From the Wall Street Journal: (article reproduced in full, since the WSJ site is subscription-only)
Syria Rejects U.S. Demands To Return Money From Iraq
Damascus Says It Will Use The $250 Million to Repay Creditors of Hussein Regime
By MICHAEL M. PHILLIPS
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- The U.S. and Syria are locked in a quiet but tense dispute over the fate of hundreds of millions of dollars that Saddam Hussein's regime deposited into a Syrian state bank, American officials say.
Despite behind-the-scenes U.S. diplomatic pressure, Syria has refused to hand over the funds -- estimated at $250 million -- to the American-controlled occupying coalition in Iraq, as mandated by the United Nations Security Council. U.S. officials say the talks with Syria appear to have reached an impasse.
The struggle illustrates the broader difficulties the Bush administration and U.S.-appointed Iraqi authorities face in trying to track down and retrieve large amounts of oil revenue that Mr. Hussein stashed outside the country between the first Persian Gulf War in 1991 and his ouster in April. Those are funds the occupying coalition now wants for Iraq's reconstruction.
The Saddam Hussein regime also is believed to have deposited about $500 million in accounts in Jordan and a similar amount in Lebanon. Jordan, in particular, was an important transit point for goods and material moving in and out of Iraq throughout the 1990s. U.S. and Iraqi officials have made progress recently toward retrieving money from those two countries. Jordan's leader, King Abdullah, met Thursday with President Bush at the White House, and Iraq was a prime topic on their agenda.
Mr. Hussein's regime also is thought to have deposited money in banks in Persian Gulf states.
But retrieving all those dollars isn't simple. In this case, Syria acknowledges that the money is being held in the Commercial Bank of Syria, a state-owned institution, and Syrian officials allowed a team of Iraqi and U.S. Internal Revenue Service investigators access to bank records during a visit in October. "It shows you at least there's some good will," said Imad Moustapha, Syria's charge d'affaires in Washington.
But Damascus argues that private Syrian companies should have first crack at the funds to pay off debts run up by the Hussein government. U.S. officials say that as much as $750 million in Iraqi funds may already have been distributed to such Syrian commercial creditors, who are thought to have sold pharmaceuticals, textiles, citrus fruit and other goods to Iraq before the invasion in March. "Lots of Syrian businessmen have claims against this money," Mr. Moustapha said.
He said that U.S. officials had assured him that they, too, thought those claims should be settled before the remaining money is returned to Iraq. U.S. officials say the money should be returned immediately.
Likewise, the Syrians say the deposits were the proceeds of U.N.-sanctioned oil-for-food deals, while the U.S. says the oil sales and purchase contracts were in violation of U.N. resolutions.
A spokesman for the U.N.'s oil-for-food program, Ian Steele, said he had no information on the Syrian accounts. Oil-for-food, under which the U.N. oversaw sales of Iraqi crude and ensured that proceeds were used to buy food and other essential items, ceased operations last month and its remaining functions have been transferred to the U.S.-led coalition, which will have to authorize payment of any outstanding debts, Mr. Steele said.
Exacerbating the tension is a loud feud over how much Iraqi money the Syrians hold. While U.S. and Syrian officials agree that there is now just about $250 million in the Syrian bank, Iraqi authorities claim the Syrians have much more than that. "The Governing Council demands the return of $3 billion in Iraqi assets" from Syria, said Haidar Ahmed, spokesman for Ahmad Chalabi, a council member and head of the Iraqi National Congress political party.
Such demands leave the Syrians nervous that even if they hand over the $250 million, they still will be accused of holding back the larger sum. "This makes us wary," said Mr. Moustapha, who calls the $3 billion "illusory."
"They try to create an atmosphere of hostility toward us," he said. "We always have the feeling we're being accused of things we're innocent of."
For the Bush administration, recovering such funds is a politically sensitive mission, in part because the U.S. is returning a large sum of Iraqi assets that were frozen in this country. The U.S. seized $1.74 billion in Iraqi government assets held in American banks earlier this year and intends to return about $1.44 billion of that to help rebuild Iraq. The remainder will be used to settle lawsuits against Baghdad.
In addition, the U.S. government has recently maintained that American soldiers who have claimed they were tortured by Iraq while held as prisoners during the first Gulf War shouldn't be able to collect damages from the frozen assets.
While clearly irked by Syria's unwillingness to turn over the money it holds, the Bush administration is trying to keep the dispute as quiet as possible, hoping that Damascus will give in.
In the diplomatic world of carrots and sticks, however, there doesn't appear to be much the U.S. can do to win Syrian cooperation. There are few carrots at hand: Syria is ineligible for much U.S. aid because of its presence on a list of state sponsors of terrorism.
And, in any case, the stick is coming Syria's way. Both chambers of Congress have passed the "Syria Accountability and Lebanese Sovereignty Restoration Act," and Mr. Bush is expected to sign it into law shortly. The bill would bar all trade with Syria until the president certifies that Damascus has ended its occupation of Lebanon, cut off support for Hamas and other Middle East militants, stopped development of certain missiles and chemical and biological weapons and taken steps to prevent the use of Syrian territory by insurgents attacking coalition forces in Iraq.
U.S. trade with Syria already is limited. The country imported just $274 million in American goods last year. By contrast, Canada, America's largest trading partner, imported $161 billion of U.S. products. But Syria has been able to win waivers allowing it to import computers and other U.S. high-technology equipment. Those purchases would be prohibited under the new law.