Explosions rocked Chile's largest bomb factory Saturday, killing as many as 28 (29) people and injuring 11 01/25/1986 Cardoen Industries sells its products to Iraq and possibly Iran, El Salvador, and Honduras, diplomats said. It also supplies Chile's military and police forces.
Indefensible: Seven Myths that Sustain the Global Arms Trade 2016
Bob Dole and Saddam Hussein shake hands 1990-04-12 "Notes: Dole with Senate Delegation whose mission was to dissuade Iraqis from invading Kuwait." This statement is highly unlikely and not the way Friedman describes it. At that time there was little or no official knowledge about plan to invade three and a half months later.
National Security Directives (NSD) [Bush Administration, 1989-93]
C.I.A. Had Warned Bush Over Iraqi Farm Loans 07/19/1992 "The President has asked me to say to you and through you to President Saddam Hussein in the most direct way possible that the United States is not involved in any effort to weaken or destabilize Iraq," the message said. "Having looked into the matter and discussed it with the President, I can tell you this with the highest authority. Such an action would be completely contrary to the President's policy, which is to work to strengthen the relationship between the United States and Iraq whenever possible."
The Spider's Web: The Secret History of How the White House Illegally Armed Iraq By Alan Friedman Reviewed By Stephen E. Ambrose March/April 1994
In the late afternoon of Sunday, June 7, 1981, a squadron of eight Israeli F-16 jets took off from an air base in the eastern Sinai and headed across the northern fringes of Saudi Arabia. Their secret flight plan soon brought them into Iraqi air space. Flying low, in less than an hour the pilots spotted their target: a nuclear reactor site located just twelve miles southeast of Baghdad. While six twin-engine interceptor jets provided protective cover, the F-16s dropped two two-thousand-pound bombs that punched holes into Saddam Hussein's most cherished nuclear project, the Osirak reactor. Then they unloaded ten additional bombs. The roof collapsed instantly, as did both the reactor's walls and its core, which contained twenty-six pounds of weapons grade uranium, enough to fashion a crude nuclear weapon.
The preemptive strike shocked many, but it was the result of Israel's deep frustration at its apparent inability to get the Reagan administration to focus on the Iraqi nuclear project. The raid was based on a timetable that accorded with Iraq's own plans for Osirak; according to the Israelis, the reactor was scheduled to begin functioning by early June. For months they had been warning top aides to President Ronald Reagan that it posed a serious threat, but few in Washington wanted to hear about it. Most of Reagan's aides assumed the Israelis were simply exaggerating the extent of the Iraqi dictator's progress. Yet it was hardly a secret that Saddam was aiming to develop nuclear weapons. He had already shelled out $3 billion, purchasing much of the equipment from the French. Indeed, Saddam had even given an interview to Lebanese journalist in 1975 in which he called his dealings with France "the first concrete step toward the production of the Arab atomic weapon." Although Saddam had been obtaining most of his arms from the Soviet Union since the early 1970s, the top-of-the-line equipment he really craved was Western. So he had begun cultivating the Europeans, especially the French, and in September 1975 he found himself flying into Paris for a champagne reception offered by Prime Minister Jacques Chirac. It was not long before France, which saw billions of francs' worth of business just over the horizon, began selling Saddam missiles, helicopters, defense electronics, and ultimately the materials and technology he needed to construct a nuclear reactor. So Obvious was his intended use of this technology that the French press even allowed itself some grim humor, referring to the Iraqi reactor as "O'Chirac." After he approved the Osirak deal and other weapons transactions for Baghdad, he became known in certain French business circles as "Mr.s Iraq." (Alan Friedman "Spider's Web" 1993 p.3)
It was providing Larry Hickey, the company president, with a good life. Home was an apartment on Sutton Place, just off the East River, and his fellow executives were a decent bunch. Like him, they tended to have a military background, an appetite for travel, and a proper respect for a company almost a hundred years old. As was usual with former military men, they kept in touch with old acquaintances inside and outside the Pentagon. For months they had been hearing through the grapevine that the Iraqis were in the market for U.S. arms. The phone call from the Iraqi on Long Island confirmed this, and that fit nicely with a sensitive matter already in hand. Six months earlier, in March 1981, and Iraqi military officer from Baghdad named Lieutenant Abu Ali had arrived at American Steel with an introduction from an Iraqi businessman in New York. He was shopping for a highly sophisticated security system.
To the men who ran American Steel, there had been something about Lieutenant Abu Ali on that first visit that didn't quite fit, and one didn't have to wear khaki to be able to figure out what it was. To begin with, what was a mere lieutenant doing trying to buy a $12 million security system? What kind of lieutenant had two bodyguards and a drive for his black Mercedes? Why was the lieutenants interpreter—the Iraq-born chairman of a New York chemical company—being so deferential, even toadying? Just as odd was the mere presence of an Iraqi military man on a shopping trip in the United States. Since 1979, Iraq had been on the State Department's list of states identified as sponsors of terrorism. What was an army officer from a country certified by the U.S. government as a terrorist state doing in America, when there weren't even any diplomatic relation?
Similar thoughts may have crossed the minds of certain New York City police officers at the time. A special group had been detailed to beef up protection at Ambassador Saleh's private residence, where Lieutenant Abu Ali was staying. The ambassador's town house, although spacious, was bursting at the seams. there were twenty-one bodyguards who had been flown in from Baghdad, and during the day an additional security detail of seven Americans provided by the State Department. The reason for the security lay in the identity of the guest of honor, who was Sajida Khairallah, Saddam Hussein's wife. With her personal entourage, the number of people staying at Saleh's town house for two weeks came to thirty. Madame Saddam Hussein, Lieutenant Abu Ali, and the rest of their group had arrived in New York on a private Iraqi government-owned Boeing 747.
While Madame Saddam Hussein visited Bloomingdale's and the culture houses, the mysterious lieutenant carried a shopping list of a somewhat different order. Half a dozen bombproof cars, bulletproof vests, security and communications equipment, and electronic components figured prominently among his requirements.
It was the search to fill part of that shopping list that had brought the lieutenant to American Steel. The attempt to provide the equipment on this and subsequent Iraqi shopping lists would change forever the life of a young Jordanian-born employee of American Steel named Fred Haobsh.
In March 1981, Haobsh's horizons barely extended beyond his daily commute from his wife, child, and home in Ridgewood, New Jersey, to the chores of Middle East regional manager at American Steel in Manhattan. If the truth were known, he was fed up with selling auto parts and Maytag washing machines to clients in the Middle East. He was thus more than intrigued to learn from an Iraqi friend in New York that the real name of the visiting Lieutenant Abu Ali was Hussein Kamel, the son-in-law of Saddam Hussein. After Saddam Hussein himself, Hussein Kamel was regarded as the most powerful man in Iraq. His ostensible rank of lieutenant now provided him with cover for his true roll as head of Saddam's weapons-procurement program. It was Hussein Kamel who spearheaded Saddam's clandestine drive to obtain Western technology and equipment for Iraq's nuclear, chemical, and biological weapons projects. Furthermore, he was about to add to his responsibilities the command of Saddam's elite Republican Guard. Ruthless and brilliant, he was a man to be reckoned with. The word was that Saddam trusted Hussein Kamel more than his own son. (Alan Friedman "Spider's Web" 1993 p.8-9)
Haobsh remembered the mixture of terror and awe he felt when he looked at the list. To begin with, the cost would be staggering—at a guess, it would run over a billion dollars. Then, of course, there would be the commissions, totaling millions and millions of dollars. It was all down there in black and white—a complete arsenal, from radar through tanks to aircraft, helicopters, battlefield missiles, and spare parts—the list went on and on. In more ways than one, Fred Hoabsh was out of his depth. He barely knew one end of a tank from the other. But he was sure that to fill this wish list would be one hundred percent illegal. His instincts were correct. Under the 1976 Arms Export Control Act, American exports with military potential required approval from the State Department. Since Iraq had been certified as a sponsor of terrorism, approval of such arms shipments was highly unlikely. Further, to prevent weapons transfers to Iraq and Iran, President Jimmy Carter had imposed a ban on arms sales soon after the two countries went to war in September 1980.
Haobsh also did not know that while he and Hickey were being asked by Saddam's son-in-law to come up with American arms, Morris Draper, a State Department envoy, had been visiting Saadun Hamadi, Iraq's foreign minister, in Baghdad on the initiative of the United States to explore the possibility of reestablishing diplomatic relations with Iraq. Though the Reagan administration's gambit was rebuffed, it had come about in part because of the increasingly pro-Iraq sentiment at the White House, and in part because U.S. allies such as Jordan and Saudi Arabia were advising the administration to get closer to Saddam.
The meeting between Haobsh, Hickey, and Hussein Kamel lasted less than an hour, and Haobsh emerged from it depressed; it was clear that all Iraq wanted was American weaponry. Hickey, on the other hand, had taken a surprisingly relaxed position about the whole thing, which Haobsh found difficult to comprehend. American Steel wasn't in the arms business—how could Hickey have responded to Hussein Kamel that, in essence, he would see what he could do?
Haobsh did not obtain even a partial answer to that question until much later in the year. During the summer after the trip he heard little about the $ 1 billion Iraqi shopping list, and for several months he was assigned back to his normal task of selling Maytag washing machines and other industrial and consumer goods in the Middle East. Hickey seemed to bring him into the more mysterious world of arms-dealing only when he required either his Arabic language skills or his Middle East contacts. In the autumn, to be sure, a friend of Hickey's did take Haobsh on a couple of quick trips to Brazil, where a deal was made with a factory in Rio de Janeiro to supply Iraq armaments, from 75-mm. antiaircraft shells right through to 105-mm. and 155-mm. ammunition for howitzers and major artillery pieces. But since the transfer of arms to Iraq from a South American country was of no legal consequence as far as an American citizen was concerned, the experience did not worry Haobsh.
By the beginning of December 1981, however, Haobsh was beginning to learn a good deal that did worry him. The way Hickey's friends treated official, publicly stated American policies and laws governing the sale of arms to Iraq astonished him. It made him nervous—he didn't relish the idea of going to jail—but Hickey's friends, all well connected to the U.S. military, tried to reassure him. When it came to arms deals, they explained, governments tended to know precisely what was going on. Very few middlemen in the arms trade actually went to jail. If anything, they went to Geneva, Monte Carlo, or Paris, perhaps to visit their properties. In time-honored fashion, they brought buyer and seller together, took their cut, and moved on.
Haobsh still didn't believe it could be that easy unto December 2, when he met Robert Johnson and Richard Smith. Once again, Hickey made the introduction, this time one that would plunge Haobsh into the world of covert operations.
From the outside, the offices of Johnson Consultants, worldwide marketing consultants in northern Virginia, were no different than a thousand others in the five-mile wall of glass facing Washington across the Potomac. The principals, Richard Smith, chief operating officer, and Robert Johnson, president, fit easily into the community whose lifeblood is government business, public or private.
In much of this neighborhood, stretching south from Langley to Falls Church, the brass plates and gold lettering that confront visitors hint at high-tech operations with an international flavor whose purpose is not immediately clear. The impression conveyed, enhanced by the rosewood desks and rented art, is of importance, connections, significance. The government has offices here too, quiet little operations and subdivisions of departments dealing in the sensitive and secret that don't appear in any directories or phone books. This is the neighborhood of plausible deniability, the home of the cut-out—an innocuous corporate entity whose actual function of the government prefers to keep under wraps.
In neighborhood parlance, Johnson and Smith were longtime Agency people—not on the staff of the Central Intelligence Agency but, like hundreds of others in the loose-knit fraternity, placed under contract from time to time to perform operational assignments either personally or through one of their handful of nebulous-sounding corporations. By and large, the Agency contractors who use their companies as fronts for the government do not perform the glamorous assignments so colorfully chronicled by novelists and film makers. Their tasks tend to be humdrum and can range from making and maintaining contacts to acquiring and passing on information. At times, these contractors must also organize the transportation of goods in politically sensitive areas, in which the hand of government is not to be detected. Rarely do such companies and their owners know, or have the need to know, the larger picture in which the task they are carrying out plays a part. The work is unpredictable, irregular, and not always very lucrative. Months or years may go by between calls from the Agency requesting assistance. For their own differing reasons, therefore it is necessary for both the Agency and the contractor that the latter maintain an entirely legitimate business as well.
Nineteen eighty-one, however, was an unusual year. It marked the end of what many Agency people regarded as an unnecessarily self-righteous but thankfully short period in which the Carter administration had naively cut to a minimum the use of covert operations as an arm of government policy. The shrinking of the Agency's operational—as opposed to analytical—staff numbers, which Carter's CIA director, Admiral Stansfield Turner, had carried out in the late 1970s, had been matched by a decline in the use of front companies for covert Agency purposes. But with the arrival of the Reagan administration, the installation of former CIA director George Bush as vice president, and the appointment of William Casey, one of the very architects of America's postwar intelligence apparatus, as CIA director, the mood in the Agency heartland of suburban Virginia had become decidedly upbeat. Furthermore, a war of extraordinary ferocity was being conducted in the Persian Gulf—a region of crucial strategic importance to the United States. If ever there was a scenario in which intelligence operatives of all types could play a vital role in assisting the national interests, this was it. The victims of Admiral Turner's changes at the CIA, their skills undiminished, stood ready to do their part, as did dozens of contractors and providers of other services.
There was another unusual aspect to that year. Before the Reagan administration was six months old, the intelligence network was humming with the word that the U.S. government wanted both sides to lose the Iran-Iraq war, and the prospect was laden with moneymaking possibilities. Given the public pronouncements of neutrality by the new administration, direct involvement of the CIA or any other government agency was officially out of the question, quite apart from the fact that severe penalties in law precluded any unauthorized military trade with Iraq. Nevertheless, while Iraq might officially be a pariah state, to counter Iran's offensives the White House seemed quietly to let it be known that Iraq needed help with whatever armaments could be provided in the so-called gray market, as soon as possible.
At American Steel in New York City, Larry Hickey had already picked up on this rumor by the time Hussein Kamel paid him the visit in March. And after Hickey and Haobsh returned from Baghdad in April with Hussein Kamel's weapons wish list, it was only a question of time before the two men found themselves working Hickey's contacts in the Department of Defense and the intelligence community.
On December 2, 1981, not long after his deal-making in Rio, Fred Haobsh walked with Hickey into the fourth-floor office suite of Johnson Consultants in Virginia. Haobsh, who had been told little about the firm by Hickey, was expecting the usual chat with a couple of executives who had contacts in the right quarters. He would come away stunned.
The offices themselves were what he expected—well-appointed with mahogany furniture, spacious, and sunny. The carpets were deep, and the artwork on the walls could best be categorized as inoffensive modern. Apart from a secretary, there seemed to be no other staff. Both principals were present. Richard Smith, the older of the two, was probably in his late fifties, and like the executives of American Steel, he carried himself with a military bearing. During the course of the meeting he was often oddly silent. The man whom Hickey had come to see was Robert Johnson.
It took Haobsh no time at all to understand that he was sitting opposite a player of substance. Johnson's comportment implied army, but his manner of speaking implied government. Indeed, to the knowledgeable it would suggest intelligence services. He never said more than he needed to, and he tended to listen far more than he spoke. The only thing striking about him was his piercing blue eyes. Johnson had many friends in the Pentagon and at the Joint Special Operations Command (JSOC) at Fort Bragg, North Carolina. Bragg was the home of the legendary Delta Force, of the Navy SEALs and the Green Berets.
Johnson also had the excellent connections with military suppliers and represented a number of companies that made bomb fuses, artillery pieces, and other items that form the stock in trade of an arms merchant. According to Pentagon officials and intelligence agents, Johnson was also on very friendly terms with Robert Gates, the CIA man who was now rising steadily at Langley as William Casey's protégé. He was clearly someone who could count on friendships and contacts even at the higher levels of government.
Despite his activities thus far, Haobsh was unprepared for this meeting in Virginia. He had still barely cut his teeth in the arms business—putting together a deal in which a South American company would sell weapons to Iraq was of little consequence. But the Iran-Iraq war was making a lot of people rich in a lot of countries, and few paid attention to the unanimous resolutions of the UN Security Council that called upon all states to exercise the utmost restraint in selling anything that could lead to a further escalation of the conflict. In the United States, however, the law was far more binding. One simply did not export arms to Iraq without formal approval. That was why Haobsh couldn't believe what happened next in the little office suite in Virginia. Robert Johnson sat back in his chair on that winter afternoon and scrutinized Hussein Kamel's billion-dollar shopping list. He ran through the items with his partner: the missiles, the defense electronics, the tanks, the helicopters, and more. No problem, said Johnson.
Haobsh continued to associate with Johnson and Smith in the months that followed, In early 1982, he began to suspect that his value to them was less as a colleague than as a legman, one who spoke Arabic and knew his way around the Middle East. Still, "after a few meetings they loosened up a bit," said Haobsh years later, recalling the way he had been drawn further into the plan to fill the billion-dollar shopping list. Johnson and Smith finally told Hoabsh that they were ex-CIA. They also introduced him to their lawyer, another former Agency man. In fact, the lawyer had been a longtime operator in the smoke-and-mirrors world of government special operations. Haobsh's most vivid recollection of the lawyer was the way he constantly reminded them that the word Iraq should not be used, even in conversation. The word Jordan should be substituted, "even though we all know where the goods are going."
"The only problem these guys had seemed to have was getting the phony end-user certificates from somewhere to cover the deliveries to Iraq," Haobsh recalled. "Jordan was the obvious place, but that meant all kinds of diplomatic maneuvering, and it was the Iraqis' responsibility to set this up. Because I had family in Jordan, they kept asking me to put pressure on anyone I could in Jordan to try to move things along."
Johnson and Smith were not the only people interested in using Jordan as a transshipment point to supply weaponry to Iraq. "That 1981-82 period was pretty grim for Iraq, and we were worried about the cabinet. By 1982, the Jordanian military was diverting U.S.-made helicopters to Iraq, even though American export laws expressly prohibited the third-party transfer of U.S.-made weapons without approval from Washington. But the Reagan administration, by now convinced that Baghdad needed help, looked the other way when such transfers occurred.
Thus the appeal of Jordan as a fake end-user of U.S. arms actually destined for Iraq was no different at the political level than it was for covert operators like Johnson, Smith, and their new recruit, Fred Haobsh. By chance, while on a visit to Johnson in Virginia one day in late March 1982, Haobsh recognized a figure walking across the office parking lot. It was General Ahmad Jweiber, a family friend from his years in Jordan who at the time was the Jordanian military attache in Washington. The Jordanian diplomat was soon befriended by Johnson, who laid plans to ship some of the latest-model Cobra helicopters to Amman, intended for Baghdad.
Haobsh's unease about his new colleagues grew when he saw the way they could arrange to ship these Cobras to Iraq by way of Jordan, even though the Jordanian air force had only recently been denied those same Cobras and had to settle for a less-advanced model. He learned from Jweiber that the prices being quited for the more advanced models were less than what Jordan had paid for the inferior models it had bought directly from the American government. “That is what really convinced me that Johnson and his people were government,” Haobsh reflected later. “Most arms dealers would double or treble the price for top-of-the-line equipment. In this case they were pretty much giving it away. And they also agreed not to take payment until after the material had been delivered and tested. That again was not the way normal arms dealers work.”
But by the spring of 1982, despite his growing doubts, Haobsh found himself too deeply involved with Johnson and Smith to back away. He had left the staff of American Steel and was now working on a free-lance basis both for his old boss and for Johnson Consultants. It was under these circumstances that he agreed to make another trip to Baghdad, to deliver the news that the Iraqi shopping list was about to be filled.
Back at the Melia Al-Mansour Hotel in early April, the effects of the Iran-Iraq war were far more obvious to Haobsh than they had been a year ago. Shortages were beginning to bite deep, and it seemed that every other doorway in Baghdad was draped in black. The hotel manager had taken Haobsh aside in a quit moment and wept. His two sons had already been killed in the war, and while overseeing the delivery of every extravagance to his hotel guests, he himself had barely enough to live on. Nevertheless, he said as he regained his composure, he was better off than most people he knew.
On both sides of the border the television pictures were running red with carnage, accompanied by martial music and forecasts of ultimate victory, but there was no denying that Iraq was in trouble. The Iranians were relentlessly pushing the Iraqi forces back. Iraq had spent a billion dollars a month on the war. The death toll on both sides had already reached 100,000. In the dining room of the hotel, though the hour was late, Haobsh saw military figures from half a dozen Western countries dotted around the tables. Most of those not in uniform looked as if they should have been. For more than a year now their home countries had been paying some lip service to the UN resolutions against shipping war material to either Iran or Iraq, but there was no way these men were observers. They were here to sell. The picture had been pretty much the same in the chief of staff's waiting room at air force headquarters on his last trip, where the uniformed British, French, Soviet, and Czech military officers were awaiting their turn at bat.
The United States also had taken a step toward helping Iraq. On February 26, 1982, the Reagan administration told Congress that it had dropped Iraq from the list of nations that supported acts of international terrorism. Before coming to Baghdad, Haobsh had read about the move and the complaints from senators about Congress not being properly consulted ahead of time. The State Department had made it clear that taking Iraq off the list of terrorists nations did not mean the United States was lifting its ban on arms shipments to Iraq. Little was said, however, about the significant hidden value of the change in Iraq's status: Baghdad would now be eligible for American government loan guarantees. The decision in Washington was more important than people like Fred Haobsh could have realized. To covert operators like Johnson and Smith, it was a signal that they now had political cover to go ahead with their plans to provide U.S. equipment to Iraq, albeit by way of unofficial channels. They would have much less need of bit players like Fred Haobsh.
Just now, in his Baghdad hotel suite, Haobsh was bothered by a more pedestrian concern: He disliked waiting around. Twenty-four hours after he had arrived in town, he had still not heard from the presidential palace. It was frustrating to sit there with good news for Hussein Kamel and not be able to deliver it. Not until the third day did the call finally come from the reception desk: The visitors were on their way up.
Hussein Kamel, dressed in civilian clothes, welcomed Haobsh to Baghdad and apologized for the delay meeting him. Then he introduced the military figure at his side, Lieutenant General Shenshel, the army chief of staff, and without delay the three men were driven with military escort to Hussein Kamel's office in the presidential compound. For the next two hours Haobsh set out his good news in detail. It had taken most of a year to put this deal together, he said, but finally, with the help of nongovernment contractors with the CIA backgrounds, it would be possible to fill the shopping list. Once friendly officials in Jordan agreed, shipments would come into Amman for onward transit to Baghdad. Training on the American equipment would be arranged through Jordan. As long as they carried Jordanian passports, Iraqi pilots might even be trained within the United States—that was a matter still to be dealt with. Haobsh would come to Baghdad as often as necessary while details of the entire package were being finalized.
The men finished their Turkish coffee and embraced. Then, as Haobsh turned to leave, Hussein Kamel drew him aside and explained that there was somebody he needed to meet. The two men stepped out into the sunshine and walked together across the compound to the palace, passed through two antechambers, and arrived in a large but rather undistinguished room. Seated behind a dark wooden desk was Saddam Hussein. He rose immediately and walked across to Haobsh, and they embraced in greeting. There was no small talk. In formal language, Saddam expressed his thanks for the work Haobsh had done on behalf of Iraq, then gestured to an aide, who approached Haobsh and pressed a small suede pouch in his hand. The audience was over within three minutes. (Alan Friedman "Spider's Web" 1993 p.12-9)
Although the bearded and youthful Teicher was assigned at first to the Near East and South Asia directorate of the NSC, he was essentially Bud McFarlane's right-hand man. His job would expand in time, and soon he would be the key White House person who was monitoring arms deals in the Middle East. Teicher already had experience in the boiler room of policy-making, both at State and during a prior two-year stint at the Pentagon. He had finished his graduate studies at the School of Advanced International Studies (SAIS), an elite branch of the Johns Hopkins University that used to be nicknamed "the CIA Training School" by its students. This was unfair, since SAIS's tiny number of graduates fanned out into top jobs in many areas: diplomacy, banking, business, journalism, and Congress. Each year, only a few would actually go to work for the CIA. At SAIS, Teicher had kept very much to himself. At the White House he found himself in conversation with everyone, including President Reagan and Vice President Bush. Like others with a very high security clearance at the NSC, Teicher got to read the most sensitive intelligence reports, cable traffic, and cabinet- and presidential-level memos. It was heady stuff for so young a man, and fascinating as well.
Teicher had a special interest in Saddam Hussein from the start of his career. Back in 1979, while he was working as an analyst in the Office of the Secretary of Defense, he had written a fifty-page paper predicting that Saddam would invade Iran, seek to annex oil-rich provinces from Tehran, and eventually even try to renew Iraq's historical claims to Kuwait. So obsessed with Saddam and Iraq did Teicher become that colleagues at the Pentagon jokingly nicknamed him Teicher al-Tikriti; the reference was to the Tikriti clan from which Saddam came. But Harold Brown, the secretary of defense under Jimmy Carter, brushed aside Teicher's dire warnings, scribbling at the margin of the report, "I disagree. Iraq has changed. It has moderated its behavior." This did not persuade Teicher to change his view of the Iraqi threat; if anything, he grew more convinced of it when he joined the Reagan White House.
In 1982 and 1983, when monitoring arms transactions in the Middle East was part of his job, Teicher began to notice some strange things. From time to time he read cables referring to U.S. arms shipments that had found their way through third countries to Iraq. He knew that such transfers were illegal. He also learned something from colleagues that surprised him: U.S. military equipment was being sent to Iraq on the order of the White House, including ammunition, spare parts, defense electronics, and computers. When Teicher asked about what was going on, the answers he was given struck him as very odd indeed. He was told that certain officials at the White House simply picked up the telephone and "cleared" the deployment of a plane with a classified cargo. Teicher inquired how this could happen. He was informed that there were "channels" that the White House used to carry out such policies. "I asked my colleagues how we were getting this stuff to Iraq," he remembered. "and I was told that there are people out there who do it for us." Although it seemed incredible to him that officials at the White House could be assisting in the clandestine transfer of U.S. material to Iraq, Teicher was told not to bother himself about it.
Teicher was a stubborn man, however, and as he continued to serve in the Reagan White House, he took notes, watched, listened, and argued his case against helping Iraq. He was intrigued and angered that senior U.S. officials would take it upon themselves to authorize people outside the government to transfer arms to Iraq. He asked friends both at the White House and in the intelligence community who these people were. That was how he learned the names of Robert Johnson and Richard Smith.
Johnson recalled Teicher, "was one of the channels used by the White House. His name came up when I asked my colleagues how we were getting the stuff to Iraq." What about Smith, the other former CIA operative involved in the transactions? "Yeah," said Teicher, "they were a couple of the guys. These were former government operatives who were trying to leverage their government past into current business. You have to understand something, though. These off-the-shelf operations in the Middle East occurred with great regularity. Yes, they were illegal. But people think the Iraqgate affair was something strange. It wasn't. It was just the one that went public. It was not abnormal."
To hear a former White House official discussing outright illegalities so forthrightly is an unusual experience. Would he go further? How did it work? Teicher took every question he was asked in stride. "The government found third parties and private channels for our shipments. I call this our 'dirty policy.' This was all consistent with covert operations at the time. False fronts were used a lot." But under U.S. law that kind of activity—in the White House or anywhere else in the government— surely had to have a secret presidential authorization, a piece of paper known as a presidential finding, that allowed U.S. arms export laws to be broken only in the name of national security. Were there any presidential findings for these shipments to Iraq? "No," said Teicher matter-of-factly. "It was done off the books." So that would make it what kind of operation? "That," said Teicher, "would make it illegal."
Who in the White House helped to facilitate covert shipments? Who knew? "Two of the most active people," said Teicher, "were Judge Clark and William Casey." While Clark denies this, Casey certainly helped coordinate the secret arms transfers with officials of the government of Saudi Arabia. "Casey would tell people at the White House to make it happen, and they would get it done Casey would travel to Saudi Arabia a lot. He went every two or three months to coordinate. Not many people know this, but Casey had an office in the Old Executive Office Building, right next to the White House. Casey didn't even spend that much time at CIA headquarters in Virginia. He was frequently at the White House, and he would meet with Reagan all the time."
The other person Casey confided in, recalled Teicher, was George Bush. "Bush knew about the covert operation and all that." Teicher also remembered Bush making his position explicit in meetings at the White House: "I attended meetings where Bush made clear he wanted to help Iraq. His door was always open to the Iraqis. If they wanted a meeting with Bush, they would get it."
In February 1982, Casey's belief in the importance of helping Iraq led not only to secret arms transfers to Baghdad but to the critical decision to remove Iraq's name from the list of countries sponsoring international terrorism. Casey was convinced that only Saddam Hussein could effectively prevent Tehran from dominating Persian Gulf oil resources, and he was a man who was more interested in the ends than in the means used to achieve them. "Casey was very fearful that Iran would come out on top in the war being fought in the Persian Gulf," recalled Alexander Haig. "I wouldn't have help either Iraq or Iran, but Casey had a position that I called active neutrality." Haig, Teicher, and other in the administration who tended to be concerned about the underlying threat that Saddam posed to Israel, a strategic American ally, were shocked when they found out that Iraq had been taken off the terrorism list.
Secretary of State Haig was especially upset at the fact that the decision had been made at the White House, even though the Sate Department was responsible for the list. "I was not consulted," he complained. Casey had gone around everyone's backs in pressing for the change in Iraq's status, ignoring information about Saddam that was available to the CIA and the White House. "We knew very well that Abu Nidal was based in Baghdad," Teicher recalled. "We knew of Iraq's support for his and other terrorist organizations. The decision to take Iraq off the terrorist list was Casey's and Clark's." Clark, when asked about the way the decision had been made, said it "could very well be" that Casey approached him, but he could not recollect this. (Alan Friedman "Spider's Web" 1993 p.23-6)
Also among those arguing on Saddam's behalf were a number of U.S. diplomats, including William Eagleton, head of the U.S. interests section in Baghdad. In an October 1983 cable to Washington Eagleton suggested that the United States“ selectively lift restrictions on third-party transfers of U.S.-licensed military equipment to Iraq.” The official response was that this bright idea would not work because of legal restrictions and because it would certainly trigger opposition if Congress were informed. Several months later, Shultz sent a cable to Eagleton in which he reiterated that it was against U.S. polict to permit third-country transfers of U.S. arms to Iraq. Yet, Shultz wrote, "under present circumstances in which Iraq is clearly on the defensive and Iran is in little danger of defeat, we are not actively opposing non-U.S. controlled exports of arms to Iraq which do not contribute to widening the war. Our interests is in maintaining a strategic balance between the belligerents in the interests of regional stability." The truth, however, was that while official correspondence between diplomats in Baghdad and the State Department stuck to the letter of U.S. law, covert shipments of U.S. arms were already being sent through Jordan, Egypt, and even Kuwait.
Eagleton continued to lobby Washington for more cooperation with Baghdad, recommending that the United States take the initiative to restore diplomatic relations with Iraq. In November 1983, Saddam's deputies informed Eagleton that if an American envoy were now to visit Baghdad, he would be welcome to discuss the prospect of exactly such a resumption. In Washington this idea fit logically with the views of Casey, Reagan, Bush, and others who were willing to avert their glance from Saddam's more outlandish behavior in the interests of protecting U.S. security interests in the Gulf. Thus, on December 17, 1983, President Reagan's special Middle East envoy, Donald Rumsfeld, flew into Baghdad bearing a handwritten letter to Saddam. In it Reagan offered to renew diplomatic relations and to expand military and business ties with Baghdad. Teicher, who traveled to Baghdad with Rumsfeld, said that it was this letter that paved the way for the U.S. tilt to Iraq: "Here was the U.S. government coming hat-in-hand to Saddam Hussein and saying, 'We respect you, we respect you. How can we help you? Let us help you.'" Saddam listened politely and then told Rumsfeld that America should try to stop the flow of weapons to Iran. The United States did even more: It began offering government-backed loan guarantees to Iraq.
Among the vehicles chosen for this back-door aid was the ExportImport Bank, known in Washington as the Eximbank. The Eximbank is actually a U.S. government agency that helps American exporters by guaranteeing to cover their loans if foreign customers default. In the spring of 1984 pressure was put on Eximbank to provide $500 million in American taxpayer-backed loan guarantees for an Iraqi project: the new Aqaba pipeline. The pipeline was to carry one million barrels of crude oil each day from northwestern Iraq to the Jordanian port of Aqaba, thus diverting the oil away from the Persian Gulf war zone and carrying it to the Red Sea. Because of its distance from the fighting and from the Strait of Hormuz, which Iran was threatening to close, the pipeline would make it harder for Tehran to disrupt oil sales critical to Saddam Hussein.
the contractor on the project was Bechtel Corporation, a multi-billion-dollar-a-year California company that had worked for many years in the Persian Gulf. Bechtel, which provided employment to Caspar Weinberger and George Shultz when they were not in government, was the biggest engineering and construction firm in the United States, with interests in 135 countries; in fact, Shultz had left Bechtel to become secretary of state. The company was virtually an unofficial expediter of U.S. policy, so close to Washington's thinking were its executives.
Saddam had given the green light for the project, but he had one reservation. In order to reach Aqaba, the pipeline would pass through Jordanian territory only a few miles from the border with Israel, making it an easy target. What Saddam wanted was a U.S.-brokered political guarantee that Israel would not attack the pipeline. At a meeting in Baghdad in February 1984, Foreign Minister Tariq Aziz told Richard Murphy, the ardently pro-Iraqi assistant secretary of state, that Saddam was insisting on "direct U.S. involvement" in the project; if this were not forthcoming, then Washington could "just forget it." There was also a problem back in Washington: Eximbank was opposed to extending any U.S. credits to Iraq because it feared the cash-strapped country would be unable to repay the loans it guaranteed. Help was clearly needed. It was at this stage that Vice President George Bush was asked to lend a hand.
........
Bush had already embraced covert military aid for Iraq, and now he would labor to push through financial assistance. The call to Eximbank was made easier for him by the friendship he and its chairman, William Draper, had shared since their days together at Yale . ........
Bush reviewed the memorandum and its attachments and placed the call to Draper. On June 25, just a few days later and after months of refusal, Eximbank suddenly reversed itself and announced it was offering more than $500 million of financing for the Aqaba pipeline. (Alan Friedman "Spider's Web" 1993 p.28-30)
Iran kept changing, but the same thing could be said of the rival factions at the White House; some continued to assist Iraq, while others were party to a new secret policy toward Iran. The idea of opening up lines of communication to the so-called moderates in Khomeini's regime resulted in a series of covert operations that were in odd contradiction to the steady support that Washington was providing to Baghdad. Casey and his White House allies plotted secret arms sales to Tehran, partly in order to seek the release of American hostages held in Beirut by Iranian-supported terrorists and partly to counteract the perceived threat of Soviet influence in Iran. ......
On July 23, 1986, a group of senior officials from the NSC, the Pentagon, the State Department, and the CIA met at the White House to discuss American support for Iraq. One of their tasks was to decide on a request from the American embassy in Baghdad to move U.S. weaponry from Jordan to Iraq, which would be against the Arms Export Control Act. After the meeting, Richard Murphy sent a cable to the American ambassador in Baghdad stating: "As for the possibility of Iraq's 'borrowing' U.S.-supplied Jordanian equipment, there are legal restrictions on any action of that sort, besides the difficult policy questions which you have pointed out. Then, too, any such transfer has to be notified to the Congress and thus made public. In addition, the experts here believe that the equipment in question would not have a significant impact on the war effort."
This particular request was rejected, but the White House meeting that July explored other ways to help Saddam. Iran had launched a major military offensive against Iraq earlier that year , and the war now seemed to be approaching a stalemate. The CIA was worried that Saddam was not making effective use of the secret intelligence data it was sending him. He seemed reluctant to respond to Iranian attacks with aerial bombings because he was trying to conserve his resources. The White House meeting, according to Murphy's cable, "reviewed the military situation, discussed in detail the Iraqi conduct of the war, explored possible further ... efforts by us, and looked at U.S.-Iraq relations ..." Murphy also wrote that the idea of sending a senior U.S. emissary to talk with Saddam Hussein was still under discussion .
The most important decision taken at that White House meeting was to employ once again the talents of George Bush, who was about to make a trip to various countries in the Middle East, including Jordan and Egypt. Bush was to provide strategic battlefield advice to Saddam through intermediaries who were head of state. "We have encouraged the Vice President to suggest to both King Hussein and President Mubarak that they sustain their efforts to convey our shared views to Saddam to Saddam regarding Iraq's use of its air resources," Murphy wrote. (See Appendix B, p. 310-1 quote also in The Banca Nazionale Del Lavoro (BNL) Scandal and the Department ..., Parts 1-2 "We have encouraged ..... be a major plus.") "If Saddam does what he says he would do with the Air Force, that would be a major plus." Saddam might have been highly amused, or even flattered, if he had know that the secret cable was entitled "U.S. Government support for Iraq during the war." This was no longer a tilt—it was becoming a bear hug.
On Monday, August 4, 1986, George Bush was in Cairo, nearing the end of an eleven-day swing through the Middle East. He had been shuttling across the region on Air Force Two. When he set off on his trip, the White House was asked if the vice president had a policy goal in mind. Since Bush and James Baker had begun gearing up for Bush's presidential campaign to succeed Ronald Reagan, the answer was no, "nothing but politics." This was somewhat disingenuous. Although there were a dozen campaign-style photo opportunities during the trip and the television crews filmed Bush meeting the Israelis and visiting the Egyptian pyramids, no cameras were allowed into his two-hour private meeting with Hosni Mubarak. While Bush was in Cairo officially to continue the search for a Middle East peace, to strengthen diplomatic relations, and to spread good cheer, he had more than good cheer in mind for Mubarak. Bush had been briefed to talk to the Egyptian president about how Saddam could best bomb the Iranians. According to as member of the senior-level group that prepared the brief, the vice president carried out the request that had been made of him after the White House meeting in late July: He asked Mubarak to tell Saddam to make better use of his air force against Iranian troops.
For his part, Mubarak needed little persuading. The Egyptian president was a pragmatic man with a chameleonlike ability to survive. To the Americans he was a reasonable partner, a leader with whom one could do business. To Saddam Hussein, he was a friend and a weapons source. It didn't matter that Saddam had led the Arab world in condemning the Camp David Accords between Israel and Egypt; there were other realities for Mubarak, such as the need for oil and money and political allies in the Middle East. Indeed, during the 1980s Mubarak sold some $3.5 billion worth of missiles and arms to Iraq, only to find Saddam later refusing to pay for them. In 1984, he also agreed with his colleagues in the Egyptian government to work with Iraq on a secret nuclear-capable ballistic missile program for Iraq that was named the Condor II project (or as it was called in Cairo, BME, for Ballistic Missile Egypt). By the time of his meeting with Bush in 1986, Mubarak had turned Egypt into a channel for a wide range of NATO-based missile technologies that front companies in Europe were smuggling to Baghdad. Among Mubarak's government cronies at the time of the Condor II project were Abu Ghazala, the defense minister, and Boutros Boutros-Ghali, the minister of state for foreign affairs.
In short, Mubarak's pro-Iraqi credentials were not in doubt; nor was his willingness to act on occasion as a conduit for the covert transfer of U.S. weapons technology to Baghdad. “We knew Mubarak was a middleman for arms sales to Iraq, for the Condor missile and other stuff," recalled Teicher. "He was actually our covert agent."
After Bush delivered his secret message about the need for Saddam to use more air power, Mubarak acted as expected. The Iraqi air force suddenly intensified its raids against Iran, stepping up its bombing in September 1986 and inflicting significant damage on Iranian oil fields and shipping facilities along the Gulf. Saddam gained in the short run, but his escalation triggered an Iranian response that led both sides to target civilian centers over the next two years, contributing mightily to the resulting bloodbath.
At the same time that Bush and Mubarak were meeting, Prince Bandar bin Sultan, the Saudi ambassador to Washington, was making an unusual confession. Bandar acknowledged to the State Department that Saudi Arabia had transferred to Iraq hundreds of U.S.-made two-thousand-pound MK-84 bombs, known as "dumb bombs" because they are not guided by any special electronics. The MK-84 is nonetheless a highly lethal weapon, and in 1986 a number of them were used by Iraq against Iranian soldiers. Shultz, who did not share the relaxed attitude toward Iraq that was prevalent at the White House, cabled the American embassy in Riyadh, demanding more details of the transfer. He reminded the embassy that whatever the explanation for the shipment to Iraq, the U.S. government was still required by law "to report promptly repeat promptly to Congress" such a transfer.
As it happened, the public heard nothing about the transfer, although a U.S. government official who had dealings with Iraq said that Washington had informally blessed the covert military aid for Iraq. Years later, James Baker would go before a congressional committee and explain away the Saudi transfer as "inadvertent.” Washington, said Baker, did receive reports that Saudi Arabia transferred to Iraq some U.S. origin equipment.” He was careful to add, however, that “I don't personally know the circumstances of that transfer."
Yet Baker's explanation did not sit well with an American intelligence agent who had been personally involved in the region. "Saudi Arabia was a proxy for Washington," the agent later recalled, "and shipped plenty of arms and money to Saddam as part of U.S. covert operations." One diplomat close to the Saudis said there was "no way in the world that Saudi Arabia would transfer one bullet out of its inventory without getting U.S. government approval." At that time, infact, Washington was already playing a far more direct role in Baghdad, and on the ground. (Alan Friedman "Spider's Web" 1993 p.31-4)
The American military commitment that had begun with intelligence-sharing expanded rapidly and surreptitiously throughout the Iran-Iraq war. A former White House official explained that "by 1987, our people were actually providing tactical military advice to the Iraqis in the battlefield , and sometimes they would find themselves over the Iranian border , alongside Iraqi troops.” A military officer who was sent to the war zone remembered the Iraqis being relaxed about his presence and grateful for it: "Access to the battlefield was allowed not just to Americans, but to military personel from other nations such as Britain and France. There was great interest on our part in strategy and order of battle, and we wanted to know about the competence of the Iraqi officers. They wanted any advice we could give. We were under instructions to give them everything they wanted in the way of information." The officer, like his colleagues, carried a sidearm only, for self-defense, and he did his best to avoid the heaviest fighting on the front lines. The only problem was that it became impossible at times to know where the line was. "As a result," he said, "I guess some of us from America ended up inside Iranian territory from time to time."
There was another problem with the deployment of U.S. military personnel on the ground in the Iran-Iraq war: It took the Reagan administration to the very fringes of the law. The War Powers Act requires that Congress be notified whenever American soldiers are deployed in a military conflict, or even involved in imminent hostilities, whether they number in the dozens or the thousands. Calling the soldiers in Iraq "observers" made aides to President Reagan feel more comfortable, but some White House officials, already jittery about the breaking Iran-Contra affair, worried that they were becoming involved in yet another off-the-books operation. These worries were compounded when the same NSC staff members who were using the services of facilitators like Robert Johnson and Richard Smith and their operatives decided, along with William Casey, to ship U.S. military supplies to Iraq directly from American military bases in Europe. Once again, U.S. military officers were called upon to perform tasks that were not being reported to Congress.
NATO stockpiled in Europe were the source of these shipments, according to a former NSC official. The U.S. base most utilized was the sprawling Rhein-Main compound at Frankfurt , the largest combined cargo and passenger terminal in the air force and home of a squadron that flew in support of Defense Department and European airlift requirements. Rhein-Main was convenient because it shared runways with Germany's largest civilian airport, the busiest on the continent.“ The chain of command was secret but incredibly simple," said a former Special Operations officer from Fort Bragg who was sent to Frankfurt to organize the clandestine transfers. "A call would be made by someone at the National Security Council to a midlevel officer at the Pentagon. We would then hear about the request at Bragg, and we would go over to Frankfurt and into the warehouses on base, where we would arrange the flight manifests. There was so much surplus equipment there that if you came over with confidential orders and dealt with the right supply people, they would move the stuff over to the civilian side of Rhein-Main. Then an Iraqi Airways cargo jet would land and the pallets would be loaded up by the local airport workers without any American personnel in sight."
The material involved was always very carefully selected and was determined chiefly by judging which critical supplies the Iraqis could not manufacture themselves or purchase with ease. these determinations were made in Washington after consultations with U.S. military personnel on the ground in Iraq. "the kinds of things we handled out of Frankfurt included spare parts mainly, such as fuses for artillery pieces. You could get hundreds of thousands of fuses into just a few packing pallets," recalled the Fort Bragg officer. "We also sent chopper parts, specialty fuels, and graphite lubricants, and a few black box items, meaning high-tech electronics and other sensitive bits and pieces."
In January 1987, as the war entered its seventh year and the combined death toll neared one million people, Iran began yet another major offensive. This time, it pushed deep into Iraqi territory. Saddam Hussein needed help—but he also required reassurance from Washington about its intentions, since revelations in the Iran-Contra scandal were now detailing the U.S. covert military aid that had been going to his enemy Iran. From Baghdad's point of view, Washington was either ambivalent or duplicitous. Thanks to the rival pro-Iraq and pro-Iran factions inside the government, the United States had indeed sent out very confusing signals. Nonetheless, the secret shipments to Iran paled when compared with the support given Saddam, and William Casey led the drive to placate Iraq. He had already met with Tariq Aziz at the United Nations to make sure Iraq was happy with the flow of intelligence it was receiving, and he encouraged Aziz to go ahead with more attacks on Iranian economic targets.
Then neutral ships in the Persian Gulf began coming under attack from both Iran and Iraq. Those of oil-rich Kuwait were of particular concern to the administration. Kuwaiti leaders wanted their oil tankers protected by either Moscow or Washington, and in March 1987 top U.S. officials, including Caspar Weinberger, George Shultz, and Admiral William Crowe, the chairman of the Joint Chiefs of Staff, decided to defend Kuwaiti vessels that were navigating the Gulf. Two months later, on May 17, pro-Iraqi officials and such as Weinberger suffered an instant case of political whiplash when a U.S. frigate, the Stark, was attacked by an Iraqi warplane and thirty-seven Americans on board were killed. The episode was quickly dismissed as an error, and Baghdad apologized and offered to compensate the families of the crewmen who had died. Nonetheless, the Stark incident underscored the increasingly risky state of affairs in the Gulf, and it was followed by a formal announcement from President Reagan that the United States would reflag Kuwait oil tankers so that the U.S. Navy could escort them.
On Capital Hill, the reflagging announcement drew protests, and some in Congress demanded that if the United States were to become militarily active in such a dangerous venture, then the War Powers Act ought to be invoked. The White House rejected the idea, and the State Department's Richard Murphy argued that the entire reflagging operation was merely a defensive action based on the need to protect the freedom of navigation and the flow of oil. Yet Murphy also gave a not-so-subtle hint of the administration's intentions by warning Iran, not Iraq, that any attack on American naval forces in the region could result in U.S. involvement in the war in the Gulf. The reflagging exercise, he said, was part of a comprehensive strategy.
Murphy did not describe that strategy in detail, but it soon became known, on a need-to-know basis, to lower-level operatives at the CIA, at Fort Bragg, and in the U.S. Navy. "The real plans were for a secret war, with the U.S. on the side of Iraq, against Iran, on a daily basis," said retired Lieutenant Colonel Roger Charles, who was serving in the office of the Secretary of Defense at the time and who later conducted an extensive investigation of American clandestine operations in the Persian Gulf.Using military terminology, Colonel Charles called it "a mixture of black and white operations at the same time." The black operations were covert, aimed at provoking Iran; the white operations were public, aimed at defending navigation rights in the Gulf.
In June 1987, although senators of both parties had warned that the United States was in danger of being drawn into an armed conflict with Iran, President Reagan ordered warships into the Gulf. The White House pronounced the threat to American personnel as "low to moderate." Simultaneously, but hidden from public view, the administration sent a team of high-ranking officers to Baghdad , including an admiral, to begin sharing strategic information with Iraq about movements in the Gulf. In U.S. military circles, the purported reason for these visits was to improve understanding and avoid a repeat of the Stark incident. The reality was that it was a black operation, in which cryptographic radios were provided to Iraqi pilots, allowing them to communicate with American petty officers stationed on the ships in the Gulf. "What happened," said a retied military officer, "was that as the Iraqis flew their airplanes down the Gulf, they would talk to our officers. As the relationship grew on a daily basis, the petty officers would give them the bearings and range of tankers that were trading with Iran, thus helping the Iraqis to chose their targets."
The reflagging of Kuwaiti tankers began on July 18; three days later, American naval ships started the escort operation. Some of the navy's biggest warships, designed for the open sea, were now on patrol in the constricted and unpredictable war zone of the Persian Gulf. The first disaster was not long in coming. On July 24, the 400,000-ton Bridgeton, a Kuwaiti supertanker, struck a mine as it moved through a major shipping channel. The explosion was so powerful, as Admiral Crow would later write, that the captain and some of the crew members were literally bounced up in the air, but although the ship's hull was torn open, there were no casualties. In Washington, the Bridgeton accident set off political mines; several dozen members of Congress announced that they planned to file a suit in federal court against President Reagan's Persian Gulf policies in order to force the president to comply with the War Powers Act. The lawsuit was ultimately dismissed, but George Shultz was already busy taking evasive action. Frank Carlucci, the national security adviser, had sent Shultz a memo asking him to take charge of efforts at the United Nations to end the war. "There is no support in Congress for our Gulf policy," Carlucci wrote to Shultz, "so we need to draw attention away from the reflagging idea." Shultz went to New York and joined decisively in a discussion at the Security Council, which voted unanimously to approve a resolution calling for a cease-fire.
the summer of 1987 was dominated by diplomatic efforts to bring about peace and by a mounting number of military incidents involving the United States and Iran. A navy fighter jet fired missiles at an Iranian aircraft, an American supertanker operated by Texaco hit a mine, and several navy men were killed when their helicopters and jets crashed into the sea. At the same time, Washington was conducting black operations with the help of the CIA mission code-named Eager Glacier. Only fragments of this story have been made public up to now. It is known that the CIA sent spy planes and helicopters over Iranian bases starting in July 1987. In fact, the CIA's intelligence-gathering operation soon turned military. The CIA utilized the assistance of an American oil service company that transported its workers on helicopters from the Saudi air base of Dhahran to oil platforms in the Persian Gulf. During the day, Agency operatives flew in the company's civilian helicopters; at night, they used their own aircraft to patrol, and eventually they engaged in secret bombing runs. The Agency aircraft flew over Iranian territory, and late in the summer of 1987, having located a factory in which mines were being manufactured they blew up a warehouse full of mines.
The CIA's clandestine activities in the Gulf were followed by a more public incident. On Monday, September 21, 1987, a Special Operations helicopter equipped with night vision equipment spotted the Iran Ajr, an Iranian minelaying ship, swooped down, and fired rockets and a barrage from its machine guns. The shots riddled the entire side of the ship, shattering windows and piercing the bulkheads, stairwells, and oil barrels. Three Iranian sailors were killed instantly, and twenty-six were captured, including four who were wounded. The crew members were held briefly and then repatriated.
In Washington, President Reagan defended the helicopter attack, claiming it was authorized by law. But what he did not say was that many of the military actions in the Gulf were being discussed on an almost daily basis by a special committee comprised of senior officials from the White House, the State Department, the Pentagon, and the CIA on a secure telephone conference line. By agreement, the truly black operations were handled by lower-level officials in the Pentagon and the CIA on a highly compartmentalized basis. That way, Reagan's political appointees could plausibly deny any awareness of the details.
The helicopter that shot at the Iran Ajr was a Hughes AH6 attack helicopter from the U.S. Army's Delta task Force 160, a special unit that had traveled to the Gulf all the way from Fort Campbell, Kentucky. These helicopters, nicknamed Sea Bats, were stationed on a U.S. barge the size of a football field that was anchored in the middle of the Gulf. In February 1988, the pilots from Fort Cambell were joined by colleagues from Fort Bragg, who manned a second barge and flew small, heavily armed OH-58D helicopters made by Bell Helicopter. Fifteen of these helicopters, called Little Birds by their pilots, had been specially modified at Bell's facilities in Fort Worth, Texas, to spectacular effect. "These things looked extremely sinister," recalled a Special Forces officer who was stationed in the barge. “They were all black and bristling with antennas and had a huge round sight module about two feet in diameter struck on a mast above the rotor blades. that contained radar and cameras. The impression you got, just looking at one of these things on the ground, was of a giant insect staring at you before you die."
The Sea Bats and Little Birds flew missions night and day, conducting reconnaissance and at times firing on Iranian minelayers. Some of their successes were made public, but when one helicopter crashed, the accident was kept secret. "A marine buddy of mine saw the helicopter afterwards," said a former Pentagon official. "It had been hit by our own ordinance. The operation was so secret that the families of the two crew members who died were told the men had been killed in a car crash."
Also kept secret were the navy's black operations. Lieutenant Colonel Charles learned that in 1988 a couple of Mark III patrol boats were lowered by cranes from a barge and sent off on a decoy mission aimed at luring Iranian gunboats away from territorial waters and provoking an incident. "They took off at night and rigged up false running lights so that from a distance it would appear there was a merchant ship, which the Iranians would want to inspect. Deceptive radio traffic was also used in that instance."
"I talked to Marines from Fort Bragg who were given these black missions, and they weren't confused about what they were doing," he added. "They said they were at war, that their daily actions included combat activities against Iran. The truth, which the government has never told, is that in 1987 and 1988 there were two operations going on in the Persian Gulf. One tracked with President Reagan's policy declarations, that were there to defend international waterways and Kuwaiti tankers, and the other was a black operation, designed to provoke the Iranians."
Admiral Crowe, who had gone before the House Armed Services Committee and denied a press report suggesting that Congress had been misled about any covert operations , decided in his memoirs to address the definition of American actions in the Gulf. He wrote that the administration had argued in Congress that the Gulf operation was not subject to the War Powers Act. "The argument was somewhat dubious, but nevertheless that was our story and we were sticking to it," wrote Crowe. Years later, after he had left government, Frank Carlucci was asked if it was fair to say that America had been fighting an undeclared war. "Oh yeas, I don't think there's any question that— well, war—you get into semantic issues here. The military would call it more an engagement or a firefight. ... We were having problems with the War Powers Act, so I hesitate to use the term war, but there's no question it was a conflict." (Alan Friedman "Spider's Web" 1993 p.38-44)
Half a world away from the Persian Gulf, the remote Chilean harbor town of Iquique was booming in 1986. Iquique, located on the Pacific coast some eleven hundred miles north of Santiago, was benefiting from from the opening of a nearby free-trade zone and a new airport. At least once a month, an empty Iraqi cargo aircraft landed on the runway, taxied to the edge of the field, and safely out of sight of passengers boarding regular flights, picked up shipments produced in an anonymous-looking industrial plant situated nearby. Visitors to Iquique, which was once no more than a collection of shanties at the base of a barren headland, had no idea the town had become the home of a manufacturing facility that was supplying some of the deadliest weapons in Saddam Hussein's arsenal, cluster bombs.
Most of the people of Iquique, including the laborers in the factory, did not know the final destination of the weapons until early 1986, when the community was shattered by an explosion that killed twenty-nine of the seven hundred workers at the cluster bomb plant. The local Roman Catholic bishop was appalled. He condemned the plant as "social sin" and warned that "these are the same bombs that are killing people in Iran and Iraq, and now they have been turned on our own brethren."
Cluster bombs, originally invented in the United States to halt tank columns, dispense a particularly gruesome form of death by very simple means. A cluster bomb is simply a container packed with hundreds of small bomblets. Each bomblet is is no more than twelve inches long and weighs less than two pounds. As the bomb drops, it rotates, a small charge opens the casing, and the spinning bomb distributes the bomblets in an elliptical pattern of spaced clusters that spread devastation over a wide area. Known in the trade as "area denial ordnance," cluster bombs are effectively aerial mincing machines—they shred everything in their path. The U.S. Air Force first used them as antipersonnel weapons in the Vietnam War; when dropped properly, a single bomb has the capacity to kill or maim anyone in the area the size of ten football fields. Some of the bombs that were being made in Chile were timed to explode hours after they had been dropped, causing further casualties among troops and rescuers who had assumed they were now safe. Although technically considered weapons, cluster bombs can wreak almost as much destruction on the battlefield as unconventional arms such as chemical weapons.
Saddam's military planners in Baghdad found cluster bombs highly effective in killing the huge numbers of Iranians who poured into battle in human waves. For Carlos Cardoen, the owner of the plant in Iquique as well as other arms factories scattered around Chile, they had proved to be a very lucrative business. Not only was Iraq eagerly buying as many bombs as he could produce; he paid no taxes or duties in the Iquique free-trade zone, and his own costs were extremely low. His workers received the equivalent of ninety dollars a month, often for a twelve-hour day, and the average output of the factory was one thousand bombs a month. Thanks to all this, Cardoen was able to price his cluster bombs at as little as $7,000 each, or $19,000 less than his competitors in Europe, and still prosper.
Cardoen was both an enterprising businessman and a quick study, especially adept at making use of political contacts. The son of a middle-class family of Belgian extraction, he had grown up in rural surroundings in the Santa Cruz region of central Chile. Both at technical school in Chile and then in the 1960s on a scholarship to the University of Utah, his chosen discipline was metallurgy. He came home to Chile equipped with an engineering doctorate from Utah, and by the 1970s, he was managing a company that supplied explosives to the mining industry. In 1977 he founded his own business, Industrias Cardoen, expecting to continue working in the mining sector.
In February 1976, the United States had imposed an arms embargo on Chile because of congressional anger at the persistent human rights abuses and political assassinations in Santiago under the junta headed by President Augusto Pinochet, and President Jimmy Carter continued the embargo when he took office in 1977. The U.S. government was beginning to see the Chilean government as a pariah regime almost as trouble-some as South Africa.
This marked a shift in Washington's turbulent relations with Santiago. Early in the 1970s the Nixon administration had orchestrated an attempt to overthrow the Socialist government of Salvador Allende. When Pinochet seized power in 1973 in a military coup that left Allende dead in his blazing palace, the finger of suspicion pointed to Washington. That suspicion was heightened in 1976 when Orlando Letelier, Allende's former ambassador to the United States, was blown to pieces by a car bomb in downtown Washington and little was done to pursue the case until Carter took over the White House.
As Pinochet's death squads used terror to eradicate all traces of the leftist ideals that had originally brought Allende to the presidency through the ballot box, the symbol of Chile's suffering became the soccer stadium, the holding pen where thousands were hauled for questioning and beatings following the dreaded midnight knock on the door. Thousands of people were said to have "disappeared," a term meaning they had been murdered or exiled by the Chilean secret police.
In 1978, when a territorial dispute with Argentina made war seem imminent, the military junta headed by Pinochet launched a desperate appeal for local businessmen to manufacture whatever arms they could. The U.S. embargo had cut off access to American arms, but as had already happened in South Africa when it was hit by sanctions, the embargo forced Chile to develop a domestic industry. For Carlos Cardoen, it was the opportunity of a lifetime. Senior officers in Chile's air force approached him with a request for bombs. General Fernando Matthei, its commander, said that in 1978 Cardoen had never seen one. "But we showed him one," said Matthei, and fifteen days later Cardoen returned with a sample fashioned by his engineers. It was the start of his intimate business relationship with the Chilean military. "I'll have to build Jimmy Carter a statue," Cardoen later declared. "If it hadn't been for the U.S. embargo we would never have invested in arms production here."
In addition to aerial bombs, Cardoen began making armored vehicles under a Swiss license, as well as antitank mines and hand grenades, and in 1981, when his achievements in the world of arms-manufacturing were still modest, he began to develop his first prototype of a cluster bomb. The financing came from low-interest government loans, but the source of the technology—which Chile did not possess—was kept a mystery. Cardoen completed a prototype the next year, but he still lacked the international contacts that would generate sales That began to change on July 13, 1982. On that day a business associate of Cardoen's in Miami encountered Nasser Beydoun, a Lebanese-born former cigarette salesman who was then exporting food and other goods to the Middle East, and in the course of their discussion mentioned the hard time Cardoen was having breaking into the right military circles in Iraq. Beydoen was a natural door-opener. Almost immediately, he was asked to represent Cardoen in Iraq, and a few months later he found himself sitting in Cardoen's Santiago office and signing a commission agreement worth about five hundred dollars for every cluster bomb he could sell. If Beydoun pulled off a big deal, he and Cardoen could become rich. In 1991, when Beydoun found himself suing Cardoen to collect $30 million in unpaid commissions, he would recall their first meeting: "The sky was the limit when we started. According to him, heaven is opened by a golden key. He called me his golden key, rightfully really."
Thanks to Beydoun, Cardoen won his first contract with Iraq in March 1983 for a trial order of three thousand cluster bombs. He had written to Beydoun with a message for Baghdad: "We are pleased to inform you that Industrias Cardoen is willing to take its share [sic] in helping Iraq in this time of need. We can provide you with our cluster bombs at the lowest possible price." Baghdad didn't know it, but it had made this deal on the basis of a brochure that Cardoen's graphics people had rushed together. When the news that Iraq had accepted the deal and was placing an order was telexed back from Baghdad to his Santiago office, Cardoen didn't know whether to laugh or cry. He was still unable to produce bombs in any kind of volume. As he confessed to Beydoun, he still had to "iron out the bugs" in the bombs mechanism.
He did. Cardoen hastily set up shop in Iquique, and in early 1984 the first shipment, worth $21 million, was delivered to Iraq. More sales followed, and within a year he was to visit Saddam Hussein in Baghdad. So important did Iraq become to Cardoen that it soon represented about three-quarters of his annual arms-export revenues of $100 million a year.
Later that year, as business with Baghdad increased, Cardoen's representatives began shopping for complete factories in the United States that they could dismantle and ship to Chile. They were looking for ammunition and bomb factories with all the associated equipment in place, and courtesy of the U.S. military, a couple of interesting possibilities were made available. One was an abandoned factory in New Orleans that had been used to manufacture 105-mm. heavy mortar shells back in the days of the Vietnam War; the other was a disused plant in Los Angeles that had made general-purpose bombs ranging in size from 250 to 1,000 pounds. There were, of course, certain constraints attached to both, since it was against U.S. law to ship anything with military applications to Chile. The factories were to be sold on the condition that they were demilitarized—that is, their weapons-making capacity had to be removed. Straightening out this crucial difficulty took some effort.
Lieutenant Colonel Carlos Rickertson, a retired American air force officer who represented Cardoen in Washington at the time, recalled there was "a great deal of trouble with U.S. Customs,” and the sale of the two munitions factories was held up for nearly a year. Eventually, however, they were reclassified by U.S. officials as "scrap metal." After some further hassles with suspicious customs men who couldn't figure out why all these presses and drills to make shells had been officially designated scrap metal when they were in such good working order, the factories were finally shipped to Chile.
In 1985 two American diplomats from the embassy in Santiago flew up to Iquique on one of Cardoen's factory tours. There they were proudly shown the new operation, which was already turning out a range of general-purpose bombs. In the presence of Cardoen and surrounded by all the noise and bustle of a war machine at work, it seemed churlish for the diplomats to point out that nobody had bothered to remove the labels from the tools that clearly stated that they had come from the United States. "I saw them myself," recalled Rickertson. "It should have been quite evident to them that this was U.S. equipment because the placards on the bomb-making presses identified them."
As his business with Baghdad increased, Cardoen began to find himself in the company of American officials from the embassy in Santiago more often. At first, there were the usual military attachés of lower rank, who came to arms fairs and other public forums where his burgeoning empire was becoming more publicly visible. But before long he found himself with military guests of an altogether different rank—people like General Henry D. Canterbury, deputy commander-in-chief of the U.S. Southern Command, responsible for all air force command matters in Latin America. To Cardoen, being with the general was the kind of ultimate endorsement, a bestowal of legitimacy, that he memorialized in his growing library of photograph albums. Here was General Canterbury examining a fuse, General Canterbury examining a gun, General Canterbury in conversation with Cardoen. Over time there were photos of Cardoen with other new-found military and diplomatic friends as well: in March 1986, General Robert Reed, assistant vice-chief of staff of the U.S. Air Force; also in March 1986, General Ramon Vega, chief of staff of the Chilean air force; and in 1990, Charles Gillespie, the U.S. ambassador to Chile, strolling past a Cardoen exhibit headed "Technology Transfer." (Alan Friedman "Spider's Web" 1993 p.45-9)
Casey felt safe with his disciple, and especially with Gates's willingness to bend the rules when necessary. The fact that the two men shared the same views on critical issues such as the Soviet threat and the need to assist Iraq also pleased Casey. ... He had spent the bulk of his career as an analyst on the paper-pushing side of the Agency. For almost two decades—ever since 1966, when the CIA had recruited him while he was still in college—he had carefully made the right career moves. When he emerged at Casey's side in 1981, he was noted for little beyond a politically appropriate hard-line approach in his analytical studies of the Soviet Union, his field of expertise, and a talent for making important friends within the national security apparatus.
In fact, however, there were other aspects to Robert Gates. Inside the Agency, as in most organizations through which a particular individual can rise with great rapidity, his appointment as deputy director of intelligence generated some resentment and a good deal of grumbling. Malicious gossip circulated around Langley in 1982 when Gates went to Fort Peary, the Agency's training ground outside Washington, to learn to shoot a sidearm. "There was no reason on Earth for a senior CIA official to learn to shoot," recalled one intelligence officer. "He just liked it."
But other officers explained this as an example of the desire of some CIA people from the analytical side to emulate their counterparts on the more glamorous operational side. And indeed, as Casey's right-hand man, Gates did do more than sit at his desk in Langley and analyze the paper flow relating to the secret arming of Iraq.
"Gates got things done," said an intelligence officer who worked with him on the covert tilt to Iraq. "He liked to pick up the telephone and call people. He did not shy away from doing things. He was not just a faceless administrator. He was truly involved in the details, without micromanaging, if you see what I mean," There were occasions in the mid-1980s when Gates decided to travel to the Middle East or to implement policy personally by meeting with members of the gray network of operatives who supplied arms to Baghdad. Historically, the handful of top jobs at the CIA were filled by people who had spent more time in conference rooms than in the field. Besides, travel involved risk—whether it was the risk of being recognized or the risk of attack—no matter how elaborate the security. But Gates was an exception to the rule, his former colleague recalled: "One of the less well-known traditions, at least since Casey, was that the top CIA men go out and get their hands a bit dirty. These guys get bored just sitting behind the desk all the time."
The manner in which Robert Gates got his hands dirty was to oversee the transfer of American cluster bomb technology to Carlos Cardoen, first in 1982 and again later, when more technical information was required to improve the weapons. Over at the National Security Council, Howard Teicher knew that Gates was involved: "Sure. He was tight with Casey and with the White House. He was one of those who helped get things done." The CIA has denied in blunt terms that Gates facilitated or oversaw any illegal shipments of U.S. military technology to Iraq by way of Chile or any other third country during the 1980s. But in the summer of 1986, Robert Johnson was visiting Cardoen in the large comfortable house Cardoen owned near Miami. They had been discussing details concerning the outfitting of Mirage aircraft with cluster bombs, and as Johnson prepared to leave, stepping across the white-tiled entrance hall, a new visitor appeared at the door. It was Robert Gates, arriving for his own meeting with Cardoen. Why would Gates meet with Cardoen? Though Johnson was clearly uncomfortable discussing the meeting, he later summed up the situation matter-of-factly: "Gates is a great patriot, a very loyal man, and he knows how to get things done. He and Cardoen had a series of meetings in 1986 and 1987. We needed an offshore supplier, and the Chileans were very cooperative. That is a place where money taslks. Cardoen could move quickly, and we needed to keep the balance in the Iran-Iraq war. This was a policy decision. Therefore the White House had to get something done. Where would they turn? Langley. But Gates was not given specific instructions on how to do it. He was just told to get it done. Cardoen was already well known. We could rely on him. For Gates to meet Cardoen was like a blessing from Washington—he was giving his imprimatur. He didn't have to get into details."
The CIA took a very careful position on the matter of a meeting between Gates and Cardoen. It issued statements denying that Gates had been involved in a covert CIA operation that supplied Iraq with U.S. arms and weapons technology. It denied that the CIA had ever had a relationship of any type with Cardoen. But it never specifically denied that the two men had met. That task was left to the White House, which issued a statement in July 1991 saying, "The wholw story is unfounded. There never were any sales, overt or covert, to Iraq or Iran through a third country. Mr. Gates never met with Carlos Cardoen."
Nevertheless, another U.S. government agency's computer records do make mention of the encounter between the two in Florida, and a knowledgeable American intelligence agent explained that there were actually two reasons for the meeting: "First, Cardoen knew what was moving to Iraq at the time, and that was useful information, very useful. Second, it was purely a matter of coordination of the shipments. Coordination of what we wanted Saddam to have."
Although the meeting was carried out in secrecy, Gates left a trail that would gradually be pieced together later. Almost inevitably, word of his involvement with Cardoen leaked out to some of Cardoen's own top-level employees in Santiago. As one former executive confided: "If I start to make trouble, I will have trouble not only here in Chile, but outside. I know about these things, and many other meetings with the Americans. There were meetings with gates, and other meetings in the States and in Europe." Indeed, the reports of Gates liaising with Cardoen was an open secret as far away as London, the city to which Iraq's former UN ambassador Saleh Omar al-Ali had moved after leaving his diplomatic post in 1983. "I received the information informally about Gates when I was in Baghdad in the early 1980s," he would later recall. "It was one of those things that I wasn't supposed to know, even though I was an ambassador," he said with a smile. (Alan Friedman "Spider's Web" 1993 p.52-3)
Guerin filled the ranks of ISC with former military and intelligence officers, talking all the time of the multinational colossus he planned to create. In his relentless drive to make money and attach some importance to his life, he was willing to call in favors wherever he could. He was also prepared to break the law. In 1975, he began selling defense goods to South Africa, in violation of the longstanding UN arms embargo that had been imposed because of the country's regime of apartheid. The United States was observing the embargo at the time, but this did not matter to Guerin. One day in 1975, he called an aide to his office and told him he wanted to procure a variety of electronic components and arrange theft shipment to South Africa. By hook or by crook, International Signal and Control was finally going to live up to its name by achieving sales outside the United States. The South Africans, Guerin told his aide, were "fed up" dealing with European distributors of defense electronics; ISC would now take the lead.
What he did not tell his employee was the reason he felt able to go about breaking American export laws so cavalierly. That year, James Guerin struck a deal with the government of the United States; he had entered the world of espionage and found a way to ship goods to South Africa.
In 1975, working closely with Admiral Bobby Ray Inman, then the director of naval intelligence, Guerin became a trusted covert operator for the Ford administration. The United States wanted to spy on Soviet ships off South Africa's coast, and the plan was to have Guerin ship advanced electronic sensors, optics, and related goods to South Africa in an intelligence venture that would supply the listening posts at the Simontown naval station, off the Cape of Good Hope, with what it needed. Despite the official U.S. policy of seeking to isolate Pretoria, the leaders of both countries shared a fervent anti-Soviet sentiment. Business between the two could thus be rationalized in terms of the need to fight the cold war. In exchange for the electronics technology, Pretoria agreed to share the information it had on Soviet ships and submarines with Washington.
Admiral Inman was the most prominent intelligence official to work with Guerin on the clandestine operation, which was code-named Project X. "ISC had the South African connection," Inman later confirmed. But Guerin's institutional partner in the covert operation was the National Security Agency (NSA), the secretive American electronic surveillance agency.
In order to facilitate ISC's shipments to South Africa while conceal-ing the hand of the American government in the operation, the NSA helped Guerin set up a front company called Gamma Systems Associates. Gamma was not really a company at all; it was just the address of an office located in the Jamaica, Queens, section of New York City, near Kennedy International Airport, used mainly to generate shipping records. In the jargon of the intelligence world, Gamma was a mail and phone drop, a destination through which ISC could send equipment before the goods were shipped out from New York aboard airliners bound for South Africa.
Guerin set up a specially walled-off area at ISC's headquarters in Lancaster that did nothing but liaise with intelligence contacts in Washington, procure goods for Gamma, and arrange for their delivery to the address near Kennedy airport. No one was allowed to enter the restricted zone without authorization from Guerin, and those given such authorization had to tap a special code into a lock on the door. Former colleagues recalled that as Project X developed between 1975 and 1977, Guerin seemed to relish the intrigue almost as much as the profits derived from his sales to South Africa. While to his neighbors in Lancaster, Guerin . seemed the perfect family man, singing in his local church choir and always generous when it came to civic causes, he was actually becoming something of a Jekyll and Hyde figure. The select group of ISC executives who were party to Project X watched his ego grow by the day, along with his penchant for the twilight world of spies. (Alan Friedman "Spider's Web" 1993 p.58-9)
Among those who received BNL money were a number of companies that formed part of Iraq' weapons-procurement network, including Iraqi front companies in London such as the Technology and Development Group (TDG) and TMG Engineering. Both were owned by Al-Arabi Trading Company of Baghdad, the master procurement vehicle that was itself controlled by Hussein Kamel. TDG had a partnership with Dr. Gerald Bull's Space Research Corporation, and it financed purchases for Bull thanks to loans from BNL Atlanta. In late 1987, TMG had bought an obscure machine tools business in the city of Coventry and renamed it Matrix Churchill. In short order, Matrix Churchill began supplying Iraq with advanced and computer-driven cutting lathes that went into Iraq armaments factories. Drogoul first met Matrix's Iraqi owners—who doubled as members of Baghdad's procurement network—in the company of Sadik Taha in London in October 1988. That same year, Matrix signed contracts to supply machinery to Iraq's Nasser Enterprise for Mechanical Industries, another of Baghdad's procurement and weapons-development state companies. BNL Atlanta provided a letter of credit to Matrix on May 23, 1989, to finance the shipment to Nassar of goods that were described elliptically as "hot forging dies project" (See Appendix B, p. 318) In fact, the project involved artillery shells and other weapons.
Drogoul's loans funded many genuinely dangerous projects, such as improving the range of Saddam's Soviet-made Scud missiles and providing thermal imaging night-vision components that would allow Iraqi troops to see their enemy in the dark. This sophisticated military technology, manufactured by the Hughes Aircraft Company of Santa Barbara, California, was shipped by a Belgian company that received nearly $28 million of Atlanta credits. In effect, Drogoul provided finance to any American or European exporter who was directed to him by the Iraqis.
After his friend Sadik Taha underwent a heart transplant operation in early 1989 and was replaced at the Central Bank, Drogoul finally saw with his own eyes the military use that Baghdad had made of his bank's money. His new Iraqi counterparts proved entirely different; they were no-nonsense military procurement men who worked directly for Hussein Kamel. In the spring if 1989, on his last trip to Baghdad, a visit was arranged for Drogoul and Von Wedel to the Nasser industrial complex in the company of TDG executives. There Drogoul viewed a bomb plant and machine tool production plant filled with Matrix Churchill equipment. Thanks to BNL Atlanta's loans, Matrix Churchill had provided equipment that went straight into Iraq's nuclear missile project; its computer-controlled lathes helped shape the very missile casings. No longer could there be any doubt about what Baghdad was doing with the Atlanta loans.
It also became clear to Drogoul that this dangerous game involved the world of espionage as well as arms. During one of their increasingly frequent weekend visits to meet Matrix Churchill executives in London in the winter of 1988-89, Paul Von Wedel told him he thought they were being followed by intelligence agents. Drogoul immediately asked the Iraqis about this: Was it possible the CIA knew what was going on? Were American intelligence officers aware of what tehy were doing? Drogoul's Iraqi contact shrugged nonchalantly and informed the banker from Atlanta that there were no problem. "There is nothing to worry about. We are working together. We have been working together for years with the Americans."
If Baghdad's nuclear weapons ambitions were acknowledged by London and Washington at the same time they were officially condemned by them, the same was true of Iraqi chemical weapons development. The Iraqis would frequently order BNL to provide funds to finance a huge petrochemical complex called PC2, located about seventy kilometers south of Baghdad, near the natural gas feeder lines that came from the southern oil fields. PC2 was to be the pride of the Iraqi military establishment because it had the support of contractors from the United states, Japan, Italy, France, and Britain. More significant, as Western intelligence agents knew, although PC2 would manufacture normal petrochemicals upon completion, like many of Saddam's disguised operations, it would be duel-use. This meant that it would be able to generate chemical compounds needed to make mustard gas and nerve gas as well. The head of Iraq's chemicals industry, Lieutenant General Amer Hamoudi al Saadi, was proud of PC2. Al Saadi was himself a duel operative—his other job was the head of Saddam's ballistic missile and chemical weapons programs, reporting to Hussein Kamel and his father-in-law, Saddam Hussein.
The general contractor on PC2 was the Bechtel Corporation, a familiar name when it came to Iraqi business. Bechtel was the company that had been ready to handle the Aqaba pipeline project back in 1984, the project for which George Bush had lobbied Eximbank so hard. The pipeline project had never worked out, but int he summer of 1988 Iraq asked Bechtel's London office to manage the entire PC2 petrochemicals project. The U.S. embassy in Baghdad was pleased for Bechtel, as was the Department of Commerce in Washington, which encouraged Bechtel to go ahead. Managers at Bechtel though nothing of the request from Baghdad that tehy accept payment through letters of credit issued by BNL Atlanta. They gave little thought to the fact that the plant's principal product—ethylene oxide—was a chemical that is easily converted to thiodiglycol, which is used to make mustard gas.
Only when Secretary of State George Shultz left the Reagan administration in early 1989 and returned to the Bechtel board of directors did the company focus on the possiblity that it was going to build a plant that Saddam could use to manufacture chemical weapons. Shultz, who had been president of Bechtel before going to the State Department in 1982, had plenty of clout in the California company. When he found out about the PC2 project and asked questions, he was initially given assurances that it had nothing to do with chemical weapons. "But I thought about it a little more, and I gave my advice that they should get out," he recalled.
Shultz's advice was ignored for several months, even though he realized "these things could be converted pretty easily." Finally at a board meeting, Shultz pressed his case. He insisted to his fellow directors that "something is going to go very wrong in Iraq and blow up, and if Bechtel is there, it will get blown up to." This time Bechtel listened, and it pulled out of PC2.
The same kind of duel-use shipments occurred many times over, but few companies wanted to contemplate the ultimate use of their technology if the profits were sufficiently attractive. And the Atlanta branch on Peachtree Street kept generating letters of credit. A few weeks after taking care of Bechtel's bills, Drogoul's staff was forwarding to Eximbank an application for U.S. government loan guarantees in a transaction involving Dow Chemical. This time it was a shipment of pesticides for Iraq. An employee at Eximbank examined the request, then told his superiors that the compound was highly toxic to humans. "It behaves like a nerve gas. Death ultimately results from asphyxiation." Yet, \added the Eximbank analyst, the Dow product was not on the State Department's munitions list, and there was no reason to deny the application. Almost as an afterthought—or perhaps to protect himself—the memo writer added a final note: "I cannot categorically state that these materials cannot be used as chemical warfare agents, nor that they cannot be converted to such." Dow Chemical, according to a former senior BNL executive, did not get, Eximbank's blessings for this transaction, but it did obtain loans from BNL Atlanta for a series of other exports to Iraq.
BNL Atlanta, meanwhile, was doing more than just financing Saddam's conventional, nuclear, and chemical weapons projects. In the time-honored tradition in which BNL performed services on behalf of the Italian government, Drogoul's branch was also being used for military transfers from the United States to Italy, Drogoul's branch was also being used for military transfers from the United States to Italy. From 1984 onward, the Italian government, through both the Defense Ministry and the Foreign Currency Office, designated the Atlanta branch as the official vehicle for a number of military procurement transactions. Between 1986 and 1988, BNL Atlanta credits were requested, signed, and disbursed for the transfer from U.S. Air Force bases of satellite-tracking equipment and a thousand target-detectors for Sidewinder missiles. The Sidewinder is the most widely used air-to-air missile in the NATO arsenal. It is deployed by a variety of combat aircraft and helicopters and is top-of-the-range technology. The Ministry of Defense in Rome instructed the Italian embassy in Washington to use BNL Atlanta in order to finance the Sidewinder component shipments. U.S. investigators were later told that the Sidewinder parts were to be transshipped to Iraq rather than remain in the stated destination of Italy. In Rome, this triggered investigations years later.
Drogoul's Iraqi loans, hidden in gray books or not, were actually something of an open secret in parts of the banking community. BNL Atlanta even had its clearing account at Morgan Guaranty Trust in New York; Morgan regularly channeled payments between BNL and the Central Bank of Iraq. The account had been originally opened by Giuseppe Vincenzino back in 1984; five years later, no fewer than four Morgan employees were handling BNL Atlanta, and Morgan processed a total of $1.7 billion worth of Drogoul's Iraqi business in just seventeen months. Morgan would later argue, reasonably, that this was no reason to become suspicious, since in its handling of fund transfers for a wide range of institutions, it cleared sums many times larger than this each day. But within the BNL network in North America, the Atlanta branch was the only office that used Morgan to transfer funds.
Drogoul's office became so loaded with Iraqi business that, as it had in 1986, it once again began trying to share out loans with other banks. When customers came in to seek finance for exports to Iraq, Drogoul would occasionally send them to Gulf International Bank in New York, an Arab-owned bank in which Baghdad itself was a minority shareholder. He also asked the National Bank for Cooperatives in distant Colorado to take a piece of Iraq's CCC business. Word was spreading, and very quickly, that BNL Atlanta was Grand Central Station of U.S.-Iraqi banking traffic.
The Federal Reserve Board in Washington and other U. S. banking authorities appeared to be completely in the dark about the BNL Atlanta, despite its extraordinary level of activity, its sharing out of loans around America, and its constant tapping of the wholesale money market for funds to lend to Iraq. Patrick Clawsen, a former Iraq specialist at the International Monetary Fund, shook his head in disbelief when he was later informed of the supposedly secret operation being run by Drogoul: "If some bank starts on a regular basis tapping the interbank market for nearly $2 billion over seventeen months and sending that money to Iraq, don't you think the Federal Reserve or other banks would hear about it?" (Alan Friedman "Spider's Web" 1993 p.116-9)
Unbeknownst to Drgoul, however, a problem far more serious than whether Rome approved an Iraqi deal was in the making back in Atlanta. At the end of June two women on his staff—Mela Maggi, who ran the money desk, and Jean Ivey, an assistant vice-president who helped keep the gray books—quietly decided to hire lawyers and blow the whistle on the entire Iraqi loan saga. Maggi, a rotund, dark-haired woman who quite literally kept the entire Iraqi loan operation going by raising funds from other banks, was known inside the BNL branch fior her volatile personality. She was a workaholic who would not stop her fund-raising efforts even when driving and made calls from the cellular telephone installed in her white Cadillac. Ivey, a soft-spoken blonde, was an old friend of Drogoul's and ahd followed him to BNL from Barclays Bank in the early 1980s.
Why these two junior BNL Atlanta officers decided to become informants has never been clear. William Hinshaw, a former special agent in charge of the FBI's Atlanta office, later recalled hearing speculation that they had been forced to tell all because of pressure from Mossad, the Israeli intelligence service. That the Israelis might wish to bring a halt to loans that were fueling Saddam's nuclear weapons projects is plausible, but it is hard to imagine they would have got to Maggi and Ivey. "It was strange,real strange," remembered Hinshaw. In any event, lawyers for the two women obtained immunity from prosecution, and on July 29, 1989, Maggi and Ivey provided local prosecutors and officials from the Federal Reserve with a mind-boggling story of what they and Drogoul had been up to for the past five years. A team of law enforcement agents from Atlanta, New York, and Washington was assembled toward the end of July and laid careful plans to close in on BNL Atlanta.
As far as Christopher Drogoul was aware, everything was going well that summer. Everyone at BNL Atlanta was a little fatigued by the workload, but vacation time was just around the corner. At the beginning of August, Drogoul and his family were themselves traveling from Atlanta to Paris, en route to his father's country home in the south of France. The prospect of good food, good weather, and a much-needed rest made them all cheerful. It would not last long; the vacation in France was about to be interrupted by a most upsetting development. When Christopher Drogoul returned to the United States, his life would never be the same.
The boss was away on vacation, and it was a hot and humid Frida afternoon in Atlanta on the fourth of August 1989 when sixteen employees of BNL Atlanta began to wind down for the coming weekend. In only ten more minutes it would be five o'clock.
Suddenly, the double doors of BNL's twentieth-floor suite of offices on Peachtree Street swung open, and more than two dozen federal agents fanned out before the startled receptionist, flashing their badges. "FBI. Everyone stay where they are. We have a search warrant."
The Branch's employees were ordered into the conference room and told to turn over their purses and wallets. The agents raced from room to room, gathering up files and boxes. Every file cabinet was thrown open, every desk drawer emptied of its contents, every scrap of paper collected. Some of the agents placed themselves in front of personal computers, racing over the keyboard, searching directories, and making sure they obtained every floppy disk in sight. In the conference room the employees waited as the drama unfolded. They were not told the reason for the raid. Eventually they were given back their purses and wallets, but only after they had been thoroughly searched. The document seizure took hours, while the employees sat huddled in little groups, staring aimlessly at what was going on. If anyone wished to go to the toilet, an FBI escort was required. Not until ten o'clock that night were the employees allowed to leave the building, and then only after records of their identities and addresses had been provided to the agents and meticulously recorded.
Within minutes of the start of the FBI raid in Atlanta, another group of agents, ...... New York offices ....... The same process occurred at BNL branches in Chicago, Los Angeles, and Miami. (Alan Friedman "Spider's Web" 1993 p.122-3)
The idea, as one of the officials involved in preparing these views at Baker's State Department summarized it, "was to embrace Saddam in a cocoon of moderation."
While many saw evidence that Baghdad was no less a menace than before, Bush and Baker wanted to emphasize the positive. So on Monday, October 2, 1989, with all the necessary information available to him, President George Bush lifted a pen and with one stroke set in motion a secret presidential policy to help Saddam. He signed his name to a secret order that would become known by the acronym of NSD 26, for National Security Directive 26. (See Appendix B, p. 320-2; in 1993 this was only partly declassified, now the whole thing is available.)
"When you look at NSD 26, you find out it was the Administration's sole desire and policy to aid and abet Saddam Hussein," says Congressman Sam Gejdenson, a Connecticut Democrat who became one of Bush's harshest critics. "The cop was put in the intersection, and he was waving the sellers on."
NSD 26 stated the BushBaker policy in unequivocal terms. Access to Persian Gulf oil and the security of friendly states in the area were vital to the U.S. national interest. The United States would propose "economic and political incentives for Iraq" to moderate its behavior and to increase Washington's influence in Baghdad. Chief among these was the administration's plan to encourage American companies to get more involved in Iraq's oil industry.
There was little in either man's experience that should have led them to believe that befriending Saddam would produce such results. By the autumn of 1989, Iraq had been off the U.S. terrorist list for seven years, yet Baker had been told that terrorists such as Abu Abbas were still moving in and out of Baghdad. NSD 26 said explicitly that the United States would apply sanctions if Saddam used chemical and biological weapons or violated international rules on the development of nuclear weapons, yet just one year before, Bush had been among those in the Reagan administration who resisted congressional efforts to levy sanctions on Iraq that were intended to punish Saddam for gassing the Kurds in August 1988.
Nonetheless, in his directive Bush laid out a pro-Iraq agenda that even decreed that the United States should consider various forms of military assistance to Iraq on a case-by-case basis. Within weeks, the Joint Chiefs of Staff had prepared a set of proposed U.S.-Iraq military initiatives, ranging from military officer exchange programs to aerial reconnaissance training. From Baghdad, Ambassador April Glaspie recommended such steps because they would improve the dialogue with the Iraqi government.
The policy of enhancing Washington's relationship with Baghdad has been dictated directly from the Oval Office, and it was now official, though still classified a state secret. James Baker wasted no time at all in implementing it. On October 3, 1989, just one day after NSD 26 was signed, officials from the Department of State, Agriculture, Commerce, and Treasury, the Federal Reserve, and other agencies gathered to discuss a new proposal to offer a $1 billion loan guarantee for Iraq, to be backed by the same CCC program that had figured so prominently in the BNL affair. They met in a committee that reported to the National Advisory Council (NAC), a cabinet level group that called in actual cabinet members only when their low level surrogates could not resolve their differences. the council convened when U.S. government financial commitments needed to be weighed against foreign policy goals. Iraq was certainly such a case.
The State Department representative at the meeting was particularly forceful in arguing that the program should go forward, but others, such as officials at the Treasury Department, were fearful of giving Iraq more financial aid when evidence was mounting of its involvement in illegal behavior. In fact, on the same day that Bush had signed NSD 26, aides to Treasury Secretary Nicholas Brady were filing a memorandum warning that the CCC guarantees for Iraq "should not go forward at this time." The Treasury aides had heard there was "good reason to believe there are serious irregularities" in the CCC scheme for Iraq that were linked to the BNL affair.
Dozens of career Bureaucrats and political-level officials in the Bush administration were now monitoring the BNL situation. Each new revelation about the scandal that leaked to the press—an Iraqi missile financed by BNL here, a suspected grain-for-arms deal there—put the secret U.S. policy on Iraq under greater threat. Trying to force the machinery of government to grant Saddam another $1 billion of taxpayer loan guarantees was becoming a serious challenge, even for the White House.
The treasury officials who objected to Baker's push for this loan, as well as concerned colleagues at the Federal Reserve and the Office of Management and Budget, had all seen the reports that summer stating that Baghdad was not creditworthy and revealing that Saddam was now spending 42 percent of his $12 billion of annual oil revenue on military procurement. The Treasury representative at the NAC meeting was among the toughest opponents of Baker's plan. He noted that Baghdad was desperate for cash and was demanding that BNL's Rome headquarters still honor hundreds of millions of dollars worth of fraudulent credits. And the prosecutors in Atlanta were convinced that the Iraqis were involved in the fraud. Treasury officials in Washington had learned from the Atlanta team of possible kickbacks and the financing of illicit military exports. It just made no sense to hand out more U.S. credits to Saddam.
Indeed, Baker's own aides were being told that lending to Iraq was not a good deal. One secret State Department cable to Baghdad disclosed that William Ryan, the acting Eximbank chairman, had called on Undersecretary Robert Kimmitt and told him Iraq was "overspending its resources to develop an unprofitable military-industrial complex that will not produce exports to service long-term debt. Iraq's attitude toward its foreign debt is special. Once the Iraqis suck you in, they only service the debt if you give them ever increasing amounts of credit." At the October 3 meeting the Treasury's desk officer for Iraq this view, saying that if the CCC approved another billion dollars for Iraq, it would be contributing to a "Ponzi-type" scheme, the term used to describe what happens when swindlers persuade investors to throw good money after bad.
Although Baker's representatives at the October 3 NAC meeting pressed hard, he and others were aware that Washington was among the last Western governments still willing to trust Saddam when it came to money. Germany and France were reluctant to do any more for Saddam. Britain's government loan-guarantee program was open to Iraq only because Margaret Thatcher had made a political commitment to invest more each year. On the other side of the world, Japan had stopped further financial support. The Commerce Department official at the NAC meeting addressed the problem directly: The U.S. government would be "courting disaster" if it did not ban BNL from the loan-guarantee program.
The meeting was in clear danger of reaching a stalemate, so the officials engaged in the time-honored Washington tradition of setting on half a loaf—or in this case, a bit less. Only $400 million of CCC credits would be offered, and the BNL investigation would be watched for further developments.
Two days later, on Thursday, October 5, USDA officials met with a visiting Iraqi delegation that included among its ostensible farm and financial experts a friend of Christopher Drogoul's — an official from the military industrialization ministry in Baghdad that was busy supervising the development of nuclear weapons.
It was left to these Agriculture officials to break the bad news of the reduced loan guarantees. But while the Americans knew what they had to tell the Iraqi delegation, they could not have anticipated what the Iraqis would tell them. The Iraqis admitted they had demanded and received bribes and kickbacks, except they refused to call them by those names. Instead, they euphemistically referred to them as requests for "after-sales services." Yes, there had been trucks and trailers and cash involved, but this was normal Iraqi business practice.
Midlevel officials in the Bush administration now heard the Iraqis acknowledge directly this clear violation of the U.S. law governing the CCC program, in which kickbacks were simply not allowed. According to the CCC program,'s rules, an admission like this should have led to the program's immediate suspension. Government loan guarantees were not supposed to be extended to anyone who engaged in criminal behavior. U.S.-Iraqi talks about the new loan were suspended.
(Alan Friedman "Spider's Web" 1993 p.134-7)
If the bank had been willing to make the loans, then any customer would have said it was the bank and not the customer who ........
..... on the investigation, but Aziz pressed his point: If Iraqi officials were implicated, his government wanted to know "immediately. ........
Glaspie promised both ministers that there was no U.S, intention "to infer Iraqi involvement in the BNL issue." but her reassurances were not enough. Two evenings later, on Sunday, October 8, Baker's Iraqi problem became worse. Aziz's deputy, Nizar Hamdoon, the undersecretary of foreign affairs who had been so friendly with George Bush throughout his stint as Saddam's envoy to Washington, ordered Glaspies's deputy, Joseph Wilson, over to the ministry. Hamdoon had a message for Washington that came from “the highest levels in the Iraqi government”—the usual code word for Saddam himself. The government of Iraq was interested in strengthening bilateral relations with the United States, but it needed to stabilize commercial relations and make them more predictable. No announcement should be made on the current CCC negotiations unless an agreement on the full program was reached. Wilson reported the threat succinctly to Baker: "With his mailed fist still in his velvet glove, Hamdoon then pointed out that Iraq does have alternative sources of supply to which it could turn to if the U.S. were unwilling to commit itself to a program." (See Appendix B, pages 324-325.) He also reported that Hamdoon had raised the issue of favoring the United States when it came to repaying its debts. Implicit in Hamdoon's remarks wrote Wilson, was that unless Washington agreed to an acceptable CCC program, Iraq would rethink both its dependence on U.S. suppliers of agricultural products and the priority treatment it accorded to U.S. creditors in the repayment of its debts.
Both Bush and Baker were now in a serious bind. Just days into their new Iraqi policy, they were facing not only protests from below, in the form of conscientious U.S. officials who suspected Iraq of criminal behavior, but protests from Saddam, who wanted his $1 billion of promised credits and wanted it now. But much as Baker was willing to help Saddam, his own deputies continued to offer him more evidence of serious wrongdoing that involved BNL, the Iraqis, and the CCC program. A few days after Hamdoon's threat, Baker received a confidential report on the situation from Richard McCormack, his undersecretary for economic affairs. McCormack, a Reagan administration holdover who had previously worked for Senator Jesse Helms of North Carolina, didn't mince words. He informed Baker that several agencies—including the FBI, the Pentagon, Agriculture, and the Internal Revenue Service—were looking at allegations of "widespread and blatant" irregularities in the CCC program.
Among the concerns were the suspected diversion and transshipment of U.S. commodities to places other than Iraq, the reported use of CCC money for arms purchases, and the apparent overpricing of some commodities to double and triple wholesale prices. Any one of these would have made it illegal to approve a penny more from U.S. government coffers. "The unfolding BNL scandal," McCormack told Baker, "is directly involved with the Iraqi CCC program and cannot be separated from it."
Word of the suspected abuse of U.S. taxpayers' money was also being reported to administration officials by Gale McKenzie, the assistant U.S. attorney who headed the BNL task force in Atlanta. In 1989, McKenzie was a junior prosecutor with no particular experience in international banking, diplomacy, the Middle East, military matters, or any of the other aspects involved in the Iraqi loans case. The daughter of a Georgia peach grower, McKenzie was known in Atlanta legal circles as an ambitious woman, and her peers in Atlanta sensed that the Drogoul case represented the chance of her lifetime to tackle something really big. While she would later find herself floundering in the investigation and stymied by interference from Washington, in the autumn of 1989 Gale McKenzie had understood very well certain fundamentals, like the nature of the crimes likely to have been committed in the Iraqi loans case.
On October 11, 1989, McKenzie was visited in Atlanta by two officials from the Department of Agriculture. There she told them of the criminal complicity of Iraqi government officials involved in the BNL loans and the CCC program, of the use of BNL funds to acquire equipment for nuclear missiles, and of kickbacks that involved the CCC program and that were continuing even after the United States had warned Iraq this was illegal. McKenzie had already explained to the Federal Reserve that the volume of U.S. farm products supposedly being shipped to Iraq was so inflated that in some cases there were contracts for seeds that exceeded the needs for the entire country.
The game was up now. On October 12, Clayton Yeutter, the secretary of agriculture, was briefed by his people, and the next day the informed the Iraqi delegation in Washington that even the $400 million of CCC credits was now uncertain. In fact, Yeutter had suspended the credits entirely. The visiting Iraqis reported the news back to Baghdad and were ordered to return home at once.
At 8:40 on the morning of October 13, aides participating in Baker's daily senior staff briefing conveyed Agriculture's decision to the secretary of state. The crimes were also explained to him. When he heard the news, Baker was not a happy man. His response was immediate. Withdrawing the $400 million of CCC credits for Iraq was a "step in the wrong direction," said the secretary of state. "Get it back on the table!" he instructed his aides.
Baker could order his staff to figure out a way to resurrect a government program for Iraq that was now clearly riddled with suspected illegalities, but he could not stop another member of the State Department bureaucracy from giving him even worse news. Later that same day, a thirty-two-year-old Foreign Service officer named Frank Lemay returned from a briefing he had attended at the Agriculture Department. Lemay, a special assistant to Richard McCormack, had met with Agriculture Department lawyers to hear about the status of the BNL case. When he came back to the State Department, he scribbled down what is known at State as a "memcon," or memorandum of conversation. The memorandum was classified as confidential and immediately sent to five of Baker's top people, including McCormack, Jock Covey, the acting assistant secretary for Near East affairs, and Abraham Sofaer, the State Department's legal adviser.
Lemay reported that ten separate BNL investigations were now under way, covering violations of U.S. banking laws, CCC abuses, and help for Iraq's nuclear weapons project. The investigations had reached "the explosion state," and colleagues at the Agriculture Department were saying the BNL affair could "blow the roof off the CCC." This was not what James Baker wanted to hear.
Lemay also reported that the Agriculture Department had briefed him on suspected corruption at the Ohio affiliate of Matrix Churchill, the Iraqi-owned machine tools company in Britain that was supplying "military hardware" to Baghdad with illegal BNL loans. The young Foreign Service officer didn't know it, but Matrix Churchill was a company Baker had already encountered.
A few months before the BNL raid, the unmistakable signature of "James A. Baker III" had appeared on a State Department approval form that certified the worthiness of the Ohio-based Matrix Churchill to do business with Iraq. Baker had signed the approval form, which made Matrix eligible as a contractor in Baghdad, even though his State Department was sitting on intelligence reports that spelled out the company's role as an arm of Saddam's nuclear weapons-procurement network.
The hapless Lemay, whose career would suffer precisely because of this memo, urged top brass at State to "proceed carefully" with any CCC guarantees for Iraq. "If smoke indicates fire," he concluded, "we may be facing a four-alarm blaze in the near future. This is particularly true given the intense scrutiny the CCC program has been under during the last year. McElvain indicated that there were 19 investigations of" (See appendix B, p.326-7)
"I guess I'm the guy that did the wrong thing at the wrong time," Lemay said later, after he began to feel his career at the State Department sinking into a Washington version of the gulag archipelago. "The issue was brought to the attention of all the big boys, and Baker was aware of all the assertions through the huge paper trail," a rather defensive State Department official recalled later, "We knew Saddam Hussein wasn't a saint and there was this bank thing in Atlanta, but we couldn't cut off a policy based on hunches and assertions."
Lemay's memo frightened some at State, but not Baker. He was going to try and carry out George Bush's order to aide Saddam, come what may. He had already told his staff to get the financial aid for Baghdad back on the table. Now he had to reassure Tariq Aziz again.
Dear Mr. Minister," Baker wrote in a secret message to Aziz on October 21. "I Appreciated the opportunity to meet you and I found our meeting extremely useful." (See Appendix B, pages 328-329.) He then conveyed a message from George Bush:
The President has asked me to say to you, and through you to President Saddam Hussein, in the most direct way possible, that the United States is not involved in any effort to weaken or destabilize Iraq. Having looked into the matter and discussed it with the President, I can tell you this with the highest authority. Such an action would be completely contrary to the President's policy, which is to work to strengthen the relationship between the United States and Iraq whenever possible.
Turning to the question of the CVCC guarantees, Baker wrote as follows:
Mr. Minister, you also asked me to look into the issue of CCC credit guarantees. I am doing so on an urgent basis and will give you a final response as soon as I can. An investigation is underway and in all our candor there are some serious allegations that need to be examined further. I can assure you that our actions in connection with the CCC program are not in any way motivated by political considerations. The government of Iraq has set a high standard on issues of integrity of public officials and corruption and I am sure you will understand the determination of my government to be thorough. At the same time, I very much hope that it will be possible to resolve the problems which have arisen quickly and to continue with this important program. As you requested, I will continue to give this matter my personal attention.
On October 24, Ambassador Glaspie called on Aziz to deliver the letter. She watched him read it and then reported back from Baghdad that he was "clearly delighted with the Secretary's message." He assured her that Baghdad was "ready to cooperate with the United States in any matter needing cooperation." When Glaspie finished her meeting with Aziz, Hamdoon had taken her aside to say that "the ball is in Washington's court."
Nonetheless, Baker clearly still had his work cut out for him if he was going to push through U.S. government financing for Iraq in the face of a spreading criminal investigation. He decided to ask Abraham Sofaer, the State Department lawyer, to examine the legality of going ahead with the CCC credits for Iraq. (Alan Friedman "Spider's Web" 1993 p.139-43)
Two days before the November 8 meeting, both the White House and the State Department received a report that theoretically should have halted any efforts to provide Iraq with U.S. taxpayers' funds. The six-page report, entitled "Iraq-Italy: Repercussions of the BNL-Atlanta Scandal,"came from the directorate of intelligence at the CIA. (See Appendix B, p.330-5) The CIA report was something of a mixed blessing for Bush and Baker. On the eve of their final push for that one billion dollars, the CIA named Matrix Churchill, the front company at the center of the BNL affair, as a member of Baghdad's "complex procurement network of holding companies." These companies were acquiring technology for Saddam's chemical, biological, nuclear, and ballistic missile programs, the CIA explained. The report also said Iraqi intelligence was "directly involved" in the activities of these holding companies. That didn't quite fir with Baker's hopes that the Iraqis would not be implicated in wrongdoing.
Yet the CIA report on November 6 also said that "the loss of BNL financing and, more important, any reduction in U.S. agricultural credit guarantees because of negative publicity about the scandal probably would damage U.S.-Iraqi political relations caused by the BNL scandal would be short lived, the CIA concluded, "if Baghdad believes additional U.S. credits will be forthcoming after the dust of the investigation settles."
On November 7, one day after the CIA report was dispatched, another White House official who was tracking the BNL affair did an extraordinary thing. Jay Bybee, a lawyer in the office of C. Boyden Gray, the president's counsel, was a point man on BNL, getting detailed briefings from other government agencies and making sure he was contacted about any significant developments regarding Iraq. Just before the $1 billion of CCC credits for Iraq was to be decided once and for all, Bybee breached normal procedure and telephoned Gale McKenzie at the U.S. attorney's office in Atlanta to discuss the criminal investigation of BNL. It is highly inappropriate for the White House to contact a prosecutor for any reason; normally, a request is made to the Justice Department, which makes its own inquiries and reports back. Bybee later denied there was anything improper about the call, but notes indicate McKenzie, having been called from the White House, "got [the] impression they are concerned about the embarrassment level."
Bybee's boss, Boydon Gray, claimed the White House call was made because Bybee was doing "due diligence for us on the CCC question." Yet Gray, almost as close a confidant to George Bush as was James Baker, later admitted that Bybee ought not to have made the call. "He shouldn't have called Atlanta. He should have called somebody at the Department of Justice and had them check."
On November 8, 1989, when the National Advisory Council met to discuss the controversial $1 billion program for Iraq, James Baker placed his faith in Robert Kimmitt to represent him at the meeting. The session dragged on a long time, and and toward the end John Robson, the deputy treasury secretary, noted that absent compelling agricultural export and foreign policy interests, the proposed program for Iraq would not go forward. But it did. Those present were political level players, and concerns about BNL were soon brushed aside. Baker's man laid down the law by invoking the name of George Bush. To terminate the program in Iraq abruptly, declared Kimmitt, would "clearly run counter to the President's intention and would, furthermore, cause a deterioration in our relationship with the Iraqis." There might be "possible future revelations" in the BNL affair, but "overwhelming foreign policy considerations" called for support of the Iraqi credit. The trump card worked and Baker's billion dollars of U.S. credits for Iraq was recovered. There was only one condition—that it be divided into two $500 million parts so that the second could be suspended if any wrongdoing by Iraq were uncovered. "Oh, yes," remembered a smiling Stephen Danzansky. who had sat in on the meeting as President Bush's representative, "there was State doing its thing."
Kimmitt reported back to Baker immediately and suggested "that you break the good news to Foreign Minister Tariq Aziz." Baker did so in a letter that argued soothingly the manner in which "this decision by the Administration reflects the importance we attach to our relationship with Iraq."
James Baker had won his fight. The foreign policy vision that he and George Bush had shared for so many years was finally being implemented. But there was still more work to be done.
Ten
See No Evil
Nothing, it appeared, would stop Bush and Baker's policy of giving overwhelming and unequivocal support to Saddam Hussein. Warnings about Iraq's suspected criminal behavior in the BNL case and Baghdad's drive to develop unconventional weapons did not matter. The president had defined Washington's national interest in the Persian Gulf in National Security Directive 26, and by signing that document he had bet on Baghdad as the cornerstone of political stability in the region. When the CIA or other government officials came up with reasons to recoil from Saddam, Bush and Baker didn't want to know about them.
Only days after Saddam Hussein and Tariq Aziz extracted the promise of up to one billion dollars in U.S. loan guarantees came a new challenge for Washington. The administration had to decide what to do about American companies that wanted to deliver highly sensitive technology to Baghdad. NSD 26 had explicitly recommended promoting U.S. business ties with Iraq, and the welfare of corporate America was top priority. Not surprisingly, when difficult cases were considered, it was business that was likely to win the day.
On November 12, 1989, a high-level interagency committee headed by the State Department met to consider a handful of export-license requests. Among the commodities were goods, including computers and machine tools, that were ostensibly to be used for civilian purposes, but the address of the recipients were almost all military establishments.
The importance of the interagency committee, which brought together officials from the Defense, Commerce, State and Energy departments, was belied by its nondescript bureaucratic name: the Subgroup on Nuclear Export Control, or SNEC. Although Commerce had chief responsibility for issuing export licenses, the State Department and the Pentagon were generally asked to offer their views on so-called duel-use items, or industrial equipment suspected of having a potential military use. In cases of exports that ahd possible nuclear applications, SNEC would be called in to settle disputes between different agencies over which sensitive technologies could be licensed for export. At the SNEC meeting on November 12, there were at least nine items on the agenda relating to Iraq that caused alarm bells to ring.
The SNEC officials faced a real dilemma in considering these export proposals, not least because they were trying to follow the guidelines of George Bush's still-secret policy on Iraq. "SNEC policy for some years has been not to approve exports for Iraq’s nuclear program,” wrote one participant in the meeting. (See Appendix B p.336.) But “at the same time, U.S. policy as confirmed in NSD 26 has been to improve relations with Iraq, including trade, which means that exports of non-sensitive commodities to ‘clean’ end-users in Iraq should be encouraged.” He added that the State Department’s Near East affairs division had said exports of duel-use commodities “for conventional military use” could be approved.
In order to reach an informed decision, members of the committee asked for and received a detailed intelligence briefing on Iraq’s nuclear program. What they learned only compounded their predicament.
They were told of “presumption by the intelligence community and others that the Iraqi government is interested in acquiring a nuclear explosive capability.” They were made aware of “evidence that Iraq is acquiring nuclear related equipment and materials without regard for immediate need” and that Iraqi front companies were engaged in nuclear-related procurement. And they were left in no doubt that the substantial quantities of equipment such as computers and machine tools that the Iraqi state enterprises listed as end-users had ordered could well go into military projects.
Those at the SNEC meeting took note of the warning before them and the probable use to which Iraq would put the U.S. products it had requested. The consequences of the decisions they were to make could not have been laid out more clearly. Yet after the meeting, most doubts were brushed aside by the State Department, the lead agency in the SNEC process. State described the intelligence information as “complicating factors” but was not particularly troubled by it. Within twenty-four hours of the intelligence briefing. State had already made up its mind. It recommended seven of the nine export applications for immediate approval.
The Way the State Department got around the obvious danger that the exports would go into the Iraqi nuclear program was to recommend that each license carry a kind of health warning. Thus, the export of a special measuring device to an Iraqi front company engaged in weapons research was to be marked: “Approve subject to license conditions with no nuclear use and no retransfer without prior consent.” A similar warning was affixed to a shipment of optical heads for cameras that went to the Daoud Research Center “for work on projectile behavior and terminal ballistics.” The rationalization for sending such equipment directly to an Iraqi installation engaged in work on nuclear-capable missile development was the surmise that the speed of the equipment was appropriate for conventional artillery founds but too slow for nuclear applications. But how could Washington ensure the conditions were complied with? It was utterly impossible, and the State Department knew it. With decisions like these in 1989, the secretary of state had opened the door to a dictator with a well-documented appetite for money and an equally clear, even outspoken intention to build nuclear weapons.
“State had the policy responsibility for nonproliferation. The other agencies were simply no in the same league,” recalled Bryan Siebert, a senior export-control official at the Department of Energy who specialized in spotting items that were headed for Saddam’s nuclear weapons projects. During 1989, said Siebert, a number of sensitive exports to Iraq were approved by SNEC: “We sent a lot.”
Indeed, even before the November 12 meeting a $140,000 shipment of sophisticated frequency synthesizers was already en route to Baghdad from Hewlett-Packard of California. "According to our information,” read the caption on confidential Commerce Department records, “the end-user is involved in military matters.” The end-user was the Salah al-Din establishment, one of Iraq’s most prominent military electronics factories. In fact, the Bush administration knew the Hewlett-Packard synthesizers would be used “in calibrating, adjusting and testing” an Iraqi surveillance radar system. A little more than a year later, during Operation Desert Storm, the same system would provide ground support for Iraqi missiles, helping Baghdad detect and shoot down U.S. planes.
It was not merely in SNEC that the State Department campaigned to speed up shipment of sensitive technologies to Iraq. As far as James Baker’s aides were concerned, SNEC was actually an obstacle to the promotion of U.S. exports. In early 1990, John Kelly, the assistant secretary of state with responsibility for the Middle East, complained in a memorandum that “our licensing procedures have been a drag on trade with Iraq.” He even drafted a letter on the subject for Robert Kimmitt, to be sent to the Commerce Department. Difficult though it may be to believe, the letter said specifically that the examination of nuclear proliferation concerns by SNEC needed to be balanced “by other considerations, including our duty to support U.S. exporters who can right our trade imbalance with Iraq and the broader needs of the overall relationship.”
President Bush’s national Security directive was thus casting a long shadow over policy-makers, and this created a dangerous ambiguity. Stopping Saddam's nuclear weapons development was a frequently stated U.S. policy goal, but NSD 26 made far more prominent mention of promoting trade. The result was that when decision-makers were uncertain about the ultimate use of an export product, they tended to lean toward approval.
“If we were selling nuclear equipment to Iraq, then we were incompetent and Commerce couldn’t run an export control program,” Abraham Sofaer, the former State Department legal adviser, later remarked. "It happened, of course, and it may well be that people in the State Department learned from the CIA memos that Iraq was building a nuclear capability from our exports. I certainly didn’t see any CIA memos, and I don’t know what Baker knew. We did not have a close relationship.”
The U.S. government granted scores of licenses,” commented Gary Milhollin, a leading expert on Iraq’s nuclear weapons program. “The government knew very well that Saddam was running a big missile and nuclear program and that the exports were almost certainly going to help both. But the State, Commerce, and Energy departments acted like the three little monkeys: ‘See no evil, hear no evil, speak no evil.’”
It had been that way, Milhollin recalled, from the beginning of the Bush administration. In February 1989, the month after it took office, for example, the Du Pont company of Delaware was cleared to supply nuclear-grade vacuum pump oil to the “State Organization for Oil Production,” a state company involved in both civilian and military projects. UN inspectors would later discover that the Du Pont product “was used or intended for use in Iraqi efforts to establish a centrifuge production and operation capability.” The nuclear-grade oil was vital to atomic bomb production because it lubricated the centrifuges that created the weapons-grade uranium that forms the core of the bomb.
Even before Bush took office, in December 1988, Saddam's operatives had come shopping to the Finnigan Corporation of California and received SNEC approval to buy $661,000 worth of computing equipment that Iraq used to measure the progress of uranium enrichment. The actual value of the shipments could be misleading; as far as Baghdad was concerned, items that were valuable for nuclear research did not need to cost a lot—they just needed to be secured.
"Allah Akbar, Allah Akbar." God is great, God is great. The shouts of the assembled technicians crescendoed over the an-Anbar desert range 230 kilometers southwest of Baghdad on the morning of December 5, 1989, as a three-stage, eighty-foot-long rocket weighing forty-eight tons lifted off the launch pad and blasted through the high cloud cover into the upper atmosphere.
The missile, a bundle of modified Scud missiles that was given the name al-Ahid, "The Worshipper," was supposed to deliver a warhead over a distance of more than a thousand miles. When word of the test launch reached Washington, it caused consternation in the White House and State Department. Admittedly this was just a test, but the prospect of Saddam Hussein having a missile with a range of a thousand miles sent tremors through every Middle eastern capital.
The Bush administration kept its public response to Saddam's missile launch muted, but certain quarters of the Commerce Department well understood the significance of the event. While Secretary of Commerce Robert Mosbacher was very much a part of Bush's pro-Saddam team, worries about Iraq's nuclear procurement had been growing among working-level officials within his department. They were the people who had to carry out the department's see-no-evil policy toward Saddam's requests for nuclear related technology, a policy that had been firmly in place well before NSD 26 was signed in October. "When Saddam sent up his Roman candle, it became clear to me that we were going to have a problem with this country," said Dennis Kloske, Commerce's undersecretary for export administration. In fact, Kloske had already made up his mind about Iraq the preceding autumn, when he became alarmed at the amount of money Iraq was pouring into its weapons programs and the number of high-technology items it had obtained from the United States and elsewhere.
He raised concerns during informal discussions with his counterparts in other cabinet agencies but got little in the way of response. In Baker's State Department, in particular, the preoccupation as always was less the details of Saddam's weapons programs than with U.S. diplomatic relations toward Iraq; the overriding concern, it seemed, was to keep Saddam happy. Without the support of the State Department and the National Security Council, there was no chance of modifying the policy that was worrying people both at Commerce and at the Pentagon. "We were being left in a situation where we were going to be screwed," said an official in the Commerce Department. "We made it very clear to our counterparts that Commerce had a major problem with the desultory diplomatic initiatives toward Saddam that were not going anywhere," he added. "We made it very clear that we had to tighten up the controls—but we were met with indifference."
The same level of frustration existed at the Department of Energy, where Bryan Siebert had been waging a lonely and unsuccessful battle to get James Baker and National Security Advisor Brent Scowcroft to do something about the steady flow of U.S. exports that were materially assisting Iraq's nuclear weapons program.
Siebert had been monitoring Saddam's nuclear-procurement operations since 1987. Armed with data from both the CIA and the Energy Department's own intelligence sources, he concluded in February 1989 that Saddam was not ten years away from building an atomic bomb, as the government had generally assumed, but three— and perhaps even less if the flow of technology from the United States were not halted. Saddam was spending heavily, he was determined, and he was ingenious.
That Spring, Siebert tried to bring the issue of how the United States was contributing to Saddam's nuclear program to the attention of Baker and Scowcroft. His strategy was to have Admiral James Watkins, the energy secretary, suggest to them that the National Security Council initiate a high-level review or Iraq's growing nuclear ambitions. If Baker agreed, it was Siebert's hope that he would be able to present his information to the National Security Council, thereby empowering the Department of Energy to take the lead in an interagency review of export controls regarding Iraq.
In late March 1989, Siebert began to pull together the telltale intelligence indications of Saddam’s nuclear plans. He worked days, nights, and weekends sifting through data as he prepared to ask Admiral Watkins to approach Baker. But Siebert could not know that at this same time Baker was busy consolidating U.S. relations with Iraq, which had become Washington’s second-biggest trading partner in the Arab world. In preparation for a March 24 meeting with Iraq’s Nizar Hamdoon, Baker was told of Baghdad's desire for “freer export licensing procedures for high tech." Applications were often held up, his staff wrote him in briefing memorandum, because of the Commerce and Defense departments' fears that the U.S. exports could could bolster Iraq's military capabilities.
Siebert decided to make his report to Admiral Watkins blunt and brief. He had already learned the need to keep things simple when sitting in meetings with President Bush or with Brent Scowcroft and his aides at the NSC. "At White House meetings I would raise something complex and Bob Gate [by now the deputy national security advisor] would say, ' God damn, we shouldn't have these types of complicated questions,'" he later recalled.
On April 17, a nervous Bryan Siebert finally sounded his alarm. (See Appendix B, page 337.) "Recent evidence," he wrote to Admiral Watkins, "indicates that Iraq has a major effort under way to produce nuclear weapons." Baghdad already had enough specifications to point "unambiguously" to detailed knowledge of how to produce nuclear materials. Beyond that, it was "attempting to procure some items in the United States" that included a component identical to one used in U.S. nuclear weapons.
Siebert stated that if Iraq were able to obtain these goods in the United States, "it would embarrass the U.S. government, as well as injure U.S. nonproliferation objectives." In light of this risk, he recommended that the secretary of energy contact both Baker and Scowcroft and warn them of the problem.
There could be no misunderstanding what Siebert was saying. He also had every reason to assume that his message would get through. After all, only two months before, George Bush had proclaimed in his first State of the Union message that "our diplomacy must work every day against the proliferation of nuclear weapons." Siebert's memorandum was an action call.
He felt relieved after he delivered it. "This thing had been getting clearer every day," he later said. "If State took it up and it went to the National Security Council, it would be tough to turn a blind eye.
But the State Department never even saw Siebert's warning, nor did Admiral Watkins. The memo was dismissed as overly alarmist by Robert Walsh, the deputy assistant secretary for intelligence, defense programs, in the Department of Energy. Walsh, who attended White House meetings on such matters on a regular basis, felt "uncomfortable with a Secretarial level initiative." He refused to go ahead with the recommendation, terming it "premature."
Siebert had been stopped, but he would not give up. On May 11, he wrote another memorandum, this one protesting his evidence of the Iraq bomb program was being ignored. "I would bet my job [that] Iraq is moving toward a nuclear weapons program and the time to try to stop it is now." The second memo had equally little effect on policy, but it eventually had personal consequences. In April 1991 Siebert was stripped of his senior responsibilities for technology policy and export control and left with lesser responsibilities as the head of the Department of Energy section that handled the classification of documents.
Four months after Siebert's second memo—and three months before Saddam launched al-Abid, his first intermediate-range ballistic missile—Siebert and other officials who worried that the United States was helping Iraq's nuclear program were appalled when they discovered that the Department of Energy—in conjunction with nuclear weapons laboratories, the air force, and the navy— had invited two Iraqi nuclear scientists to visit Portland, Oregon, for a symposium on detonations. They had come from Saddam's Al Qaqaa establishment, where Iraqi technicians were researching the kind of missile technology that would help to deliver nuclear payloads. The Iraqis were only too pleased to attend the symposium, which was staged by the U.S. armed forces and the national laboratories such as Los Alamos and Lawrence Livermore. As a senior Energy Department official wrote later on, "In a nutshell, the conference was the place to be in September 1989 if you were a potential nuclear weapons proliferant."
A year after his memos, Siebert was still trying to get word to higher-ups, discussing proliferation concerns with colleagues from the State Department, and briefing the secretary of energy every time he got the chance. On two occasions he accompanied Admiral Watkins to cabinet meetings at the White House, where the subject under discussion was U.S. export controls.
As a nuclear expert, Siebert would sit in the second row of chairs in the cabinet room, behind President Bush, with a view of the cabinet members assembled around the table and portraits of former presidents on the opposite wall. He later remembered feeling his want of stature in the elevated presence of the decision-makers. But the absence of any real debate about export controls at the cabinet meetings astounded him. "Scowcroft would outline the purpose of the meeting for the benefit of the president, but then the atmosphere was like a high-level funeral," he recalled. "This was not a gathering of cabinet members who wanted to talk and politic around. It was more like a board of directors composed of good old boys. John Sununu [the chief of staff] did much of the talking, and he was quite a bully. He dominated the cabinet, and Bush let him get away with it." (Alan Friedman "Spider's Web" 1993 p.146-55)
For the Bush administration, the truth was hard to face. There were fresh indications that same February that Iraq was still abusing the loan-guarantee program. "Possible indictments for violations of CCC regulations" were in the wind as a result of the investigation into BNL Atlanta, noted Paul Dickerson, the CCC program's administrator, on February 23. The question troubling Dickerson, as he wrote to his boss at the Department of Agriculture, was whether to publicly announce any more loan guarantees. There were good reasons to go ahead with the announcement, but there were also reasons not to. Among them was the prospect of "considerable adverse Congressional reaction and press coverage." And there was an even worse scenario to contemplate if "investigators would find a direct link to financing Iraqi military expenditures, particularly the Condor missile."
The problem of Iraq's demand for kickbacks could perhaps be finessed somehow for public consumption, but the Condor was an entirely different matter. If there was one thing that would destroy Bush's embrace of Saddam in a split second, it would be the revelation that the United States had guaranteed for Saddam loans whose proceeds he might have used to help build a nuclear-capable missile.
It didn't help matter when, on March 15, Saddam ordered the hanging of Farzad Bazoft, an Iranian-born reporter for a British newspaper. Amid protests from Margaret Thatcher, Bazoft was accused of being an Israeli spy and put to death in an exceedingly public display. Later that month, relations between Saddam and his would-be-supporters in the U.S. and British governments were jolted again, this time by a reminder of Iraq's nuclear intentions. To make matters worse, BNL was also involved.
On March 28, 1990, customs officers at London's Heathrow Airport intercepted a shipment nuclear detonators en route from California to Baghdad, closing a successful eighteen-month Anglo-American sting operation. Eight days later, the link between the nuclear triggers and BNL was confirmed in a confidential memo addressed to Gerald Corrigan, president of the New York Federal Reserve. "As you suspected, there is a connection," wrote a member of his staff, adding it was "entirely possible that BNL financed some of the material." (See Appendix B, page 338.) The sting proved to be more symbolic than practical value, however, since a smiling Saddam Hussein appeared on Iraqi television shortly afterward holding a nuclear detonator in his hand. "We can make these in our own factories," he said to his cheering audience. That statement, true or false, gave added menace to an address he gave to a senior Iraqi military officers at a decoration ceremony on April 2. Wearing a general's insignia, Saddam delivered a chilling speech that lasted more than an hour and would echo across the world.
"We don't need an atomic bomb because we have advanced chemical weapons," said Saddam. "Iraq's chemical weapons capability is matched only by the United States and the Soviet Union," His blood curdling speech ranged far and wide over real and imagined adversaries. "I swear to God we will let our fire eat half of Israel if it tries anything against Iraq," he proclaimed, and concluded ringingly: "May God's curse fall upon the big powers."
While world leaders searched for suitably outraged responses, George Bush seemed stunned. "I think these statements are very bad," he mused as he digested the news aboard Air Force One on his way from Washington to Indianapolis. "I'm asking Iraq very strongly to immediately reject the use of chemical weapons. I don't think it'll help the Middle East or Iraq security; I would even say that it'll have the opposite effect.
Then Bush ended with the observation, "I suggest that such statements about chemical or biological weapons be forgotten." It was an extraordinary response, tinged with a mixture of regret and wishful thinking. It seemed as if Bush could not believe his ears. For almost ten years Washington had delivered to Saddam enormous amounts of agricultural credits and Eximbank guarantees, weapons and technology, sometimes covertly and sometimes quite openly. Now the Iraqi leader was making speeches like this. Surely he could not mean it.
The truth was, George Bush was beginning to find himself in a political straitjacket. Congress was already demanding sanctions on Iraq; several bills had been introduced. Various legislative proposals would cut off CCC and Eximbank aid programs, ban high-technology exports of computers and other equipment that might be used in making or operating weapons systems, and halt any loans from international financial institutions. Without even knowing of the existence of NSD 26, Congress was threatening to destroy the heart of Bush's secret policy.
While Saddam's threats to use chemical weapons against Israel were producing politically violent reactions on Capital Hill, both George Bush and James Baker were sending private messages that sought to reassure Saddam. The President's first message was carried by Senator Robert Dole, the dour Republican minority leader from Kansas who led a Senate delegation to Iraq in a two-hour meeting with Saddam on Thursday, April 12. Dole did express U.S. concern at Saddam's publicly acknowledged development of unconventional weapons, but he also lent a sympathetic ear to the Iraq's complaints that he was the victim of a smear campaign.
"He indicated that he feels very strongly that there's an American-British-Israeli campaign to tarnish the image of his government and his country," said Dole, upon emerging from the meeting in the northern Iraqi town of Mosul, which happened to be the site of several Iraqi missile projects. Senator Alan K. Simpson, a Republican from Wyoming, embraced Saddam's views, telling him, "I believe that your problems lie with the western media, and not with the U.S. government. As long as you are isolated from the media, the press—and it is a haughty and pampered press—they all consider themselves political geniuses." Saddam also gave the senators the implausible promise that he was prepared to destroy all of Iraq's weapons of mass destruction. There was only one catch—Israel would have to do the same.
Dole told Saddam that if there were any smear campaign, it certainly didn't come from President Bush, who only twelve hours before had "assured me that he wanted better relations, and that the U.S. government wants better relations with Iraq." The senator, who represented a state that had exported large quantities of wheat to Iraq on the back of CCC credits added his personal assurance that President Bush would oppose sanctions in Congress.
On the same day that Dole was carrying a message from the president, James Baker sent a secret cable to the U.S. embassy in Baghdad, instructing April Glaspie to meet with Saddam or his top aides. The cable noted that Iraqi actions in recent weeks and months had caused a sharp deterioration in U.S.-Iraqi relations. It requested that Glaspie spell out the administration's disappointment over Saddam's demand for a withdrawal of the American naval presence in the Gulf; that she question Baghdad's human rights record; and that she protest clandestine attempts by the Iraqi government to smuggle nuclear triggers from the United States. Baker also reminded Glaspie to register disappointment at Saddam's drive toward unconventional weapons and his threats against Israel earlier in the month.
But Baker softened the blow considerably by stipulating that the ambassador deliver an additional message: "We want one thing very clearly understood, however. As concerned as we are about Iraq's chemical, nuclear, and missile programs, we are not in any sense preparing the way for a preemptive military unilateral effort to eliminate these programs." Baker even reminded Saddam that back in 1981, when Israel had launched such a bombing raid against Iraq's Osirak nuclear plant. "we condemned the 1981 raid. And would do so again today. We are telling Israel so."
Two weeks later, George Bush tried an even more direct approach when he sent Saddam his own conciliatory message. While the rest of the world waited to see what the Iraqi dictator would do next, President Bush told him he hoped that ties between the United states and Iraq would contribute to the peace and stability of the Middle East.
But the tensions between Washington and Baghdad were real, and so were the differences among U.S. government agencies. Bureaucrats and political-level officials inside the Bush administration were already waging a form of guerrilla warfare over Iraqi policy. That same April, the Commerce Department began taking unilateral action to curtail trade with Iraq, while the Defense Department made it clear to colleagues at State that it would support initiatives to limit technology transfers to Baghdad. State officials who had been among the staunchest supporters of Saddam in the past, such as Robert Kimmitt, were now being warned by their aides that critics of the U.S.-Iraqi relationship at other agencies were ready to seize the moment and cripple the relationship for the foreseeable future.
Assistant Secretary John Kelly, one of the most pro-Iraqi officials at State, wrote to Kimmitt outlining the need "to regain control of policy toward Iraq." Kelly's memorandum was designed to brief Kimmitt before he and other senior officials assembled in the White House Situation Room for what was known as a deputies committee meeting, so called because it was composed of second-ranking officers from the cabinet departments. The committee was to meet on April 16, 1990, to decide whether the Bush administration should try to punish Iraq. It would be chaired by Robert Gates, the former CIA man who was now President Bush's deputy national security advisor.
Kelly laid out the problem succinctly for Kimmitt: "The dilemma we face is that the relationship is already paper-thin. We don nothing for Iraq." If a message of displeasure was to be sent to Baghdad, it could take the form of placing the CCC program on review and not releasing the second $500 million that Baker had pushed for in November 1989; or the government could withdraw the presidential waiver that George Bush had signed in January that allowed Eximbank to continue servicing Iraq. The latter move, read Kelly's memorandum, would have the virtue of "placating Congressional critics" and could even help head off sanctions legislation in Congress, which the Bush administration was already fighting. As for those who wanted tougher controls on exports to Iraq, State now agreed that it should not approve exports of technology if they were deemed likely to contribute to Iraq's nuclear or missile programs.
The deputies committee meeting at the White House on April 16, however, resolved nothing. "We had already labeled Iraq as a member of the 'Sleaze Bucket Four' countries that were pouring money into weapons of mass destruction, along with Syria, Libya, and Iran,” said an official who attended the meeting. But when Dennis Kloske of Commerce suggested taking firm action to limit sensitive technology sales to the Persian Gulf, aides to Brent Scowcroft at the National Security Council objected to any measures “that singled out Iraq.” Both State and the NSC were still insistent on maintaining good relations with Iraq despite Saddam’s rising militance and his fiery speech two weeks before. As one disgruntled participant in the meeting recalled, the State Department allowed that it might consider some minor moves to remind Saddam that his behavior was losing him support in the White House, but there was no question of a radical policy shift. When Kloske pressed his case for action, “State effectively told him to get out of our face.”
The deputies committee, whose deliberations were still secret, had in any case deferred making any decisions until May. Ten days after the meeting, when a House Foreign Affairs subcommittee questioned John Kelly about the Bush administration's Iraq policy, he had little to say that was new. He fielded questions for ninety minutes, but the real import of the hearing was the depth of congressional anger it revealed. Tom Lantos , a California Democrat, listened politely to Kelly and then lost his temper, branding the president's policies toward Saddam Hussein as "Alice in Wonderland." Kelly, he said, had cataloged a "chamber of horrors" and then expressed the hope that Saddam would change. Rhetoric like Saddam's had not been heard since Adolf Hitler. When was the Bush administration going to recognize that sanctions were appropriate?
Kelly protested that dealing with countries that do atrocious things was difficult, but the U.S. government believed "there is a potential for positive, altercation in Iraq's behavior." When pressed about Saddam's unconventional weapons programs, however, Kelly acknowledged that the recent attempt to procure nuclear triggers "leads us to believe Iraq is actively pursuing a nuclear weapons capability." This, of course, was precisely what Bryan Siebert had been trying to tell James Baker and Brent Scowcroft more than a year before.
Scowcroft got a chance to do something about Iraq a month later. The NSC-sponsored deputies committee had prepared a list of policy options, which was forwarded to Scowcroft on May 16. The options ranged from political actions—such as ending U.S. intelligence-sharing with Baghdad, or reducing the size of the U.S. embassy staff—to more stringent economic measures, such as suspending CCC and Eximbank credits. The full panoply of options was to be considered at a one-hour meeting in the White House Situation Room on the afternoon of May 29. Yet once again, as Robert Gates wrapped up the White House meeting, little of substance had been agreed upon.
In money terms, the single most important option put to the May 29 meeting concerned barring Iraqi oil sales to the United States, which the NSC estimated totaled more than three billion dollars in 1990. A ban on the purchase of Iraqi crude would thus be a serious step indeed. Favoring this option was the argument that "oil provides the wherewithal for Iraq's efforts to develop its own non-conventional military production capacity." Against it was the reality that a ban on imports from Iraq might have an impact on American oil prices.
Oil revenues were even more important from Saddam's point of view. He was in urgent need for money for his arms buildup, and he was becoming impatient with low oil prices. For months, he had been at odds with other members of the Organization of Petroleum Exporting Countries (OPEC) and in particular with Kuwait. He openly accused his fellow OPEC members of exceeding agreed-upon quotas on oil production at a time when the market was glutted. So low was the price of oil that in March 1990 a special OPEC meeting had been convened in Vienna to reduce the level of production. Yet the price had still failed to climb.
To make Saddam's situation worse, his debts from the Iran-Iraq war were enormous. At an Arab summit meeting in Baghdad on May 28, he demanded forgiveness of the debts he had accumulated with Saudi Arabia, Kuwait, and the other Gulf states during the course of the war, a total of $35 billion. Iraq, said its leader, "needed to return to its economic situation of 1980." That meant he wanted an additional ten billion dollars in cash to meet his most pressing needs.
Kuwait, which had a border dispute with Iraq that dated back to the 1930s, was not pleased to be accused of exceeding its quotas or to be pressed to cancel Iraq's repayment of debts. Saddam coveted Kuwait's oil wealth, as well as its large natural harbor and its 120 miles of Persian Gulf coastline. In response to Saddam, Kuwait's oil minister said at another OPEC meeting held in Jeddah on July 10, that Kuwait would respect production quotas only if other members did the same. "If we believe that the agreement is not being taken seriously, then obviously we will act to protect our national interests," he said.
As the summer progressed, Saddam became ever more desperate for cash, and he increasingly saw the prospect of getting his hands on more oil-producing land as the solution to his problems. At a meeting of Arab foreign ministers in Tunis that July, Iraqi foreign minister Tariq Aziz accused Kuwait of stealing oil worth two billion dollars from the Iraqi sector of the Rumaillah oil field which lay on a disputed border territory between the two countries. By the time the Tunis meeting broke up in disarray on July 27, Saddam Hussein's position had hardened. In a speech he gave that day to mark the anniversary of the Iraqi revolution, he boasted of his new weapons and hinted that he would take military action. Attacking the "agents of imperialism" for waging and economic guerrilla war, he railed that " their policy of keeping oil prices at a low level is a poisoned dagger planted in Iraq's back." Within hours of his speech, he moved the first Iraqi troops and equipment toward the border with Kuwait.
It would be two more weeks before Saddam's tanks rumbled into Kuwait City. In that period any number of warnings reached both his Arab neighbors and the Bush White House. This time Saddam meant business.
To Margaret Thatcher, prime minister of Great Britain, the Statesman Award. To George Bush. president of the United States, the Distinguished Leadership Award. There were among the prime items on the order of business at the fortieth anniversary celebrations of the Aspen Institute in Colorado. But by the evening of Thursday, August 2, 1990, when President Bush arrived in Aspen, there was very little to celebrate.
Bush made the trip to Aspen, where an anxious Margaret Thatcher was waiting, even though Saddam Hussein had sent two Republican Guard armored divisions and eight hundred tanks over the border into Kuwait only a few hours before. Both politicians would soon lead the world in condemning Iraq's aggression, but in his initial pronouncement Bush remained circumspect" "We are not ruling any options in, but we are not ruling any options out." The British prime minister was equally careful that weekend when asked for her reaction to the Iraqi invasion. "I have a very good rule," she said. "First find the facts. It has stood me very well in Parliament."
As the world's attention shifted between the unfolding drama in Kuwait and the gathering in Colorado, both Bush and Thatcher worked the telephones, conferring with other world leaders as their advisers scrambled to come up with options to defuse the crisis.
Thatcher might have been surprised had she known that on July 28, just days before, Bush had sent a message to Saddam, thereby exercising an option that had been under consideration for more than two months. The list of policy options on Iraq that the deputies committee had furnished to Brent Scowcroft in May included the option of sending a presidential message to Saddam Hussein. The Iraqi leader, Scowcroft was informed, "likes the personal touch." In favor of such a move was the argument that "a carefully crafted message from the President could be effective if it hit hard on our key concerns, proliferation and regional tension, but also emphasized a continued desire for improved relations." On the other hand, however, such a message "could be construed here as being soft on Saddam."
Early on the morning of July 28, CIA director William Webster had gone to the White House to brief the president, carrying with him in a thick manila envelope satellite intelligence photographs that showed Iraqi troops transporting ammunition, fuel, and water to the northern border of Kuwait. The infrared photography that Webster put in front of Bush that morning confirmed that this was no routine exercise. Some 35,000 Iraqi troops had massed and were ready to move. Four tank transporters, an ominous sign that they were prepared to travel long distances.
Bush did not want to overreact, no matter how detailed the intelligence information might be. Later that day, he went ahead and sent a cable to Saddam, saying he was concerned about the Iraqi leader's threats to use force. He did not mention Kuwait by name, however pretending instead to reiterate the standard U.S. policy line: "Let me reassure you that my administration continues to desire better relations with Iraq." The president's message, coming after years of equally friendly signals, gave Saddam little reason to be deflected from invading Kuwait. It was, as one State Department hand put it later, "another busted signal." Before Bush sent the cable, senior Defense Department officials had tried to stop it, fearing it was so weakly worded that it would send the wrong message to Saddam. "We were already seeing troops moving. We were getting worried, and we were putting up this piece of pap. It was just very weak. We should have been much more threatening," remembered Henry Rowen, assistant secretary of defense for international security affairs at the time. Rowen and others at the Pentagon, concerned that Ambassador April Glaspie had already been spineless in her dealings with Saddam and that a conciliatory message from Bush would be equally ineffectual, had done there best, but the president was not deterred.
Margaret Thatcher's position had been similarly encouraging to Baghdad until the spring of 1990. London's own tilt to Iraq had been as lopsided as Washington's during the Iran-Iraq war, and in its aftermath Downing Street had been an eager competitor in the race to keep Saddam happy and to enrich its own treasury's coffers in the bargain. While continuing publicly to espouse the British embargo on supplying arms to Baghdad after the war was over, Thatcher's ministers privately exulted at the moneymaking possibilities the Iraqi market presented.
Late in 1989, even as the British public was deluging the Foreign Office with thousands of letters urging action against Saddam for his use of chemical weapons against the Kurds, William Waldegrave, a senior Foreign Office official, had suggested to John Major, the foreign secretary, that he make a personal visit to Saddam in order to drum up business. There was no pussyfooting or brave rhetoric about bringing Saddam into the community of nations. This was purely a matter of commerce; Iraq was known among Major's staff as "the big prize." Waldegrave wrote in a memorandum in October 1989, "I doubt if there is any future market on such a scale anywhere where the UK is potentially so well placed. ... We must not allow it to go to the French, Germans, Japanese, Koreans, etcetera. The priority of Iraq in our policy should be very high. But time was of the essence. He argued that the arrest of Farzad Bazoft, the British journalist whom Iraq would hang as a spy a few months later, meant Major should go sooner rather than later. "A few more Bazofts or another bout of internal repression would make this more difficult," wrote Waldegrave. (additional source one, two and three.)
So as the Iraqi army dug into Kuwait in the summer of 1990 and Thatcher joined Bush in founding up world leaders against Saddam's aggressive move, both leaders had much to reflect upon. Neither Bush nor Thatcher was in any doubt when it came to assessing Saddam's capabilities and intentions. The part their governments had played in helping to build up the Iraqi dictator was another matter.
The intelligence flow to Iraq had continued after the war ended in 1988. The man who held direct responsibility for deciding what information Iraq would receive was Robert Gates. From the days when he had served as a top aide to William Casey in 1982, Gates had been involved in implementing White House strategy toward Iraq.
American intelligence-sharing had continued as Saddam adopted an increasingly belligerent posture in the spring of 1990. It had continued after Iraq had been caught trying to ship critical nuclear components from the United States to Baghdad through London in March. It had continued after Saddam threatened to burn half of Israel in early April. It had even continued after April 10, when British customs officers seized eight one-thousand-millimeter-diameter tubes on the docks of Teeside, en route to Iraq, where they were intended for Dr. Gerald Bull's science fiction-like supergun. Indeed it was not until the end of May 1990, two months before Iraq invaded Kuwait, that the question of discontinuing the comfortable arrangement with Saddam had come up for discussion. Even then, it had been treated simply as a possible option at the White House meetings on Iraq that Gates chaired, and few people really wanted to discontinue it, so natural had it become. (Alan Friedman "Spider's Web" 1993 p.158-67)
However much President Bush might now be depending on others, he did not forget his old friend. Six days after the invasion and before Baker left for Wyoming, the president signed an unusual document that had been drawn up by White House counsel Boyden Gray. It was a financial conflict-of-interest waiver that authorized Baker and ten other cabinet officers and officials—including Brent Scowcoft, Robert Mosbacher, and Robert Gates— to participate in "current United States policy-making, discussions, decisions, and actions in response to the Iraqi invasion of Kuwait."
Gray had asked the president to sign waivers for all these officials who had substantial oil, defense, or other business holdings that might be affected by the Persian Gulf crisis. A waiver was also issued for Gray himself. "I insisted we couldn't afford to take any chances," Gray recalled after the waivers became public two years later, to howls of protest from congressional Democrats. "We wanted to make sure that there wasn't the slightest question in terms of anyone asking questions and shouting 'Independent council! Independent council!' The goddamn press! They get it so goddamn wrong."
The three-page waiver, dated August 8 and presented in the form of a memorandum from the president to the attorney general, was couched in grandiloquent terms. (See Appendix B, pages 339-41.) "As you know, vital United States and world interests are at stake in the Middle East as a result of the Iraqi invasion of Kuwait,, As Commander in Chief and the Nation's Chief Executive, I am confronting decisions of immense Import with lasting consequences for the nation and the world. ... We now face a series of decisions, large and small, about policies and military measures required to defend United States interests and counter this act of blatant aggression." The president noted that he had been briefed on the financial interests of Baker and the others for whom he was issueing the waiver, and that in some instances "individuals have quite substantial financial interests in industries that might be affected ... by the resolution of situations that may arise."
What was noteworthy about Bush's move on behalf of Baker was the absolute secrecy imposed by the White House. The waiver document was regarded as so sensitive that not even Baker himself was to be given a copy. "Because of the breadth and sensitivity of the waiver, the White House is currently unwilling to distribute copies to affected individuals," a State Department memorandum reported. Baker's potential conflict of interest, of course, concerned oil. The memorandum informing State of the waiver explained that it would "allow Secretary Baker to participate in all foreign policy questions related to the Kuwait crisis, even those directly involving oil production and prices." A quick glance at the holdings of Baker and his immediate family indicate why his might be an especially sensitive case. The information was filed by Baker in January 1989, right after his nomination as secretary of state. He and his family held interests in the major oil companies Amoco, Exxon, and Texaco, three other oil-related companies, and ten limited partnerships in oil wells or leases. (See Appendix B, page 342.)
The president could waive conflicts of interests with the stroke of the pen, but it was not so easy to wipe out Washington't assistance to Saddam Hussein, both official and covert. Weeks before the invasion of Kuwait, the CIA had warned the Bush administration of the old problem of arms shipments to Iraq that were transitioning through Jordan.
This was a sticky issue for George Bush, especially because King Hussein of Jordan, who was walking a political high wire to keep on friendly terms with both Baghdad and Washington, was scheduled to visit the president in Maine. He flew to Kennebunkport on August 16, 1990, to meet with Bush at his vacation home. The media was informed beforehand that this would be an occasion for a stern lecture to Hussein. Jordan had refused to join Saudi Arabia, Kuwait, and Egypt in supporting the Western coalition Bush was assembling to force Saddam out of Kuwait. The king had limited himself to stating he would abide by the UN embargo against Iraq. It wasn't enough: Saudi Arabia acted to cut off $700 million in aid and oil sales to Jordan, and Washington put its $50 million a year in economic and military aid on hold as a result of congressional indignation at the king's stance.
It was clearly time for George Bush to persuade the monarch to get in line. As the two men stood before TV cameras outside the Bush home after their mid-August meeting, it did indeed look as if Hussein had been firmly dealt with.
Appearances were one thing, but the truth was that the underlying relationship between King Hussein and President Bush had barely changed. There was a good deal of harrumphing in public as the king insisted that he was abiding by the UN embargo, even as television pictures showed trucks on their way over the border from Jordan to Iraq and ships in Jordan's port of Aqaba unloading cargo also destined for Iraq. Behind the scenes in both Washington and London, though, not only was there sympathy for the king, there was awareness of the uncomfortable fact that for almost a decade both Britain and the United States had used the Jordanian monarch and his generals as a conduit to arm Saddam Hussein covertly. (Alan Friedman "Spider's Web" 1993 p.169-71)
Conflict-of-interest waiver also shown in Appendix B, pages 339-41 (Alan Friedman "Spider's Web" 1993 p.)
Because of the breadth and sensitivity of the waiver, the White House is currently unwilling to distribute copies to affected individuals," a State Department memorandum reported. (Alan Friedman "Spider's Web" 1993 p.170) full memorandum
Dohan spelled out the details for Haobsh. Finding Jordanian front companies through which Haobsh could do business with Iraq would be no problem, said Dohan. Two hundred had been formed in Jordan since the invasion. Under instructions from his CIA handler to cultivate Iraqi contacts, Haobsh displayed vivid interest. "I told Mr. Dohan I would be happy to work and help the Iraqis in getting to them some of the products which they were looking for," he later recalled. Dohan asked for more details of what kind of products Haobsh could provide. Dohan said he had approval from Baghdad for some orders and was willing to open a bank account in Haobsh's name to deposit up to one million dollars to pay for some orders up front. Haobsh replied that the bank account would not be needed, that he preferred to deal strictly on the basis of individual orders. Dohan pressed him to visit Baghdad, but Haobsh was worried that he would have problems back in the United States if he traveled to Iraq. No problem, said Dohan; Haobsh's passport would not be stamped. Haobsh demurred, steering the conversation back to payment terms and shipping procedures. The port of Aqaba was one possible route, but Dohan also suggested that products be delivered to Italy or Turkey and then be trucked overland to Jordan, for transshipment on to Iraq.
When Dohan bade Haobsh farewell, the aircraft carrier USS Independence was steaming toward Iraq. Haobsh was relieved to leave Jordan. Twenty-four hours later, in a safe house across the Potomac from Washington, "Alan" and "Debbie" from the CIA and "Dan" from the Defense Intelligence Agency read his four page report, debriefed him, and asked him to revisit Dohan as soon as possible. In the meantime, Hobsh was told to get in touch with Union Carbide and obtain a bid for the graphite that Dohan wanted. In the back of his mind, something began to trouble Haobsh, just as it had when Dohan first mentioned graphite in Amman. Dohan had told him that graphite was to be used "for casting purposes in weapons system." Was the agency going to have him deliver the graphite? he asked Debbie. "She told me yes," said Haobsh. "She also told me the Agency was well aware that American companies had been sending graphite to Saddam through Jordan after the UN sanctions. It did not seem to bother them."
As the downhill progress toward war quickened in the autumn of 1990, Haobsh made a second trip to Jordan for the Agency. British foreign secretary Douglas Hurd had just announced that the international community was willing to use force against Saddam, and Iraqi military commanders were ordered to prepare for a U. S. attack "within a few days." Haobsh arrived in Amman on October 27, just before President Bush announced he had "had it" with the mistreatment of American citizens in Kuwait, touching off another round of rumors that he was preparing the American public for war.
Despite the jittery times, however, Dohan was surprisingly upbeat when he met Haobsh again. He explained to Haobsh that he was moving his operations to Tunisia. War seemed to be just on the horizon, so he had set up new supply lines to Iraq through Tunisia, Algeria, and Morrocco. What he needed were weapons of all kinds and spare parts for Iraq's air force, particularly brakes for its French Mirages. Haobsh said he would see what he could do. As before, Dohan emphasized that there would be no money problems. As if to illustrate the point, he detailed to Haobsh how Iraq had shipped gold bullion looted from Kuwait through Jordan to Europe, right under the nose of American warships.
Upon his return to Washington, Haobsh met Debbie and Dan and was again taken to a safe house for debriefing. I was really worried when I left that meeting," he recalled later. "First of all, they weren't interested in the information about the gold, and that surprised me. I had details about a huge Saudi Arabian trading company that was acting as a front for Iraq, and they were not interested in that either." Haobsh gained the distinct impression that he was being used for a purpose very different from that which his handler had originally described. All these people seemed to want him to do, he concluded, "was to sell weapons to Iraq." After his next trip there would be no doubt in his mind.
By the end of October, secret plans had already been laid in Washington for the launch of an air war in January, with a ground war to follow after a month. After President Bush announced on November 8 that he was doubling the 200,000 troops already in Saudi Arabia, war seemed inevitable. The only queation for the public was when would it begin. This prospect, in turn, raised the specter of Iraqi-sponsored terrorism in the American consciousness. After all, Iraq had once been on the State Department's blacklist of states sponsoring terrorism -- before the ?Reagan administration quitly removed it in 1982 -- and it had been hastily put back on the list only after the invasion of Kuwait.
In June 1990, before the invasion of Kuwait, however, James Baker had received what he termed "disturbing reports that Iraqi officials had been in contact with members of the notorious Abu Nidal terrorist organization." On an official level, Baghdad had promised WAshington years before that its policy was not to allow Abu Nidal to come to Iraq. In a message to April Glaspie on June 27, 1990, Baker wrote, "It is troubling therefore that we continue to hear reports that the Abu Nidal Organization has been allowed to open a new office in Iraq. As you well know, in our view the Abu Nidal Organization is among the most dangerous terrorist organizations in existence." (See Appendix B, pages 344-45.) Iraq might find itself back on the State Department's blacklist if the reports turn out to be accurate.
After the invasion, the matter of Abu NIdal's office in Baghdad became moot, since the UN embargo was more stringent than the sanctions that would have accompanied a new blacklisting by the State Department. Abu Nidal, however, was no less of a terrorist threat. The solution, devised by the Saudi government with the quit blessing of Washington, was to neutralize him and his operations. This was done in a manner that was as simple as it was crude.
"Sometimes," noted a U.S. intelligence officer familiar with the plan, "you have to get your hands dirty." With Operation Desert Storm in the offing, an extraordinary deal was implemented. Fred Haobsh got wind of it during his travels on behalf of the CIA. Early in 1991, Saudi emissaries asked Abu Nidal to relocate himself personally to a safe haven in their kingdom. There he remained throughout Operation Desert Storm. A U.S. intelligence source later confirmed Haobsh's information, adding that in addition to a home and office, Abu Nidal was provided with millions of dollars in cash to induce him to suspend his terrorist operations before and during the war. "The money came from the Saudis, but Washington knew what as going on. The Bush administration turned a blind eye. They didn't really want to know," said the intelligence officer.
This Abu Nidal episode was by no means the first time the Reagan or Bush administration had allowed dealings with terrorists in pursuit of U.S. policy goals. In the mid-1980s, Washington had learned of Saddam's links to Abu Abbas, leader of the Palestinian terrorist group that hijacked the cruise ship
Now, with only days to go before the United States began bombing Baghdad, the time was ripe for a discreet arrangement with Abu Nidal. The movement of the world's most dangerous terrorist from Iraq to Saudi Arabia was known about and countenanced.
At eleven O'clock on the morning of January 9, 1991, in a conference room at Geneva's International Hotel, James Baker and Tariq Aziz sat down opposite each other for what would be their final conversation. If their first encounter, in the Henry Clay Room of the State Department back in October 1989, had not been easy, this meeting would be far more difficult. The two men spent six and a half hours achieving nothing.
Early in the meeting Baker, on behalf of President Bush, had handed Tariq Aziz a letter addressed to Saddam Hussein. If Iraq fully complied with the many UN Security Council resolutions on the table, then Iraq would "gain the opportunity to rejoin the international community," wrote Bush. "Mor. At the e immediately, the Iraqi military establishment will escape destruction," Bush added, and he warned that if Iraq destroyed the Kuwaiti oil facilities, "you and your country will pay a terrible price."
Aziz responded to Baker in the clearest of terms: "I am sorry, I cannot receive this letter. The language in this letter is not compatible with language between heads of state." The letter lay on the table between the two men for the rest of the meeting. The die was now finally cast. At the separate press briefings each man held immediately after the meeting, Baker announced, "Regrettably, ladies and gentlemen, I heard nothing today that—in over six hours I heard nothing that suggested to me any Iraqi flexibility whatsoever on complying with the United States Security Councils Resolutions." Aziz was equally bleak: "The tone of [Sedcrfetary Baker's] language was diplomatic and polite. I reciprocated. But the substance was full of threats. And I told him, also in substance, we will not yield to threats."
General Norman Schwarzkopf, the Allied Forces Commander, was sitting alone in his office in Riyadh at the time, watching Baker and Aziz make their statements on TV. "I realized this was it: we were going to war," he thought to himself.
On the evening of January 16, Fred Haobsh was sitting in his living room in Dallas watching the about-to-be famous CNN broadcast from Baghdad. He saw the clear sky over the capital light up with antiaircraft fire like a Fourth of July fireworks display. Distorted through the eerie green hue of the TV camera's night-scope, liquid lines of tracer shells threaded up into the darkness, to the wailing accompaniment of constant air-raid sirens. The bombing of Baghdad had begun.
Cruise missiles and Stealth aircraft struck the three main air defense centers and central Baghdad itself, while three hundred more aircraft took out defense radars, communications links, and a wide range of military equipment that the West had covertly supplied to Iraq, and billions more in high technology that Saddam Hussein had illicitly obtained, were now being bombed by his principal suppliers.
The cluster bomb factories that Carlos Cardoen had supplied and built were among the very first targets. Those had arrived in Iraq with CIA knowledge and blessings. The radar-guided antiaircraft systems that resembled fireworks over CNN as they assisted Baghdad's defenses had wound their way to the Iraqi capital from James Guerin's companies in Pennsylvania. The computers from Hewlett-Packard, the trucks from General Motors, the satellite down-links from California, and a thousand more U.S.-supplied components of Saddam's huge military machine were being methodically obliterated.
As dramatic as the bombing was, however, Fred Haobsh had other things on his mind. He was due to meet Saddam's procurement officer, Anas Dohan, in Tunis in less than two weeks. All the paperwork covering Dohan's order of graphite was in place—the letters and specifications from Union Carbide and the price quotations. All that remained was his pretrip briefing by Alan and Debbie, and an introduction to another CIA agent who would be making the trip with him, a man who called himself a commodities broker from Marietta, Georgia. The commodities broker would be introduced to Dohan as an associate of Haobsh's, and a well-connected one at that.
On January 28, Haobsh and his new CIA companion met Dohan in Tunis. The Iraqi seemed at first to be remarkably unworried by the war that was now underway. As the Hilton Hotel's television brought news of the 2,600 sorties that the allies had flown the previous day, Dohan belittled their efforts to destroy ?Saddam's mobile missiles. "He explained that Iraq had at least 150 Scud missiles and launchers left, while the allies had been saying there were only thirty-six," said Haobsh. YThe statement would not turn out to be accurate.
The technical specifications and prices for the Union Carbide graphite were presented to Dohan, who examined the paper and promised to respond with an order shortly. During the course of the meetings, there was a constant flow of telephone calls to Dohan from the Iraqi embassy in Amman, but between interruptions it became clear that Dohan was prepared to pay heavily for Soviet-made shoulder-operated surface-to-air-missiles (SAMS). That was when Haobsh's CIA companion responded: He said there would be no problem. That was one of the "commodities" he knew all about.
Haobsh's inner alarm began to well up once more. "Here we were in the middle of Operation Desert Storm, with the TV on twenty-four hours a day, watching the war. and we were offering to sell Saddam's procurement officer a bunch of SAM missiles,"Haobsh said. "I just didn't understand it, and I became frightened." Haobsh at first assumed his CIA colleague was willing to go along with Dohan's latest request because the missiles in question would be deliberately altered to be defective. But when the two men returned to Washington for their Agency debriefing on February 2, his fears mounted once more. Debbie was pleased with their progress. "'Great,' she said, 'now we're going to sell Saddam some missiles,'" recalled Haobsh. Then she cut to the point: in fulfillment of Doahan's request, would Haobsh be prepared to sell him the SAMs Despite his assumption that the CIA knew what it was doing and would never supply fully functioning missiles to Iraq, Haobsh nonetheless blanched at the idea.
"I knew I couldn't do it," he recalled. His CIA handlers tried to reassure him, but Haobsh was out of his depth and becoming increasingly nervous. "I asked if they could give me some kind of letter saying that I was working on their behalf, in case I was prosecuted," said Haobsh. "But they said that was not possible. That's when I decided I wanted out."
From then on, Haobsh refused to travel anymore for the CIA. But the Agency emphasized how valuable his information had been and urged him not to quit; if he didn't want to travel, that was understandable, but he could not give up now. After all, he had immediate access at any time to Saddam's major procurement officer in the Middle East. So Haobsh continued fax contact from his Dallas office with Dohan in Tunis, and the CIA made the necessary arrangements to provide a sample batch of weapons.
Following instructions from his Dallas-based Agency contact, Haobsh faxed Dohan's office on February 4, 1991, offering him twenty-five SAM 7 and twenty-five SAM 16 shoulder-fired missiles of Soviet origin for delivery to Tunis within two weeks. The SAM 7 was a relatively primitive weapon, but the SAM 16 was a great deal more advanced and had been seen by the West only sicne 1987. It had a range of four miles and had already shot down some U.S. Marines' Harrier jump-jets during the course of Operation Desert Storm.
Foir reasons that were unclear at the time, Dohan took a long time in replying to the offer from Haobsh; in fact, he did not get back in touch until after the war had ended. When he contacted Haobsh on May 18, it was with a most curious fax. "Dear Fred," it began. "We have confirmed document that FBI is monitoring our correspondences. Pls wait for the time being. We will come back to you when the matter is solved." Haobsh had no idea how the FBI might ahve discoverd his communications with Dohan, and he never heard from the Iraqi again.
By that time, Haobsh had formerly cut his link with the Agency. No more cash payments came to him in envelopes from the CIA man in ?Dallas, and, he hoped, there would be no more bizarre and inexplicable scenarios like the one he had just been through. He didn't know if the CIA agents he had been dealing with were renegades out to make a fast buck or regular agents trying to sabotage and track Saddam's procurement network, and he never would. But soon it no longer mattered to him. Haobsh had sat out the rest of Operation Desert Storm in Texas, and "on February 28, the day after Desert Storm was over, I made up my mind,"he said. "Never again would I have anything to do with the CIA."
President Bush .... cease fire in effect .........
In Washington, however, there remained some unfinished business for the Bush administration. It concerned the troublesome BNL branch in ?Atlanta that had provided billions of dollars of Iraqi loans which helped arm Saddam Hussein. For many months now, the prosecutors in Atlanta had been ready to bring indictments, only to be stopped for one reason or another. The waiting was about to be over.
The next day, a number of journalists were called to the Department of Justice building in Washington. This was to be neither as military briefing nor a political event, but rather a press conference. The press conference, however, would raise more questions than it would answer, and critics would later claim it was itself part of the Bush administration's attempt to cover up its prewar dealings with Iraq. The star was Richard Thornburgh, the attorney general of the United States.
Chapter Twelve: Justice Delayed
.........
The reporters chuckled again when it was announced that the attorney general was about to reveal the story behind "Operation Desert Fraud"; they settled down like students in a rowdy classroom as Thornburgh approached the microphone. Reading from a prepared text, he said a federal grand jury in Atlanta had just indicted ten persons for conspiracy, mail fraud, and wire fraud involving more than $4 billion in loans made to the government of Iraq by the Atlanta branch of an Italian government-owned bank. The bank was called Banca Nazionale del Lavoro. Four Iraqi officials and an Iraqi bank had also been charged in this "international white collar scam with dire global consequences."
The eighteen month investigation, Thornburgh said, had unraveled a paper trail spanning three continents. "By utilizing modern technology such as computers, fax machines, and instant communication these defendants were able to silently pick the pockets of a major Italian bank of more than $4 billion ... almost by the push of a button." U.S. authorities had also been deceived, he added, and possible violations of federal law in connection with the acquisition by Iraq of military armaments and other goods remained under investigation.
Thornburgh never mentioned the name of Christopher Drogoul, the former BNL branch manager; he left that task to Robert Mueller, the assistant attorney general in charge of the criminal division of the Justice Department. Mueller—who would spend the rest of the year denying repeated accusation that he was the man responsible for covering up U.S. government involvement in another banking scandal, the BCCI case—now accused Drogoul and his fellow defendants of defrauding BNL's Rome headquarters. Drogoul, he revealed, had been arrested that very morning in Atlanta.
The Iraqi loans had been made in violation of BNL, Italian, and U.S. lending limits, and the branch's book had been falsified along the way. Some of the loans, Mueller explained, were backed by U.S. government loan guarantees. Among the four Iraqi officials indicted was Sadik Taha, Drogoul's friend at the Central Bank. The others were Abdul Munim Rasheed, also of the Central Bank; Raja Hassan Ali, the director-general of the economic department at the Ministry of Industry and Military Industrialization; and Safa Al-Habobi, the director-general of one of the ministry's weapons plants and a director at several Iraqi front companies, including TDG and the British and U.S. branches of Matrix Churchill.
When the presentation was over, the reporters scrambled to ask questions. The very first one proved difficult for Thornburgh: How much of the money had gone to the Iraqi military machine, and how much of the guaranteed loans would the American taxpayer be stuck with? Thornburgh dodged the issue of military items, saying, "I can't answer the question with regard to where the investigation will lead." As for the pocketbook question: With regard to the taxpayers, in one respect, again, that's—we can't answer that right now because these loans are due and owing, and in many respects the ultimate victim is going to be the bank." There were, however, "certain loan guarantee features that may cause some exposure to the U.S."
As he listened to the next questioner, Thornburgh squinted, scrawled some notes, then looked vaguely displeased. He was told that the Financial Times of London had obtained evidence showing that BNL money had gone into Iraqi missiles, chemical weapons, and other military projects, and that cabinet-level officials seemed to have been aware of this. If a British newspaper could obtain this information, presumably the Justice Department could as well. Why was the Bush administration not moving ahead with any indictments of those involved in using BNL loans to assist Iraq's weapons program? And was the Justice Department investigating any past or present U.S. government officials for their participation in the BNL affair, including agents at the CIA? And what comment could the attorney general offer on documented evidence that a full year ago he himself had participated in delaying the BNL indictments?
The attorney general said he wouldn't discuss the military dimension, which was still being pursued. He declared "without hesitancy" that there was no evidence of U.S. government officials being involved. As for his own role in delaying the indictments: "Well, I can certainly comment on the latter. I did not delay any of these indictments. This investigation has really been done ... in a very expeditious manner. It's been about an eighteen-month investigation."
After this exchange, the reporters became progressively tougher on Thornburgh. Had the State Department played a role in the BNL investigation? None,. replied Thornburgh, except in matters concerning the "international arena" both the State Department and the National Security Council had been advised. Was there a White House decision that had to be made about BNL? No, the White House had merely been kept abreast of where the investigation was going.
But how on earth could all the regulatory agencies in the United States and Italy, and the bank in Rome, have been in the dark about billions of dollars over several year? BNL, replied Thornburgh, was a victim rather than a participant. There had been "a very sophisticated and complicated scheme to conceal and cover up precisely what was being done, a scheme that was obviously very successful for a considerable period of time."
Then came another question that flustered Thornburgh. Hadn't a member of Congress from Texas named Henry Gonzalez, the chairman of the House Banking Committee, said just a week ago that a top-ranking administration official, whom he did not name, had knowledge that the BNL credits had been used for money purchases? Thornburgh declined to respond. But Gonzalez, insisted the reporter, had claimed that he was having trouble with his own BNL investigation. "He claims that effectively you've been stiff-arming him. Is that true?" It was true, said Thornburgh, that Gonzalez did want to investigate, but the requests he had been making would have interfered materially with the Justice Department's own work.
At this pont the reporters began to smell blood. Did Thornburgh have evidence of CIA knowledge of any of this BNL business? "Our business," the attorney general replied, "is to prosecute criminal cases, and that's as far as I can go in characterizing the nature of the investigation." But was there or was there not some awareness of the BNL loans? "We're not a general investigative agency; we're a law enforcement agency," Thornburgh said, becoming exasperated. There was, he repeated, no evidence that "anyone in the current government is involved."
Finally, a friendly face appeared, a reliable reporter whose daily bread was the Justice Department beat: "How are you going to get these people from Iraq to stand trial?" Thornburgh smiled broadly and with perfect timing he barked into the microphone: "Good question!" Laughter filled the room.
It was getting late. Thornburgh's press secretary said there was time for just a couple of questions more. The last one concerned the infamous Sadik Taha, the Iraqi Central Bank director. His death had been reported in the British papers in June 1990, yet some U.S. investigators had said the death was faked in order to avoid his being implicated in the BNL affair. One law enforcement official said Taha had been spotted in Moscow four months after his supposed demise; others insisted he really was dead. Now he had been indicted. Was Taha alive or dead?
"Dead or alive," said Dick Thornburgh, laughing, "we've indicted him ... and we always get our man, one way or another!" And on that high note a relieved attorney general excused himself and strode briskly from the room. (Alan Friedman "Spider's Web" 1993 p.176-87)
.... When the issue of McKenzie's findings came up, it was clear that the facts could no longer be ignored. The meeting decided simply to advise Baghdad that the United States would not go forward with the $500 million of remaining farm credits until the investigation in Atlanta was completed. Further complicating the BNL investigation was the fact that Robert Barr, McKenzie's boss, was about to leave his job. Barr a former CIA employee who worked for George Bush when Bush served as CIA director in the mid-1970s, admitted later that in the BNL case considerations of foreign policy had become entwined with those of law enforcement. The State Department, he said, got involved early on, and the case soon became "complex both legally and because of foreign policy concerns." William Hinshaw, the FBI special agent on the BNL task force at the time, later recalled that in the spring of 1990, "we were ready to go with the indictment, but Washington was holding things up and I still have no idea why."
Meanwhile, back at Thornburgh's Department of Justice, there were new fears about another problem. It seemed that Henry Gonzalez, the outspoken Democratic congressman from Texas, was gearing up to launch a full-scale BNL investigation. The House Banking Committee, which Gonzalez chaired, was asking a string of embarrassing questions about the White House's policy toward Iraq and its consequences in the BNL affair.
By September 1990, while George Bush was sending U.S. troops over to the Saudi desert to stanch Saddam, Gonzalez announced he would hold congressional hearings on the BNL affair. The timing was very awkward from the administration's point of view. Ir came just as the administration was engineering a speedy 180-degree shift in its Iraqi policy. Saddam was no longer the privileged friend of George Bush and James Baker; he was now the enemy. As part of the shift, President Bush signed an executive order freezing Iraqi assets in the United States. Yet when the Treasury official in charge of preparing the list of Iraqi companies whose assets were frozen was asked why certain known BNL-funded front companies had not been included, he demurred. "Can't talk about that. It's classified," he replied.
There was, however, one prominent exception that he would discuss. U.S. Customs Service agents had been dispatched to Ohio to padlock the doors of Matrix Churchill, which was now publicly identified as an Iraqi front company, even if this was the same Matrix Churchill to which Baker had given his personal approval for exports to Baghdad a year before. Matrix Churchill, said one, "was brokering a whole host of things for the Iraqis, including the attempted purchase of entire turnkey factories and of fiber optics needed for their missile development sites."
The atmosphere in Washington had most definitely changed as America contemplated going to war, and the BNL affair now looked as though it could prove a major embarrassment for the Bush administration. Thus in September 1990, when Thornburgh learned that Henry Gonzalez was ready to hold hearings, he decided he had to move quickly to stop the BNL investigation. His staff prepared a briefing memo for the attorney general's telephone call to the stubborn Banking Committee chairman. "Our best attempt to thwart any further congressional inquiry by the House Banking Committee into this case is to have you contact Chairman Gonzalez directly," Thornburgh's legislative aide, Lee Rawls, wrote in that memo. But when the phone rang on September 25, 1990, Gonzalez declined to take Thornburgh's call. So a letter was drafted at the Justice Department. It went from Thornburgh to Gonzalez the next day.
"The purpose of this letter is to express my profound disappointment in your decision to ignore the strong objections of this department in the Banca Nazionale del Lavoro matter," wrote Thornburgh. "I am similarly distressed by your refusal last evening to discuss the matter with me," he added. Thornburgh expressed powerful opposition to Gonzalez's plan to hold public hearings. He claimed the entire Atlanta investigation would be jeopardized. The most important reason he cited for stopping Congress was not, however, spelled out in great detail. "As you should be aware, this is a sensitive case with national security concerns," wrote Thornburgh. (See Appendix B, page 346.)
As if that weren't enough, Thornburgh's aides also had to contend with an extremely delicate situation in Atlanta. Congressional staffers working for Gonzalez were due to arrive from Washington to interview witnesses in the BNL affair. Gale McKenzie wanted to warn the witnesses not to speak with the staffers, but officials at Justice knew this was most certainly not the way to stop Gonzalez. A memo was hastily drafted by one of Thornburgh's top aides, suggesting that word be conveyed to McKenzie that under no circumstances should she advise, suggest, or imply to witnesses that they refuse to talk to anyone.
"If we have a valid reason to ask Congress to refrain from acting in a particular investigation, we tell the staff directly, and never try to block their investigation by chilling witnesses," the worried Justice Department official wrote. "If she [McKenzie] talks to those witnesses, the Congressional lead will be too hot for any but robots to handle." Then the Justice Department official added one line to the memo: "I thought that the U.S. Attorney's Office was under control now that Joe Whitley is in place?"
Joe Whitley, the man who was supposed to have McKenzie and the BNL team"under control," was a loyal friend of Thornburgh's. Thornburgh had chosen him to replace Robert Barr as the new U.S. attorney in Atlanta; he had been approved by President Bush and sworn in just three months before. Whitley became Gale McKenzie's boss, and the man who presumably would take charge of the BNL case, at a very interesting moment in the investigation; the more the Atlanta team examined the BNL case, the more some members were developing suspicions about the possible involvement of U.S. intelligence agents in the Iraqi loans saga. These suspicions were about to be set down in a formal request for a briefing at CIA headquarters in Langley, Virginia.
Whitley's own background was almost as interesting as the BNL case itself. In the summer of 1989 he had stepped down from his position as acting associate attorney general of the United States, the third-ranking job in Dick Thornburgh's Department of Justice, and moved back to his native Atlanta to become a partner in the law firm, Whitley took on a most unusual corporate client with both British and American operations. The client was none other than Matrix Churchill.
As lawyer to the Iraqi-owned company, Whitley's task was twofold—to defend Matrix Churchill from any criminal charges McKenzie might bring, and to threaten BNL's Rome headquarters with a lawsuit in order to make sure the bank paid out money it had promised to Matrix Churchill as part of its funding of exporters shipping goods to Iraq. By December 1989, Whitley had written, signed, and formally lodged the legal action against BNL, demanding it make good on Drogoul's promises of credit to Matrix Churchill.
In April 1990, after consulting with the White House, Thornburgh namerd the thirty-nine-year-old Whitley to the job in Atlanta. He started on June 1. The U.S. attorney's office in Atlanta was investigating Matrix Churchill at the same time, and on June 8 Whitley wrote a memorandum to McKenzie stating that "although it could be argued that there is no conflict of interest in my continued involvement, I believe it is appropriate to recuse myself and reevaluate this decision as the case progresses." Thus it made no sense when Thornburgh's deputy added that line to his memo on September 21, 1990: "I thought that the U.S. Attorney's Office was under control now that Joe Whitley is in place?" By then Whitley was supposed to be out of the case.
Reflecting on this development, Bob Mueller said later that "it would have been nice to know" about Whitley's work on behalf of Matrix Churchill. An aide to Mueller put it more bluntly to William Safire of The New York Times: "Whitley's recusal came as a real shock to me and a shock to Bob Mueller. We were looking forward to a U.S. Attorney who could oversee this operation, and it was disappointing."
Whitley's decision to have nothing to do with the BNL case in the summer of 1990 seemed clear enough. But on February 28, might have to be "readdressed via Joe Whitley." Clearly there was some confusion at Justice about Whitley's status. (Alan Friedman "Spider's Web" 1993 p.193-5)
Copy of Thornburgh letter to Representative Gonzalez in Banca Nazionale Del Lavoro Affair and Regulation and Supervision of U.S. Branches and Agencies of Foreign Banks
Years later, when a reflective Prime Minister Giulio Andreotti was asked about Rome's involvement in the scandal, he replied later that "the really important question to ask is who in the bank knew." As the BNL case went forward in the wake of Operation Desert Storm and became a major political controversy in Washington, no single issue was more important than the Bush administration's repeated assertion that Rome was the victim not a participant in the Iraqi loans affair.
What was really happening, however, was that the Italians were lobbying Washington in a hundred different ways to make sure that the BNL, an Italian government entity, would not be indicted. As a close friend of Joe Whitley's in Atlanta remarked, "The folks representing BNL did a very good job of directing the U.S. government, and the prosecutors fell for it."
Right from the start of the BNL scandal, when George Bush and James Baker were continuing to press for U.S. financial and technology aid to Saddam in spite of evidence of Iraqi complicity, the issue of Rome's involvement was a sensitive matter. Italy was a NATO ally and had a talent for keeping on good terms with Washington.
Certain facts, however, pointed directly at Rome's involvement. As soon as the scandal erupted in the autumn of 1989, the State Department received a disturbing report from Joseph Wilson at the U.S. embassy in Baghdad. The confidential cable reported that an embassy source with "intimate ties" to the Italian embassy in Baghdad had informed Wilson that "the Italian embassy is under strong suspician of complicity in the BNL financial scandal."
That diplomatic cable was one of many reports available to the White House and State Department on Rome's alleged rore in the Iraqi loans saga. From September 1989 until Dick Thornburgh announced the BNL indictments in February 1991, at least six U.S. intelligence reports that were widely disseminated inside the Bush administration either suggested that BNL's Rome headquarters knew of the Atlanta loans to Iraq or stated it point-blank.
In Rome, after BNL' former chairman, Nerio Nesi, and director-general, Giacomo Pedde, were ousted in 1989, the new chairman, a close friend of former Prime Minister Bettino Craxi named Giampiero Cantoni, grew increasingly worried about the Atlanta investigation. Cantoni wanted to make sure BNL was not indicted; he believed the theory of Drogoul having been a lone wolf. So did Guido Carli, the treasury minister who exercised formal control over the Italian government bank. On October 19, 1989, Cantoni strolled out of BNL headquarters on the Via Veneto, crossed the street, and walked into the American embassy. He went straight to the office of Peter Secchia, the Michigan lumber tycoon whom George Bush had named as his new ambassador to Rome.
Cantoni expressed his concerns about the BNL Atlanta case and suggested to the U.S. ambassador that the matter should be raised "to a political level." Secchia reported back to James Baker that the BNL chairman had indicated the bank's desire to cooperate fully with U.S. government authorities "while making it fairly clear they want to achieve some kind of damage control." (See Appendix B, page 347.) At the same time, Secchia noted Treasury Minister Carli was trying to block an effort by the Italian Senate to open an investigation of the BNL affair.
The bank and the Italian government were thus taking parallel action. In effect, Rome had started its own cover-up. George Bush and James Baker, although mainly preoccupied with their relations with Iraq, were kept up to date on how the Italians were reacting to the BNL matter. Less than three weeks after Cantoni had approached Secchia, the CIA informed the White House and State /Department that the scandal had already become a major political embarrassment in Rome that could bring down the government. But the CIA also noted that that Rome "appears pleased at the low-key manner in which Washington has reacted."
That may have been so, but members of the Rome bank's own task force on Atlanta, who spent long hours each day examining thousands of pages of telexes and loan records, were exhausted and frequently furious with Cantoni. We kept getting demands to pay out millions of dollars that Drogoul had promised. One day it was Matrix Churchill. The next day it was General Motors or Mobil. We knew by then that many of the exports we were financing were going into Iraqi military projects, but the orders were to keep paying and keep quit," complained one of the harried task force bankers at BNL Rome.
Then, for reasons that escaped the comprehension of those lower-level employees, the ubiquitous Wafai Dajani turned up in Rome and began discussing the Atlanta loans with senior BNL officials. "There was no doubt in our minds," a former BNL executive later recalled, "that when we met with Dajani he was representing the Iraqis." BNL officials such as Pierdomenico Gallo, the head of Rome bank's task force on Atlanta, were brought into meetings with Dagani, but Gallo and his staff wanted to sue Baghdad for fraud rather than suffer through conversations with the Jordanian middleman. They were given little choice. The Italian government, in the person of Treasury minister Carli, had a different priority. "Carli considered Iraq to be a friend of Rome;s because Iraq was a friend of Washington's. So we were ordered to follow the government policy even though the loans were bogus and the end-users were Iraqi military installations. It was terrible," complained one BNL man who eventually left the bank in disgust.
By the end of 1989, however, Dajani was no longer needed as an intermediary between Baghdad and BNL. A more direct line of communication had been established. Iraq was threatening to default on billions of dollars of debts it owed to a variety of Italian state-owned and private companies unless ther Italian government ordered BNL to make good on all the Atlanta loan comitments. More than $500 million of such loans had still not been disbursed. Faced with this threat, the government decided it had to make a deal with Baghdad, even if that required the approaval of Prime Minister Andeotti himself.
On the morning of December 6, 1989, Andreotti called in his treasury minister for a talk. Andreotti was extremely well briefed om the BNL affair and had in fact already received a top secret report from SISMI, the Italian military intelligence service, confirming that BNL money had financed Iraq's Condor II missile project using exports from around the world, including severl Italian companies.
The prime minister, who wanted to maintain good relations with Baghdad, asked Carli to meet with the Iraqi finance minister, who was on a visit to Rome, and then brief BNL's top management on the decisions taken. That same evening, Carli sat down with the Iraqi minister, professed the continuing friendship between Rome and Baghdad, and listened politely as the Iraqi minister declared the Atlanta loans to be "totally legitimate." It was time for the remaining funds to be paid out, said the Iraqi. The meeting ended with both sides agreeing on the need for a political solution.
The next day, Carli informed the chairman of BNL of the meeting. For once, the normally bureaucratic machinery of Rome had functioned efficiently. A few days later, Carli went before the Italian parlament and announced that it was clear that Rome had been involved in a number of the BNL Atlanta transaction on behalf of Iraq. In Langley, Virginia, a CIA analyst following the BNL case read about the statement and filed a classified report confirming Carli's conclusion.
What Carli did not say to the parliament, however, was that a secret decision had been made in Rome to give the Iraqis the funds they were demanding. "We were obligated, in banking and legal terms," Andreotti would later claim.
The decision took only a few weeks to implement. On December 26, 1989, a delegation from BNL was sent to meet Iraqi officials in Tunis. "The meeting lasted two days, but it was the weirdest experience of my life," recalled a BNL executive who was part of the delegation. "An agreement had already been reached between our governments that would validate all the rotten loans made by Atlanta. We didn't like it, but we were told to pay out another $500 million of the money. So we sat there, virtually in silence, with the Iraqis for two days. The deal had already been done. There was little aside from details to negotiate."
"The most important element of the Tunis negotiations," wrote Paolo Di Vito, the BNL executive who was assigned to deal with both the political and the financial repercussions of the Atlanta scandal and who began keeping a daily diary that would ultimately run to hundreds of pages, "was the Iraqi decision to place the controversy with BNL clearly and unequivocally in the total picture of the complex Italo-Iraqi relationship."
The deal was formalized at an elaborate signing ceremony in Germany early in 1990. It became known in Rome and Washington as the "Geneva accord." Baghdad had been dealt with, even if that had meant Rome's giving in to blackmail. Now the real problem was coming from Atlanta, where the criminal investigation led by Gale McKenzie was still under way. ............... (Alan Friedman "Spider's Web" 1993 p.198-201
..... Bryan pointed his finger directly at the White House, disclosing that Brent Scowcroft's National Security Council had pressed him in his official capacity to be "more forthcoming" and approve of some of the riskier exports.
A few days later, the Bush administration released a list of $1.5 billion in new technology and equipment that had been sold to Iraq, including items that might have helped Baghdad's nuclear missile projects. But one official, speaking on the condition that he not be named, downplayed the importance of the list. "This is the post-mortem on Iraq. Everyone's going to be more careful in the future," he said.
The new political strategy of conceding that mistakes had been made in the past did not work; instead, it only invited more probing by Congress. Embarrassing revelations about the Bush administration's dealings with Iraq kept on coming. One day a list of Iraqi front companies would be published, leading congressional and media investigators to discover that a number of the companies were BNL funded. Another day, U.S. Customes agents would seize a helicopter in Texas and claim that Carlos Cardoen, the Chilean arms dealer, was modifying it on behalf of Iraq. Suddenly Cardoen, who had once served American covert aims so effectively, was being vilified by the Bush administration for his role in arming Iraq. but Dan Pettus, a Texas-based business partner of Cardoen's, went public, claiming that "the Commerce Department, the State Department, FBI and CIA and everybody in the U.S. government has known since 1988 that we were hired by Mr. Cardoen.
Stanching the campaign by the media and Congress was proving a difficult task for the Bush administration. In the press, William Safire of The New York Times led the charge by suggesting that Ambassador April Glaspie was being made a scapegoat by James Baker because "the Bush-Baker policy was appeasement of the dictator." Neither Bush nor Baker came to Glaspie's defense; instead, they allowed her to be pilloried for allegedly having been so weak and indecisive back in July 1990 that she had somehow given Saddam the green light to invade Kuwait. In the jargon of tough Washington politics, Glaspie was being "hung out to dry."
The White House itself was receiving numerous congressional demands for documents concerning prewar U.S. dealings with Iraq. As these poured in from Capital Hill, George Bush and his advisers grew concerned that the aura of victory in Operation Desert Storm was beginning to fade. In short, it was time to hold the line.
The president got conflicting advice from his closest associates. Brent Scowcroft argued strongly in favor of claiming executive privilege and not allowing any documents to be released. James Baker, as one White House official put it, "wanted to let the documents go and hope it would look like we had nothing to hide.." (Alan Friedman "Spider's Web" 1993 p.207)
Later that day, on the letterhead of the National Security Council, Rostow wrote a memorandum setting down the results of the discussion. After reviewing the requests for information on U.S. policy toward Iraq, the group had decided on a plan of action that would create multiple hurdles for any member of Congress who wished to obtain documents. (See Appendix B, page 350.) Step one was to try to block all requests for Iraq-related documents on the basis of executive privilege. The government lawyers were even given sample grounds for justifying such a move; among these samples were "deliberative process," "foreign relation," and the inevitable "National security." Next, Rostow reminded State, Defense, Treasury, Agriculture, Commerce, and the CIA to seek "alternatives to providing documents." Before any member of Congress was given access to documents, such a recommendation would have to be "circulated to this group for clearance." And finally, the Rostow group decided that even if access to documents were to be allowed, no document could be retained by a member of Congress; only notes could be taken, and these themselves were to be marked as classified documents.
The mechanisms decided upon that day would mark the start of the most robust assertion of White House prerogatives since the days of Richard Nixon. Rostow dispatched the memo to the partcipants in the meeting and scheduled a second meeting the very next day in order to discuss requests pertaining to "the BNL/CCC matters." There was more work to be done.
On April 9, when the Rostow group reconvened, it had plenty to talk about, and not merely the Iraqi loan scandal. Overnight, the White House had identified a new fire that needed dousing. While the small group of lawyers had been meeting the day before, an embarrassing problem had developed in a hearing room on Capital Hill. George Bush's chief of staff John Sununu was furious as a result.
The Commerce Department's to export official, Undersecretary Dennis Koske, had gone before a subcommittee chaired by Congressman Sam Gejdenson and disclosed that the White House had disregarded his strong recommendation to stop the fow of advanced equipment to Baghdad just weeks before the August 2, 1990, Iraq invasion of Kuwait. Kloske revealed that he had made clear his fears about the sensitive and militarily useful shipments "at the very highest levels." He had pressed the matter at White House meetings chaired by Robert Gates of the NSC and attended by Robert Kimmit, the undersecretary of state, and he blamed the State Department for its "adamant" opposition to halting the sales to Iraq. After Kloske finished speaking, Gejdenson announced that the State Department was refusing to allow Kimmitt to testify before Congress.
Reaction to Kloske's bombshell—the first time a senior Bush administration official had broken ranks over Iraq—came swiftly. Word leaked from the White House that Sununu had ordered Kloske to be fired. If Kloske was criticizing James Baker's State Department, said one source, "it criticizes the President. Sununu just doesn't put up with that sort of thing." Marlin Fitzwater, the president's spokesman, confirmed that Kloske was leaving the government, but when asked if Sununu had fired him, Fitzwater was vague: "I don't think he did, but I don't know." Gejdenson went on the warpath. He called a press conference and accused the State Department of a deliberate attempt to mislead Congress. "Firing a government official because he was willing to tell the truth to Congress," said Gejdenson, "is an outrage and represents a bastardization of the way our government is supposed to work." Kloske was not quite the martyr the congressman made him out to be, but he had certainly become a political liability.
The Kloske revelations only heightened the sense of urgency at the White House and at the meeting next door of Rostow and his colleagues. Full disclosure of the documents being demanded would not only show George Bush's role in building up Saddam Hussein; it would illustrate the escalating objections that officials such as Kloske had lodged.
"It was really a scary thing,"recalled Stephan Rademaker, a protege of Boyden Gray's who worked as a deputy to Rostow and participated in several of the Rostow meetings. "There were these hearings on the Hill, and so these witnesses would all point the finger."
As the heat was turned up in Congress, the pace of the Rostow meetings quickened. Several aspects of these sessions, which continued for nearly four months, were highly unusual. "It is normal for government agencies to coordinate these things on occasion, but I suppose it was fairly unusual for the top lawyers at CIA, Defense, Commerce, and State and all of us others to meet, physically, face-to-face, for a dozen discussions over a period of several months," admitted one participant.
A State Department official who attended the sessions recalled there having been a "bunker mentality." A White House aide who took part in them said "there was a really high level of discomfort about the process. People were already suggesting a cover-up. Everybody was nervous. There was a lot of hand-wringing, and at times it was quite pathetic. We sat around, and we couldn't figure out what to do. Rostow couldn't agree on anything. He just kept scheduling meetings."
This was not the first time that Charles Nicholas Rostow had stared controversy in the face and taken action to loyally defend a president of the United States. Now forty-one, he had already dealt with accusations on subjects ranging from George Bush's relations with Panama's Manuel Noriega to Ronald Reagan's role in the Iran-Contra affair. (Alan Friedman "Spider's Web" 1993 p.209-11)
But the grenades eventually did explode. The following year, when Henry Gonzalez learned of the White House meetings, he went before Congress and christened them "the Rostow gang." It used to be, said an angry Gonzalez, "that the cover-ups were sort of ad hoc events, a mad scramble to provide damage control for the moment. The Rostow gang advances the notion that cover-up mechanisms have become an integral cog in the machinery of this administration."
Gonzalez was not the only member of Congress who felt that way. Among the documents that the Rostow group was reviewing were Commerce Department papers that related to a longstanding investigation of U.S. exports to Iraq. The probe had first been launched in 1990 by Doug Bernard, a Georgia Democrat who suspected that Bush administration officials had tampered with records of export liscences to Iraq before sending them to Congress in October of that year. In the spring of 1991, Barnard, the chairman of a House subcommittee on commerce, consumer, and monetary affairs of the House Committee on Government Operations, was becoming increasingly irritated. His staff was being told to discuss his requests for documents with the National Security Council instead of the Commerce Department.
On June, 4, 1991, the inspector general of the Department of Commerce reporting to Secretary of Commerce Robert Mosbacher revealed an unusual piece of news. He had found that Commerce officials had change information on sixty-eight of the export records that were provided to Barnard's subcommittee the previous October, removing all references to the military end-use that Iraq would make of the goods it received. In particular, the designation "military truck" was changed, on licences having a total value of more than $1 billion. The inspector general concluded that the changes were "Unjustified and misleading."
Barnard and his staff did not see the inspector general's report until July 1991, and they would have been furious if they had known of an earlier memorandum on the subject from Dennis Kloske to Wendell Willkie, the general counsel at Commerce who was participating in the Rostow meetings. Kloske informed Willkie in his February 26, 1991, memo that commerce had prepared the computer printout of Iraqi licenses to reflect "White House guidance not to provide information that was not directly responsive to the chairman's request." (See Appendix B, p. 351.)
The Commerce documents were only some of the many the Rostow group had to review during the spring and summer of 1991. The idea of achieving some kind of damage control over the body of material that became known internally as the "Iraq papers" continued apace. The bunker mentality at the White House contrasted sharply with the image of a victorious world leader that George Bush was projecting to the general public.
On June 10, more than two million New Yorkers turned out to watch the victory parade for Operation Desert Storm. .... But back at the White House the atmosphere was decidedly different. While Schwarzkopf basked, the president was reading an intelligence report indicating that a substantial portion of Saddam's nuclear and chemical weapons remained intact. The information showed that three months after the end of the war, Iraq was continuing its efforts to develop these weapons. Worse, only three of the seven Iraqi nuclear weapons sites had been properly identified and targets during allied bombings.
The report was contained in the National Intelligence Digest, a top secret daily summary distributed to the president and selected senior officials. It quoted both photographic evidence and a top-level Iraqi nuclear physicist who had just defected by driving out to a Marine checkpoint in Iraq and turning himself in.
Moreover, CIA and Pentagon officials reported that arms were once again being shipped into Iraq by way of Jordan, mainly on specially hollowed-out oil tanker trucks. "Wafai Dajani and others close to King Hussein were back in business within weeks of the end of Desert Storm," said a U.S. intelligence agent who tracked the shipments. "Nothing changed. They just started up the old network again."
..........
As if there were not enough headaches for the president, more cries of cover-up over his Iraqi policies were emanating from Congress and the media. No longer content to examine the records of the president and his secretary of state, critics and investigators were starting to focus on Robert Gates, a lower-profile but controversial figure. On May 10, 1991, Bush had nominated him to be the new CIA director, and Gates came under fire almost immediately. It was the second time Gates had been named to the job, and to a chorus of criticism. The first was in February 1987, and the criticism concerned suspicions that he had played an improper role int eh Iran'Contra affair; it had forced him to withdraw his nomination. Now Bush was trying to put him in charge of the CIA again.
What the outside world did not yet know was that Gates—who in early 1989 had transferred from the CIA, where he had been deputy director, director, to the White House as President Bush's deputy national security adviser—Had played a prominant role in the pro-Iraq policy. He ahd played a decisive role when it came to allowing U.S. duel-use exports to go to Iraqi nuclear installations. Nor did those outside the White House know that the name of Robert Gates featured prominendy in a number of the documents that Rostow and his fellow lawyers were in the midst of holding back from Congress.
Suspicions and charges that Gates knew of illegal off-the-books diversions of profits to Nicaraguan Contra rebels derived from the White House's sale of missiles to Iran still lingered. But there were new and surprising accusations from former CIA colleagues that Gates had distorted the intelligence process to provide politically slanted reports to the White House. What is more, there were new allegations concerning Gates and America's tortuous relations with Saddam Hussein. Within two weeks of his nomination, the media revealed that while Gates was CIA deputy director in the late 1980s, the Agency had known about James Guerin's illegal shipments of ballistic missile technology and other equipment to South Africa and had done nothing to stop it. Many of these shipments, government officials now acknowledged, had then gone on to Baghdad. Since the CIA had a legal obligation to pass such information to law enforcement authorities, critics wondered how Gates could have allowed the shipments to continue.
Then it was revealed that in 1988, while Gates was serving as a top CIA official, the Agency had been warned repeatedly that one of the prime contractors who helped Libya's Colonel Moammer Qaddafi build his chemical weapons plant at Rabta was at work on a potential chemical weapons factory in Boca Raton, Florida. The CIA took no action, even though cyanide produced at the plant was later shipped to Iraq.
Finally, on July 12, a major television network reported the alleged involvement of Gates in the approval of cluster bomb and other arms shipments to Iraq by Carlos Cardoen, the Chilean arms dealer. The White House was livid, and after denying the report, it used informal channels to make sure its anger was known to the network.
In fact, before the report aired, a former CIA operative and friend of Gates had warned the journalists that they risked opening "a real can of worms" with their probe of Gates, Cardoen, and the transfer of cluster bomb technology to Iraq. "You've got a number of government officials pretty rattled about this. You might get them in trouble," he said.
Other Iraq-related charges against Gates had been piling up for weeks, and they only heightened criticism of Bush's Iraqi policy, which left the president seething. On the afternoon of Friday, July 12, Bush lost his temper while chatting with reporters in the yard of his seaside home in Kennebunkport. Wagging his finger at reporters, he railed against those politicians who had questioned the suitability of Gates to be CIA director. "They ought not to accept a rumor. They ought not to panic and run like a covey of quail because somebody has made an allegation against a man whose word I trust." His voice rising, Bush let his frustration get the better of him: "What have we come to in this country where a man has to prove his innocence against some fluid, movable charge? ... I just don't think it's the American way to bring a good man down by rumor and insinuation."
The controversy continues through the rest of the summer and David Boren, chairman of the Senate Select Committee on Intelligence, launched his own probe, but in the autumn Gates managed to win Senate confirmation anyway. By that time most of Washington was distracted by a more sensational fracas involving the president's nomination of Clarence Thomas to be a Supreme Court Justice.
By the years end, although congressional inquiries into BNL and the Iraq papers continued, the White House was able to enjoy a brief respite from the issue. Most Americans were preoccupied with their pocket-books, the problem of recession,and to a lesser extent the search for a Democratic nominee to run against George Bush in the 1992 presidential election.
Little attention was paid, for example, when in early 1992 the name of a prominent Florida lawyer began circulating in Miami as President Bush's choice to become the new U.S. attorney there. The lawyer in question, a politically active Republican named Roberto Martinez, had a problem, and it brought shivers to those in law enforcement agencies who had followed the BNL case still pending in Atlanta. Martinez, the man the White House wanted as the chief prosecutor in Miami, was defending a certain Carlos Cardoen against charges that he had broken U.S. export laws and sold cluster bombs to Iraq. A civil suit had already been filed against Cardoen and it seemed only a matter of time before a grand jury would decide criminal indictments for violating U.S. arms export laws. The intensive investigation of Cardoen was being led by the U.S. attorney's office in Miami. Now Cardoen's chief defense attorney was being chosen to run the investigation and prosecution of Cardoen.
Like Joe Whitley in Atlanta, who had defended a BNL-funded Iraqi front company before he was named to head the office in charge of the BNL prosecution, Martinez had a quick solution. He dropped Cardoen as a client and promised to avoid any conflict of interest. His appointment went through without any problem.
The White House respite ended in the spring of 1992, when it found it had to pay more attention to the BNL affair, which was back in the news. In April, an Italian Senate investigation concluded that the governments in both Rome and and Washington had probably been involved in Christopher Drogoul's Iraqi loans. The Italian senators called the BNL affair an "international political operation" to support Iraq, and the news quickly traveled across the Atlantic. Moreover, the Rostow group's strategy of going slow in its review of document requests was failing as congressional subpoenas poured in. The White House was politically a good deal weaker that it had been the year before, and Brent Scowcroft had failed his efforts to impose the argument of executive privilege.
A select few documents had been provided to Gonzalez in August 1991, but only now were the more sensitive ones being released to Congress. As shocked staffers and their bosses started reading them, pieces of the broader story began to leak. Dennis Kane, the chief investigator for Gonzalez, recalled that when he first asked for NSD 26, Rostow "told me it would be a cold day in hell before Congress got NSD 26 or any of those documents." When a heavily edited version of NSD 26 was finally sent to Congress in May 1992, it provided critics with instant insight into why the Bush administration had set up Rostow's task force to limit the investigation of its pre-invasion policies. Henry Gonzalez was proving an indefatigable opponent. Almost every week he stood on the floor of the House of Representatives, often virtually alone in the chamber, reading his statements and on occasion placing secret documents into the Congressional Record. Not since the Pentagon Papers had so many classified materials been made available to the public.
Even so, the alarm Gonzalez was sounding attracted relatively little notice except among anguished aides to Brent Scowcroft, James Baker, and George Bush. A member of Baker's State Department staff later recalled that it was not really Gonzalez who troubled the secretary of state. It was William Safire, whose articles on Bush and Baker's handling of BNL and Iraq were appearing in The New York Times with almost as much frequency as Gonzalez's floor statements appeared in the Congressional Record. On May 18, 1992, Safire published an article entitled "Crimes of Iraqgate," in which he both coined the term and referred to "the Bush administration's fraudulent use of public funds, its sustained deception of Congress, and its obstruction of justice." The concept of Iraqgate was now formally in print, and it began dogging the Bush administration as never before.
While Safire was spelling out his suspicions, Gonzalez was revealing that the Bush administration had adopted a new and uncompromising stance. William Barr, who had taken over as attorney general in late 1991 after Thornburgh stepped down to wage an unsuccessful Senate race in Pennsylvania, informed Gonzalez that he was damaging "national security" and that the government would no longer provide him with any classified documents. Barr, a former CIA official who had worked for George Bush at the Agency in the 1970s and was fiercely loyal to the president, told Gonzalez that if more information was to be furnished, he would require an assurance that the congressman would no longer disclose any of the documents. This was the last straw for the Texas Democrat. Gonzalez retorted that none of the Iraq documents he had placed in the Congressional Record had compromised U.S. national security. Barr's threat to withhold documents, said Gonzalez, "has all the earmarks of a classic effort to obstruct a proper and legitimate investigation." As a result, Gonzalez disclosed that he would seek the appointment of a special prosecutor to investigate the Iraqgate affair. (Alan Friedman "Spider's Web" 1993 p.216-21)
..... Gonzalez arrived nine minutes later, and when he started speaking, it was clear that the chairman of the House Banking Committee was in a combative mood. It matched the scowl on Eageburger's face.
"I would like to report a letter that was just hand-delivered to me in my office ten minutes ago from the White House," Gonzalez began, and announced that Stephen Danzansky, President Bush's former director of cabinet affairs, and Richard, and Richard Haass, an aide to Brent Scowcraft, were not being permitted to testify as scheduled. Gonzalez read from the White House letter that said that "it is the long standing practice of the Executive Branch to decline requests for testimony by members of the President's personal staff." Two chairs were therefore left unfilled at the witness table.
Eagleburger looked increasingly uncomfortable, then annoyed, as Gonzalez and his colleagues launched into their opening attacks, Charles Schumer, a New York congressman, termed Saddam Hussein "President Bush's Frankenstein" and said the Iraqi dictator had been created "in the White House laboratory with a collection of government programs, banks and private companies." Joe Kennedy, Jr., the Massachusetts Democrat, blasted the White House for refusing to turn over any more Iraq documents on national security grounds. If there were legitimate concerns, "let them tell us," said Kennedy. He suggested that the White House was engaged in "the kind of Nixonian tactics we have seen in Watergate, of trying to undercut the truth being allowed to come forth because it is going to provide embarrassment."
...........
The interrogation of Eagleburger and the administration officials who followed him made for a brutal day; it did not end until nearly four o'clock. At one point, when Eagleburger argued that Iraq had been a creditworthy recipient of U.S. loan guarantees, Gonzalez shot back: "That statement, I respectfully submit, is patently untrue." When Eagleburger was asked which of the documents that had been released had compromised national security, he demurred: "I can't say. I haven't gone through the documents." Pressed on the push for CCC credits, Eagleburger said the program was "one of the few tools we had to try and influence Saddam to some moderation."
Finally a very different question was put to him. Bernie Sanders, an independent congressman from Vermont, asked Eagleburger whether he was aware of any third-country transfer of U.S. military equipment to Iraq. Eagleburger started to reply, "No, I am not aware of anything ...," then stopped and turned around in his chair to listen to a whisper from an aide. Sanders asked the question again, this time referring specifically to a 1986 transfer of U.S. bombs from Saudi Arabia to Iraq. "I will have to get an answer for the record," Eagleburger answered, "but I am told, from behind here, this is all a classified issue, but the Congress was notified at the time. Please let me get you an answer in writing that is accurate." The answer, when it was eventually supplied in writing, confirmed the Saudi transfer.
A week after Eagleburger's bruising session before th Banking Committee, an even more direct hit was scored against the White House, the CIA, and the State, Justice, and Treasjury Departments. Allan Mendelowitz, a senior official at the General Accounting Office (GAO), wen before the committee and laid bare a record of obstruction of his own independent investigation, which had been commissioned by the committee; he atributed the GAO's problems to the Rostow group. Medelwitz, director of the International Trade and Finance Office of the GAO, testified about his efforts to obtain information and documents concerning the BNL Atlanta scandal and Iraq's abuse of the CCC program. He told the committee that under U.S. law, the GAO was supposed to have access to executive agency records. "Generally, we do not encounter problems in accessing records in the course of most of our work," he explained. However, "this was not the case in conducting our ongoing review of Iraq' participation in the CCC's export credit guarantee programs and issues involving the Banca Nazionale del Lavoro." Mendelwitz attributed the lack of cooperation by the Bush administration to "the procedures adopted by the Rostow group. The implementation of these procedures, he added, "clearly was a White House initiative." (Alan Friedman "Spider's Web" 1993 p.224-6)
Then, in May 1992, just weeks before trial was set to start, Sheila Tyler informed Shoob that Drogoul had changed his mind and decided to plead guilty to all of the 347 charges against him. Faced with the prospect of 390 years in prison sentences and government demands that he provide $1.8 billion in restitution, that seemed an odd move. But Tyler explained that Drougal wanted permission to make a statement in open court when he entered hi guilty plea before Shoob. In that statement he would name those in Washington, Rome, and New York who were involved in the Iraqi loans affair. He would then place himself at the mercy of the court. "It is clear to me that my client was merely a small fish in a larger operation," said Tyler at the time. She added that the entire BNL-Iraqi loans effort had received covert U.S. government approval.
.......
Less than a week before the court date, Shoob encountered Gale McKenzie on the street. He asked her if there was any possibility that Drogoul would not plead to the full 347-count indictment and agree to a modified plea bargain. The prosecutor confirmed Tyler's statement that Drogoul was going to plead guilty to the entire indictment. On Friday, May 29, before the session scheduled for Tuesday, Tyler went to see the judge to say that Drogoul had completed a five-hundred-page statement and wanted guarantees that he could read the full document in open court. "I said he could take as much time as he liked," Shoob later recalled.
On the Afternoon of Monday, June 1, 1992, the day before Drogoul was to make his statement in court, Shoob was shocked when the prosecutors informed him that a new deal had been made over the weekend, while McKenzie was out of town. The Justice Department had made a surprising offer to Drogoul—he could plead guilty to only sixty of the 347 charges against him and might then win a reduced sentence. The only requirement was that he agree to be debriefed extensively by government prosecutors for a period of several weeks. That meant that the plea hearing would go ahead, but his sentencing would have to wait until Drogoul had been fully debriefed. A second strange occurrence on June 1 was the visit of a federal marshal to Judge Shoob's chambers on the nineteenth floor of the Russell Building in downtown Atlanta. The information he conveyed left the judge incredulous at first. The marshal told Judge Shoob that he was very concerned about Drogoul's safety and wanted to bring the former BNL branch manager to the courthouse that very evening, rather than wait until the next morning.
Shoob asked the marshal who might be threatening Drogoul. "Would you believe the CIA?" asked the Marshall, to which the judge replied no, he would not. The two men agreed, however, on a compromise. Drogoul was to be awakened at five o'clock in the morning and brought by heavily armed guards from the Atlanta penitentiary to the Russell Building.
That night, the judge .... went to bed with their floodlights still on. .........
On June 2, when Christopher Drogoul appeared in Judge Shoob's packed courtroom looking tired and fragile in a rumpled dark blue suit, the judge did his best to maintain his reputation as a soft-spoken southern gentleman who was unflappable on the bench. His courtroom that morning had attracted an unusually international crowd of people, all of whom—lawyers, government officials, Italian diplomats, and journalists from around the world—were interested in either BNL or Iraq.
Shoob was already seething with anger because he felt he had been misled about the last-minute plea agreement. After the court had been convened, the judge was informed that in addition to the plea agreement, Drogoul had abandoned his plan to name names. The normally courteous judge lost his patience completely. He asked Drogoul if it was true that he never expected to come to trial "because there are so many substantial people involved." Drogoul replied that it was true. "I don't believe for a minute that you were able to do all of this on your pwn," said Shoob. "You're right," said Drogoul, and he confirmed before the court that he would not name names just now.
Shoob was beside himself by then, and he told the court he would not allow the BNL case to be "sealed, stonewalled, or suppressed." Shoob then turned to Gale McKenzie and made a statement that would signal a turning point in the BNL affair: "I do not want to be in a position where I have to sentence Mr. Drogoul, where he takes the fall when there are other people involved who are equally culpable. ... A special prosecutor ought to get into this entire matter, because I am not getting the information from Mr. Drogoul, and I am going to get a sanitized version at the time of the sentence. I will have no way of knowing what sort of disclosure he has made to the government and what is presented to me at the time of sentence."
When the judge mentioned the words special prosecutor, the little courtroom in Atlanta fell silent for a moment. Almost immediately afterward, people at the rear of the court whispered to each other; comparsins were made between Judge Shoob and the late Judge John Sirica, whose determination had helped unmask the Watergate scanadal. That afternoon, Shoob went back to his chambers and talked privately with his law clerk and others about his deep suspicion that Drogoul was merely a convenient scapegoat, a victim of the Bush administration's attempt to hide its own knowledge and involvement in the Iraqi scandal.
That was precisely how an increasing number of Democrats in Congress were viewing the BNL case, which by now was understood to be at the heart of the broader scandal called Iraqgate. BNL, said congressional investigators as they pored through stacks of newly declassified White House documents, had been a financial mechanism, one of the biggest, in a decade-long effort to get aid to Saddam Hussein under the table.
At almost exactly the same time Judge Shoob was explaining the need for a special prosecutor in the Atlanta courtroom, members of Congress were saying the same thing in a very different venue. ..... yet Jack Brooks, the conservative Texas Democrat who chaired the committee, was a far more cautious man than Henry Gonzalez ......
Doug Barnard, the Georgia Democrat whose subcommittee on commerce had investigated U.S. high-technology exports sent to Baghdad, appeared as a witness before the Judiciary Committee. He described how the Commerce Department had tampered with export licenses after discussing which documents to alter with the White House. "Wrongdoing has taken place," said Barnard, "and nothing has been done."
Patrick Leahy, whose Agriculture Committee had probed BNL and the CCC program for Iraq, accused the Bush administration of misleading Congress and said there was evidence that top officials might ahve violated criminal laws in carrying out and later justifying U.S. policy toward Iraq.
Gonzalez showed the Judiciary Committee "before and after" memos from Gale McKenzie to the Atlanta branch of the Federal Reserve on the BNL case in which entire paragraphs and pages had been blocked out by heavy black splotches. The original copies not only showed that the government had been ready to bring indictments as early as January 1990, but that a trip to Rome had been planned in order to speak with Italian executives who had been accused of complicity in the BNL Atlanta loans. One section that had been blacked out read: "The stop in Rome is necessary to speak with a number of BNL-Rome employees, officers, and directors at whom Christopher Drogoul and other key subjects have leveled charges of complicity in their BNL-Atlanta scheme. A Rome setting is required for immediate access to all relevant records which may assist in defeating these spurious claims by subjects of our criminal investigation." The trip, of course, had never taken place, having been put off by the Juastice Department.
When the House Judiciary Committee finished its work that day, with Republicans accusing Democrats of trying to embarrass the White House in an election year, Brooks said he would put off any immediate decision on whether to seek a special prosecutor. But he allowed that the day's testimony had raised some troubling questions.
The handling of the BNL case thus became the single most prominent issue in the unfolding Iraqgate scandal. But there remained the uneasy sense among many in Congress that the White House was trying to hide something broader. In the days that followed, further revelations began to spill out, and with them came more denials of wrongdoing from the White House.
On June 8, less than a week after the Brooks committee met, it emerged that back in April, Admiral Bobby Ray Inman, a top intelligence adviser to President Bush, had written a letter to a judge in Philadelphia trying to win a lighter prison sentence for James Guerin, the arms-maker from Lancaster, Pennsylvania. Guerin had already been convicted of a $1 billion fraud and of illegally transferring military technology to South Africa and Iraq. But Inman, who had been CIA deputy director until 1982 and was now serving as the acting chairman of the president's foreign intelligence advisory board, called Guerin a patriot and revealed in the letter to the judge that he had worked secretly in the mid-1970s with intelligence agencies. That was the period when Bush had been CIA director. The fact that an intelligence official as prominent as Inman, albeit one who had once served on Guerin's proxy board, was willing to engage in special pleading for a convicted fraudster, raised further concern among Iraqgate investigators. (See Appendix B, page 354.)
The pressure was building on George Bush himself, especially after Brooks's Judiciary Committee sent a letter to the White House seeking the testimony of Boyden Gray, Nicholas Rostow, and Frank Lemay, the whistle-blower from the State Department who had tried to warn his superiors of the suspected use of U.S. government loan guarantees in Saddam's nuclear weapons arsenal in 1989. The General Accounting Office had already told Gonzalez's Banking Committee that its requests for the Iraq papers had been delayed and thwarted by the Rostow group. By inviting Gray and Rostow, officials with personal knowledge of how the White House had coordinated its response to congressional investigations, the Judiciary Committee seemed to be sending a message: The same committee that had led the congressional charge in the Watergate affair was now focusing on the possibility that the Bush administration had moved to cover up actions in order to limit political damage.
Iraqgate was beginning to follow the president wherever he went. In Rio de Janeiro on June 13 for the UN earth summit, a reporter asked Bush what he thought of the House Judiciary Committee's investigation. "I think it's purely political," said Bush, adding that as far as the administration was concerned, "we have detailed testimony by Larry Eagleburger." He said he didn't know whether a special prosecutor would be named, but he offered his first formal defense against the cover-up charges: "We tried to bring Saddam Hussein into the family of nations. That policy was not successful." (Alan Friedman "Spider's Web" 1993 p.229-33)
"This case is the mother of all cover-ups," roared Cooke, and then, in a softer voice, proceeded to argue that his client had been manipulated for years. U.S. intelligence officials, said Cooke, had made regular visits to see Drogoul and were briefed in the Iraqi loans. Giacomo Pedde, the former director-general of BNL, was among the senior executives who know of the Atlanta loans, Cooke claimed. A senior U.S. government official and the Iraqi ambassador had met Drogoul in 1988 and encouraged him to provide U.S.-backed loans.
Cooke's revelation came thick and fast, but it was in his questioning of Art Wade, the hapless Agriculture Department investigator, that the government's cover-up began to unravel. Wade admitted that he and other members of the BNL task force had never gone to Rome to interview bank executives and had relied instead on teh bank to provide selected witnesses. He acknowledged he ahd no experience of international finance. When asked, he was unable to name a single member of the BNL board.
Cooke then questioned a previous lawyer for Drogoul who said he had hired a private investigator to look into the activities of a Virginia company funded by BNL for its sales of technology to Iraq, only to find that the company was also financed by the Central Intelligence Agency. Paul Von Wedel, Drogoul's old deputy, testified that the Virginia company's owner had told BNL bankers that he was a former employee of the National Security Agency and still supplied information to U.S. intelligence.
While the courtroom drama was going on in Atlanta, Henry Gonzalez took the highly unusual step of quoting from a classified CIA letter on the floor of the House of Representatives in Washington. The letter said that while most of the CIA's reports on Iraq and BNL did not add much that was new, there had been exceptions. Among these was one report that BNL financing had helped pay for the Condor II missile project, and another that confirmed that senior BNL officials in Rome "had been witting of BNL-Atlanta activities."
The Gonzalez disclosure changed the focus of the entire Iraqgate scandal. How could the government charge Drogoul with defrauding Rome if the CIA had known about the involvement of BNL Rome officials—and had a legal obligation to provide such information to the Justice Department? The answer did not come immediately; instead, the CIA simply prepared a three-page document for the prosecutors in Atlanta, claiming its information on Rome's involvement came from publicly available sources.
Toward the end of September, as Drogoul's hearing entered its third week, there was more disquieting news. Judge Shoob summoned Cooke and the prosecutors for a bench conference one morning and revealed that three CIA reports he had read "definitely" showed that BNL's Rome headquarters were aware of the Atlanta loans. The reports, said Shoob, "undermine the government's position that this was a lone wolf type operation."
In Italy, meanwhile, two former BNL executives had informed the Financial Times of at least eight midlevel and senior BNL colleagues who were involved in the Atlanta loan affair. Both of the executives, who spoke only on condition that they not be named, had direct knowledge and involvement themselves. One of them explained how he had directed Iraqi business to Drogoul in Atlanta: We knew there was an open line of credit to Iraq that was being run by our Atlanta branch. We were told that the highest levels of BNL wanted to give privileged treatment to Iraq." The second former executive said he had been told not to worry too much about credit risk becasue a large portion of the loans were being guaranteed by the U.S. government. "There was also political cover in Rome for the bank," he added.
The chairman of BNL quickly issued a strong denial of any Rome involvement in either the loans or a cover-up. But the Justice Department's case began to crumble when Cooke revealed BNL documents in court detailing how the Italian government had pressured the Bush administration not to indict the state bank. Among them were the detailed diaries kept by Paolo Di Vito, in which the BNL executive had reported on the way the Italian ambassador to Washington had been ordered by his superiors in Rome to lobby the Justice Department that the bank not be indicted.
After Cooke revealed these documents on September 30, he informed the court that he wished to file a motion withdrawing Drogoul's plea bargain, changing his plea to innocent, and seeking a full scale trial instead. Judge Shoob had already denied a similar motion on September 21, saying there had not been "fair and just reason," but now, after reading CIA reports that showed Rome's involvement and BNL reports that illustrated a lobbying effort by the Italian government to influence the indictments, he was prepared to change his mind. He didn't need to. The daily revelations that had been coming out of his courtroom since September 14 had so undermined the government's case that on October 1, Gale McKenzie, Gerrilyn Brill, and the other federal prosecutors threw in the towel. They told Judge Shoob they wanted to cancel their plea agreement with Drogoul and go to trial. For his part, Judge Shoob then said he simply did not believe the government's case anymore.
On October 5 he spelled out his conclusions in a fifteen-page court order that represented an extraordinary bold ruling from the bench. "The court concludes," wrote Shoob, "that officials at BNL-Rome were aware of and approved Mr. Drogoul's activities." He cited classified reports from the CIA that showed in part "that a number of high-level BNL-Rome officials supported Mr. Drogoul's activities," and he described BNL Rome as "an extremely political organization operating more as an agency of the Italian government than as a bank."
Shoob also concluded that prosecutors had "failed to investigate seriously whether BNL-Rome knew of defendant Drogoul's activities," and he said this failure, coupled with or provoked by the involvement of other departments of the U.S. government, indicated "an effort to absolve BNL-Rome of complicity in the Atlanta branch loans to Iraq." He lambasted the telephone call from Jay Bybee in the White House to Gale McKenzie as "highly unusual and inapropiate" and added that the June 1992 plea bargain with Drogoul "effectively silenced Drogoul, who had announced his intention to make a full disclosure at the plea hearing."
It was an angry statement, and Shoob knew it. As a result, he reluctantly acceded to the government's request to remove himself from the trial on the grounds that he had already formed strong views about the case. But he saved the best for last, finishing the October 5 order with these words: "These are grave questions as to how the prosecutors made their decisions in this case—both as to the nature pf the charges and whom to prosecute. It is apparent that decisions were made at the top levels of the United States Justice Department, State Department, Agriculture Department and within the intelligence community to shape this case and that information may have been withheld from local prosecutors seeking to investigate this case or used to steer the prosecution. Furthermore, the Attorney General's exceptional refusal to grant the Congressional request for an independent counsel in itself raises concerns for the Court about the government's impartiality in handling this case. Accordingly, this Court again strongly recommends that an independent prosecutor be named to investigate this matter." *
* The full text of the order will be found in Appendix A. (Alan Friedman "Spider's Web" 1993 p.239-41)
With the CIA, the FBI, and the Justice Department now engaged in guerrilla warfare, and many in Congress complaining that they had been misled by the White House on a number of Iraq-related matters, legislators in both the House and Senate renewed their demands that Attorney General Barr name an independent prosecutor. Senator Howard Metzenbaum, a Democrat from Ohio and member of the Senate Judiciary Committee, told Barr that if BNL had financed a CIA front company, "we would effectively be faced with a case of secret U.S. government involvement in arms sales to Iraq, as well as a possible cover-up." But it was the intervention of Senator Boren, a well-known conservative, that proved decisive. Boren wrote to Barr demanding "a truly independent investigation."
The attorney general responded with a half-measure. In the face of such a political firestorm, he had to do something. Taking some form of action mattered to the Congress, but more important, it mattered to the White House, which was now worried that Iraqgate might affect the presidential election just a few weeks away.
Nonetheless, Barr still could not bring himself to appoint an independent prosecutor. On October 16 he chose instead to pick his own private investigator, a retired Republican judge from New Jersey named Frederick Lacey. As a Department of Justice appointee, the hiring or firing of Lacey was directly under Barr's control. In fact, Barr made use of the same federal rule that had led to the appointment—and dismissal— Archibald Cox, who was ousted after challenging Richard Nixon during the Watergate scandal. The ruling, which predated the Ethics in Government Act, provided for the appointment of outside prosecutors to investigate accusations of wrongdoing by the Justice Department; but it allowed the attorney general to fire the outside prosecutors. Ironically, it had been President Nixon who in 1969 appointed Lacey as the U.S. attorney for New Jersey, and then, a year later, to the bench as a federal district court judge in the same state. Later, during the Reagan administration, Lacey sat on the president's foreign intelligence surveillance court—the special panel that grants requests for eavesdropping in national security investigations.
Barr set the tone for the Lacey investigation right from the start. Standing at Lacey's side as he made the announcement, Barr said there was "no reason to believe that any officials at the Department of Justice have acted improperly or unprofessionally." He blamed the need even to appoint Lacey on "media sensationalism." And while claiming he had not discussed the matter with the White House, Barr did let slip that he had telephoned Presidential Council Boyden Gray to tell him of his plans.
Many in Congress roundly condemned the appointment of Lacey. Senator Boren pronounced it "unsatisfactory." Jack Brooks said Barr was covering up his responsibility to appoint an independent prosecutor "with the fig leaf of an investigator reporting to him personally, and not to the American public." While critics suggested that Barr was simply trying to stall the investigation until after the presidential election on November 3, Al Gore, the vice presidential candidate, went further and termed the whole affair worse than Watergate. "George Bush is presiding over a cover-up significantly larger than Watergate," charged Gore. I'm not using the word impeachment," he said, adding that nevertheless that "the Bush White House is having its attention diverted trying to manage this cover-up."
For his part, President Bush tried to avoid making any direct statements about Iraqgate. But in October, under pressure to discuss BNL and Iraqgate during a television interview, he made a most curious remark. "We were making agricultural loans. We were trying to bring this guy along. What happened was they had an illegal diversion of materials that would have helped them build a nuclear capability that we have substantially wiped out in the war." Having contradicted both himself and every senior government official who until then had denied that the White House knew of any illegal diversions into Saddam's nuclear weapons project, Bush then added a caveat: "To allege that we were building up his arms, or building up his nuclear power knowingly, is simply fallacious."
The cover-up was now unraveling in real time, on television and in the president's own words. Bush's White House advisers knew they had to act. Nicholas Rostow helped Brent Scowcroft draft an op-ed article for The Washington Post that would rebut the Iraqgate charges. In the article, Scowcroft contradicted what Bush had said just days before. Whereas Bush had acknowledged a diversion of materials to Iraq's weapons projects thanks to U.S. farm credits, Scowcroft said that no investigation had ever established "that Iraq misused credit guarantees to purchase weapons." And while it was true that $500 million of U.S. exports were shipped to Iraq between 1985 and 1990, most of these were for "low-level computers and heavy-duty trucks." Almost the same words were used by Lawrence Eagleburger, another Bush administration official wheeled into action, in an angry letter to The New York Times a few days later.
Bill Clinton, urged by his campaign strategists to focus on the economy, was content for the most part to leave comments on Iraqgate to Al Gore. But on the evening of Monday, October 19, in the last of the three televised presidential debates, Ross Perot forced the issue into the open.
"If you create Saddam Hussein over a ten-year period using billions of dollars of U.S. taxpayer money, step up to the plate and say it was a mistake," said Perot, adding the charge that Bush had given Saddam "the green light" to invade Kuwait. Bush defended his Iraqi policy, denied any green light had been given, and repeated his standard line about having tried to bring the Iraqi dictator into "the family of nations."
Clinton then said high-level officials had known Saddam was trying to develop weapons of mass destruction and had still pushed through aid to Iraq. Bush became furious. "There hasn't been one single scintilla of evidence" that any U.S. technology was used in Iraq's nuclear program, he insisted. Transcript of 3d TV Debate Between Bush, Clinton and Perot
Within twenty-four hours, David Kay, the former chief of the UN inspection team in Iraq, contradicted the president. Kay said he had seen the U.S. technology with his own eyes. "The U.S. equipment was there and there is no disputing that. I simply don't see how the president can say that U.S. technology was not used in Iraq's nuclear program."
In a television show the following week, Bush was pressed again on this claim. "Well, okay, let me clarify it. There was duel-use technology," he now said, adding that "maybe I overstated." Asked to comment on the cover-up charges over the BNL affair, Bush responded, "Wrong, wrong and wrong." He called Iraqgate a "Democratic frantic charge," but became testy again when he was reminded that the CIA had admitted misleading Congress. Was the CIA wrong? "May I say this? You've got an independent prosecutor looking at it. Let him make the determination," said Bush, referring to Frederick Lacey.
In fact, Lacey had made a preliminary determination three days before on October 26. Following the law that required him to inform the attorney general whether there was enough substance in the case to go ahead with an investigation, Lacey had written to Barr saying he had found "sufficient specific and credible" allegations to do just that. But October 26 was one week before an election day, and the administration did not make public this highly sensitive piece of information. Instead, Lacey's preliminary findings were withheld until November 12, more than a week after George Bush lost his battle to remain in the White House.
On November 4, 1992, one day after Bill Clinton was elected president, events in Britain turned the Iraqgate affair into a transatlantic scandal.
The mood in London was glum, fostered by a lengthening economic slump that many blamed on Prime Minister John Major, a colorless Conservative party politician who had taken over Number 10 Downing Street from Margaret Thatcher, now Baroness Thatcher, two years before.
Inside a courtroom behind the austere stone facade of the Old Bailey, Britain's most famous criminal court, a member of former Prime Minister Thatcher's government stepped up to the witness box. Alan Clark, a junior trade minister in the Thatcher government, was to be the star prosecution witness in the trial of three former executives of Matrix Churchill, the British machine tools company that had been bought in secret by agents of Iraq's arms procurement network. The companies executives, led by Paul Henderson, the former managing director, stood accused of violating Britain's export laws by lying about military uses of the advanced equipment they had shipped to Iraq. The indictments had been brought in mid-February 1991, during Operation Desert Storm and just days before Dick Thornburgh announced the BNL charges in Washington. Like Drogoul in Atlanta, Paul Henderson and his fellow executives from Matrix Churchill had argued in court that they could not possibly have broken any laws becasue the British government had known what they were doing and approved of their activities.
There were other connections between the Matrix case in London and the BNL affair in Atlanta. Matrix had obtained BNL Atlanta financing that helped its Iraqi exports, and Henderson had recently received a secret offer of immunity from the Atlanta prosecutors, negotiated by Whitley's law partners and Gale McKenzie, in exchange for his testimony about BNL and the Iraqi procurement network. The immunity order would protect him from being charged in the United States.
In fact, Matrix Churchill was a name well known to senior officials of both the Bush administration and the government of Margaret Thatcher. In November 1989 the CIA had reported to the White House and the State Department that Matrix Churchill was part of "Iraq's complex procurement network of holding companies in Western Europe to acquire technology for its chemical, biological, nuclear and ballistic missile development programs." Then, following Saddam Hussein's invasion of Kuwait in 1990, the U.S. Treasury had publicly declared its American sister company in Ohio an Iraqi front and frozen its assets.
Matrix Churchill had shipped special lathes to Baghdad that were used to manufacture artillery shells. It's machine tools also ended up helping Baghdad to make mortars, fuses for howitzers, cluster bomb factory components, Scud missile parts, and gas centrifuge components for the development of nuclear weapons.
As in Atlanta, British government prosecutors in the Matrix Churchill case had initially tried to withhold intelligence reports and other documents related to Iraq. In the autumn of 1992, four ministers in John Major's government signed papers to this effect, known as Public Interest Immunity Certificates. These ministers—Kenneth Clarke, the home secretary; Tristan Garel-Jones, a Foreign Office minister; Michael Heseltine, the secretary of state for trade and industry; and Malcolm Rifkind, the secretary of state for defense—were determined to keep secret the history of Britain's dealings with Iraq. (See Appendix C.) The certificates informed the court that it would not be "in the public interest" for secret government documents to be released during the trial. The problem, it seemed, was one of national security.
When Judge Brian Smedley asked to see the documents himself before pronouncing on their admissibility, they were brought to his room in safes. In addition to dozens of interdepartmental memos and letters, there were intelligence reports from the headquarters of both MI5 and MI6, the British intelligence services. Such was the secrecy surrounding these agencies and their relations to government that the guard remained outside the judge's room during an entire weekend as he studied the papers.
Like Judge Shoob in Atlanta, who did not see any threat to U.S. national security in disclosing information about Washington's past relations with the now-defeated government of Iraq, the British judge decided to permit at least some of the several hundred pages of paper to be seen by Henderson's lawyers. As a result of this decision, his lawyers, led by Geoffrey Robertson, an able barrister with a keen understanding of intelligence matters, were armed and ready. Well before it was time for Alan Clark to testify for the government, its case against the men from Matrix was being battered by courtroom revelations.
On October 13, the second day of the trial, the court heard that when Henderson had first been interviewed by Customs and Excise investigators, he had told them that officials at the department of Trade and Industry had been prepared to "close their eyes" when granting export licenses to Matrix Churchill. Further, the British government was fully aware that some of the exports from Matrix often went to Baghdad by way of the Chilean arms dealer Carlos Cordoen, Iraq's biggest supplier of cluster bombs, fuses, and components for chemical weapons, were known in detail to British intelligence. Yet Matrix received British government loan guarantees to ship its equipment to Iraq by way of Cardoen, a company that government records identified as "involved in chemical weapons manufacture." Evidence of the Matrix Churchill shipments to Iraq via Chile was first available back in 1987, but government ministers made a decision to let the exports go in order "to protect sources."
The London court was told that a Matrix executive had worked for MI6 while the company was selling to Iraq. An August 1989 British intelligence telegram released during the trial showed that the executive had reported back both on BNL and on Iraq's procurement network, which owned Matrix Churchill through a cascading series of front companies. The telegram also illustrated the closeness of the intelligence relationship between London and Washington, at one point suggesting "it would be useful if you could eventually get details from the Americans of other British and European companies involved in procurement."
On October 26, while Frederick Lacey in Washington was privately telling the Bush administration that he needed to go further with his Iraqgate probe, the jury in the London trial was hearing from a government official that the Matrix Churchill executive who had worked for MI6 was Paul Henderson. Eric Beston, an assistant secretary at the Department of Trade and Industry, also revealed that British ministers had approved Matrix exports while knowing they would go straight to Iraqi munitions production. One reason for allowing such dangerous cargo was the fear that breaking off shipments would damage Henderson's cover as an intelligence-gatherer watching Iraq for Her Majesty's government. Was that really the reason? "That was one of the considerations," said the government witness.
There was another, less appealing justification for the British government's continuing to knowingly ship equipment into Iraq's weapons sites, and it was argued tortuously in a secret February 1989 report to senior Foreign Office officials. The report agonized about the likelihood that the Matrix exports could end up being used in Iraq's nuclear weapons project. "There is good reason to be skeptical about allowing any export which might help the achievement of Iraq's nuclear objectives," noted the Foreign Office report, before arguing there was no reason to believe Matrix Churchill lathe equipment was "of specific interest" to the Iraqi nuclear program. Still these same machines "are essential for the production of nuclear weapons." But, the report waffled, "they also have many other legitimate industrial uses." Simply withholding the Matrix Churchill lathes "would not therefore be an effective obstacle to the Iraqis' objectives." Neither, concluded the strange Foreign Office rationalization, "would it absolve Britain morally from any involvement in this network, since all non-licensable Matrix Churchill equipment would remain freely available to Iraq." (See Appendix B, pages 356-357.)
As the Matrix trial progressed, years of secret and cynical decisions by Margaret Thatcher's government were laid bare in the Old Bailey courtroom. On November 2 an officer from MI5 took the stand, seated behind a paper screen to protect his identity. He confirmed that Mark Gutteridge, a Matrix executive, had reported on Dr. Gerald Bull's Space Research Corporation. Geoffrey Robertson said Gutteridge first told MI5 about Bull and his supergun in May 1988.Secret documents showed that Matrix was being asked to provide machine tools for the supergun a year later, in October 1989. This was the same time that the Bush administration was approving its own export licences that enabled Dr. Bull to send sophisticated U.S. technology to Iraq's supergun project. Gutteridge, it was later revealed in Paul Henderson's autobiography, had provided detailed reports on Iraq's procurement network as early as December 1987. The information provided by Gutteridge had been passed straight to the CIA.
On November 3, Paul Henderson's controller at MI6 whose secret name was Balsam, took the stand and, like his colleague from MI5, gave evidence anonymously, seated behind the screen. He revealed that Henderson had first worked for British intelligence in the early 1970s, providing information on commercial contracts behind the Iron Curtain. He had been "reactivated" as an agent for MI6 between 1985 and 1986 for the same purpose, spying on Iraq's military projects later in the 1980s.
"There are very few people who would take such risks and take them in their stride," said the MI6 officer, as prosecutors shook their heads in the knowledge that their defendant was now being praised by a government official. Henderson, said the MI6 agent, had even handed over blueprints for a projectile capable of being fired twelve hundred kilometres and said Matrix Churchill had been approached by the Iraqis to make machine tools for the project, believed to be Gerald Bull's supergun. And reports from Henderson's meetings with MI6 were sent to a "very high ministerial level."
It was becoming clearer each day to the jury that instead of violating Britain's arms export rules, the Matrix shipments of militarily useful goods to Iraq had been approved by the government. The real question was becoming a different one: Who in the government had approved such shipments, and how could any intelligence-gathering operation justify sending vital equipment straight into Saddam's war machine? The secret documents answered at least the first part of the question. They showed that Prime Minister Thatcher was herself kept informed about many of the sensitive exports. According to one memo, marked "Advice to Prime Minister," government officials discussed the suitability of selling engines for minelaying vessels.
There were some enormous question marks hanging over the trial when a somber-looking Alan Clark finally approached the witness box on November 4, 1992. Although he had been one of Thatcher's most ardent supporters, Clark was an unlikely politician. He was a man who enjoyed all the trappings of privilege. He lived in Kent, drove a Rolls-Royce Silver Ghost as well as a Porsche, and had a private wealth that had brought him, among other things, 27,000 acres in the Scottish Highlands and an inclination to speak his mind, often at the wrong moment and in colorful terms. To Clark, teamwork and the diplomatic turn of phrase did not seem to come easily. As one former cabinet minister put it: "Alan is a charming fellow, but not a natural team player."
Before the trial began, Clark had told prosecutors he would implicate Henderson and others by describing how they had lied to the Department of Trade and Industry about the intended use of Matrix equipment in Iraq. He had even denied press reports that suggested the government knew of the military end-use of Matrix exports to Iraq.
But on November 4, under persistent questioning from Geoffrey Robertson, Clark told a very different story. First he admitted that as late as 1989, London still perceived Iraq as "a very strong potential customer for defense sales." Then he said he had considered the government's guidelines on exports to Iraq to be "tiresome and intrusive." Finally, after hours of interrogation that had begun in a friendly manner and then taken on the flavor of an Oxford debate, Clark was asked whether it was true that he had met Paul Henderson in early 1988 and instructed the Matrix executive on how best to frame applications for export licenses so they would have a good chance for being granted. The answer was yes.
The former minister now found himself in a corner. He went on to admit that he had told Henderson the intended use of the Matrix machines should be couched in such a manner as "to emphasize their peaceful" rather than military aspects. So Clark did not want to let anyone know, at that stage, that the Matrix equipment was destines for munitions factories in Iraq? "No," replied Clark. And the emphasis on "peaceful" purposes was designed to keep the whole issue confidential? "I do not think it was principally a matter for public awareness," said Clark. "I think it was probably a matter for Whitehall cosmetics." (Alan Friedman "Spider's Web" 1993 p.244-51)
"Some of us in the Atlanta task force were trying to block the Iraqi loans from Rome, but even after Drogoul had been removed from his job in Atlanta, the new manager there was still making good on the transactions. It was very frustrating," recalled Gianmaria Sartoretti, who spent months poring through more than thirty thousand Atlanta telexes, faxes, and other Iraq-related documents. BNL bankers like Sartoretti who tried to get tough with Iraq in order to block payments to it on some of Drogoul's loans found themselves in conflict with other top executives. Sartoretti, an outspoken and devoted BNL banker, only made matters worse for herself when he went before the Iralian Senate commission that was probing the Atlanta affair and revealed that Drogoul had also extended hundreds of millions of dollars of improper credits for exports to countries other than Iraq. These included some that an American intelligence officer later identified as having financed the purchase of arms by Iran.
In December 1992, Sartoretti was among the three BNL executives who were fired by the bank. Louis Messere, the hapless auditor who had originally discovered irregularities at the Atlanta branch back in the autumn of 1988, was another who was fired. The third was Teodoro Monaco, who met Drogoul on his first trip to Baghdad and reported this to headquarters, and had later channeled business for Iraq from Rome to Atlanta. None of these three were senior enough to be of great consequence, but out of the bank they went.
Even a more senior executive named Pierdomenico Gallo, who had been a deputy general manager at the bank, found life difficult after he fought a battle with Cantoni and the BNL board of directors over the issue of Atlanta. Gallo had written a long letter of protest to Cantoni in April 1991; he was particularly upset that an internal BNL report did not make clear the circumstances of the infamous $50 mission Iraqi loan proposed by Drogoul in Atlanta and ultimately signed in Rome. Within days of Gallo's complaint, the bank's executive committee ordered the author of the flawed report to investigate Gallo's staff.
Gallo was now clearly identified as a dissident inside the BNL board. During a board meeting in June 1991, after Cantoni had fumed about media coverage and outside criticism of the bank, Gallo read his complaints out to the entire board. Two months later he left the bank, claiming it was for reasons of health. (Alan Friedman "Spider's Web" 1993 p.257)
It was not until 1991, when he parted company with the CIA in the wake of his missions to Amman and Tunis during Operation Desert Storm to meet Anas Dohan, that Haobsh began to feel apprehensive once more. America was celebrating the defeat of Saddam Hussein, but Haobsh had walked out on the CIA confused, afraid, and ultimately questioning the nature of the work he had done. He had taken risks but had never been told enough to understand why CIA officers had wanted him to sell weapons to Baghdad in the middle of the Gulf war.
The Agency had been displeased when Haobsh said he wanted to leave. But Haobsh didn't understand why anybody would expect him to be willing to sell weapons to Saddam in the middle of Desert Storm. "I had always heard that you are never ex-CIA. They always keep an eye on you," he said later. "I had put myself on the line in a very dangerous area. I did my bit for the United States just as the men in Dessert Storm did. I provided all kinds of information to the Agency. But there was no way I was going to sell SAM missiles to the Iraqis, which is what they asked me to do. That is the reason I stopped working for them."
Things went wrong for Haobsh almost immediately. His trading company, which he had used as a front for CIA intelligence-gathering, shrank to nothing. The CIA's promises that his import-export company would be favorably mentioned to U.S. embassies in the Middle East seemed never to have been kept. He wrote to senators, Lloyd Bentsen and Phil Gramm, that during the Gulf war "I was working with our government in their effort to fight Iraq and the Iraqi regime" and that he had been promised business from Kuwait and Saudi Arabia after the war. Yet not being able to disclose that the government agency he had worked with was the CIA proved an insurmountable handicap. Senator Gramm put Haobsh in touch with David Jensen, a deputy assistant secretary at the Commerce Department's international trade division. Jensen tried to help, but in August 1991 he wrote to Senator Gramm that since Haobsh could not name the government agency he had worked with, "we cannot be of much more assistance to him."
In the spring of 1992, betrayed, angry, and on the verge of bankruptcy, he contacted a journalist he had seen interviewed on television about the Iraqgate scandal. The journalist initiated a lengthy series of meetings and debriefings with Haobsh. Going to the press had been a last resort; clearly it was a risky move, but Haobsh wanted help and protection. The problem was that somebody seemed to know he was talking. Thereafter, he an his family, already weary from harassment, would suffer an escalating pattern of more of the same.
On the morning after Labor Day, September 8, 1992, Haobsh and his family were in Dallas, spending the weekend at his parents' home. In the driveway stood the family's single largest asset: the remaining silver Mercedes 600 limousine. Haobsh came outside to find every window had been broken, every tire slashed. The dark blue velour interior had been cut to ribbons with a knife. Buried in the wealnut dash, the wrecked clock was stopped at 3:00 A.M. On the roof, etched into the paintwork in crude letters twelve inches wide, was the word KILL. On the trunk lid, similarly etched, was the word YOU. It turned out the neighbors had heard dogs barking during the night, but the Haobsh family had heard nothing. "We didn't stay in Texas after that," said Haobsh.
Moving to Atlanta did not solve his problems. Although Haobsh had given nobody his telephone number, not even his own lawyer, there was often only one night a week when the phone did not ring in the small hours of the morning. Mostly these would be hang-up calls. Then there were the cars, cruising at times and occasionally stopping in front of the rented house in Atlanta.
In early April 1993, a law enforcement friend ran a licence plate check on a red Pontiac that had cruised up and down outside Haobsh's house and traced the owner's address The address turned out to be at the Fort McPherson military base in Atlanta, the headquarters of FORSCOM, which was the military command responsible for maintaining the readiness of more than a million soldiers in the continental United States. FORSCOM hosted the U.S. Army, the Army Reserve, and the National Guard—and the Defense Intelligence Agency.
The harassment of Fred Haobsh sounded "like classic psy-ops," said a U.S. intelligence officer when asked to interpret what Haobsh was enduring. "It's the kind of thing the Special Operations people teach you at Fort Bragg. It's cheap to carry out because it doesn't take many people, it has very little chance of being traced to anywhere unless somebody really screws up, and it works. It is extremely tough to deal with. The guy may have been a patriot, but it sounds as if he's being hung out to dry."
By now, not surprisingly Haobsh was living in a state of chronic fear, almost waiting at home for the telephone to ring. After his family was in bed, he would go over and over his life since his trips to Baghdad ten years earlier on behalf of the covert operatives who made things happen for the White House. He would relive the days of Desert Storm, when on behalf of the CIA he had sat with Saddam's chief military procurement officer in Tunis. He had played a tiny role in a larger sequence of events involving Washington and Baghdad, but now he had become a prisoner of a Kafkaesque nightmare. He could think of nothing else. Whether by design or accident, Saddam and the CIA had taken over his mind. (Alan Friedman "Spider's Web" 1993 p.264-5)
The White House justified the missile barrage as a response to Saddam's restrictions on UN weapons inspectors. David Kay, the former chief nuclear weapons inspector for the United Nations, who was in London when the attack occurred, found a grim irony in this. Kay had himself suffered Iraqi harassment, and he had personally visited Zaafaraniya three times. He later recalled the paradox of "Western technology going to destroy Western technology. You had to use very advanced cruise missiles to destroy equally advanced Western products.
Kay's last visit to the complex had been in July 1991. "We rolled up to the metal link gates of the facility on a challenge inspection," Kay recalled. "It was a very modern industrial park, with about twenty-five buildings, laid out like a California campus plant, and very well landscaped as well. I split my team and took one group to the third floor of a four-story building, to the former office of the defector who had tipped us off. When we got there, all the offices were locked up except for his, and it was clean. The Iraqi security people just stood around laughing. They knew what we were looking for."
The UN team had better luck in a large production building, where they found British-made Matrix Churchill equipment. "I think everyone came away impressed by the quality of the facility. It was without doubt the best industrial tooling facility we had seen, although the uranium enrichment method they were using there was primitive." During the course of the inspection, recalled Kay, "we joked about one member of the team, who came from British intelligence. We knew why he had such good information on the total number of Matrix Churchill machines that would be there." In January 1993, when Kay and his former colleagues discussed the British administration's destruction of Zaafaraniya, they told one another a new joke: "We said that this was the ultimate cover-up—to bomb the place."
Saddam reacted to the bombing in his usual manipulative way—he took one careful step backward. On January 19, two days after the cruise missile attack and just twenty-four hours before the Clinton inauguration, Saddam announced a new cease-fire, backed by a pledge not to harass U.S. planes patrolling over Kurdish and Shi'ite Muslim enclaves in Iraqi territory. Ever a wily politician, he also promised to guarantee the safety of UN inspectors, terming it a gesture of goodwill toward Bill Clinton. His welcome to the former governor of Arkansas had little effect; within hours of the inauguration, two American warplanes locked on to a radar site that appeared to pose a threat and fired. Thus did the new president have his first opportunity to tell the Butcher of Baghdad that American policy on Iraq had not changed.
It was clear from the first day of the Clinton administration, therefore, that the problem of Iraq would not disappear as long as Saddam Hussein remained in power. Former White House officials from the Bush administration, now looking for new jobs, had another reason to worry about the tangled history of U.S. relations with Iraq: Clinton had pledged during the campaign to get to the bottom of Iraqgate. Whenever the Bush crowd made any remarks at all about the scandal, they would mouth the familiar Washington refrain that it was best to "put it behind us and move on."
Not everyone was prepared to do this. The Federal Reserve, unhappy at BNL's lack of cooperation, formally reopened its own probe and in early 1993 dispatched a team of investigators to Rome. Judge Shoob issued a new court order on February 1, instructing the CIA to turn over more classified documents that might shed light on the degree of Italian involvement in the case. And on Capitol Hill the iconoclastic Henry Gonzalez, still smarting from the treatment he ahd received during his previous work on Iraqgate, vowed to widen his inquiry, this time to governments in the illegal supply of money and arms. Gonzalez said he would investigate the degree to which London had shared intelligence information with the Bush administration concerning Matrix Churchill's exports to Iraq and their funding by BNL's Atlanta branch.
The idea that Western politicians and intelligence services had been involved in some of the dirtier transactions that provided arms and money to Iraq was gaining currency in London as well. Word spread that Paul Henderson, the man at the center of the Matrix Churchill affair, had decided to write his memoirs about life as a reluctant spy for Her Majesty's government. The government of Prime Minister John Major was asked in Parliament to reveal the extent of its knowledge of illegal arms-dealing with both Iran and Iraq. In reply to almost all questions put to the government, Major's answer was always conveniently the same: It would be inappropriate to respond while a judicial inquiry was being conducted.
In early May 1993, nearly six months after Major had named him to probe Britain's Iraqgate scandal, Lord Justice Scott quietly called his judicial hearings to order. Unlike Frederic Lacey, Scott was prepared to let his investigation take as long as was needed. He proceeded at a deliberate and almost leisurely pace.
........
Scott's intentions ....... The discomfort was summed up by one former minister who had personally tried to withhold documents from the Matrix Churchill trial by signing one of the notorious Public Immunity Certificates. "I'm a firm believer in the absolute secrecy of the government process," said the Conservative politician, insisting his name not be cited. As for the Scott inquiry, that was just "politics." It would all blow over. Parliament, he said wearily, would go through the ritual witch hunt that follows a failed policy and then things would get back to normal.
Another former minister, this one having served closely with Margaret Thatcher when she headed the government, was even more dismissive of Scott. "A lawyer always sees the pathology," he remarked, adding that "the Lord Justice Scott inquiry is a post-mortem on a death that didn't happen. ... What Lord Scott is looking at is the consequence of a non-conspiracy, not a conspiracy." When asked about British arms sales to Baghdad during the Iran-Iraq war, the minister then allowed somewhat sheepishly: "Of course we wanted both sides to exhaust each other."
These ministers were underestimating Scott, as genuine believer in the concept of open government, who engendered resentment in the British political establishment precisely because he was not prepared to go easy on his peers. Despite his seemingly mild manner, Scott was unafraid of confrontation, In one of the comparatively few heated exchanges, he was accused by Sir David Miers, the former head of the Foreign Office's Middle East department, of failing to understand how government worked. "It did not really matter," Miers suggested, if the government's guidelines banning the export of arms to Iraq had been broken. Commercial considerations were more important. "Real people were being thrown out of work when everything turned on a semantic exercise about how the guidelines should be interpreted," said Miers. Lord Scott, in answer, declared that Foreign Office officials had taken a "cynical approach" to the arms export guidelines, which Sir Geoffrey Howe, the foreign secretary, had laid down in 1984 and that banned the approval of orders from Iran or Iraq for defense equipment that "would significantly enhance the capability of either side to prolong or exacerbate the conflict."
As the Scott hearings went forward, a very senior aide to former Prime Minister Thatcher was asked in private about the British cabinet's previous attitude to Iraq. His reply was frighteningly nonchalant: "Yes, of course there was a degree of cynicism in the tilt toward Iraq. We were very concerned about Khomeini and the expansion of fundamentalism. Nobody was upset that these two nations wanted to fight themselves to a standstill." But how much did Britain actually do to help Saddam? "We did have information that British companies were building hardened shelters for Saddam and providing him with communications equipment, that kind of thing. British companies were involved in building Saddam's personal bunker. We used to encourage our businessmen to go over to Baghdad trade fairs and sell everything they could, within the guidelines."
When it came to selling to Iraq, the government's guidelines were supposed to have been sacrosanct; in truth, they were not sacrosanct at all. After Iran and Iraq ended their long war in 1988, British government ministers decided secretly to relax the rules on exports to Baghdad. Confidential documents show that on November 4, 1988, Alan Clark, the Department of Trade minister who later became the surprise star of the Matrix Churchill trial, wrote to William Waldegrave, a Foreign Office junior minister, arguing in favor of the relaxation of export controls toward Iraq. He sent a copy of the letter back to Clark that he and Lord Trefgarne, a junior defense minister, had agreed "to interpret the guidelines more flexibly in respect to Iraq, as we have done in practice since the end of last year." But, noted Waldegrave, it was "preferable not to have to announce publicly any change."
When it was Waldegrave's turn to appear before Scott, he admitted that approving Matrix exports to Iraq in 1989 had been "the wrong judgement." Yet his testimony was by and large marked by circular arguments, denials, and contorted logic. Waldegrave, who by 1993 was John Major's so-called "minister for open government," admitted that in 1988, in consultation with Prime Minister Thatcher, Foreign Minister Sir Geoffrey Howe had authorized "a little increased flexibility" in export controls toward Iraq. He insisted, however, that the changes were so marginal that there had been no need to tell Parliament. Scott was not impressed: "Isn't it a healthy factor of a democratic society that this kind of subject should be debated?"
Many in Britain thought so. Indeed, the explicit willingness on the part of government ministers to deceive the public was confirmed in detail before Scott by a whistle-blower from the Foreign Office, Mark Higson, the former Iraq desk officer. Higson told the Scott inquiry that the policy change had been treated within the government like a state secret, on a "need to know" basis. He said that when members of Parliament or the public asked about the policy on Iraq, they were given "dishonest" answers from Sir Geoffrey Howe. Like Waldegrave, Howe was opposed to a public announcement of the more relaxed attitude toward selling militarily useful equipment to Iraq because he in fact did fear that it would look "very cynical" so soon after the world had seen Saddam gassing the Kurds. "We were being economical with the truth," Higson confessed. "I did my job. Regardless of whether I thought it was a sham. I did my duty."
Another British official who did his duty was Sir Stephen Egerton, the former British ambassador to Saudi Arabia. It was his testimony before Scott in June 1993 that brought into the open, for the first time, the same fears that Frank Machon had about Allivane being used as a covert channel for arms sales to Iraq. When Egerton was asked about suspicions that artillery shells that Allivane had sent were actually intended for Iraq, he demurred at first, then said, "this is coming back to me now, yes." He revealed that when he asked London about the musterious company, "they told me it was not Her Majesty's government's responsibility to question Saudi's intention of using this firm instead of normal channels." Egerton added one final thought on the subject, which he said came up in a conversation he had with a Saudi prince: "I did not like the smell of it." It was easier to stay away from the matters such as Allivane, the ambassador seemed to be saying.
An army officer at the defense ministry took a more activist role than the ambassador. Lieutenant Colonel Richard Glazebrook's father had been gassed during World War I, and he had no qualms about telling Scott that Her Majesty's government had been aware that Jordan passed British chemical warfare equipment on to Iraq. He also revealed that in 1988 and 1989 the government approved contracts with Jordan for artillery shells that used Space Research Corporation, the Gerald Bull company involved in Iraq's supergun project, as the main contractor. Glazebrook explained not only how Jordan had been used as a conduit for arms exports to Iraq, but how frustrated he had felt that he could do little to stop this. "I had an uncomfortable feeling that things were going on behind my back," he told Scott. Glazebrook found that some of the deals through Jordan had even been brokered by a British government company called International Military Services. A former director of that company later said it "did nothing without the full knowledge and approval of the government." Glazebrook was more explicit; he told Scott he had learned the details of the sales had been sent directly to Prime Minister Thatcher in one of the defense intelligence reports she received every three months about British arms sales.
Thatcher, who is scheduled to appear at the Scott inquiry toward the end of 1993, was allegedly well aware of the way her government had connived at feeding choice items to the Iraqi military machine. Mark Gutteridge, a former Matrix Churchill executive who had worked for MI5, said he was told by his handler that his own intelligence reports would be seen by the Prime Minister. "She knew what was going on," claimed Gutteridge.
Gutteridge's claim of Thatcher's personal involvement was later buttressed by the revelation during the Scott hearings of a Ministry of Defense document that described how intelligence sources had reported that Matrix Churchill lathes "were to be used for making shells and missiles." The memorandum suggested strongly that Thatcher had personally approved Matrix Churchill exports to Iraq in order to protext an intelligence sources inside the company, believed to be Gutteridge himself. Written in December 1988 by Alan Barrett, a defense ministry official who was a member of a government committee privy to intelligence data on exports, the document stated: "The Prime Minister agreed that in order to protect the intelligence source, the licenses already granted should not be revoked."
Thatcher's personal involvement was underscored by the additional notation that "this case needs to go back to the Prime Minister before we could recommend approving the current application." In a later section of the same document there was a reference to why Thatcher should be consulted: "Press for a separate submission to go to the Prime Minister as she was involved last time."
Geoffrey Robertson, the lawyer who had defended the Matrix Churchill executives and originally laid bare much of the government's duplicity said the Defense Ministry document was "the missing link which appears to take the chain of approval as far as the Prime Minister herself."
Scott's hearings were painting an ugly picture of ministerial deceit and repeated violations of both policies and guidelines on military exports to Iraq. Prime Minister Major was also to be called to testify, and aside from being questioned about allegations that he and others had misled Parliament, he was expected to be asked about government loan guarantees for Iraqi arms purchases. This was because part of his brief as chief secretary to the Treasury until July 1989 had included responsibility for the loan-guarantee program for Iraq, which in 1989 allocated a 20 percent portion for the sale of defense items to Baghdad. But Major was not scheduled to appear until January, as one of the last witnesses the Scott investigation would hear from.
Britain's Iraqgate was thus very much alive in 1993. And whatever happened in Washington, there was some very knowledgeable friends of Margaret Thatcher's who feared the ultimate result could be a political disaster. During Thatcher's tenure as prime minister until late 1990 and later under John Major, the government had allowed its ministers systematically to suppress information about militarily useful sales to Iraq and documents that could have acquitted innocent men, said one senior business executive from the defense sector who had dealt with Thatcher for many years. In a private conversation this businessman, who had personal knowledge of sales to Iraq, predicted the Scott inquiry would raise fundamental questions about government morality as it came to a close. "I think this could well bring down the government. The question of whether Parliament was misled is very serious," he said in May 1993, more in sadness than anger. And Parliament, he added had been misled. (Alan Friedman "Spider's Web" 1993 p.272-8)
"I was furious," recalled one U.S. law enforcement official, "when in February 1993 the CIA suddenly contacted a prosecutor in Miami to say they had just found a misplaced report from early 1984 that showed they did have detailed knowledge of U.S. exports to Cardoen in Chile for military purposes." As a result of the newly "found" CIA report, which had been sent in 1984 to the White House and to several government agencies, the pending indictment of Cardoen might now be in jeopardy. If the CIA knew of improper exports, it was hard to see how Cardoen could be charged.
The case was put on hold in Miami, while in Santiago the Chilean arms-maker decided to go public. "American officials patted me on the back," said Cardoen, finally revealing that the Reagan and Bush administrations had received detailed briefings throughout the 1980s of his use of U.S. equipment to provide cluster bombs and factories to Iraq.
In May 1993, it was decided that Cardoen could be indicted anyway, and he was, along with Teledyne, a Los Angeles defense contractor. The two were charged with the illegal export of zirconium, the metal used in the manufacture of cluster bombs for Iraq. Teledyne denied doing anything wrong and threatened to make public documents showing that the Reagan and Bush administrations had known exactly what it had been sending to Cardoen from 1982 to 1989. Cardoen reacted to the charges by announcing that over the years literally dozens of U.S. and British officials, diplomats, and intelligence officials had visited his factories and encouraged his work. "The Bush administration tried to produce some scapegoats. They were deeply involved in the supply of weapons to Iraq, and they tried to deny any involvement," said Cardoen, who began making available photographs of himself in the company of senior U.S. officials. As for the British, Cardoen said they also knoew full well that the equipment Matrix Churchill sent to Chile was being used to make weapons for Iraq.
In Washington, Cardoen's lawyer summed up the paradox facing his client in stark terms: "The very government that now charges Mr. Cardoen as a criminal was supplying weaponry to Iraq. [It] knew of, approved of, and even solicited the conduct it now deems illegal."
A similarly telling disclosure was made in June by Robert Simels, a criminal lawyer who was the newest head of Drogoul's defense team. Simels had talked in London with Paul Henderson, and he now revealed in a court filing the details of a rather significant conversation back in 1989 between Henderson and Safa Al-Habobi, who masterminded Sadda,'s clandestine procurement network and who was indicted in the BNL case. Al-Habobi had told Henderson, reported Simels, not only that Rome was fully aware of the Atlanta loans but that these were an extension of a government-to-government agreement between Italy and Iraq. As if to underscore Habobi's importance, Saddam named him Iraq's oil minister in the summer of 1993.
At this stage Janet Reno, who came to Washington with a reputation as ethical, forceful, and unafraid to make tough calls and was soon more popular than any other Clinton cabinet member, began taking personal interest in the BNL case. In early July she named John Hogan, who since 1984 had been her chief assistant at the Dade County state attorney's office in Miami, to supervise the BNL task force. Hogan had a tough time at first, sicne he joined the investigation only ten weeks before the case was set to go to trial. Within days of taking over, he also ahd to contend with some high-profile legal maneuvers by Drogoul's lawyer.
In mid-July, Simels dragged the name of George Bush into the BNL case by issuing a subpoena that demanded thirty-seven documents plus the former president's testimony for the Atlanta trial. The aim of the subpoena, explained Simels, was to compel Bush to appear and to discuss his knowledge of U.S. foreign policy toward Iraq in the 1980s, coupled with his alleged efforts to assist Iraqi purchases backed by loan guarantees from from the U.S. government. Simels added: "We also want to show Mr. Bush's communications with Prime Minister Andreotti and the Italian government on this matter." Bush's lawyers moved to quash the subpoena almost immediately, but even as they did, Simels hit back with a new set of demands for testimony, this time leading off with James Baker and Lawrence Eagleburger. Simels said the reason he issued the new subpoenas was "to further corroborate U.S. awareness of BNL's role in the financing of exports to Iraq."
For many who had followed Iraqgate, the question of what James Baker knew and when he knew it seemed a central issue. The former secretary of state had been a primary architect of Bush's secret presidential directive on Iraq, and he had personally pressed the hardest to implement it. Very few people, however, were willing to speak about Baker on the record. Half of Washington respected him; the other half feared him.
Alexandra Haig is an exception. He had known Baker for many years, had worked alongside him in the Reagan administration. When he looked back at the way Baker pushed U.S. support for Saddam during the 1980s he became surprisingly blunt. The tilt policy Baker had supported during those years "brought Saddam to the belief that he would not be challenged in Kuwait," argued Haig. "And the consequences were a Gulf war and the outcome that the threat of Saddam is still there." (Alan Friedman "Spider's Web" 1993 p.280-2)
(Alan Friedman "Spider's Web" 1993 p.289-96) Judicial Order in the BNL Case Issued by Judge Marvin Shoob on October 5, 1992.
(Alan Friedman "Spider's Web" 1993 p.297-306) Judicial Order in the BNL Case Issued by Judge Marvin Shoob on August 23, 1993.
This matter is before the Court on the motions of each of the defendants for a downward departure from the sentencing guidelines. Earlier the Court considered and ruled on the various objections to the pre-sentence reports and determined the appropriate offense level for each defendant. Because of the absence of any prior criminal record, each defendant is in Criminal History Category I.
On August 19, 1993, the government in a sentencing memorandum advised the Court that it will move for a downward departure pursuant to § 5K1.1 of the Sentencing Guidelines for defendants Von Wedel, New, and DeCarolis, and reserved the decision whether to make a similar motion on behalf of defendants Fiebelkorn and Barden. The government also advised the Court that it does not oppose a downward departure for defendant Barden based on her extraordinary family situation.
While the government's new position makes this Court's task of imposing a fair and appropriate sentence far less burdensome, the extent of any downward departure is governed by considerations which go beyond defendants' cooperation or individual family circumstances.
The Court has reviewed considerable material, including National Security Agency reports; CIA documents prepared by the Directorate of Information and the Directorate of Operations; the book of 29, which includes 29 documents from these agencies determined by the government to be discoverable by defense; the so-called black book, which consists of a series of State Department memoranda, National Security Council reports and memoranda, and Defense Intelligence Agency confidential and unclassified cables and information (the black book was not furnished to defense Counsel as the information is substantially a duplicate of that furnished in the form of summaries and the book of 29); the several reports of the Italian Senate Commission involving this matter; the diary of P. Di Vito, an official at BNL; the CIA report of the investigation of its handling of BNL-related matters; the Senate Select Committee on Intelligence staff report on the involvement of United States intelligence agencies in the BNL affair; the summaries of classified information prepared by the government and furnished to defense Counsel; the testimony during the three-week sentencing hearing of defendant Christopher Drogoul; and the various exhibits introduced during that proceeding.
The preponderance of the evidence well supports this Court's conclusion that BNL-Rome was not a victim in this case. The evidence of CIA knowledge of the activities of BNL-Rome and BNL-Atlanta prior to the August 1989 raid of BNL-Atlanta is less persuasive but clearly troublesome. Either the CIA knew of the activities or the CIA failed to detect a five-year international deception and large-scale illegal financing of arms for Iraq through a small branch bank in Atlanta, Georgia. That this Court. The Court does conclude that this is an appropriate case for a downward departure as to each defendant and will grant defendants' motions in part and will also grant the government's motions for a downward departure for substantial assistance and will consider defendant Barden's extraordinary family situation.
07/06/1986 For Ambassador from NEA Murphy ........
4. As for the possibility of Iraq's "borrowing" U.S.-supplied Jordanian equipment, there are legal restrictions on any action of that sort, besides the difficult policy questions which you have pointed out. Then, too, any such transfer has to be notified to the Congress and thus made public. In addition, the experts here believe that the equipment in question would not have a significant impact on the war effort.
5. We in the NEA are in essential agreement with you reaction to the proposal to send a senior U.S. emissary to talk with Saddam Hussein. We have encouraged the Vice President to suggest to both King Hussein and President Mubarak that they sustain their efforts to convey our shared views to Saddam to Saddam regarding Iraq's use of its air resources. The very recent report from Amman (Jordan) on that subject leads us to conclude that Saddam may not be open to the suggestion. On the other hand, if Saddam does what he says he would do with the Air Force, that would be a major plus. (See Appendix B, p. 310-1 quote also in The Banca Nazionale Del Lavoro (BNL) Scandal and the Department ..., Parts 1-2)
Bush Tied to ’86 Bid to Give Iraq Military Advice 05/07/1992 cites same memo
Please find below full details of our irrevocable letter credit no ..... after adding you confirmation please notify M/S Matrix Churchill "hot forging dies project" (See Appendix B, p. 318) (Alan Friedman "Spider's Web" 1993 p.318)
(Alan Friedman "Spider's Web" 1993 Appendix B, pages 328-329)
(Message from Secretary of State James Baker to Foreign Minister Tariq Aziz, with reference to President Bush's reassurance for Saddam Hussein, and promise of Baker's personal interest in CCC credits for Iraq. October 1989.)
1. Secret - Entire text
2. Please deliver the following message from Secretary Baker to Foreign Minister Aziz. There will be no signed original.
3. Begin text
Dear Mr. Minister
I appreciated the opportunity to meet you, and I found our meeting extremely useful. My hope is that it has laid the basis for a frank and direct relationship between us. In that spirit I want to respond to the concerns you raised with me.
As I said in our meeting, the United States seeks a broadened and deepened relationship with Iraq on the basis of mutual respect. That is the policy of the president.
In this regard. The President has asked me to say to you, and through you to President Saddam Hussein, in the most direct way possible, that the United States is not involved in any effort to weaken or destabilize Iraq. Having looked into the matter and discussed it with the President, I can tell you this with the highest authority. Such an action would be completely contrary to the President's policy, which is to work to strengthen the relationship between the United States and Iraq whenever possible. If you are in a position to provide more information I hope you will do so. I want to be very sure that there is no doubt about this and the mind of the Iraqi leadership.
Mr. Minister, you also asked me to look into the issue of CCC credit guarantees. I am doing so on an urgent basis and will give you a final response as soon as I can. An investigation is underway and in all our candor there are some serious allegations that need to be examined further. I can assure you that our actions in connection with the CCC program are not in any way motivated by political considerations. The government of Iraq has set a high standard on issues of integrity of public officials and corruption and I am sure you will understand the determination of my government to be thorough. At the same time, I very much hope that it will be possible to resolve the problems which have arisen quickly and to continue with this important program. As you requested, I will continue to give this matter my personal attention.
(Alan Friedman "Spider's Web" 1993 Appendix B, p.330-5)
Summary The revelation that a US branch of an Italian bank, Banca Nazionale del Lavoro (BNL), granted more than $3 billion in unauthorized letters of credit to Iraq has had wide-ranging repercussions for Iraq and Italy. For Iraq (Alan Friedman "Spider's Web" 1993 p.)
SNEC policy for some years has been not to approve exports for Iraq’s nuclear program, except for very Insignificant Items for clearly benign purposes such as nuclear medicine. However, at the same time, U.S. policy as confirmed in NSD 26 has been to improve relations with Iraq, including trade, which means that exports of non-sensitive commodities to ‘clean’ end-users in Iraq should be encouraged.
(Alan Friedman "Spider's Web" 1993 Appendix B, page 337)
(Memorandum warning of Iraqi efforts to procure U.S. goods for its nuclear weapons program April 1989.)
Action: Recommendations to Strengthen U.S. Nuclear Nonproliferation Policy.
The Secretary
Issue
* Recent evidence, indicates that Iraq has a major effort under way to produce nuclear weapons.
* There is recent evidence of Iraq endeavors to procure both non-nuclear components for weapons, as well as items specific to producing nuclear materials. On component is the same as used in U.S. nuclear weapons.
* Procurement specifications for non-nuclear components indicate detailed knowledge of designs for nuclear weapons assembly.
* Specifications for procurement items specific to producing nuclear materials unambiguously point to detailed knowledge of design for centrifuge uranium enrichment equipment.
* Iraq is attempting to procure some items in the United States
Sensitivities
* Manufacture of Iraq nuclear weapons would further destabilize the Middle East and multiply the chance for a nuclear event when added [XXXXXXXXXX Redacted XXXXXXXXXX] and others' known or suspected nuclear weapons capabilities.
* Should Iraq successfully procure such items in the U.S. it would embarrass the U.S. Government. as well as injure U.S. nonproliferation objectives.
Recommendations
* In that recent information combined with prior information indicates a major nuclear proliferation risk with Iraq. I recommend that you contact Secretary Baker to discuss a high level intergovernmental review, under National Security Council auspices, to determine options and provide recommendations.
Matrix Churchill case was 'ludicrous': Former minister could not see justification for trial. David Connett reports 12/15/1993
Britain Drops a Case Against 3 Charged With Arms Sales to Iraq 11/10/1992
(Alan Friedman "Spider's Web" 1993 p.)
(Alan Friedman "Spider's Web" 1993 p.)
(Alan Friedman "Spider's Web" 1993 p.)
(Alan Friedman "Spider's Web" 1993 p.)
(Alan Friedman "Spider's Web" 1993 p.) —
(Alan Friedman "Spider's Web" 1993 p.)
Supreme Court appeal involving Estaban Santiago victim of mind control?
Airport shooting suspect blamed ‘mind control,’ ISIS ties 01/17/2017
(Alan Friedman "Spider's Web" 1993 p.)
(Alan Friedman "Spider's Web" 1993 p.)
(Alan Friedman "Spider's Web" 1993 p.)
Evidence to the Scott Inquiry (Arms for Iraq) 12/08/1993 Official transcript testimony of of Lady Thatcher
Banker Imprisoned in BNL Case Tells Story to House Committee 11/09/1993
Atlanta Magazine Saddam's Atlanta Bankers 1993
Testimony of Christopher Drogoul
"Spider's web' of conspiracy and deceit 10/10/2005 The October, 1988 indictment had charged BCCI as institution with having a corporate policy of soliciting drug money.
Criminal History: BCCI, the Bushes … and Mueller 12/05/2018 Bush also used the global criminal network of the Bank of Credit and Commerce International (BCCI) to secretly funnel cash and weaponry to Saddam – then intervened to quash federal investigations of the scam.
BCCI AND LAW ENFORCEMENT 1992
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