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Bechtel Built Iraq's WMD "Smoking Gun" with US Taxpayer Dollars
by repost
Sunday, Apr. 27, 2003 at 3:45 PM
hmm...
From the Oil & Gas Journal's survey of worldwide construction in 1991:
IRAQ: South of Baghdad. $2 billion petrochemical complex No. 2 (PC-2).
Products include: 450,000 mt/y ethylene (Feed: Naphtha); 160,000 mt/y
polyethylene; 100,000 mt/y polypropylene; and 120,000 mt/y polystyrene.
Consult: Bechtel UK on ethylene unit. Proposed Completion: Possible
1992.
Summary:
The documents below establish the fact that in 1988 Bechtel Corporation
signed a contract to consult in the constructioin a petrochemical
complex (PC-2) South of Baghdad, just 4 months after the Hussein
government infamously “gassed the Kurds” with mustard gas. The Bechtel
design involved “dual-use” technology. According to Middle East
Defense News, “a key feature of the PC-2 project was the plan to
manufacture ethylene oxide, a precursor chemical that is easily
converted to thyodiglycol, which is used in one step to make mustard
gas.” When UN weapons inspectors arrived in 1991, they declared the
industrial complex that PC-2 was a major part as the “smoking gun” that
proved Iraq was pursuing a “Weapons of Mass Destruction”(WMD) program.
US Dept. of Agriculture’s Commodity Credit Corporation (CCC) funded
Bechtel’s construction of the PC-2. The CCC is designed to create
export markets for US farmers, but, in the 1980s, the Reagan-Bush
Administrations used it as a “piggy bank” to covertly arm Iraq. The
Atlanta branch of the Banca Nazionale del Lavoro (B.N.L.) used CCC
guaranteed loan to fund Bechtel’s construction of the PC-2 project,
which was obviously not a grain purchase.
After the imposition of sanctions in 1990, Iraq defaulted on this loan.
In other words, in 1990, US taxpayers paid for Bechtel’s construction
of an Iraqi chemical weapons factory, and, now in 2003, they are paying
Bechtel $680 million to rebuild Iraq after the US destroyed and invaded
the country under the pretext of preventing Iraq from developing WMD.
All these claims substantiated in the documents below.
###
The Documents:
Shaking Hands with Saddam Hussein:
The U.S. Tilts toward Iraq, 1980-1984
National Security Archive Electronic Briefing Book No. 82
Edited by Joyce Battle
February 25, 2003
http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB82/press.htm
Affadavit of Howard Teicher Staff Member to the United States
National Security Council from1982 to 1987
Warning forced Bechtel out of Iraq chemical project
BY ALAN FRIEDMAN
Financial Times
February 21, 1991
According to the US Export-Import Bank, Iraq used foreign credit to
purchase arms from US firms
ByAmy Kaslow, Staff writer of The Christian Science Monitor
Christian Science Monitor
April 19, 1991, Friday
Iraq: the Smoking Gun
Mednews - Middle East Defense News
SECTION: PROLIFERATION; Vol. 5, No. 2 & 3
November 4, 1991
Construction of Iraq’s Petrochemical Complex Permanently Delayed
Platt's Petrochemical Report
August 8, 1991
Shell Game: A True Story of Banking, Spies, Lies, Politics - and the
Arming of Saddam Hussein._book reviews
Doug Ireland
The Nation
June 10, 1996
HEARING OF THE HOUSE BANKING, FINANCE AND URBAN AFFAIRS COMMITTEE
SUBJECT: IRAQI LOAN INVESTIGATION
Federal News Service
NOVEMBER 9, 1993
BUSH EXERCISED HANDS-ON ROLE IN IRAQ AID EFFORT
By DOUGLAS FRANTZ, TIMES STAFF WRITER
Los Angeles Times
April 26, 1992
###
Shaking Hands with Saddam Hussein:
The U.S. Tilts toward Iraq, 1980-1984
National Security Archive Electronic Briefing Book No. 82
Edited by Joyce Battle
February 25, 2003
http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB82/press.htm
U.S. DOCUMENTS SHOW EMBRACE OF SADDAM HUSSEIN IN EARLY 1980s
DESPITE CHEMICAL WEAPONS, EXTERNAL AGGRESSION, HUMAN RIGHTS ABUSES
Fear of Iraq Collapse in Iran-Iraq War Motivated Reagan Administration
Support;
U.S. Goals Were Access to Oil, Projection of Power, and Protection of
Allies;
Rumsfeld Failed to Raise Chemical Weapons Issue in Personal Meeting
with Saddam
Washington, D.C., 25 February 2003 - The National Security Archive at
George Washington University today published on the Web a series of
declassified U.S. documents detailing the U.S. embrace of Saddam
Hussein in the early 1980's, including the renewal of diplomatic
relations that had been suspended since 1967. The documents show that
during this period of renewed U.S. support for Saddam, he had invaded
his neighbor (Iran), had long-range nuclear aspirations that would
"probably" include "an eventual nuclear weapon capability," harbored
known terrorists in Baghdad, abused the human rights of his citizens,
and possessed and used chemical weapons on Iranians and his own people.
The U.S. response was to renew ties, to provide intelligence and aid to
ensure Iraq would not be defeated by Iran, and to send a high-level
presidential envoy named Donald Rumsfeld to shake hands with Saddam (20
December 1983).
The declassified documents posted today include the briefing materials
and diplomatic reporting on two Rumsfeld trips to Baghdad, reports on
Iraqi chemical weapons use concurrent with the Reagan administration's
decision to support Iraq, and decision directives signed by President
Reagan that reveal the specific U.S. priorities for the region:
preserving access to oil, expanding U.S. ability to project military
power in the region, and protecting local allies from internal and
external threats. The documents include:
A U.S. cable recording the December 20, 1983 conversation between
Donald Rumsfeld and Saddam Hussein. Although Rumsfeld said during a
September 21, 2002 CNN interview, "In that visit, I cautioned him about
the use of chemical weapons, as a matter of fact, and discussed a host
of other things," the document indicates there was no mention of
chemical weapons. Rumsfeld did raise the issue in his subsequent
meeting with Iraqi official Tariq Aziz.
National Security Decision Directive (NSDD) 114 of November 26, 1983,
"U.S. Policy toward the Iran-Iraq War," delineating U.S. priorities:
the ability to project military force in the Persian Gulf and to
protect oil supplies, without reference to chemical weapons or human
rights concerns.
National Security Decision Directive (NSDD) 139 of April 5, 1984,
"Measures to Improve U.S. Posture and Readiness to Respond to
Developments in the Iran-Iraq War," focusing again on increased access
for U.S. military forces in the Persian Gulf and enhanced
intelligence-gathering capabilities. The directive calls for
"unambiguous" condemnation of chemical weapons use, without naming
Iraq, but places "equal stress" on protecting Iraq from Iran's
"ruthless and inhumane tactics." The directive orders preparation of "a
plan of action designed to avert an Iraqi collapse."
U.S. and Iraqi consultations about Iran's 1984 draft resolution seeking
United Nations Security Council condemnation of Iraq's chemical weapons
use. Iraq conveyed several requests to the U.S. about the resolution,
including its preference for a lower-level response and one that did
not name any country in connection with chemical warfare; the final
result complied with Iraq's requests.
The 1984 public U.S. condemnation of chemical weapons use in the
Iran-Iraq war, which said, referring to the Ayatollah Khomeini's
refusal to agree to end hostilities until Saddam Hussein was ejected
from power, "The United States finds the present Iranian regime's
intransigent refusal to deviate from its avowed objective of
eliminating the legitimate government of neighboring Iraq to be
inconsistent with the accepted norms of behavior among nations and the
moral and religious basis which it claims."
###
I, Howard Teicher, hereby state that, to the best of my knowledge
and belief, the facts presented herein are true, correct and complete.
I
further state that to the best of my knowledge and belief, nothing
stated
in this Declaration constitutes classified information.
1. My name is Howard Teicher. From 1977 to 1987, I served in the
United States government as a member of the national security
bureaucracy.
From early 1982 to 1987, I served as a Staff Member to the United
States
National Security Council.
2. While a Staff Member to the National Security Council, I was
responsible for the Middle East and for Political-Military Affairs.
During my five year tenure on the National security Council, I had
regular contact with both CIA Director William Casey and Deputy
Director
Robert Gates.
3. In the Spring of 1982, Iraq teetered on the brink of losing its
war with Iran. In May and June, 1982, the Iranians discovered a gap in
the Iraqi defenses along the Iran-Iraq border between Baghdad to the
north
and Basra to the south. Iran positioned a massive invasion force
directly
across from the gap in the Iraqi defenses. An Iranian breakthrough at
the
spot would have cutoff Baghdad from Basra and would have resulted in
Iraq's defeat.
4. United States Intelligence, including satellite imagery, had
detected both the gap in the Iraqi defenses and the Iranian massing of
troops across from the gap. At the time, the United States was
officially
neutral in the Iran-Iraq conflict.
5. President Reagan was forced to choose between (a) maintaining
strict neutrality and allowing Iran to defeat Iraq, or (b) intervening
and
providing assistance to Iraq.
6. In June, 1982, President Reagan decided that the United States
could not afford to allow Iraq to lose the war to Iran. President
Reagan
decided that the United States would do whatever was necessary and
legal
to prevent Iraq from losing the war with Iran. President Reagan
formalized
this policy by issuing a National Security Decision Directive ("NSDD")
to
this effect in June, 1982. I have personal knowledge of this NSDD
because
I co-authored the NSDD with another NSC Staff Member, Geoff Kemp. The
NSDD, including even its indentifying number, is classified.
7. CIA Director Casey personally spearheaded the effort to ensure
that Iraq had sufficient military weapons, ammunition and vehicles to
avoid losing the Iran-Iraq war. Pursuant to the secred NSDD, the
United
States actively supported the Iraqi war effort by supplying the Iraqis
with billions of dollars of credits, by providing U.S. military
intelligence and advice to the Iraqis, and by closely monitoring third
country arms sales to Iraq to make sure that Iraq had the military
weaponry required. The United States also provided strategic
operational
advice to the Iraqis to better use their assets in combat. For
example,
in 1986, President Reagan sent a secret message to Saddam Hussein
telling
him that Iraq should step up its air war and bombing of Iran. This
message was delivered by Vice President Bush who communicated it to
Egyptian President Mubarak, who in turn passed the message to Saddam
Hussein. Similar strategic operational military advice was passed to
Saddam Hussein through various meetings with European and Middle
Eastern
heads of state. I authored Bush's talking points for the 1986 meeting
with Mubarak and personally attended numerous meetings with European
and
Middle East heads of state where the strategic operational advice was
communicated.
8. I personally attended meetings in which CIA Director Casey or
CIA Deputy Director Gates noted the need for Iraq to have certain
weapons
such as cluster bombs and anti-armor penetrators in order to stave off
the
Iranian attacks. When I joined the NSC staff in early 1982, CIA
Director
Casey was adamant that cluster bombs were a perfect "force multiplier"
that would allow the Iraqis to defend against the "human waves" of
Iranian
attackers. I recorded those comments in the minutes of National
Security
Planning Group ("NSPG") meetings in which Casey or Gates participated.
9. The CIA, including both CIA Director Casey and Deputy Director
Gates, knew of, approved of, and assisted in the sale of non-U.S.
origin
military weapons, ammunition and vehicles to Iraq. My notes, memoranda
and other documents in my NSC files show or tend to show that the CIA
knew
of, approved of, and assisted in the sale of non-U.S. origin military
weapons, munitions and vehicles to Iraq.
10. The United States was anxious to have other countries supply
assistance to Iraq. For example, in 1984, the Israelis concluded that
Iran was more dangerous than Iraq to Israel's existence due to the
growing
Iranian influence and presence in Lebanon. The Israelis approached the
United States in a meeting in Jerusalem that I attended with Donald
Rumsfeld. Israeli Foreign Minister Yitzhak Shamir asked Rumsfeld if
the
United States would deliver a secret offer of Israeli assistance to
Iraq.
The United States agreed. I travelled wtih Rumsfeld to Baghdad and was
present at the meeting in which Rumsfeld told Iraqi Foreign Minister
Tariq
Aziz about Israel's offer of assistance. Aziz refused even to accept
the
Israelis' letter to Hussein offering assistance, because Aziz told us
that
he would be executed on the spot by Hussein if he did so.
11. One of the reasons that the United States refused to license
or sell U.S. origin weapons to Iraq was that the supply of non-U.S.
origin
weapons to Iraq was sufficient to meet Iraq's needs. Under CIA DIrector
Casey and Deputy Director Gates, the CIA made sure that non-U.S.
manufacturers manufactured and sold to Iraq the weapons needed by Iraq.
In certain instances where a key component in a weapon was not readily
available, the highest levels of the United States government decided
to
make the component available, directly or indirectly, to Iraq. I
specifically recall that the provision of anti-armor penetrators to
Iraq
was a case in point. The United States made a policy decision to
supply
penetrators to Iraq. My notes, memoranda and other documents in my NSC
files will contain references to the Iraqis' need for anti-armor
penetrators and the decision to provide penetrators to Iraq.
12. Most of the Iraqi's military hardware was of Soviet origin.
Regular United States or NATO ammunition and spare parts could not be
used
in this Soviet weaponry.
13. The United States and the CIA maintained a program known as
the 'Bear Spares" program whereby the United States made sure that
spare
parts and ammunition for Soviet or Soviet-style weaponry were available
to
countries which sought to reduce their dependence on the Soviets for
defense needs. If the "Bear Spares" were manufactured outside the
United
States, then the United States could arrange for the provision of these
weapons to a third country without direct involvement. Israel, for
example, had a very large stockpile of Soviet weaponry and ammunition
captured during its various wars. At the suggestion of the United
States,
the Israelis would transfer the spare parts and weapons to third
countries
or insurgent movements (such as the Afghan rebels and the Contras).
Similarly, Egypt manufactured weapons and spare parts from Soviet
designs
and porvided these weapons and ammunition to the Iraqis and other
countries. Egypt also served as a supplier for the Bear Spares
program.
The United States approved, assisted and encouraged Egypt's
manufacturing
capabilities. The United States approved, assisted and encouraged
Egypt's
sale of weaponry, munitions and vehicles to Iraq.
14. The mere request to a third party to carry out an action did
not constitute a "covert action," and, accordingly, required no
Presidential Finding or reporting to Congress. The supply of Cardoen
cluster bombs, which were fitted for use on Soviet, French and NATO
aircraft, was a mere extension fo the United States policy of assisting
Iraq through all legal means in order to avoid an Iranian victory.
15. My NSC files are currently held in trhe President Ronald
Reagan Presidential Archives in Simi Valley, California. My files will
contain my notes and memoranda from meetings I attended with CIA
director
Casey or CIA Deputy Director Gates which included discussions of
Cardoen's
manufacture and sale of cluster bombs to Iraq. My NSC files will also
contain cable traffic among various United States agencies, embassies
and
other parties relating to Cardoen and his sale of cluster bombs and
other
munitions to Iraq and other Middle Eastern states.
16. Under CIA Director Casey and Deputy Director Gates, the CIA
authorized, approved and assisted Cardoen in the manufacture and sale
of
cluster bombs and other munitions to Iraq. My NSC files will contain
documents that show or tend to show the CIA's authorization, approval
and
assistance of Cardoen's manufacture and sale of cluster bombs and other
muntions to Iraq.
17. My files will contain notes, memoranda and other documents
that will show that the highest levels fo the United States government,
including the NSC Staff and the CIA, were well aware of Cardoen's
arrest
in 1983 in Miami in a sting operation relating to the smuggling of
night
vision goggles to Cuba and Libya. My files will also show that the
highest levels of the government were aware of the arrest and
conviction
of two of Cardoen's employees and his company Industrias Cardoen.
18. CIA Director William Casey, aware of Cardoen's arrest and the
conviction of his employees and his company, intervened in order to
make
sure that Cardoen was able to supply cluster bombs to Iraq.
Specifically,
CIA Director Casey directed the Secretaries of the State and Commerce
Departments that the necessary licenses required by Cardoen were not to
be
denied. My files will contain notes, memoranda and other documents
showing or tending to show that CIA Director William Casey's
intervention
was in order to maintain Cardoen's ability to supply cluster bombs and
other munitions to Iraq.
I declare under penalty of perjury that the foregoing is true and
correct to the best of my memory and recollection.
Executed on 1/31/95
Howard Teicher (signature appears on original)
###
Warning forced Bechtel out of Iraq chemical project
BY ALAN FRIEDMAN
Financial Times
February 21, 1991
BECHTEL, the California construction group, withdrew from an Iraqi
petrochemicals project on the advice of Mr George Shultz, the former US
secretary of state, who joined the company's board of directors after
leaving the Reagan administration in 1989. Mr Shultz disclosed his role
in an interview with the Financial Times.
Bechtel has also revealed, separately, that it was instructed by the
government of Iraq to obtain payment for work it did on the
petrochemicals project from the Atlanta, Georgia, branch of Banca
Nazionale del Lavoro (BNL).
BNL is the Italian bank caught up in the scandal over Dollars 3bn
(Pounds 1.5bn) of Iraqi loans made in 1988-89 by its Atlanta branch.
Indictments of US bank employees and Iraqi officials implicated in the
scandal were due to have been announced last week, but they have been
delayed after a fresh round of consultations in Washington.
The disclosures by Bechtel come amid allegations by US chemical weapons
experts that Baghdad planned to use intermediate products from the
apparently civilian Iraqi project - known as PC2 - for the manufacture
of mustard gas.
Mr Shultz, who had served as president of Bechtel before joining the
Reagan administration in 1982, said he first learned of Bechtel's work
as project manager of the Iraqi petrochemicals complex in 1989 when he
'spent a little time at Bechtel's London office and found there was
work going on in Iraq'.
Mr Shultz said he checked into the PC2 project in 1989 and was given
assurances that it had nothing to do with chemical weapons. 'But I
thought about it a little more and I gave my advice they should get
out,' said the former secretary of state.
He recalled that at a Bechtel meeting in the Spring of 1990, as work
was continuing, 'I really hit it very hard and I said something is
going to go very wrong in Iraq and blow up and if Bechtel were there it
would get blown up too. So I told them to get out.'
The revelations by Bechtel, which says it had no knowledge of any plans
by Iraq to apply the petrochemical plant's products for military use,
mark the first time a US company has provided details of the direct
involvement of Iraqi officials in the BNL Atlanta affair.
Western intelligence officials say that a substantial portion of the
Dollars 3bn of BNL money was used by Iraq to finance its development of
unconventional weapons systems, including the Condor-II ballistic
missile project and nuclear and chemical weapons projects.
The Iraqi project was handled by Bechtel Overseas of Hammersmith Road
in London, the company's UK affiliate. The Financial Times has obtained
a copy of a 1988 telex instruction from the central bank of Iraq to
BNL's Atlanta branch, asking that Bechtel's UK subsidiary be paid
Dollars 10m.
Mr Tom Flynn, a senior vice-president at Bechtel, said the company
never knew there was anything suspect about the Dollars 10m of BNL
funds, provided in the form of two letters of credits that were issued
in September 1988 and amended three months later.
'We were hired by the government of Iraq to be the project manager for
an ethylene plant. Our client, the government of Iraq, told us we would
be paid through letters of credit from the BNL Atlanta branch.'
The Bechtel official also said that the company received 'direct
encouragement' for the PC2 project from the US Department of Commerce.
A spokeswoman for the Commerce Department said 'we were aware of
Bechtel's work in Iraq through the US embassy in Baghdad, but our role
was a passive one'.
Bechtel said there was no suggestion at the time about the final use
that Iraq might make of ethylene oxide, a product that has multiple
civilian applications, but also has military uses.
Mr Seth Carus, an expert on Iraq's chemical weapons programmes who is a
fellow at the Washington Institute for Near East Policy, said the PC2
Iraqi project was intended for several purposes, both military and
civilian.
'I think it is very clear, however, that the Iraqis understood what
they were doing. It is evident that they wanted to limit their import
dependence on chemicals that are used for weapons.'
A key feature of the PC2 project was the plan to manufacture ethylene
oxide, a precursor chemical that Mr Carus said 'is easily converted to
thyodiglycol, which is used in one step to make mustard gas'.
###
According to the US Export-Import Bank, Iraq used foreign credit to
purchase arms from US firms
ByAmy Kaslow, Staff writer of The Christian Science Monitor
Christian Science Monitor (Boston, MA)
April 19, 1991, Friday
CONGRESS, scrutinizing the US Export-Import Bank's past policy toward
Iraq this week, has exposed the State Department's refusal to listen to
repeated warnings from Exim about Baghdad's military buildup.
Key Exim officials testified before the House Committee on Banking,
Finance, and Urban Affairs Wednesday on the bank's strident posture
toward Iraq despite constant US government and private sector pressures
for a softer stand.
The Bush administration issued a National Security Council directive in
1989 calling for improved relations with Iraq; it endorsed business
activity in Iraq to help satisfy Baghdad's demand for US financing and
exports. Baghdad had constantly reminded Washington in recent years
that improved commercial links were essential to warmer political
relations.
Committee chairman Henry Gonzalez (D) of Texas said it was "shocking"
that US policy awarded billions of dollars in US export credits to
Iraq, while Exim warned of Iraq's military buildup through foreign
credits.
The USDA's Commodity Credit Corporation, which supported US farm
exports to Iraq, did $1 billion a year in business with Baghdad in the
past four years. The CCC failed to notice that Iraq was abusing its
program for military purchases, many from US-based firms. CCC's rate
for Iraq was significantly lower than Exim's, despite its much higher
risk. Iraq was often in arrears to CCC, with no prospect of repayment.
House Banking Committee members were incredulous of Washington's
"policy of engagement" with Iraq as they pored over Exim's country risk
analysis. Seven Exim reports from 1986 to1989 detail Iraq's inability
and unwillingness to repay debts. They point to Baghdad's manipulation
of foreign credits to meet priority spending for a variety of "advanced
military technologies," including chemical and biological warfare
plants and a budding nuclear program.
Mary Rose Oakar (D) of Ohio and Joseph Kennedy (D) of Massachusetts
asked several times, "Did the red flag go up?," when State, Commerce,
and Agriculture Department officials regularly attended Exim Board
meetings and heard Exim's dismal assessments of Iraq.
Despite Exim's broad analyses - a composite of State Department cables
from Iraq, CIA classified and unclassified documents, exchanges with
other US departments, and sophisticated analyses from other
international export agencies - Exim was ignored.
US Embassy cables from Baghdad in 1989 - when Iraq was cash-strapped
and desperately seeking assistance for defense projects - eagerly
informed Washington of Iraq's enormous import needs and desire for US
technology. US industry and agricultural producers, supported by the
State Department, pressured Exim with repeated letters and visits.
While the Exim officials deftly avoided criticizing other departments
at the hearing, committee members constantly queried them about the
State Department's pressure on the bank to give Iraq a better rating.
The committee folders included a sampling of Exim's file of letters
from the US business community.
One 1988 letter from Bechtel Financing Services Inc. states plans to
build an ethylene oxide plant. Ethylene oxide is a precursor to mustard
gas which the Iraqis hoped to produce. Exim turned down the loan
application and Bechtel later secured financing with BNL, the
state-owned Italian bank that manipulated CCC credits to help finance
billions of dollars in defense exports to Iraq.
In an effort to slow Capitol Hill's investigation of US policy, the
administration is once again invoking national security concerns, says
a congressional aide.
"Ever since we announced our intention to hold hearings, Justice,
backed by State, tried to hold up data we requested from Eximbank," she
says. A senior US Treasury official says Exim checked with Justice
Department officials before sending over the requested documents.
A senior US Agriculture economist says the department curtailed
discussion on Iraq. "They've told us we can't talk about Iraq's CCC
program with anyone outside the USDA and we're even monitored on what
we say inside the department itself. If we violate this, we'll find
ourselves on some list, somewhere."
###
Iraq: the Smoking Gun
Mednews - Middle East Defense News
SECTION: PROLIFERATION; Vol. 5, No. 2 & 3
November 4, 1991
Analysts at IAEA headquarters last week called it the "smoking gun."
Seventeen pages in all, it was the discovery of this document - a top
secret progress report on Iraq's nuclear weapons research project -
that prompted the show-down last month in the Baghdad parking lot
between UN inspectors and the Iraqi authorities.
Called "Al Atheer Plant Progress Report for the period 1 January 1990
to 31 May 1990," the document details the advanced state of Iraq's
nuclear weapons program, identifies critical technologies that were
imported from the West, and clearly shows that the entire weapons
program was placed under the supervision of Hussein Kamil al-Majid, the
powerful son-in-law of Saddam Hussein.
Al Atheer: Before the Gulf war, the Al Atheer facility was an integral
part of the Al Musayyib rocket motor test facility, and bounded by a
single perimeter fence. Shortly before the first UN inspection team
arrived, however, the Iraqis built a new fence in between Al Musayyib
(also known as Petrochemical Project 2) and Al Atheer, blocking off the
road with 1 meter thick cement blocks. Access from Al Musayyib to the
Huteen firing bunker, where detonation tests were carried out, was also
blocked.
PC-2 began in the mid-1980s as a $ 1 billion project engineered by
Bechtel and Lummus Crest in the U.S., and coordinated by Industrial
Projects Corps and the Technical Corps for Special Projects, Iraqi
state organizations which have since been connected to nuclear weapons
research. Mednews has learned from sources in Vienna that among the
60,000 pages of documents seized by the UN in Baghdad were procurement
orders for PC-2 that suggested a nuclear tie-up.
###
Construction of Iraq’s Petrochemical Complex Permanently Delayed
Platt's Petrochemical Report
August 8, 1991
When the Gulf crisis escalated into war in January this year, the
international sanctions against Iraq had already brought the
development of its $ 2.5 billion second petrochemical complex (PC-2),
being built 60km south of Baghdad at Mussayyib, to a halt. Planned
output of the complex was around 1.5 million tonne/yr of various
petrochemical products (see IPR, January 24, page 3).
A contract to design PC-2's core 420,000 tonne/yr ethylene cracker had
been awarded to ABB Lummus Crest, with Bechtel UK to act as consultants
for the project. Contracts had already been awarded to a number of
Western contractors for some of the downstream plants when the conflict
erupted, although even before then financing for the units was not
assured due to foreign exchange shortages.
The outlook for the future development of Iraq's petrochemical industry
at this point looks bleak. Given the ongoing UN sanctions, the huge
cost of rebuilding its oil sector which a UN investigative committee
recently said will cost $ 6 billion over at least two years and the
extensive damage in the Basrah area, it is likely to be some time
before its existing petrochemical capacity is fully operational. The
implementation of the PC-2 complex looks certain to be severely delayed
and industry observers have speculated that it may never go ahead.
###
Shell Game: A True Story of Banking, Spies, Lies, Politics - and the
Arming of Saddam Hussein._book reviews
Doug Ireland
The Nation
June 10, 1996
Iraqgate was one of the costliest perversions of American democracy
wrought by that monstrous legacy of the cold war known as the national
security state. A secret, off-the-books foreign policy--begun under
Ronald Reagan and carried to obscene lengths by George Bush--used the
sanguineous dictator Saddam Hussein as a counterweight to the Islamist
primitives of Iran. Bush's Saddam-coddling led directly to the
miscalculations that provoked the Gulf War, in which materials and
technology procured by Iraq from the United States were used to kill
American soldiers. The horrific expenditure of lives and treasure on
both sides has yet to be accurately calculated, but American taxpayers
paid the bill twice over: first to help build up Iraq's military
machine, then (partially) to destroy it.
Iraqgate might never have come to light were it not for the greedy
peculations of one Christopher Drogoul, a New Jersey--born yuppie who
became Saddam's principal banker in the West. Drogoul ran the Atlanta
branch of the Banca Nazionale del Lavoro (B.N.L.). No ordinary
commercial bank, B.N.L. was an arm of the Italian government in the
Andreotti-Craxi years, when Christian Democrats and Socialists were the
Bobbsey Twins of a corrupt politico-economic system that Operation
Clean Hands has yet to dismantle. We learned in 1981 that B.N.L. had
been infiltrated by the arms-dealing Licio Gelli's infamous P2, the
renegade Masonic lodge and secret anticommunist brotherhood that used
terrorist methods and enjoyed covert C.I.A. support. A third of
B.N.L.'s senior management was purged in the P2 scandal, but the head
of the bank's lending department, Christian Democrat Giacomo Pedde,
became B.N.L.'s director general, and Christopher Drogoul was one of
his favorites.
Shell Game tells the story of Iraqgate through the prism of Drogoul's
rapid rise and fall. Peter Mantius is well placed to tell the tale: A
reporter for the Atlanta Journal-Constitution, he covered the B.N.L.
affair from the beginning, and his stories detailing the role B.N.L.
played in carrying out Bush's secret foreign policy were crucial in
bringing the scandal to national attention.
When Drogoul took over B.N.L.-Atlanta in April 1984, the branch was
floundering. In a search for ways to generate new business, Drogoul and
an associate hit upon the idea of funding exports of grain and other
farm commodities through the Commodity Credit Corporation's loan
guarantee program. According to Mantius:
In a typical CCC deal, BNL-Atlanta paid a U.S. exporter up front for
its shipment. The importing country then repaid BNL the loan principal,
plus interest, over several years... If the country failed to repay,
the CCC covered 98 percent of the bank's losses... Officially, the CCC
was supposed to award guarantees to countries based on two factors:
market potential for U.S. farmers and the prospects for getting repaid.
But the Reagan team brushed aside standards of credit risk and used the
CCC as a piggy bank for an off-the-books foreign policy. Iraq had an
atrocious repayment record... but Baghdad gathered in more than 20
percent of the CCC's worldwide guarantees in fiscal years 1987, 1988,
and 1989. During the 1980s, BNL-Atlanta served as a conduit for $ 1.9
billion of that CCC foreign aid to Iraq--more than any other bank.
Iraq had long been a major trading partner for Italy, which had
important arms contracts with Baghdad and was partially dependent on
Iraqi oil. Initially, B.N.L.'s Rome headquarters gave Drogoul
authorization for a $ 150 million loan to Iraq. Then, in 1986, Drogoul
agreed to lend Iraq $ 556 million without Rome's assent. When he
finally asked for approval, it was denied. To "mask the position," as
Drogoul put it, he simply removed $ 500 million in new Iraqi loans from
the official books, creating a second set of accounts to handle this
and future Iraqi loans. Drogoul told uneasy subordinates that both
Washington and Rome were pleased that the branch could handle such
large loans to Iraq. Along the way the plucky branch manager and two
associates illegally split a $ 1 million rake-off from a C.C.C.-backed
corn deal with Iraq, a kickback of a kind common in the corrupt
international grain market. In 1988, Drogoul eased out of C.C.C. and
began granting Iraq lines of credit for the importation of
non-agricultural products, which "Saddam used to fuel his war machine."
Among the recipients of these new loans to ship goods to Iraq were
clients of Kissinger Associates--including, says Mantius, General
Motors, Volvo, Hewlett-Packard, Continental Grain and ASEA
Brown-Boveri. B.N.L. had been a Kissinger Associates client for several
years, and Kissinger himself collected hefty fees as a member of
B.N.L.'s international advisory board from 1985 through 1991. When
K.A.'s president, Lawrence Eagleburger, and its vice-chairman, Brent
Scowcroft, became respectively George Bush's Deputy Secretary of State
and National Security Adviser, they were prime movers in tilting the
U.S. toward Iraq. A few months later, K.A.'s Alan Stoga, with officials
from Westinghouse, GM, Xerox and several U.S. oil companies, visited
Saddam in Baghdad.
Mantius details the incestuous connections among B.N.L., the U.S. and
British intelligence communities, and U.S. corporate and political
elites. For example, a billion-dollar chemical plant was built just
south of Baghdad by a subsidiary of K.A. client ASEA Brown-Boveri and
the Bechtel Corporation. Both companies received payments for the
plant, easily converted to produce components of mustard gas, from
B.N.L. George Shultz, Reagan's Secretary of State, had been president
of Bechtel; Caspar Weinberger, Reagan's Defense Secretary, had been its
general counsel.
Many of these companies were members of the U.S.-Iraq Business Forum,
which lobbied hard against Congressional attempts to impose sanctions.
Another member was the mysterious Hoosier Beurt SerVass, one of whose
companies built a plant for Iraq to recycle 70,000 tons of spent brass
shell casings. SerVass owned a chunk of the Quayle family publishing
business, and his brother-in-law had managed Quayle's 1980 Senate
campaign. Mantius suggests that SerVass, an O.S.S. veteran who
supported both Pat Robertson and pre-Mandela South Africa, may have had
ongoing ties to the intelligence netherworld.
In August 1989, just four months after granting Iraq a new, $ 1.15
billion credit line, B.N.L.-Atlanta was raided by the F.B.I., acting on
a tip from, and an immunity plea-bargain with, a Drogoul subordinate
afraid of being burned if the burgeoning dual-books system at the
Atlanta bank ever became public. Far from halting U.S. help for
Baghdad, however, the F.B.I. raid and Drogoul's arrest caused the Bush
Administration to accelerate its pro-Saddam tilt. Two months later,
Bush signed the super-secret National Security Directive 26, which
called for increased trade with Iraq. As Mantius puts it, "Over the
next five weeks, Secretary of State James Baker and his deputy,
Lawrence Eagleburger, helped Iraq win up to $ 1 billion in loan
guarantees. Splitting the lobbying chores, they wielded N.S.D. 26 like
a club to beat back stiff bureaucratic resistance... They bulldozed
over concerns that Iraq was a poor credit risk and ignored the fact
that Saddam was hurrying to prepare weapons of mass destruction." Only
Saddam's invasion of Kuwait put an end tu U.S. aid to Iraq.
Then the cover-up began. B.N.L.'s top officials and the Italian
government wanted to avoid a U.S. indictment of the government-owned
bank, and lobbied to raise the decision about prosecutions to a
"political level," as a cable from the U.S. embassy in Rome put it. In
September 1989, when Italian President Francesco Cossiga flew to
Washington for his first meeting with Bush, B.N.L.'s new chairman was
at his side. Prime Minister Giulio Andreotti met with Attorney General
Dick Thornburgh, who had ties to Pennsylvania-based contractors doing
business with Iraq. B.N.L. first hired as its lead lawyer former Carter
Administration attorney general Griffin Bell, who'd been Thornburgh's
boss at Justice in the late seventies; later it added William Rogers,
Richard Nixon's Secretary of State.
For the next year and a half, a debate raged at Justice over whether
B.N.L. should be portrayed as a "victim" of Drogoul's lending schemes
or indicated as a witting co-conspirator. Higher-ups in Washington
placed heavy pressure on local federal prosecutors in Atlanta.
Thornburgh even engineered the appointment as top U.S. Attorney in
Atlanta of Joe Whitley, who'd represented the U.S. subsidiary of
Matrix-Churchill, British-based Iraqi front for weapons purchases (and
already identified as such in a classified November 1989 C.I.A.
report). Not until February 28, 1991--the day Iraq surrendered in the
Gulf War--was an indictment handed down in the B.N.L. case. Drogoul
bore the full weight: he and some underlings were indicated on 347
felony counts. The bank itself was, indeed, portrayed as a "victim."
The chapters on the cover-up are among the book's best. The lonely
efforts of House Banking Committee Chairman Henry Gonzalez to bring the
B.N.L./Iraqgate scandal to public attention before the 1992
presidential election, addressing an empty House chamber and the C-SPAN
camera, are well-known. Less familiar are repeated attempts by Federal
Judge Marvin Shoob, the sentencing judge after Drogoul's initial guilty
plea to sixty felonies, to have a court-appointed independent counsel
outside the Justice Department investigate the B.N.L. case. The Bush
Administration rejected two requests by the House Judiciary Committee
for an independent counsel, then picked its own man, Frederick Lacey,
to conduct a lightning probe just two weeks before the elections. Lacey
had more conflicts of interest than Kenneth Starr: his law firm was
representing Lloyd's of London in a lengthy legal dispute with B.N.L.
Predictably, Lacey whitewashed the Bush Administration and its Justice
Department. As Judge Shoob later remarked in open court, "If Judge
Lacey had been appointed to investigate the Teapot Dome scandal, he'd
have handed out medals instead of jail terms." As a candidate, Bill
Clinton supported the notion of a court-appointed independent counsel
to investigate B.N.L.; as President, he allowed Janet Reno to pick one
of her Dade County political cronies, John Hogan, to re-investigate the
case. The man was known in Florida as "Hot Suit Hogan," for it seems
he'd been in the habit of buying business suits at "deep discount" from
a shady operator in a run-down apartment, suits later determined to be
stolen merchandise. When Reno prosecuted the suit-man, Hogan didn't
immediately confess that he'd been a buyer. Negative publicity forced
him to resign as a prosecutor. "Hot Suit's" whitewash of the Bush
Administration was as complete as Lacey's.
Shell Game is a masterpiece of investigative reporting, a case study in
the wormy workings of the national security state with its corporate
profiteers and spooks turned crooks and vice versa, and a cautionary
tale of immediate pertinence. With the Clinton Administration seemingly
running another off-the-books foreign policy in the Bosnian/Iran arms
scandal, it's clear that Iraqgate's lessons have yet to be learned.
###
HEARING OF THE HOUSE BANKING, FINANCE AND URBAN AFFAIRS COMMITTEE
SUBJECT: IRAQI LOAN INVESTIGATION
Federal News Service
NOVEMBER 9, 1993
SECTION: CAPITOL HILL HEARING
WITNESSES:
CHRISTOPHER DROGOUL, FORMER MANAGER,
ATLANTA BUREAU, BANCA NAZIONALE DEL LAVORO
CHAIRED BY REPRESENTATIVE HENRY B. GONZALEZ (D-TX)
2128 RAYBURN HOUSE OFFICE BUILDING
MR. DROGOUL: Yeah, I think another important thing to mention is that
every time that I traveled to Baghdad, I received telephone calls from
Mr. Larry Panacek (sp), who was the U.S. agricultural attache to the
U.S. embassy in Iraq. For some reason, even though I had never
contacted him, he was very familiar when I made trips to Baghdad, and I
never told the UDSA that I was making those trips, I just made my
trips. He knew in advance that I was there and he tried to contact me
on many, many occasions. Somehow he knew. I have no evidence that
either Ambassador Newton or Glaspie knew of the purpose of my trips to
Baghdad, but I was introduced to both while I was in Baghdad, once at a
luncheon for the Canadian government -- hosted by the Canadian
government, and another at a reception in 1989, where I was introduced
very briefly to Ms. Glaspie.
I think when you put all these factors together and you put the names
of all the people together who are involved with the U.S. government,
and when you consider the fact that there was so much Telex traffic, so
much telephone traffic between Iraq and the United States, it becomes
clear -- certainly we felt in Atlanta that the U.S. knew everything
that we were involved in.
I also believe that the foreign policy of the Reagan and Bush
administrations favored Iraq, and that the CCC program was a vehicle
used to further that policy. This was understood to me and made clear
to me in the comments by the USDA official who told the Iraqis just
before the 1988 presidential election that the Iraqis needed to come to
Washington to finalize their allocations prior to the elections.
It's also my belief that many of the companies doing business with Iraq
under the medium-term or industrial loan program had relationships with
the intelligence services. Among these companies were Loomis Crest
(sp), and an individual there mentioned to me that he had relationships
with the intelligence services, Hewlitt Packard, Bechtel, et cetera.
I'm aware that an individual by the name of William Muscarella (sp) of
a company known as XYZ Options was visited by the CIA in connection
with his activities to build a carbide plant in Iraq.
So, when one puts all those factors together, we felt, I'll use the
word comfortable, that the U.S. government was aware of our activities
from the beginning.
Your next question asks whether or not we had any reason to believe
that the commodities purchased by Iraq with CCC-guaranteed loans were
delivered for military goods. And to be honest with you, at the time, I
really didn't think about it. I mean, I thought that the CCC program
was a CCC program and that we were shipping commodities, especially
when you consider that we were shipping grain not just to Iraq, but to
various different parts of the world under the CCC program, whether it
was Yugoslavia or Turkey or Algeria. But I have had occasion -- but
first I'll say it's not inconceivable, given the way the goods were
shipped and then transshipped to Baghdad, that such a practice could
have taken place. But recently, I have learned that a BNL executive in
Italy acknowledged that such activities were taking place. More than
that, though, I really cannot comment.
I think it's important also -- my counselor just mentioned to me that
-- I found it peculiar. It was not peculiar to find a company like
Cargill or Continental Grain or Louis Dreyfus doing business under the
CCC program. But as the years progressed in Iraq, we found all sorts of
little companies that we knew nothing about, but once we explored them
found that they had industrial business and no agricultural business.
And all of a sudden now, they were involved in the CCC program to Iraq.
We did find that funny, that's very true. And I think that that's
something that needs to be looked at, and if there is any place to find
anything, that's probably where you'll find it.
REP. SANDERS: What about Bechtel?
MR. DROGOUL: Bechtel is a whole different story. I can go on about
Bechtel for a long time if you wish.
REP. SANDERS: Well, not for -- I don't have a long time. Just if you
could -- the -- maybe you could just chat a little bit. If -- some of
us have a concern that American corporations might have wittingly or
unwittingly played a role in supplying Saddam Hussein with chemical
weapons. What was BNL's involvement in that, and what can you -- what
light can you shed on that issue?
MR. DROGOUL: As far as -- I think we have to look at it from BNL's
point of view, which was that BNL Atlanta was attempting to develop
relationships with the big multinationals and Fortune 500 companies in
North America. That was specifically a directive that was given to me
by my general manager in Rome, and so when the name Bechtel pops up,
when the name Hewlett Packard pops up, and when the name Dow Chemical
comes up and one has an opportunity to become a banker to those
companies, one does whatever one can.
However, in the case of Bechtel, I went personally to visit several of
the petrochemical plants -- or one petrochemical plant in Iraq --
REP. SANDERS: Is that the PC-2 plant?
MR. DROGOUL: No, that was PC-1. PC-2 was not yet, if I'm not mistaken,
on the -- that was on the drawing boards but it hadn't been
constructed. We went to visit PC-1, and Bechtel was the official
subcontractor doing the renovation work on the project through Loomis
Crest (sp). Bechtel was the major designer and contractor, if I'm not
mistaken, on the PC-2 project as well.
REP. SANDERS: If I could interrupt you, was -- ostensibly this plant
was designed to provide pesticides for agriculture. Is that the --
MR. DROGOUL: That's what we were told.
REP. SANDERS: Did anybody have any thought or know enough about
chemistry to suggest that some of those same chemicals could be
converted into chemical weapons?
MR. DROGOUL: At the time -- at the time that this was taking place, I
certainly didn't think of that possibility at all.
REP. SANDERS: Did you hear any discussion among people who might have
said we are possibly providing chemical weapons for a very dangerous
man?
MR. DROGOUL: No, in fact, the PC-1 plant, as I recall, was designed for
exports. The product was supposed to be for the export markets. The
PC-2 plant, which was to be built outside of Baghdad, was designed for
the domestic market. I think when my colleague, Mr. Von Wiedel, and I
visited the PC-1 plant, they were working on trying to produce
ethylene. Now ethylene may have various functions, but I am not a
chemist and I don't really know, so I really relied on the fact that
Bechtel was a prominent company, and I assumed that they would not do
anything that would be against the interests of the United States
government or United States policy at the time.
REP. SANDERS: Thank you very much
###
BUSH EXERCISED HANDS-ON ROLE IN IRAQ AID EFFORT
By DOUGLAS FRANTZ, TIMES STAFF WRITER
Los Angeles Times
April 26, 1992
Early in the summer of 1990, with Saddam Hussein casting an
increasingly ominous shadow over the Persian Gulf, senior officials
from the CIA, State Department and other agencies met in the
ultrasecure White House situation room to review the Bush
Administration's policy of funneling economic aid and sophisticated
technology to Baghdad.
The agenda, classified secret, listed several options for getting tough
with Hussein, who was openly threatening to destroy Israel and annex
Kuwait. American food aid could be stopped. U.S. intelligence data
could be withheld. President Bush could send the Iraqi dictator a
strong, personal warning. But no such action was taken.
"There was a reluctance to jettison the existing policy," said an
official who attended the session. "People weren't really too focused
on Iraq. I don't remember any heated disagreement with continuing
things as they were."
The meeting, just two months before Iraqi troops overran Kuwait, was a
graphic demonstration of the failure by Bush and his top advisers to
recognize that Hussein -- long seen as a counterweight to Iran -- had
become a threat to U.S. interests. After almost a decade of fueling
Iraq's massive war machine, Bush and his most trusted aides still clung
to the illusion that they could tame Hussein's violent ambitions and
manipulate him to their own ends.
The tragic consequences of that misjudgment became clear in the
following months as 500,000 American troops were dispatched to the
Gulf, thousands of lives were lost and billions of dollars were spent
to turn back a military juggernaut developed with Western technology
and financed in significant part by American dollars.
And the story of how Bush and others helped build up their eventual
adversary in the Gulf offers a rare glimpse of the President's hands-on
role in making a critical foreign policy judgment. For Bush's
fingerprints are all over the series of decisions to provide and
continue financial and technical assistance to Hussein.
Indeed, the question of whether the policy of helping Hussein had
outlived its usefulness was sharply debated inside the Administration
in the months and years leading up to the Gulf crisis. Some senior
officials were convinced Hussein was becoming a threat to the region
and to U.S. interests; they urged a reappraisal of U.S. policy and a
pulling back on U.S. aid.
Right up to the end, sources familiar with the debate say, Bush and his
inner circle were convinced otherwise.
"There were some elements of inertia, but there also was a belief that
this was a viable Mideast strategy. There was still a perception that
Iraq could be moderated," says Marvin C. Feuerwerger, an analyst at the
Washington Institute for Near East Policy and, until 1990, a Mideast
strategist at the Defense Department.
"There were some, however, who saw Iraq as the next threat, but
President Bush was not part of that group. NSD 26 reasserted the policy
that had been maintained toward Iraq through the 1980s," he said,
referring to the top-secret National Security Directive, signed by the
President in October, 1989, that ordered government officials to extend
-- not cut back -- economic and political ties to Baghdad.
The names and signatures on the classified documents detailing those
years of American assistance to Hussein that have emerged in recent
weeks rarely say "George Bush." Yet five months of examination and
interviews with participants have made it clear that it was the
President's own hand that formulated and guided the policy.
He operated often through his most trusted adviser, Secretary of State
James A. Baker III, and through the secretive National Security Council
at the White House.
But it was Bush himself who -- at a critical period -- provided the
catalyst for sweeping away internal objections to the escalating aid to
Iraq by issuing NSD 26.
The secret order became the skewed lens through which events involving
Iraq were viewed. After it was imposed, support for Hussein's regime at
highest levels of the Administration did not waver despite rising
concerns over the wisdom of the policy.
"Once you set policy at the top, an awful lot else flows from that and
continues to flow from inertia and wishful thinking," said William B.
Quandt, a Mideast expert at the Brookings Institution and former
National Security Council staff member in the Richard M. Nixon and
Jimmy Carter administrations.
George Bush's role in shaping official U.S. policy toward Iraq can be
traced to 1984, when he was vice president and part of a faction of top
officials in President Ronald Reagan's Administration who backed
Baghdad in its war with Iran because they saw Baghdad as a buffer to
the Islamic fundamentalism that the Ayatollah Ruhollah Khomeini was
trying to export throughout the Middle East.
As part of that doomed courtship, the Administration agreed to help
build a $1-billion pipeline to carry oil from the interior of Iraq to
the Jordanian port of Aqaba, enabling Hussein's oil to reach world
markets without confronting Iranian gunboats in the Gulf.
The pipeline was to be built by a subsidiary of Bechtel, the giant San
Francisco construction and engineering firm with close ties to the
Reagan Administration. But the Iraqis needed help on two fronts:
financing and security.
The security problem was that the proposed pipeline would pass within
five miles of Israel, which rightly considered Hussein a major foe, and
would therefore possibly be expected to attack or sabotage the
pipeline. To protect against that possibility, Washington helped obtain
a secret pledge from the Israeli government not to harm the pipeline if
it were built.
On the financial front, in April, 1984, Bechtel sought financing from
the Export-Import Bank, an independent federal agency. The company had
received assurances that the State Department would assist at Exim,
according to classified documents.
But the bank balked. Its economists doubted that Iraq would repay the
loan, and the bank's charter prohibits it from providing credits
without a reasonable assurance of repayment.
Records show that then-Deputy Secretary of State John Whitehead and
Reagan's national security adviser, Robert C. McFarlane, lobbied the
bank's chairman, William H. Draper III, without success.
Then, on June 12, 1984, Charles Hill, a top-ranking State Department
official, sent a confidential memo to the office of Vice President
George Bush recommending that he, too, contact Draper. The memo did not
mention that Bush and Draper had been friends at Yale University and
that the top Exim post is a presidential appointment.
Classified documents show Bush asked Draper to provide the pipeline
guarantees shortly after receiving the memo and, a few days later, the
bank approved $500 million in guarantees for Iraq -- the first and only
time Exim authorized such a massive, long-term loan to Iraq.
Less than two years later, Bush was back on the phone to a new chairman
of the Exim bank. A bank program to provide loan guarantees for Iraq
had been cut off after Iraq defaulted on the loan repayments, but the
vice president was seeking a new $200-million aid commitment.
Classified accounts show that in late February, 1986, Bush telephoned
John A. Bohn Jr., the Exim chairman, and urged him to reverse the
bank's economists and approve the new aid for Iraq.
"Exim's support for continued trade for Iraq would be a powerful,
timely signal -- both to Iraq and to the Gulf Arab states -- of U.S.
interest in stability in the Gulf," records show Bush told Bohn.
A few days later, Bush met with Nizar Hamdoon, the Iraqi ambassador to
Washington, and informed him that the Exim credits would be renewed.
According to classified material prepared for Bush in advance of the
meeting, he also told Hamdoon the Reagan Administration was going to
permit Baghdad to buy more sophisticated U.S. technology.
Records show the Commerce Department in both the Reagan and Bush
administrations approved licenses to sell Iraq more than $600 million
worth of American technology between that meeting and the invasion of
Kuwait. Much of this equipment fell into the highly sensitive category
of "dual use technology" -- equipment with both civilian and military
applications.
At the same time, the Agriculture Department stepped up food aid to
Iraq.
The flow of U.S. technology to Iraq has been perhaps the most
controversial aspect of American assistance to Baghdad. While U.S.
officials maintain the goods were for commercial purposes, United
Nations inspectors and other independent investigators have found
extensive evidence that American technology played a vital role in
Iraq's development of nuclear, chemical and biological weapons.
Reagan policy during the Iran-Iraq War was contradictory at times.
While Bush and others arranged for Iraq to receive billions in U.S.
economic aid, the Administration was selling missiles and other arms to
Iran in an attempt to free American hostages. Bush has maintained that,
while he knew of the arms sales to Iran, he was unaware the deals were
swaps for hostages. But there is no evidence that he advised against
the Iranian arms sales.
Officials in the Bush White House defend the President's role in the
Reagan tilt toward Iraq, saying American interests were well served by
stopping an Iranian victory over Baghdad. And Bush himself has
indicated no second thoughts about his role on behalf of Iraq in the
Reagan years.
"As you may remember in history, there was a lot of support at the time
for Iraq as a balance to a much more aggressive Iran," he said in late
February in response to disclosures of the extensive aid in The Times.
"So that was part of the policy of the Reagan Administration. I was
very proud to support that."
By the time Bush became President, the situation had changed
dramatically but his position had not.
The Iran-Iraq War ended in August, 1988, leaving Iran flat on its back.
Saddam Hussein had wasted no time reasserting his drive for hegemony in
the Persian Gulf, gassing thousands of his own Kurdish population and
embarking on a course of menacing conduct that would bring him into
bloody conflict with his Arab neighbors as well as the Western world.
Iraq was no longer able to extort payoffs from its Arab neighbors to
finance its war against Iran. Rather than turning his limited resources
from guns to butter, Hussein ratcheted up arms development and relied
more than ever on his friend in Washington.
President Bush turned out to be as adamant a backer of Hussein as Vice
President Bush. Instead of restricting economic aid, the new Bush
Administration increased the subsidies. Instead of stopping the flow of
technology, the new Bush Administration expanded the sales over
objections from its own Commerce Department. This time, however, Bush
had his own proxies to execute the policy.
A potential turning point in the relationship occurred on Aug. 4, 1989.
FBI agents raided the small Atlanta branch of Banca Nazionale del
Lavoro, one of Italy's largest banks. They uncovered evidence that the
BNL branch had made $4 billion in unauthorized loans to Iraq, including
$900 million guaranteed by the U.S. Agriculture Department.
The investigation quickly implicated Iraqi government officials and two
government-owned banks in a massive scheme involving millions of
dollars of the improper loans to buy arms and weapons technology. But
classified documents show the State Department and National Security
Council struggled to keep a lid on the scandal and avoid disrupting
ties with Baghdad.
Whether it was precipitated by the burgeoning bank scandal is unknown,
but in early October, 1989, Bush issued NSD 26, the binding order
requiring federal agencies to increase economic and political ties with
Iraq.
The Agriculture Department had responded to the Atlanta bank
investigation by trying to cut food aid to Iraq to $400 million from $1
billion. The Treasury Department and Federal Reserve argued that the
aid should be halted. But State Department officials, from Secretary of
State Baker and Deputy Secretary of State Lawrence S. Eagleburger on
down, cited NSD 26 in arguing that the aid should be retained at the
full level.
Documents show that the National Security Council and its chief, Brent
Scowcroft, fought to retain the full aid, too. The NSC, which is
supposed to advise the President, went so far as to review and approve
an Agriculture Department administrative inquiry into the food aid
program with Iraq. Records show the NSC also took the highly unusual
step of monitoring the Justice Department's investigation of BNL.
"The NSC's role in the Agriculture Department administrative review
raises serious questions because the review was an almost complete
whitewash of the problems found during the BNL investigation," said
Rep. Henry B. Gonzalez (D-Tex.), chairman of the House Banking
Committee.
Scowcroft and Eagleburger are former employees of Kissinger Associates,
the international consulting firm run by former Secretary of State
Henry A. Kissinger. At the time of the BNL scandal, Kissinger served on
the Italian bank's international advisory board and the bank was a
client of his firm, according to investigators for Gonzalez, who has
been examining the BNL case for more than two years.
The State Department's pro-Iraq position was demonstrated clearly on
Oct. 31, 1989, when Baker telephoned Clayton K. Yeutter, the secretary
of agriculture, and urged him to restore the full $1 billion in food
aid for Baghdad "on foreign policy grounds."
According to Baker's own classified account of the conversation,
Yeutter responded: "I think we're seeing it the same way you guys are.
I'll get into it."
At a Senate hearing in February, Sen. Patrick J. Leahy (D-Vt.) asked
Baker about the motive for his call to Yeutter. Baker responded, "I
suppose it would not come as a surprise to you that the secretary of
state would be supportive of the position reflected by the President in
his national security decision directive."
Through the spring of 1990, the Administration continued to back aid to
Iraq and, documents show, the federal investigation of BNL dragged on
and dates for indictments were postponed. The business-as-usual
approach continued in the face of mounting evidence that Saddam
Hussein's raw ambition had not been checked by Washington's
pleasantries.
In February, Hussein had given a virulent anti-American speech at a
gathering of Arab leaders in Amman, despite attempts by Jordan's King
Hussein to persuade him to tone it down. Two months later, Hussein
threatened to destroy half of Israel with chemical weapons. Peppered
throughout his rhetoric were demands that Saudi Arabia and Kuwait
forgive billions in loans to Iraq and that Kuwait turn over two
disputed islands.
But the reaction in Washington was a sleepy one, as evidenced by the
May 29, 1990, meeting in the White House situation room attended by
senior officials from the CIA, NSC, and departments of State, Justice,
Treasury, Defense, Agriculture and Commerce.
"The BNL business was raising questions that we had to deal with, but I
don't remember anybody raising Iraq policy in a general sense as far as
a big change," said an official who atte
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