The unclassified State Department documents sent to congressional committees with oversight of U.S. foreign policy divulge that the United States deemed such sales to be in the "national interest," even though they generated billions of dollars in unmonitored revenue for Saddam's regime.

The trade also generated a needed source of oil and commerce for Iraq's major trading partners, Turkey and Jordan.

"It was in the national security interest, because we depended on the stability in Turkey and the stability in Jordan in order to encircle Saddam Hussein," Edward Walker, a former assistant secretary of state for Near East affairs, told CNN when asked about the memo documents.

"We had a great amount of cooperation with the Jordanians on the intelligence side, and with the Turks as well, so we were getting value out of the relationship," said Walker, who served in both the Clinton and Bush administrations.

The memos obtained by CNN explain why both administrations waived restrictions on U.S. economic aid to those countries for engaging in otherwise prohibited trade with Iraq.

The justifications came at a time when the United States was a staunch backer of U.N. sanctions on Iraq imposed after it invaded Kuwait in 1990.

"Despite United Nations Security Council Resolutions," a 1998 memo signed by President Clinton's deputy secretary of state, Strobe Talbott, said, "Jordan continues to import oil from Iraq."

But Jordan had a "lack of economically viable alternatives" to Iraqi oil, Talbott's memo said.

Talbott's memo lauded Jordan's commitment to the Middle East peace process, citing the late King Hussein's personal efforts to broker a resolution to the Palestinian-Israeli conflict.

"Timely, reliable assistance from the United States fosters the political stability and economic well-being critical to Jordan's continuing role as a regional leader for peace," Talbott said.

Identical language was used four years later in a 2002 memo by Richard Armitage, undersecretary of state under President George W. Bush.

"Jordan has made clear its choice for peace and normalization with Israel," Armitage said, calling Jordan "an important U.S. friend" and citing its 2001 free trade treaty with the United States.

"U.S. assistance provides the Jordanian government needed flexibility to pursue policies that are of critical importance to U.S. national security and to foreign policy objectives in the Middle East," Armitage said.

Economic and military ties to Turkey were cited by Talbott and Armitage in justifying waivers of U.S. penalties to Iraq's northern neighbor. Indeed, their memos advocated hundreds of millions of dollars in aid to the U.S. allies.

Talbott's memo praised Turkey for deploying troops to the peacekeeping mission in the former Yugoslavia, policing heroin trafficking through Turkey, and cooperating with enforcement of the "no-fly" zone in northern Iraq by allowing U.S. and British jets to use Incirlik, Turkey, as a base.

Armitage's memo said Turkey "provides irreplaceable assistance in countering the threat the Baghdad regime poses" and lauded the U.S. ally for sending troops to Afghanistan after the September 11, 2001, attacks.

"The primacy of Turkey's role as a front-line ally in the war on terrorism is expected to assume even greater prominence and urgency as the global war on terrorism continues," Armitage said.

Deputy State Department spokesman Adam Ereli told CNN Tuesday the waivers were given to Jordan and Turkey every year since 1998.

He called both countries "special cases" in which the money Saddam made through the smuggling did not allow him weapons.

"With Jordan and Turkey the circumstances were unique," Ereli said. "We approached them in a way that preserved key alliances and didn't help the regime of Saddam Hussein."

He added that Saddam's smuggling to Syria, which the United States tried to curtail, raised far more concerns because of the possibility of "dual use" goods reaching Iraq.

Illicit revenue
Estimates of how much revenue Iraq earned from these tolerated side sales of its oil to Jordan and Turkey, as well as to Syria and Egypt, range from $5.7 billion to $13.6 billion.

This illicit revenue far exceeds the estimates of what Saddam pocketed through illegal surcharges on his U.N.-approved oil exports and illegal kickbacks on subsequent Iraqi purchases of food, medicine, and supplies -- $1.7 billion to $4.4 billion -- during the maligned seven-year U.N. oil-for-food program in Iraq.

The Government Accountability Office estimated last July that Iraq earned $5.7 billion from smuggling oil out of the country, especially to Jordan, Turkey, and Syria between 1996 and 2002.

A CIA-backed Iraq Survey Group report by former Iraq weapons inspector Charles Duelfer estimated last October that Saddam acquired $8 billion by smuggling oil to Jordan, Turkey, Syria, and Egypt through 2003, when oil for food ended with the toppling of Saddam.

The Senate Governmental Affairs Permanent Subcommittee on Investigations estimated last November that the Iraqi regime earned $13.6 billion by smuggling oil during the sanctions period it defined as 1991-2003, or five years before oil-for-food started.

The oil-for-food program is being investigated by U.S. congressional committees, the Justice Department, the Securities and Exchange Commission, and a special committee appointed by the United Nations and led by former Federal Reserve Bank Chairman Paul Volcker.

Volcker's committee is to issue an interim report on Thursday. (Full story)

In an interview last month with the U.S.-based Arabic-language TV station Al Hurrah, Volcker said, "The big figures are smuggling, which took place before the oil-for-food program started, and it continued while the oil-for-food program was in place."

'Either silent or complicit'
Rep. Robert Menendez, a New Jersey Democrat on the House International Relations Committee, one of five panels probing the oil-for-food program, told CNN the United States was "complicit in undermining" the U.N. sanctions on Iraq.

"How is it that you stand on a moral footing to go after the U.N. when they're responsible for 15 percent maybe of the ill-gotten gains, and we were part and complicit of him getting 85 percent of the money?" Menendez asked.

"Where was our voice on the committee that was overseeing this on the Security Council?

"The reality is that we were either silent or complicit, and that is fundamentally wrong."

Former State Department diplomat Walker said, "It was almost a 'don't ask, don't tell' kind of policy. It was accepted in the Security Council. No one challenged it."

John Ruggie, a former senior adviser to U.N. Secretary-General Kofi Annan, said U.S. diplomats focused on assuring U.N.-approved shipments to Iraq were free of military components, and the United States felt Jordan and Turkey needed to be compensated for the adverse impact of the sanctions.

Ruggie said, "The secretary of state of the United States said each and every year that those illegal sales were in the national security interest of the United States. So it wasn't just that the U.S. was looking the other way."