UNITED NATIONS (AP) - UN Secretary-General Kofi Annan yesterday said Britain and the United States are partly to blame for Iraq making billions of dollars in illicit money because they never stopped it from smuggling oil.

Annan said the Americans and the British could have stopped the smuggling but did not, and that most of the money Saddam Hussein made illegally when his country was under UN sanctions in the 1990s was from smuggling oil, not from kickbacks under the UN oil-for-food programme.

"They were the ones who had interdiction, possibly they were also the ones who knew exactly what was going on, and the countries themselves decided to close their eyes to smuggling to Turkey and Jordan because they were allies," Annan said.

A spokeswoman at the British mission refused to comment on Annan's statement. The US Mission spokesman could not immediately be reached.

The United States had ships in the Persian Gulf to intercept smugglers and allegations have swirled for years that the United States looked the other way while some of Iraq's neighbours made substantial profits from oil smuggled out of Iraq.

Annan partly excused the smuggling to Turkey and Jordan, saying that the UN Charter requires states affected by sanctions on another country to be compensated.

"We didn't have billions to compensate these countries, and some felt the oil going in was a way of compensation to them, and so it was all generally accepted," Annan said.

The secretary-general was speaking at a reunion of current and past UN spokesmen, and his comments were part of a vigorous defense of the United Nations against recent media attacks.

The UN oil-for-food programme, which was endorsed by the United States and begun in 1996, permitted Iraq to sell oil despite a stiff UN economic embargo against Saddam's regime, provided the proceeds were used to buy food and medicine for Iraqi people suffering under the sanctions.

Beginning at least by 2000, Saddam's government, which had the power to choose who would have the right to purchase oil, demanded that those it dealt with be willing to pay kickbacks.

Estimates of how much illicit money Iraq's former government led by Saddam Hussein may have made, range from US $9 billion (euro7.02 billion) to US $21 billion (euro16.38 billion), from both smuggling and corruption in the oil-for-food programme.

But former US Federal Reserve Chairman Paul Volcker, who is conducting an independent investigation, said Saddam gained far more money from smuggling than through oil-for-food deals.

Annan himself has come under fire recently over the handling of the oil-for-food programme. Volcker criticised Annan for not pressing to learn details of his son Kojo's employment by a Swiss company that won a contract under the programme.

Annan said the scandal around the United Nations was largely "an American story" and that in the rest of the world people "still have quite a lot of respect and enthusiasm for the UN and appreciate what the UN does".

"We are outgunned. We are outmanned. And they have resources that we don't have, and they are relentless and they are organised," Annan said of critics of the United Nations.

Annan said he expected Volcker's report would reveal that at the end of the oil-for-food programme in 2003, the United Nations gave between US $8 billion- $9 billion (euro6.24 billion-euro7.02 billion) to the Coalition Provisional Authority, and the money has not been accounted for.

"When you put things in the right perspective, one should certainly realise where the bulk of the problem came out," Annan said. "But would it influence this group, I am not sure."

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