We study X-ray spectra of Cyg X-3 from BeppoSAX, taking into account
absorption and emission in the strong stellar wind of its companion. We find
the intrinsic X-ray spectra are well modelled by disc blackbody emission, its
upscattering by hot electrons with a hybrid distribution, and by Compton
reflection. These spectra are strongly modified by absorption and reprocessing
in the stellar wind, which we model using the photoionization code cloudy. The
form of the observed spectra implies the wind is composed of two phases. A hot
tenuous plasma containing most of the wind mass is required to account for the
observed features of very strongly ionized Fe. Small dense cool clumps filling
<0.01 of the volume are required to absorb the soft X-ray excess, which is
emitted by the hot phase but not present in the data. The total mass-loss rate
is found to be (0.6--1.6) x 10^-5 solar masses per year. We also discuss the
feasibility of the continuum model dominated by Compton reflection, which we
find to best describe our data. The intrinsic luminosities of our models
suggest that the compact object is a black hole.Comment: MNRAS, in pres