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Bush saddam hussein { May 18 1992 } U.S. News Archive : Iraqgate, MAY 18, 1992
MAY 18, 1992
Iraqgate
How the Bush administration helped Saddam Hussein buy his weapons of war and why American taxpayers got stuck with the bill
By Stephen J. Hedges; Brian Duffy
On Dec. 5, 1989, an Iraqi scientist pressed a button at a tiny desert military installation 138 miles southwest of Baghdad. Several hundred yards away, the sands roiled and an ungainly rocket lifted uncertainly into the air. The rocket had three stages. The first was composed of five Scud missiles bundled together for lifting power. The second was a single Scud; the third, a less powerful surface-to-air missile. Despite the failure of the second stage, the third limped into Earth's orbit, but soon fizzled. The Iraqi space-flight vehicle sent intelligence agencies around the globe scrambling, and in less than 24 hours, an American spy satellite located and photographed the desert launch pad. It was a triumph of American intelligence. What nobody knew at the time, however, was that U.S. taxpayers had helped finance the research and development of the missile technology inside the big new Iraqi rocket.
In the aftermath of the Persian Gulf war, President Bush and Secretary of State James Baker have been dogged by criticism of the American policy toward Iraq prior to its invasion of Kuwait. Despite Saddam Hussein's gassing of Iraqi Kurds, his destabilization of Lebanon with extensive weapons shipments, his generous support for some of the world's most dangerous terrorists and his obsessive quest for weapons of mass destruction, the administration of George Bush defined as its policy "improved relations" with the Iraqi leader.
Central to this policy was a well-funded but little-known program within the Department of Agriculture. Presidents have used it for nearly three decades as a handy source of foreign aid because its disbursements are not directly controlled by the Congress. Initially, the program, administered by the Agriculture Department's Commodity Credit Corp., was intended to expand foreign markets for American farm products by guaranteeing repayment of loans used for their purchase. A U.S. News examination of the CCC loan guarantees for Iraq, however, has found that the program was badly abused. Relying on more than 100 recently declassified documents and dozens of interviews with government officials, bankers and arms merchants in the United States and Europe, the inquiry found that tens of millions of dollars--and perhaps much more--was diverted from "profits" generated by the loans.
The diversion scheme was a classic. Iraqi representatives secured loans for commodities purchases at prices far above prevailing market rates. By paying commodities suppliers less than the amount borrowed, Iraqi representatives were left with millions of dollars in excess profits. At least some of this money was used to finance weapons research and purchases by a variety of Iraqi banks and businesses. Among the recipients:
Two German engineering firms, which received contracts totaling more than $1.7 million to modify the drive systems and thus enhance the range of Iraqi Scud missiles of the type used in the launch of the prototype rocket in December 1989. During Operation Desert Storm, one of the modified Scuds landed on a barracks in the Saudi Arabian city of Dhahran, killing 28 Americans, the largest number of U.S. casualties from a single attack in the entire war.
Gerald Bull, the genius weapons designer who was hired by Iraq to design three "superguns," the largest of them capable of launching a satellite into space. Bull was murdered outside his Brussels apartment in March 1990. According to Sarkis Soghanalian, an Armenian-born arms dealer who introduced Bull to the Iraqi Defense Ministry officials, some of Bull's work on the supergun was financed with profits generated by the CCC loans. "Bull told me," Soghanalian said, "[the money] came from the grain sales."
Two weapons companies--one Portuguese, the other Cypriot--which sold South African-built G-5 howitzers and ammunition to Iraq. The transactions were consummated with the assistance of a freight-forwarding company that handled many of the commodities purchases guaranteed by the CCC, according to a congressional report.
A number of unidentified nuclear-engineering firms. According to an April 1990 memorandum obtained from the Federal Reserve Bank of New York, CCC loan money obtained by an Iraqi intermediary from the Atlanta branch of Italy's state-owned Banca Nazionale del Lavoro was apparently used to purchase nuclear triggers later seized by British Customs inspectors. "[Regarding] the nuclear triggers that were seized in London," Fed official Thomas Baxter wrote to a superior, "as you suspected, there is a connection." Agriculture Department officials were also concerned that Iraq was using CCC-guaranteed loans to pay for research on or procurement of nuclear weapons. An October 1989 "memorandum of conversation" notes that the flow of those loans through BNL "may have led toa diversion of CCC-guaranteed funds from commodity programs into military sales either directly, through barter arrangements during transit, and/or through requiring fees to be paid on various transactions in violation of U.S. regulations." The memo states that diverted money may have been used to "procure nuclear-related equipment, including a nuclear fuel compounder."
It is impossible to trace, dollar for dollar, how much of the CCC-generated profits was used by Iraqi officials to finance weapons research or purchases. But as early as spring 1989, international bankers and U.S. intelligence officials say, Iraq was experiencing grave difficulty in securing new loans from abroad. After the conclusion of its eight-year war with Iran, in August 1988, Iraq refused to begin paying down some $80 billion in debt incurred during the conflict. Officials at the U.S. Embassy in Baghdad were aware of the problem and reported on it in numerous cables. Lenders also complained. Recalls a New York banker who had extensive dealings with Baghdad: "They said, basically, that if we didn't extend new credits, they wouldn't start paying on the old debt."
Money troubles. For that reason, Iraq's sources of new credit were drying up. Conveniently, by that time the State Department had succeeded in more than doubling the CCC guarantee program from $393 million in loans in 1986 to more than $1 billion a year in 1988, 1989 and 1990. Suddenly, Iraq was the largest participant in the CCC program.
This despite the fact that U.S., European and Israeli intelligence services had already identified much of Iraq's weapons-procurement network. "There was just about no other place for the money to come from," says a U.S. official who reviewed the most sensitive intelligence on Iraq during this period. Patrick Leahy, the Vermont Democrat who chairs the Senate Agriculture Committee, promises an investigation of the CCC-guaranteed loans to Iraq and the diversion of profits to weapons purchases. "It is a complete misuse of U.S. foreign aid or agricultural aid to help prop up a dictator at a time when he is involved in outrageous human-rights abuses against his own people," Leahy says. "And it becomes completely abhorrent when that money is used for weapons purchases and development. The whole policy [toward Iraq] was shortsighted, poorly devised and unbelievably ill-managed."
THE POLICY It was not too long ago that Iraq, despite its manifest belligerence and paranoia, had more supporters than it knew what to do with. Shiite Iran under the Ayatollah Khomeini was the bogyman of the Persian Gulf, and Baghdad was seen by its neighbors in the region, and by Washington, as the great counterweight. Out of this calculus was born the American "tilt" toward Iraq. Officially, Washington held itself out as a neutral party in the conflict. But less than two years after Iraq invaded Iran to secure its long-sought access to a large Persian Gulf port, the State Department removed Iraq from its list of countries that sponsor terrorism; in fact, with Syria and Libya, Iraq was among the more enthusiastic practitioners of state terrorism.
In the second year of the war, Iran's superior Air Force and numerically superior Army were chewing up the inferior Iraqi forces. King Hussein of Jordan urged Washington to sell arms to Baghdad. Soon after, the Reagan administration approved the export of helicopters and other goods having military applications.
As Iran pressed the war against Iraq, Washington tilted further toward Baghdad. In June 1984, records show, Vice President George Bush telephoned William H. Draper III, a Yale friend who was chairman of the U.S. Export-Import Bank. Despite concerns by many administration officials about Iraq's ability to repay a big loan, Bush pushed Draper to secure approval of a $484 million guarantee so that Iraq could proceed with construction of a much needed oil pipeline to the Jordanian port of Aqaba. Iran was the obvious enemy; no one doubted that Washington's discreet help for Iraq made perfect sense. In November 1984, the policy crystallized: After 17 years, Washington and Baghdad resumed full diplomatic relations. Within a month, the administration began sharing intelligence with Iraq.
Three years later, the war between Iran and Iraq was still raging, but by then Baghdad had the upper hand. The Reagan administration continued favoring Baghdad. In February 1987, Bush lobbied John Bohn, the new chairman of the Export-Import Bank, for more Iraqi aid. By now, however, Iraq was a far greater credit risk. Its debts exceeded $60 billion, and Ex-Im officials were bound by their charter to make no loans if there was reasonable doubt about the recipient's ability to repay. The political pressure carried the day, however: In May 1987, Ex-Im officials authorized $200 million in loan guarantees for Baghdad. The bank's staff, who opposed the measure, did win one concession: The $200 million would be available to Iraq as a revolving line of credit that had to be repaid within 180 days.
An Iraqi "cocoon." In August 1988, Iran and Iraq--exhausted, broke and bloodied--staggered to a cease-fire agreement. In Washington in 1989, the State Department's formidable new troika of Secretary James Baker, Under Secretary for Political Affairs Robert Kimmitt and Deputy Secretary Lawrence Eagleburger notched up the pressure to maintain the CCC loan guarantees for Iraq at more than $1 billion annually. Though there was opposition within the Treasury and Agriculture departments, as well as in the Office of Management and Budget, State prevailed. The Saudi government, which had demonstrated a consistent ability to work its will with the Bush administration, urged strongly that Washington continue to cultivate Saddam Hussein. In the fight over the CCC guarantees, the State Department had done just that. The battle won, a triumphant Bob Kimmitt dashed off a note to Jim Baker: "Your call [to Agriculture Secretary Clayton] Yeutter and our subsequent efforts with OMB and Treasury paid off."
Trouble came quickly, however. Citing Saddam Hussein's orders to gas restive Kurds in the village of Halabja, where an estimated 2,000 people died, members of Congress began pushing for sanctions against Baghdad. Separately, in August 1989, FBI agents raided the Atlanta branch of BNL and unearthed what they described as a "massive fraud" (story below).
In Iraq, BNL had found a client willing to borrow billions, apparently to buy food. Thanks to the CCC guarantees, the loans were risk-free. By 1989, BNL's Atlanta branch had extended nearly $750 million for Iraqi commodity buys. It also issued an additional $3 billion in letters of credit to Iraqi banks and businesses unrelated to the CCC guarantees.
During this same period, beginning from mid-1989 forward, officials of the State and Defense departments and the National Security Council staff began a major effort to formulate Bush administration policy toward Iraq. Those at State, in particular, sought input from Washington's friends in the gulf, Saudi Arabia and Jordan. "The idea, voiced by nearly everyone," recalls a participant in the review process, "was to embrace Saddam in a cocoon of moderation."
In October 1989, the bureaucrats' labors completed, their report was presented to President Bush, who promptly signed it. The document is recorded as National Security Decision Directive 26. It concludes that it was in the "national interest" of the United States to seek "improved relations" with the government of Saddam Hussein. Endorsement of the policy came just a month later. The Bush administration pushed through $1 billion more in CCC loan guarantees for Iraq. To mollify those concerned about Iraq's creditworthiness, it was agreed that the guarantees would be allocated $500 million at a time. That same month, 14 influential administration figures joined 90 other government and business officials at a Washington forum entitled "Financing Trade and Investment with Iraq."
Dummy companies. Even some who participated in the review process that led to NSDD 26 now concede that it ignored several critical facts. Not least was the gassing of the Kurds. More worrisome was the behavior of Iraq after the cease-fire with Iran. "We understood that they were in deep financial trouble, that they were not making decisions to put their economy on a sound financial footing," recalls a senior U.S. official stationed in Baghdad. "But we also understood that they had tremendous resources." Namely oil. Iraq's reserves are second only to those of Saudi Arabia. In the end, the appeal of potentially rich markets overwhelmed the worries about Iraq's obsessive weapons purchases.
In retrospect, senior officials now concede, this was perhaps the critical error. Various intelligence services had documented the efforts of Iraqi agents, who seemed to be scouring the European countryside buying weapons, running dummy companies and paying for exotic engineering studies. Since the end of the gulf war, U.S. intelligence agencies have identified 44 individuals and 48 companies engaged in Iraqi weapons procurement worldwide. Senior U.S. officials say that many had been identified as early as 1989. Declassified summaries of German intelligence reports support that contention. A senior U.S. intelligence official says that Saddam Hussein worked nonstop buying weapons. "The expectation was that at the end of the war [with Iran] he would be exhausted. And yet there was no letup at all in our reporting on his procurement efforts in Europe and elsewhere."
Mixed messages. Despite that, the policy remained unchanged. And even well into 1990, after Saddam Hussein began boasting of his chemical weapons and threatening to strike Israel with them, Iraq received no high-level attention until a group of senior administration officials convened on April 16, 1990. Known as the "deputies committee," this group listed options available to the president if he wanted to send a harsh message to Hussein. Only one of these options--suspending the second $500 million in CCC loan guarantees--was ultimately approved, but not before six more weeks had elapsed. At the same time, incredibly, the administration continued to provide limited military intelligence to Baghdad. A senior CIA official says now that the agency should have produced a new "estimate," a lengthy and detailed review of Iraqi behavior, in June 1990. "Had we done so," the official says, "I am confident we would have concluded that Iraq would have attacked Israel. As for Kuwait, nothing we were seeing pointed to that scenario."
There were those who did see such signs. In Washington, Ex-Im Bank reports predicted as early as April 1989 that Iraq might soon be at war with "Syria ... or even Saudi Arabia or Kuwait over simmering territorial claims." Concerns such as these, however, were steamrollered in the State Department's determined push for "improved relations" with Baghdad.
THE DIVERSION To this date, no one outside Baghdad understands just how many ways Iraqi middlemen flimflammed the United States through the CCC program. "There is no doubt that they used the guarantees to mobilize more money," says a senior Israeli intelligence official knowledgeable about Iraq's European weapons-procurement network. "They did it a lot of ways. You have to see this as a sort of symphony, not as a single instrument." Auditors from the Agriculture Department and the General Accounting Office speculate that some farm goods purchased by Iraq with CCC-guaranteed loans were swapped, for instance, for arms from the Soviet Union. U.S. and European officials say that there are credible intelligence reports of grain being offloaded from Iraqi vessels in Black Sea ports in 1987 and later.
The key to the Iraqi network, at any rate, was the CCC guarantees. Arms dealer Soghanalian says that he was approached in 1987 to assemble a shipment of various weapons for Iraq. The deal, he was told, would be financed with proceeds from loans guaranteed by the CCC. Soghanalian says he declined to go forward with the proposed transaction. He also says that because the BNL loans guaranteed by the CCC were never properly recorded, Iraqi intermediaries were sometimes able to obtain duplicate loans for the same shipment of farm goods. U.S. officials say there is no evidence to confirm that contention.
The basic element of the diversion scheme, however, is clear. By securing loans for purchases of commodities at inflated prices, Iraqi middlemen guaranteed excess profits on many sales. A May 1990 Department of Agriculture review of Iraqi shipments found that one firm in particular, Entrade International Ltd., charged up to $37.50 above the prevailing price per metric ton for sugar, and $20 above the metric ton market price for rice and corn. The potential for profit was enormous. Iraq was importing roughly 187,000 metric tons of food supplies a month--much of that from the United States. Another Agriculture Department review analyzed 64 commodity sales to various countries and found that 53 were guaranteed at prices well above market rates. Those sales resulted in excess profits of $78.6 million. CCC-guaranteed sales of farm goods to Iraq numbered in the hundreds, making the potential for profit many times larger.
The Iraqis were nothing if not brazen. In 1987, Iraqi representatives complained about the high costs of shipping food supplies all the way to Baghdad. Loans guaranteed by the CCC were not intended to cover the cost of freight, but the Agriculture Department made an exception in the case of Iraq. U.S. taxpayers, in other words, soon began underwriting the cost of the food for Baghdad, as well as the ships and trucks to get it there. This was done despite the Agriculture Department's own reviews documenting Iraqi middlemen's demands for blatant kickbacks from shippers of CCC-guaranteed commodities. With many deliveries, Agriculture Department inspectors found, shippers were required to fill Iraqi shopping lists that covered everything from trucks and copiers to telephones and calculators. Many exporters referred to these blandly as "after-sales services." The Agriculture Department--again, according to its own review--found that it had guaranteed the cost of the Iraqi kickbacks, on top of the cost of the farm goods and the charges for shipping them. The few shippers who complained about the Iraqi kickback scheme soon found themselves shut out of the CCC program. "If you wanted the business, you had to provide after-sales services," says Wafai Dajani, a Jordanian shipping merchant. "Otherwise, you would get no business."
Dajani's firm, Amman Resources, had little trouble getting Iraqi business. Allied with Gearbulk, a big Norwegian shipping concern, and Louis Dreyfus, a French grain company, Dajani all but cornered the market on commodities going to Iraq through the Jordanian port of Aqaba. BNL's Atlanta branch provided the bulk of the financing for those shipments. When BNL fired its Atlanta branch manager, Christopher Drogoul, Dajani hired him as a $50,000-a-year consultant. "I hired him," Dajani says, "because he didn't do anything wrong."
Guns and money. Now it is Dajani who is under suspicion of wrongdoing. According to knowledgeable officials, federal prosecutors, responding to concerns expressed by the State Department, delayed nearly 18 months before naming Dajani as an unindicted coconspirator in the pending criminal case against BNL. U.S. intelligence files on Dajani are substantial. Several reports link him directly to the transfer of arms and dangerous technology to Iraq. House Banking Committee Chairman Henry Gonzalez, who has led the congressional investigation into BNL and its relations with Iraq, also claims to have evidence that Dajani joined with two firms, Armiberica Defense & Security of Lisbon and A&L Management Services in Cyprus, in the transfer of howitzers, ammunition and small arms to Iraq. Dajani, who lives in an elegant London townhouse a few blocks from Kensington Palace, calls those allegations preposterous. He says he is being confused with another Dajani. "I couldn't be involved in arms," he says. "I am too big and easy to watch."
THE "COVERUP" Sifting the truth from the Bush administration's welter of conflicting statements about its policy toward Iraq is not easy. Representative Gonzalez, Senator Leahy and others complain that the administration has done little to assuage their concerns about the diversions of CCC-guaranteed loans, the role of BNL and the involvement of U.S. companies in arming Iraq. If anything, administration officials have circled the wagons. In April 1991, the White House established a vetting process directed by the National Security Council's chief lawyer, C. Nicholas Rostow. Under his direction, administration lawyers refused to provide Congress with some documents. In their place, Rostow offered oral briefings on the contents of the documents. Executive-branch departments were advised by the White House that "alternatives to providing documents should be explored." Gonzalez, who has issued more than 100 subpoenas for documents, says the "Rostow Gang" has a single purpose: to "cover up embarrassing and potentially illegal activities of persons and agencies responsible for the United States-Iraq relationship." A White House spokesman says that Rostow's office has merely coordinated the document-sharing effort and that it has played no part in limiting what government agencies share with Congress.
That may be, but the administration has been anything but forthcoming when questioned about its Iraqi policy. The Commerce Department, for example, was responsible for licensing goods bound for Iraq. But when questions were raised about $1 billion worth of heavy trucks bound for Iraq, the military designation Commerce had originally assigned to the shipment was deleted from a list of U.S. exports to Iraq that was prepared for Congress. The Commerce Department's inspector general subsequently found the deletion "unjustified and misleading." The Justice Department is investigating.
Was the U.S. policy toward Iraq justified in its inception? Certainly. But late in the Iran-Iraq conflict and especially after the war ended and Iraq began shopping for weapons around the globe, America did not recalibrate the policy. It may be that fear of Iran clouded the judgment of senior Bush administration officials. Certainly the Saudis and others among America's friends in the Arab world reinforced Washington's desire for "improved relations" with Saddam Hussein. This jibed, too, with the Bush administration's desire to expand overseas markets for American farm goods.
Wishful thinking. On these uncertain pillars did the Bush administration's policy toward Iraq rest. Was there an alternative? Senior administration officials say the policy toward Iraq was tough but fair. The State Department criticized Saddam Hussein's record on human rights as "abysmal." But there were few criticisms of that sort, and they were evidently drowned out by the steady flow of positive signals emanating from Washington.
It was almost as if the administration viewed its policy of seeking improved relations with Baghdad as a self-fulfilling prophecy. In a memo prepared in February 1990, John Kelly, the assistant secretary of state for Near Eastern and South Asian affairs, argued that $500 million in CCC credits to Iraq should be released. (Iraq had used up $500 million in CCC guarantees in January 1990 alone.) There was evidence by this time, however, that some CCC loan proceeds had been used to buy weapons. The Bush administration was nevertheless determined. Failing to approve the CCC guarantees, Kelly wrote, "will feed Saddam's paranoia and accelerate his swing against us." It seems as if it was the Bush administration that was paranoid, however: Worry over Saddam Hussein's wrath had paralyzed the president and his men. The Iraqi leader had shrewdly converted those worries to his own advantage. Today, as a result, the United States is stuck with more than $2 billion in bad Iraqi loans. Because the CCC guaranteed them, American taxpayers will now have to repay them.
Money Machine: The Iraqi Diversion Deprived of other sources of loan money, Baghdad borrowed money to purchase U.S. farm goods at artificially inflated prices and used the excess profits to pay for weapons research and procurement. The U.S. Agriculture Department guaranteed the loans to Iraq. When Saddam Hussein's army invaded Kuwait, Washington was stuck with more than $2 billion in bad loans. U.S. taxpayers must now repay them.
1. Iraq. Seeks approval to participate in U.S. Department of Agriculture program guaranteeing repayment of loans for purchase of American farm products.
2. Washington. Between 1983 and 1990, approves more than $5 billion in loan guarantees for Iraqi commodities purchases under the Agriculture Department program.
3. Intermediaries. Coordinating with the government of Iraq, grain dealers and shippers agree to sell American commodities at prices considerably above market rates.
4. Bankers. Accept the Agriculture Department loan guarantees and approve millions of dollars in loans for the commodities purchases.
5. Intermediaries. Pay commodities suppliers prices lower than those reported to the banks and the Agriculture Department.
6. Intermediaries. Pass on the excess, minus fees for their own part in the transaction, to the government of Iraq.
7. Iraq. Applies the excess profits from the commodities sales to purchases of weapons and for research on new weapons programs. Among them: Purchase of world-class South African G-5 artillery gun and ammunition; Modification of the Scud missile, to increase its range; The "supergun" artillery piece designed to launch satellites and deliver ordnance over hundreds of miles.
8. Additionally, investigators suspect that some U.S.-financed grain shipments may have been exchanged in barter deals between the government of Iraq and the former Soviet Union for a variety of Soviet-made weapons.
[Chronology] Tilting toward Baghdad: U.S.-Iraqi relations The Islamic revolution in Iran fired U.S. interest in improved ties with Baghdad. Until the invasion of Kuwait, Washington saw little reason to review or revise that policy.
1979 NOVEMBER: Adherents of the Ayatollah Khomeini sack the U.S. Embassy in Tehran and hold 53 Americans hostage.
SEPTEMBER: Iraq invades Iran, launching an eight-year war.
JANUARY: Ronald Reagan is sworn in as president. Within an hour, the American hostages are released, after 444 days in captivity.
JUNE: Israeli jets bomb Iraq's Osirak nuclear reactor, citing evidence of weapons production there.
1982 FEBRUARY: The Reagan administration removes Iraq from State Department list of countries supporting terrorism, the first sign of a U.S. tilt toward Saddam Hussein. Jordan's King Hussein proposes that U.S. arms be sent to Iraq to assist in the war with Iran.
1984 JUNE: Vice President Bush intervenes with former college friend William Draper, chairman of the U.S. Export-Import Bank, to urge loan guarantees for an Iraqi pipeline project. The bank concurs, approving $484 million.
NOVEMBER: U.S. and Iraq re-establish diplomatic relations after 17 years. Soon after, the Reagan administration begins sharing intelligence with Iraqi military.
1986 JULY: Saudi Arabia, nervous over Iranian gains in the region, transfers 2,000 pound American-made MK-84 bombs to Iraq. Saudi King Fahd informs the White House. The Senate is then told of the bomb transfer.
DECEMBER: Despite a steep drop in oil prices, cash-strapped Iraq refuses to accept OPEC quotas, vowing to produce whatever amount of oil serves its national interest.
1987 MAY: Iraqi warplane mistakenly fires on USS Stark, killing 37 American seamen. U.S. Export-Import Bank approves $200 million in revolving loan guarantees for Iraq after a call from Vice President Bush to John Bohn, the bank's chairman. As a safeguard, the bank requires Iraq to repay the loans in no more than 180 days.
1988 MARCH: Iraq kills an estimated 2,000 Kurds with chemical weapons at the village Halabja.
AUGUST: Iran and Iraq sign a cease-fire. The U.S. continues intelligence sharing with Iraq, but at a reduced pace. Iraq again attacks its Kurds with chemical weapons and continues a campaign of forced relocation, leveling Kurdish villages. Many Kurds flee north into Turkey.
SEPTEMBER: Citing the attacks on the Kurds, Congress considers sanctions against Iraq. Reagan administration opposes sanctions, noting the level of trade with Iraq.
1989 JANUARY: George Bush is inaugurated president.
AUGUST: FBI agents raid the Atlanta branch of Banca Nazionale del Lavoro and discover what is described as massive fraud, including the misappropriation of $750 million in loans to Iraq guaranteed by the Department of Agriculture's Commodity Credit Corp. BNL also secretly lent Iraq $2 billion.
OCTOBER: Bush signs National Security Decision Directive 26 ordering expanded U.S. economic ties to Iraq, despite concerns voiced by investigators that Iraq may have bartered commodities bought with U.S. aid for weapons. Iraqi Foreign Minister Tariq Aziz assures Secretary of State James Baker that the growing BNL scandal does not "involve Iraq." He presses Baker for an increase in U.S. commodity credits for 1990.
NOVEMBER: After lobbying by top State Department officials Lawrence Eagleburger and Robert Kimmitt, an administration advisory council approves $1 billion in commodity loan guarantees for Iraq for 1990, overruling the Treasury Department and the Office of Management and Budget. The guarantees are to be made in two tranches of $500 million each.
1990 JANUARY: Bush reaffirms policy of preferential treatment for Iraq, signing a presidential order declaring that expanded trade and other exchanges are in the United States' interest.
FEBRUARY: Saddam Hussein blasts U.S. for "imperialist" objectives in the Persian Gulf.
MARCH: Gerald Bull, designer of Iraq's "supergun" artillery piece, is murdered outside his Brussels apartment. Israel's Mossad is cited by Bull's family as the primary suspect.
APRIL: British authorities retrieve parts of Bull's supergun and electronic triggers intended for nuclear detonators bound for Iraq. Separately, Saddam Hussein declares that Iraq possesses chemical weapons and warns that, if attacked, Iraq will "make the fire eat up half of Israel." In Washington, Deputy National Security Adviser Robert Gates convenes a meeting of senior administration officials to discuss developments in Iraq. Out of the meeting comes a position paper outlining a variety of options.
MAY: Saddam Hussein complains that Kuwait is waging "economic warfare" against Iraq. Bush suspends the remaining $500 million in commodity loan guarantees.
JULY: Iraq accuses Kuwait of stealing $2.5 billion worth of Iraqi oil and demands compensation. Israeli Defense Minister Moshe Arens briefs senior U.S. officials on Iraq's nuclear-weapons program. The Senate and House consider trade sanctions against Iraq, which the White House opposes. As thousands of Iraqi troops and armored vehicles gather along the border with Kuwait, U.S. Ambassador April Glaspie meets with Hussein, who tells her that Iraq is ready to fight any foe over a matter of honor. Glaspie, following State Department policy, tells Hussein that U.S. "has no opinion on Arab-Arab conflicts, like your border dispute with Kuwait." On the last day of the month, Glaspie promises Iraq that State is still working to reinstate $500 million in suspended agricultural loan guarantees.
AUGUST 2: The Iraqi Army invades Kuwait.
1991 JANUARY 16: Operation Desert Storm commences with air attacks on Baghdad.
FEBRUARY 24: Allied ground assault begins against Iraqi forces in Kuwait. Bush allows in a press conference that "We tried working with him [Hussein] and changing [Iraq] through contact. ... The lesson is clear in this case, that that didn't work." In Atlanta, a grand jury returns a 347-count indictment against Banca Nazionale del Lavoro officers and Iraqi officials.
MARCH 3: Gen. H. Norman Schwarzkopf dictates cease-fire terms to defeated Iraqi generals.
APRIL: C. Nicholas Rostow, legal adviser to the National Security Council, establishes vetting policy for Iraq-related records, urging that "alternatives to providing documents [to Congress regarding Iraq policy] should be explored." Executive Branch officials are instructed to provide only verbal briefings to Congress.
JUNE: A Commerce Department inspector-general review finds that Commerce officials were "not clearly justified" in deleting the "military" designations for more than $1 billion in trucks that were to be shipped to Iraq. The deletions were made on a list of U.S. exports given to Congress. The review does not say who ordered the changes. The Justice Department begins a formal inquiry.
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