on Iraq since we got here is Iraq is now open to free trade," Paul Bremer, the US civil administrator of Iraq, said last month. "The borders are open for trade coming in. We have no tariffs."

Apart from a 5% "reconstruction surcharge" which will be imposed on most imports from next month, the borders will continue to remain tariff-free.

Under 30 years of Ba'ath party rule, it was quite the reverse. Iraq was a state-controlled socialist economy that grew more corrupt as it grew more isolated so that eventually only a small group of businessmen could operate and only after paying off a long queue of bureaucrats, security agents and relatives of Saddam.

The vast influx of new satellite dishes, televisions, fridges and cookers on to the streets of Iraqi cities is one of the most visible signs of change since the war. But the corollary of these new-found economic freedoms is a wave of smuggling.

Faris, 23, a high-school dropout and former soldier in the Iraqi army, is a regular visitor to Abu Flus. He drives down from his home in Basra to the port every 10 days or so, usually at around 2am.

Through his father's connections in the state-run South Oil Company he buys a 30,000-litre tanker-load of diesel on the black market for around $375 and then waits for an agreed night-time appointment.

On the way to the port Faris stops every few minutes while a friend drives ahead to check for British army or Iraqi police patrols and checkpoints. As long as the way is clear, Faris delivers his consignment to a contact at Abu Flus, where dealers riding on small tankers from the Gulf pay around $3,000 for the tanker load. After others in the deal have taken their cut, Faris brings home around $650 every trip. He spent 18 months in the Iraqi army be fore he deserted last autumn. During his time in service he was only once paid his monthly salary: a total of $4.

"I've got so many plans for my money," he said. "I'm divorced so I want to get married again and I want my own house and my own car and then I will stop."

Faris walks through the streets of Basra with a pistol stuffed in his belt and understands the risks he runs. Several of his fellow smugglers have been held for weeks in the Umm Qasr detention camp outside Basra. British troops operate helicopter, boat and Land Rover patrols across the south every night looking out for smugglers like Faris. Several of the hardline Shia parties also operate unauthorised armed patrols.

"I know that if I don't stop I will regret this," said Faris. "And I know this kind of work is forbidden in Islam. If there is any other kind of legal work under the sun that I can do that pays as well as this, I will stop this smuggling."

What's on offer: the Baghdad shopping list

Typical prices of newly imported, foreign-made goods in the shops and markets of Baghdad

Cooker $90 (52)
Television $180
Fridge $180
Satellite dish and receiver $200
Hi-fi $200





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