WASHINGTON — Through indirect aid, limited trade, oil swaps and non-military aid, U.S. companies are doing legal business with countries on the State Department's list of terrorist sponsors.

The deals occur thanks to loopholes in the Anti-Terrorism and Effective Death Penalty Act, signed by President Clinton last April.

The Washington Post has reported California-based Occidental Petroleum Corp. was able to bid on a $930 million project in Sudan because the Clinton administration had exempted Sudan from the list of terrorism-sponsoring countries banned from U.S. financial transactions.

According to Hillary Mann, an associate fellow of the Washington Institute for Near East Policy, this "loophole" in the 1996 Anti-Terrorism Act authorizing U.S. dealings with some terrorist nations "is just one of several avenues through which U.S. government funds and private investment can legally flow into Middle Eastern terrorist states…and terrorist organizations."

Clinton administration officials have indicated that the Anti-Terrorism Act was aimed primarily at countering potential supporters of domestic terrorism. Congressional support for it grew after the 1995 bombing of the Alfred Murrah Federal Building in Oklahoma City.

"One of the concerns we were dealing with was external sources of support for terrorist activities that might be conducted in the United States," said White House spokesman Mike McCurry.

On the other hand, in what the White House called a "routine" extension, Clinton extended the National Emergencies Act, saying that "the declaration of a national emergency…has not been resolved. Terrorist groups continue to engage in activities with the purpose or effect of threatening the Middle East peace process."

The deals with terrorist sponsors are allowed, said State Department spokesman Nicholas Burns, if they are found "not to have an impact on any potential act of terrorism or to fund any group that supports terrorism."

But critics argue that the very nations targeted by the anti-terrorism law are state sponsors of terrorism, so financial transactions with those states do influence, at least indirectly, their ability to support terrorism.