Iraqgate: Saddam Hussein, U.S. Policy and the Prelude to the Persian Gulf War, 1980-1994

Friends in Deed: The United States and Iraq Before the Persian Gulf War

The scandal that came to be called "Iraqgate" first attracted widespread public attention in 1990, in the aftermath of Saddam Hussein’s invasion of Kuwait and the ensuing Persian Gulf war. The invasion followed a decade in which two successive U.S. administrations had viewed improvement of U.S.-Iraq relations as an important tenet of U.S. foreign policy, and had engaged in extensive trade with that country in pursuit of that goal. The policy had been adopted at least in part as a way to increase influence with Iraq. The fact that it failed to deter the invasion of Kuwait led to congressional and media criticism, including allegations that the U.S. had contributed, chemical, biological, nuclear and missile programs. These were not accusations that the Bush administration was pleased to confront as U.S. and allied troops faced Iraqi forces in the Persian Gulf region, nor after the war, when the White House would have preferred to savor a military victory which, it hoped, would be perceived as a great foreign policy success.

The full range of Iraqgate allegations involves a complex cast of characters and an intricate and intertwining succession of events. The personages involved include an international array of arms dealers, bankers, merchants, lawyers, military officers, foreign agents, and government officials. It is impossible to describe the affair in brief: therefore, only a few key elements of the story will be discussed here.

Economic Assistance Programs and Exports to Iraq

In 1982, the Reagan administration removed Iraq from the State Department’s list of countries regarded as supporters of international terrorism (despite doubts that Iraq had created its relationships with terrorist groups). This action eliminated legal restrictions that would otherwise have prevented Iraq from receiving credit guarantees from the Export-Import Bank (Eximbank), enabling it to obtain credit for the purchase of U.S. products and technology. Eximbank began to provide short-term cover to Iraq in 1985. In December 1982, the Agriculture Department (USDA) authorized Iraq’s participation in Commodity Credit Corporation (CCC) export credit guarantee programs. (These programs were set up to help expand the U.S. agriculture market, by offering credit to countries otherwise lacking in sufficient resources to import U.S. commodities.) The authorization enabled Iraq to obtain financing to import U.S. food products, a significant benefit for a country that experienced growing financial difficulties throughout the 1980s, and encountered increasing problems in obtaining credit from private banks.

Iraq’s economic difficulties resulted in part from its commitment to intensive and expensive civilian and military industrialization programs, a commitment which was maintained throughout and after the war with Iran (1980-1988). To support these programs, it was most interested in obtaining western technology, and was therefore eager to expand trade with the U.S. The U.S. government, fully aware that Iraq had active programs in the areas of chemical and biological warfare and missile development, was concerned about providing it with U.S. technology. (Available documents seem to reflect some disagreement regarding the aggressiveness of Iraq’s nuclear weapons programs, and the level of sophistication of these efforts.) The U.S. had a system of export controls and an export review policy intended to prevent countries like Iraq from obtaining technology useful for nonconventional weapons programs. In addition, the official U.S. policy of neutrality disallowed the export of weapons to either protagonist in the Iran-Iraq war (a policy not always followed, as the Reagan administration’s attempts to exchange weapons with Iran in return for American hostages in Lebanon demonstrated).

Nevertheless, a great deal of dual-use equipment and technology made its way to Iraq from the U.S. throughout the 1980s. Commerce Departments records, disclosed as a result of Iraqgate investigations, confirmed this. The investigations revealed that exports had been approved for military recipients and others involved in military research and development, including the Iraqi Air Force, Iraq’s Ministry of Defense, the Saad General Establishment (missile research), the State Organization for Technical Industries (military production), and al-Qaqaa Stater Establishment (explosives and propellants research and production). 1 Further evidence of this became available after the Persian Gulf war, when U.N. teams inspecting Iraqi sites found U.S. dual-use technology, along with that of other western countries, at facilities involved in Iraq’s nuclear weapons programs.2

Chemical Warfare

Throughout the Iran-Iraq war, the Reagan administration chose to give priority to maintaining U.S.-Iraq relations over concerns about Iraq’s use of chemical warfare. Although Washington regarded the issue as an impediment to expanding the relationship, the U.S. evidently viewed chemical weapons use as, to some extent, a public relations problem for Iraq. The U.S. monitored Iraq’s use of chemical weapons closely. A State Department document from November 1983, for example, refers to Iraq’s "almost daily use of CW" and suggests approaching Baghdad in response.3 Another recommends that the approach occur as soon as possible to avoid "unpleasantly surprising" the Iraqis with "public positions we may have to take on this issue."4 (In March 1984, the U.S. publicly condemned Iraq’s chemical weapons use.) These documents also indicate that the U.S. was aware that Iraq, relying primarily on western technology, had acquired a chemical weapons production facility.

Iraq continued its use of chemical weapons against Iranian forces throughout the war. The issue became more problematic for the Reagan administration, however, in the spring and summer of 1988, when Iraq engaged in chemical attacks against Iraqi Kurds in the village of Halabja and at other locations. As early as September 2, the State Department confirmed an attack against Kurdish insurgents that had taken place on August 25, while a memorandum to the secretary of state commented that "the failure of the international community to mobilize an effective response has lowered the inhibitions on use of these weapons in the region and elsewhere."5 Nevertheless, the Reagan administration opposed congressional efforts to respond by imposing economic sanctions, arguing that they would be contrary to U.S. interests. Among the possible negative results cited were the endangerment of contracts for "massive postwar reconstruction" in Iraq.6 The administration succeeded in blocking the legislation.

Chemical weapons use remained an issue that was contentious but evidently of secondary importance in the U.S.-Iraq relationships, for the Reagan administration. In late December 1988, the State Department prepared a review for Secretary of State George Shultz concerning the possible provision by U.S. of medium-term Eximbank export guarantees. Eximbank had been willing to provide only short-term financing to Iraq, because that country’s deteriorating economic situation, high indebtedness and history of repayment problems made providing medium - or long-term cover too risky. But Richard Murphy of the Bureau of Near Eastern and South Asian Affairs and Allen Wallis of the Bureau of Economic and Business Affairs both argued that longer term financing was necessary in order to enable U.S. companies to compete for contracts for Iraq’s post-war reconstruction. They also maintained that this financing would lead to expanded commercial ties, which would in turn result in improved political relations with Iraq’s leadership.

Richard Schifter of the Bureau of Human Rights and Humanitarian Affairs, however, vehemently opposed increasing Iraq’s credit facility only four months after its use of chemical weapons against the Kurds. He described the government of Saddam Hussein as " on e of the most brutal and repressive in the world" adding that "its actions in 1988 outdid its previous performance. They probably constitute the most serious violations of the 1980’s." Measure taken against Kurds "were ordered from the very top, in a cold calculated manner....If the general American public were aware of Iraq’s human rights violations, as it is aware of human rights violations in countries covered more fully by the media, there would indeed be a great public outcry against U.S. assistance to that country. Even though the facts about Iraq’s deplorable human rights record are not generally known, they are known top us and should be taken into full account.

Murphy disagreed, suggesting that this characterization of Iraqi conduct was based on biased sources, and pointed out that Iraq’s attacks had been against Kurds who had allied themselves with Iraq’s enemy, Iran. Arguing that the U.S. should be "hard-headed" in its estimation of what it could achieve through economic pressures, and noting a "competitive position increasingly challenged around the world," he recommended that medium-term export credit guarantees be offered to Iraq. The Bureau of Economic Affairs agreed. But Schultz put off a decision, saying the matter should be left to the incoming Bush administration.7

A New Administration, BNL and the Invasion of Kuwait

The Bush administration became a particular focus of criticism because it followed its predecessor in making strengthened U.S.-Iraq relations a key objective, despite the fact that the end of the Iran-Iraq war had eliminated a major rationale for this goal. A transition paper prepared for the new presidency outlined the conflicts that characterized U.S. policy toward Iraq. The paper recommended assigning high priority to U.S.-Iraq relations because of Saddam Hussein’s potential as a "major player," but reviewed persistent divisive issues, including Iraq’s chemical weapons use which "aroused great emotions" in the U.S., and its "abominable human rights record." These negative factors were contrasted with Iraq’s value as a market and its potential as a trading partner, and wit the fact that it shared an interest with the U.S. in containing Iran. The paper recommended that the new administration should begin with a high-level message calling for further development of political and economic relations.8

Secretary of State James Baker personally intervened to promote strong ties with Baghdad. A briefing paper prepared for a March 1989 meeting between Baker and Iraqi Foreign Ministry Under Secretary Nizar Hamdoon discussed Iraq’s active involvement in chemical and biological warfare and missile programs, and recommended stressing the sensitivity of Iraq’s chemical weapons use for U.S.-Iraq relations.9 Hamdoom and Baker discussed Iraq’s wish for medium-term Eximbank export credit guarantees, and Baker assured him that he would take a personal interest in the question. (The State Department later warned Baker that moving forward with the credits would be problematic, given strong congressional opposition to Iraq’s recent chemical weapons use.)10 In June, Baker wrote to Secretary of Agriculture Clayton Yeutter to ask him to increase the size of the CCC’s GSM-102 program by $1 billion, to solve a problem "that has consequences for both U.S. foreign policy and agricultural exports."11 Soon thereafter, the Agriculture Department informed the National Advisory Council on International Monetary and Financial Policies (NAC), an interagency group responsible for approving economic programs involving foreign countries, that Agriculture planned to offer Iraq $1 billion in export credit guarantees for FY 1990.

During the summer of 1989, an issue arose which would complicate the administration’s plan to provide a generous CCC program, and damage the credibility of its relationship with Iraq. On August 4, the FBI and other agencies raided the Atlanta branch office of the Banca Nazionale del Lavoro (BNL), one of Italy’s largest banks, whose shares were almost entirely owned by the Italian government. Informants had reveled that the bank had provided massive off-the-books loans to foreign countries, including Iraq. The loans had far exceeded the bank’s lending limits and were recorded in a parallel accounting system rather than in its official records. The branch office (BNL-Atlanta) had not only handled a major portion of U.S. agricultural credit guarantees for Iraq; it had also provided financing for exports of non-agricultural products covered by Eximbank. In addition, the managers had signed a series of agreements obligating the bank to provide some $1.155 billion in medium-term loans to Iraq’s Ministry of Industry and Military Production, a government organization that was in charge of Iraq’s efforts to obtain western technology for military research and development programs, including those involving chemical, biological, and nuclear weapons and missiles.

Any concerns George Bush may have had abut this affair did not deter him from signing National Security Directive (NSD) 26 October 1989, committing his administration to a policy of improving U.S.-Iraq relations. The Directive called for "economic and political incentives" to achieve the objectives of "moderating" Iraqi behavior and increasing U.S. influence.12 Preliminary discussions of a FY 1990 CCC allotment for Iraq were already in progress, and the Bush administration took measures to ensure that Iraq would receive continued funding.

The administration pursued this goal despite already circulating reports of widespread misuse of the CCC-covered loans that BNL-Atlanta had handled. The allegations involved kickbacks, prices inflated for unknown purposes, and funds diverted for weapons purchases. Investigators knew that BNL-Atlanta had provided a number of loans to the Matrix-Churchill Corporation (MCC), an Ohio company which had been purchased by Technology Development Group, Ltd. (TDG) of the United Kingdom (through an intermediary, TMG Engineering, Ltd.). TDG was owned by agents of the government of Iraq. MCC served as an intermediary to locate U.S. companies to construct manufacturing facilities in Iraq, and had arranged for a number of such contracts. Investigators believed that these facilities, which included a glass fiber manufacturing concern a brass reprocessing factory, and a machine tool plant, could be used to produce equipment wit both civilian and military applications.

Matrix-Churchill Corporation’s parent company, TDG, also owned the British machine tool manufacturer Matrix-Churchill, Ltd., which exported sophisticated equipment to Iraq during the late 1980s. Three of its managers were put on trial in Great Britain in the fall of 1992 on charges of illegally exporting machinery with military applications to Iraq, but the case was dismissed after documents and testimony showed the British government officials had approved the exports, knowing that they would be used for weapons manufacture. Matrix-Churchill, Ltd. had also sold equipment to Chilean arms manufacturer Carlos Cardoen, who exported cluster bombs and other materiel to Iraq, and had been in contact with another weapons manufacturer, the Space Research Corporation, about providing equipment for Gerald Bull’s controversial "supergun" project.

The administration was aware of allegations about Iraq’s activities. Senior officials were provided with a report issued by the CIA on November 6, 1989, for instance, that described Iraq’s establishment of "complex procurement networks of holding companies" to obtain equipment and technology for its chemical, biological, nuclear, and ballistic missile development programs, adding that Iraqi intelligence was directly involved with some of the companies in the network. Matrix-Churchill, Ltd. was identified as one of these companies.13

Because of concerns about Iraq’s activities, several of the agencies involved in decision-making regarding Iraq’s CCC program (including the Treasury Department and the Federal Reserve) were opposed to its continuation. However, the State Department and the White House remained committed to Iraq’s funding. They discounted reports of prior abuses as unproven speculation, denied that there was evidence of Iraqi culpability, and lobbied aggressively and ultimately successfully to get approval of $1 billion in credits for FY 1990. Acknowledging concerns about BNL, the administration broke the allocation into two parts (tranches): one would be made available immediately, and one would be held in abeyance until the implications of the BNL investigation became clearer.

As the investigation continued through the end of 1989 and into the first months of 1990, the Bush administration tried to preserve the tenets of its policy toward Iraq as defined by NSD 26: improving relations and increasing U.S. influence through expanded trade. A State Department memorandum from November 1989 observed that the policy was complicated by evidence that Iraq was working to develop nuclear weapons, and was using front companies to procure material, but still recommended approving exports of designated technology (to military end-users) which U.S. experts did not feel would contribute to the program.14 The Iraqis, meanwhile, seemed to have concluded that Washington had demonstrated its approval for past Iraqi participation in CCC programs and its transactions with BNL. Iraqi and BNL-Atlanta to Iraq would receive an additional $1 billion in credit guarantees for the coming year, and that the Federal Reserve had found no irregularities in Iraq’s past CCC programs.15 (In January 1990, BNL-Rome officials agreed to honor outstanding commitments made by BNL-Atlanta to provide loans to Iraq.)16 In a December briefing of Senate Agriculture Committee staff, USDA officials also affirmed that they had no concerns about possible Iraqi misuse of its agricultural credit guarantees.17

Despite the commitment of Bush administration officials to maintaining political and economic relations with Iraq, reports emanating from that country through the spring and summer of 1990 made sustaining that relationship increasingly difficult. On December 5, Iraq launched a rocket capable of conveying satellites into space. U.S. officials, indicating that Iraq’s capabilities came as a surprise, immediately began to discuss increased efforts to control technology exports to Iraq. From Atlanta, meanwhile, BNL prosecutors disseminated additional information about Iraqi complicity in BNL-Atlanta’s excessive loans. The State Department, however, was not deterred from loans. The State Department, however, was not deterred from continuing its commitment to Iraq. When Congress considered legislation to deny Eximbank coverage for U.S. exports to Iraq in response to the missile launch and other concerns, James Baker forwarded a memorandum to George Bush recommending that the president wave the legislation.18 In January, Bush signed the waiver, although Eximbank continued a suspension of its Iraqi program for several months because of Baghdad’s delinquencies in its loan repayments. In addition, U.S. officials met with Iraq’s minister of trade and finance, and assured him that Baker had personally satisfied himself that here was no evidence "imputing" Iraq’s CCC program. Iraq’s efforts to procure technology for its chemical and nuclear weapons programs were discussed, but only as a resolvable problem impeding efforts to improve relations.19

With the strong support of Secretary Baker, the State Department urged the Agriculture Department to release the second trench of 1990 CCC credits to Iraq in January 1990. A January 4 memorandum stated that foreign policy interests called for the release, and indicated that State might "force the issue."20 After the NAC meeting held on February 22, 1990, the State Department commented that "CCC is a key component of the relationship...we need to move quickly to repair the damage to the U.S.-Iraqi relationship by getting this critical program back on track."21

The State Department remained committed to its support of the program despite disturbing information developed by the BNL investigation. Notes from a March 1, 1990 meeting between USDA officials and a Justice Department representative, for example, show that the investigators were looking into possible Iraqi violations of the law involving the illegal export of sensitive technology. The investigation had gathered evidence indicating that Iraqis participated with BNL-Atlanta I its off-the-books transactions.22 On March 5, however, a State Department memorandum again declared that there was no reason to delay the second tranche, and no evidence of official Iraqi misconduct. It also noted that the National Security Council had contacted the Agriculture Department about the delay, following a complaint by Iraq’s ambassador to National Security Advisor Brent Scowcroft.23

On May 4, 1990, Assistant U.S. Attorney Gale McKenzie, who headed the U.S. Attorney’s Office investigation of the BNL case, supported a decision to give written notice to the USDA’s Office of the General Counsel of Iraqi complicity in BNL’s transactions: written notice was believed to be advisable because previous reports had not been acknowledged. Mckenzie also noted that similar evidence had been provided before the November 8, 1989 decision to approve $1 billion in additional credit guarantees for Iraq. She added that Iraqi officials had traveled to the U.S. to commit crimes, and had to know that they had made false statements to U.S. agencies regarding their arrangements with BNL-Atlanta.24

Still, the State Department held firmly to its position of support for Baghdad. A May 18 memorandum to Department Legal Advisor Abraham Sofaer from the Bureau of Near Eastern and South Asian Affairs maintained the Department’s position that "we have seen little direct evidence" to support possible charges against Iraqis in connection with the BNL case, despite the Justice Department’s indication that Iraq officials might be indicted. According to the memo, Brent Scowcroft had instructed the Agriculture Department not to announce any suspension of Iraq’s CCC program without obtaining approval from the White House.25 A May 22, 1990 memorandum from the office for Northern Gulf Affairs discussed the possible indictment of Iraqi officials, suggesting that Assistant Secretary of State John Kelly be prepared to intervene in the case if appropriate "to ensure that our concerns are taken fully into account in any decision regarding indictments."26

Before May 2, 1990 NSC Deputies Committee meeting, Justice Department and BNL-Atlanta investigators informed the State Department and the National Security Council that six Iraqi officials would be indicted.27 When the Deputies Committee met, however, it decided to continue Iraq’s CCC program until the first tranche of credit guarantees was fully utilized; the group agreed to delay a decision on the second tranche until investigators completed a probe of reported abuse of the loans made during the first tranche.

Just two months later, however Saddam Hussein made a decision that destroyed the relationship between Iraq and the U.S. that had been so carefully cultivated during the preceding decade. Iraq’s leadership had grown increasingly frustrated over its failure to obtain additional funding from the U.S., or from other sources. In mid-July the Iraqi government informed the U.S. Embassy that Iraq would cease all imports from the U.S. unless it received new CCC credit guarantees by the end of September. The Embassy noted Iraq’s increasingly severe economic problems, and reported that recent threats Iraq made against Kuwait reflected its realization that it would have to cut back drastically on civilian "and perhaps even military projects" unless it received desperately needed funds.28 At a July 25 OPEC ministerial council meeting in Geneva, Iraq accused Kuwait of violating its oil production quotas, and of stealing Iraqi oil, and suggested that Kuwait forgive the debts Iraq owed to it (accumulated during the Iran-Iraq war). On August 1, negotiations between the two countries to resolve their differences broke down. Deciding that direct action was necessary to save his country from its economic dilemma, and greatly miscalculating the international response to his action, Saddam Hussein ordered an invasion of Kuwait on August 2, 1990.

Immediately after the invasion, President Bush issued executive orders freezing all Iraqi and Iraq-controlled assets. Iraq subsequently stopped making payments on all of its U.S. - government backed loans. On August 9, 1990, the CCC received its first claim for compensation for Iraqi defaults, and paid out $108 million in October. (In February 1995, when the Clinton administration agreed that the CCC would pay BNL $400 million, the total paid by U.S. taxpayers to cover defaulted Iraqi loans reached almost $2 billion.)29

As the Bush administration organized an international response to the invasion, deployed hundreds of thousands of troops to the Persian Gulf, and launched an air and ground war to drive Iraq out of Kuwait, the investigation of the BNL affair continued. On February 28, 1991, immediately after the announcement of a cease-fire in the Persian Gulf war, prosecutors finally brought an indictment in the case a year and a half after BNL-Atlanta was raided. It charged three former BNL-Atlanta officials Entrade (a New York-based exporter) and an official of that company, the Iraqi Rafidian Bank, and four Iraqi officials with fraud and conspiracy. The indictment assumed that neither BNL’s Italian management nor any element of the U.S. government had been aware of BNL-Atlanta’s relationship with Iraq.

Implications of Pre-Invasion Policy

Some have called Iraqgate-related criticism of the Reagan and Bush administrations spurious, discounting allegations that the U.S. provided arms to Iraq during the Iran-Iraq war for instance, and declaring untrue or unprovable charges that specific officials were engaged in illegal activities. As late as the beginning of 1995, the facts of the U.S.-Iraq relationship were still very much a matter of public dispute. In January 1995 the Clinton administration released the Hogan report, a review of the Iraqgate affair, which reported finding no evidence to prove that the U.S. provided weapons to Baghdad. While defenders of the two previous administrations would like this to be seen as final proof that Iraqgate allegations were groundless, ongoing investigations have continued. For example, shortly after the Hogan report’s release, former NSC official Howard Teicher submitted an affidavit as part of a trial involving allegations of export law violations. In that affidavit he indicated that during the Iran-Iraq war high-level CIA officers ensured that Iraq was provided with weapons, including cluster bombs, pursuant to a National Security Decision Directive signed by Ronald Reagan authorizing U.S. military resupply of Iraq.

Questions about illegal acts and about U.S. arming of Iraq, however, were only one aspect of larger overall concerns raised by the Iraqgate affair. Questions about policy itself were at least as critical. The Reagan administration was clearly committed to providing Iraq with assistance in those areas where it was needed most. This included helping it to cope with its increasingly severe economic difficulties, and supplying it with intelligence information, apparently throughout the course of (and after) the Iran-Iraq war. Iraqgate inquiries focused on the U.S. commitment to protecting and expanding relations with a dictatorial and oppressive regime. At the very least, this commitment included providing high technology, and committing the funds of U.S. taxpayers to guarantee financial assistance for a recipient with exceedingly dubious economic prospects.

Critics of U.S. policy toward Iraq during the Reagan and Bush administrations charged that it was based on short-term calculations, a commitment to a risky economic relationship, and the mistaken belief that Iraq could be persuaded to adopt policies compatible with U.S. objectives. Instead of addressing these criticisms, both presidents chose a path which simply reinforced existing policy choices. When the Bushadministrationconfronted reports of widespread abuse by Iraqi officials of U.S. government-backed programs in late 1989, for example, its response was to ensure that an additional $1 billion in credit guarantees would be authorized in 1990. When concerns were expressed both within and outside the administration that Iraq’s purchases of U.S. technology were destined for its nuclear and other nonconventional weapons programs, the White House dismissed them in favor of continued efforts to increase exports and protect the U.S.-Iraqi economic relationship.

For its part, the Reagan administration had downplayed Iraq’s systematic - and illegal - use of chemical weapons throughout the Iran-Iraq war, again for stated foreign policy reasons. Reagan officials went through the motions of responding to the issue by expanding controls on chemical agents and by approaching other governments on the subject. However, there was no serious U.S. or international response to Iraq’s sustained violation of international law through use of these agents. As some government officials have since commented, Iraq got away with using these weapons; demonstrated that they could be used effectively; and undermined inhibitions that had prevented their use in previous conflicts.30

U.S. involvement with Iraq in the 1980s developed from decisions taken by the Reagan and Bush administrations to pursue cooperative arrangements with Iraq because of perceived common interests between Baghdad and Washington. As noted above, these arrangements included providing Iraq with economic assistance and intelligence information both during and after the Iran-Iraq war. Officials sometimes preferred to characterize the programs that were utilized for Iraq’s benefit as vehicles to help U.S. exporters by making their products more competitive in the international marketplace - and they did indeed serve that purpose. However the available documentation, some of which appears in this collection, attests that they were used, with respect to Iraq, primarily to cement closer relations and to help that country cope with its financial problems. The U.S. provided assistance despite its awareness of Iraq’s active programs to develop indigenous production capabilities for missiles and chemical and biological weapons - and perhaps nuclear weapons as well. Despite controls governing U.S. exports of dual-use (civilian and military) technology, a considerable range of militarily useful material was legally exported from the U.S., including some that could be utilized in nuclear weapons development programs.

The Bush administration continued the policies established by its predecessor to preserve the U.S.-Iraq relationship, even after investigations of the BNL affair produced evidence of Baghdad’s participation in corruption within the USDA’s CCC program. From August 1989, when investigations of the bank fraud case began, until August 1990, when Iraq invaded Kuwait, the State Department and the White House minimized Iraq’s involvement in order to protect the U.S.-Iraq relationship.

After the invasion, protecting Iraqis was no longer a concern. But the government remained committed to an interpretation of the BNL case that implicitly protected America’s ally, Italy, and the administration itself. This view precluded acknowledging possible involvement by the Italian management of the bank, and dismissed all assertions that some U.S. government entities must have known about BNL-Atlanta’s voluminous international financial transactions. Ignoring these possibilities also discounted any suggestion that the activities of this bank had constituted part of an arrangement by the U.S. and other western countries to support Iraq’s military efforts and to help it survive its war with Iran.

In the course of deflecting attention from allies and from itself, the Bush administration entered into politically dangerous and legally questionable territory. As Congress launched a series of investigations into the BNL affair and the question of administration involvement in or awareness of illicit financial and commercial activities, high level officials actively tried to impede the inquiries or stop them altogether. These activities are extensively documented in this collection. For example, Hose Banking Committee Chairman Henry Gonzalez (D-Texas) was approached by Attorney General Richard Thornburgh, as well as other Bush administration officials, who tried to dissuade him from holding hearings on the BNL affair. Similarly, the Commerce Department tried to avoid providing the House Government Operations Committee with information on export license applications for Iraq by deleting sections relating to the positions various decision-making departments had taken on applications, and by improperly altering information that was stored in the government’s database of export license information. The changes were evidently made at the bureau level, but documents indicate that the secretary of commerce and other high-level officials were consulted about the department’s response to congressional requests for information.

Attempts to avoid congressional scrutiny compounded the Bush administration’s problems, by suggesting that the government believed that the truth about past U.S. relations with Iraq needed to be concealed. Questions about U.S.-Iraq policy were less concerned with illegality than with secrecy, and with whether the Reagan and Bush administrations subordinated financial prudence and broader interests, including concerns about nuclear nonproliferation and the international prohibition against chemical warfare, to a single-minded and short-sighted pursuit of narrow foreign policy goals.

NOTES:

Commerce Department List "Approved Licenses to Iraq," 12/12/90.
Senate Banking Committee Hearing: Testimony of David Kay, 10/27/92, pp. 37-43.
State Department Memorandum: "Iraq Use of Chemical Weapons," 11/1/83.
State Department Memorandum: "Iraqi Use of Chemical Weapons," 11/21/83.
State Department Memoranda: "Swan Song for Iraq’s Kurds?," 9/2/88; "U.S. Policy Toward Iraqi CW Use," 9/13/88.
State Department Memorandum: "Export Import Financing for Iraq," 12/29/88.
State Department Memorandum: "Export-Import Financing for Iraq," 12/29/88.
State Department Paper: "Guidelines for U.S.- Iraq Policy," ca. 1/20/89.
State Department Memorandum: "Meeting with Iraqi Under Secretary Nizar Hamdun," 3/23/89.
State Department Memorandum: "Export-Import Financing for Iraq," 4/10/89.
Letter from James A. Baker, III to Clayton Yeutter, 6/9/89.
The White House: "U.S. Policy Toward the Persian Gulf," 10/2/89.
CIA Memorandum: "Iraq-Italy: Repercussions of the BNL-Atlanta Scandal," 11/6/89.
State Department Memorandum: "SNEC Cases of Interest," 11/21/89.
"Atlanta Group Weekly Report," ca. 11/22/89.
Agreement, 1/20/90.
Letter from Patrick Leahy to Clayton Yeutter, 2/12/90.
Waas, Murray and Douglas Frantz. "New Documents Show Bush Aides Favored Helping Iraq." Los Angeles Times, 9/4/92.
State Department Cable: "DAS Gnehm Call on Minister of Trade- CCC and BNL," 12/10/89.
State Department Memorandum: "Second Tranche of CCC Credits for Iraq," 1/4/90.
State Department Memorandum. "Statue of Iraq CCC Program," 2/28/90.
Handwritten Notes, 3/1/90.
State Department Memorandum: "NAC Meeting on Iraq CCC Program," 3/5/90.
U.S. Attorney’s Office: "Notice to USDA of Iraqi Complicity in Criminal Violations," 5/4/90.
State Department Memorandum: "Possible Indictment of Iraqi Officials," 5/22/90.
State Department Memorandum: "Weekly Report," 5/18/90.
Senate Select Committee on Intelligence (SSCI): "The Intelligence Community’s Involvement in the Banca Nazionale del Lavoro (BNL) Affair," 2/5/93, p. 68, citing a memorandum from Nicholas Rostow.
State Department Cables: "CCC: Iraqi Grain Policy," 7/18/90; "Iraqi Threats to Kuwait and UAE," 7/18/90.
Agriculture Department Memorandum: "Freedom of Information Act (FOIA) - National Security Archives," 11/19/93. See also, R. Jeffrey Smith, "U.S. to Pay $400 Million to Cover Iraq’s Bad Debt," Washington Post, 2/17/95.
State Department Memoranda: "US Policy Toward Iraqi CW Use," 9/13/88; "Administration Position on Proposed Iraq Sanctions," 11/18/88; Senate Committee on Foreign Relations: Statement of William H. Webster, 3/1/89, pp. 29-45.

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