Prisoner could help US trace Saddam's $40bn slush fund

The capture of Saddam Hussein's half-brother Barzan Ibrahim al-Tikriti is a breakthrough for the Allies because of his unique knowledge of the billions of dollars known to be hidden abroad by the dictator and his family.

American investigators questioning Barzan are likely to focus on Saddam's slush fund. The Allies will want to ensure it is used to pay for rebuilding Iraq rather than for destabilising the country or even launching revenge attacks on the US or Britain.

Barzan used his position as Iraq's ambassador to the United Nations in Geneva between 1989 and 1998 to set up a secret network of assets estimated to be worth anywhere between $2bn (£1.27bn) and $40bn (£26bn). These assets ranged from shares in holding firms based in Panama to clandestinely placed stakes in legitimate businesses, such as the giant French media empire Hachette. For more than a decade Barzan siphoned off an estimated 5 per cent of Iraq's vast oil wealth. When sanctions were imposed he is believed to have used a foreign exchange scam to fiddle the UN oil-for-food programme.

Barzan's information on the funds could be all the more vital because of the destruction of key documents first by fleeing members of the regime and then by looters. Experts on Iraq say even senior officials in the country's oil industry and central bank were kept in ignorance of how much revenue was coming into Iraq, or how it was spent. But the former president is thought to have used his secret overseas assets to build palaces, acquire weapons and buy the loyalty of his elite forces.

Money was first siphoned from Iraq's oil revenues during the 1973 oil crisis – six years before Saddam became president – when the ruling Baath party established a "fighting fund". It was originally intended to be a political insurance policy to fund a comeback if it was ever ousted. Even after sanctions were imposed in 1990, Saddam managed to make money by oil smuggling, which is estimated by some experts to have brought in $2bn a year since 1997.

Toby Dodge, an Iraq expert at Warwick University, told The Christian Science Monitor: "If it stays as a fighting fund and the Baathists remain a fighting group, then it could be massively destabilising. But my own hunch is it will turn into a very rich retirement fund for any of the family who manage to get out."

"Recovering Saddam Hussein's hidden assets would be very, very difficult, if not impossible ... unless Barzan goes turncoat. There's a huge amount of money sitting somewhere and it's up for grabs."