HE NETS EVEN MORE FROM SMUGGLING OIL.
This is the oil he secretly sells outside U.N. supervision—and he pockets all the revenue. Late last month U.N. officials reported that Iraq was smuggling huge, 1 million­ bbl. shiploads of oil through the gulf. But most of it is carried by small craft or aging scows guided by experienced, radio-equipped Iraqis and is later sold in Iran, other gulf countries and onto the world market. Then there's the pipeline from northern Iraq to the Turkish Mediterranean coast, which until recently exported up to hundreds of thousands of barrels a day of Iraqi crude, all of it outside the U.N.-sanctions system. Long dependent on Iraqi oil, Jordan illicitly imports some 110,000 bbl. a day, for which it pays a below-market price directly to the Iraqi government. Yet another pipeline runs from northern Iraq to Banias, a Syrian port, with a second outlet in Lebanon. It currently carries some 230,000 bbl. a day, generating annual revenue estimated at more than $1 billion.

IT'S THE FAMILY BUSINESS.
Saddam's two sons operate on a smaller scale but display their father's cunning and ruthlessness. Uday, 38, the headstrong elder child, long dominated most smuggling routes but was severely injured in a 1996 assassination attempt. That has propelled Qusay, 36, to the fore. He runs Iraq's pervasive security apparatus and has used that position to consolidate financial and political power.

The profit in the sons' scams stems from exploiting local price differences. In Iraq, 20 liters of gasoline can be purchased for as little as 50¢ and resold in neighboring countries that produce no oil for as much as $10. Luxury items are smuggled in tax free by middlemen and then resold at a higher price. One big moneymaker for the sons involves trucking diesel fuel into Turkey. The trade has fallen off amid recent preparations for war, but at its high point, according to the Coalition for International Justice, a Washington-based human-rights group, some 45,000 Turkish truckers traveled regularly between the oil fields of northern Iraq and delivery points in eastern Turkey.

The sons have also masterminded cigarette-smuggling deals, which are worth as much as several hundred million dollars. The European Union is currently suing RJ Reynolds, charging it with violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act because the company has allegedly allowed its products to be smuggled into Iraq, depriving the E.U. of millions of dollars in tax revenue. The company has strenuously denied the E.U. charges, which include a court filing that says Uday "oversees and personally profits from the illegal importation of cigarettes into Iraq."

SO WHERE'S THE MONEY?
Some of it, of course, pays for the sumptuous Iraqi palaces that Saddam collects, 20 of them in the Baghdad area alone. But a Kuwaiti-financed investigation conducted after the Gulf War determined that Iraq had about $10 billion in bank accounts and other investments around the world, nearly all of it well hidden. One that remains in the open involves a long-held 8.4% share in Hachette, a French media group that publishes such well-known titles as Elle and Woman's Day. In response to questions about Iraq's stockholding, a Hachette owner has stressed that U.N. sanctions prevent Baghdad from voting the shares or receiving dividends.

The question is, Can anyone get the money back? Kuwait has tried for years. After allied troops expelled the Iraqis from Kuwait in 1991, the country launched a global dragnet to attach Iraqi assets. But little was ever recovered beyond $16 billion in reparations garnisheed from the proceeds of Iraq's official U.N. oil sales. As Deputy Defense Secretary Paul Wolfowitz suggested last week in testimony before Congress, any money that is found might also be used to defray the billions of dollars in costs the U.S. will incur if it invades Iraq. "There's a lot of money out there," Wolfowitz said, when asked whether America would foot the entire bill. "To assume that we're going to pay for it is just wrong."

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