The Death Lobby: Chapter 13

The Iran Brief®
Policy, Trade & Strategic Affairs
An investigative tool for business executives, government, and the media.

The Death Lobby: How the West Armed Iraq
by Kenneth R. Timmerman
Copyright © 1991 by Kenneth R. Timmerman. All rights reserved.

Chapter 13: BNL Builds the War Machine
(pp225-246) Saddam Hussein wasn't quite sure how he would pay for it all, but when he looked at the huge sums in foreign aid regularly awarded to Israel and Egypt by the U.S. government, he probably figured that Uncle Sam's deep pockets would have something left over for him. After all, Iraq was acting in America's strategic interest, by preventing an Iranian victory in the Iran-Iraq war that would have jeopardized the stability of U.S. allies in the Gulf. If the U.S. government couldn't sell Iraq arms openly, as France and other Western powers were doing, then the grain credits from the Department of Agriculture which freed up other Iraqi assets for arms purchases were the next best thing. By late 1985, Iraq was spending nearly 60% of its gross oil revenues to buy weapons and weapons-manufacturing technology, and had little other source of income. The war with Iran, and Saddam's ambition to build a war industry, were an immensely costly undertaking. But he had good reason to believe that the U.S. government was willing to help pay the bills. Until now, Washington had not turned down a single loan request. Saddam Hussein was not the only one to benefit from the CCC farm credit program. Christopher Drogoul of BNL Atlanta was making a career out of the Iraqi loans, and he was a happy man when he travelled to Washington in December 1985 with his assistant, Paul Von Wedel. The Iraqi program was booming, and his bosses back at BNL headquarters in Rome seemed pleased with the CCC business. When Drogoul had brought up the subject at the BNL Annual North American Managers meeting in New York over the summer, the head of the BNL International Department offered encouragement given the success of Drogoul's first $100 million loan to Iraq. "Florio agreed that Chris would finance the entire CCC program for 1986," Von Wedel recalled. "This would amount to about $600 million, with Lavoro's exposure only $12 million since the CCC guarantees 98%." The U.S. government guarantees made it easier to forget that Iraq
kentimmerman.com/news/tdl13.htm 1/14

they could not commission them. Iraq was a new and good market for U. grain exporters over the next four years.htm 2/14 . Before the day was out. Taha wanted the BNL commitment in writing.1/14/13 The Death Lobby: Chapter 13 was sitting atop a mountain of debt that was nearly as high as the sea of oil beneath it was deep. which called for delivery at Um Qasr. until the Lupo contract was paid up. . and may have helped funnel precious high-tech goods to Iraqi weapons plants as well. grain exporters." says Walter Driver.65 billion naval contract signed in 1981.S. BNL's refusal to approve the Drogoul's loan requests in 1986 was directly linked to a deepening dispute between the Italian and Iraqi governments over the $2. "By this point. the Italian government was forced to pick up the tab. But the Iraqis knew they would have to fight their way through the Iranian-controlled Straits of Hormuz to get the warships home. On December 12. by double-charging Drogoul's business and travel expenses. Drogoul and Tezeller allegedly discussed how to divert more than $1 million in CCC credits to their personal use. and Drogoul was quick to accept. Drogoul asked his credit manager. he had not yet secured their written approval to go beyond the $100 million ceiling BNL had placed on CCC-guaranteed loans to Iraq. As long as the ships had not reached Um Qasr. which was throwing a reception for a visiting team of Iraqi buyers. office of Entrade. Kenneth Cline. to telex Rome to seek formal approval for the huge loans. and no ships. The two bankers from Atlanta seized the occasion to expand their network of business contacts. By early 1986. who ran the U. who had come along for the trip. While Drogoul had discussed the booming business with his superiors in New York and Rome. grain. Wheat Board. Drogoul took the shuttle up to New York. Raffaelo Galiano. led by Ghanin Aziz of the Agricultural Ministry. Commercial banks were kentimmerman.com/news/tdl13. In March. Egypt with Italian crews. and now the Italian government had decided to change course in an effort to pressure Baghdad into paying its debts. BNL Atlanta was funding exports worth hundreds of millions of dollars to Iraq. The Italian embargo left Drogoul out on a limb. the Iraqis argued.S.S. Their hosts were the U. while others headed for Tunis. The answer soon came in. At this and subsequent meetings. That was ten million shopping carts full of food. Drogoul and Von Wedel had gone to Washington to discuss how to divide the pie. "The controversy over the Lupo contract had the effect of shrinking Italian credits for Iraq..S. Yavuz Tezeller. They wanted the word to get out that BNL was now the privileged bank for the Iraqi loans." What it transformed was the bank's money. By 1986. to break the good news to one of his best clients. BNL Atlanta set up a special "transformation account. and until they were commissioned. In the meantime. goods. thinking he had Rome's approval." explained the editor of Southern Banker. So they stalled for time by insisting the Italians adhere to the initial terms of the contract. turning it into private money with the touch of the magician's wand. For the complicated series of credits and debits. After the signing. This Turkish food emporium was a major supplier of U. "Iraq was considered a bad risk. To intensify pressure on the Iraqis to pay their debts. guaranteed by the USDA's commodity credit program. He had loaned hundreds of millions of BNL money to Iraq. and they didn't want to put their new hightech navy at risk. and the Italian government was seeking ways to deliver them to Iraq. in 1986 the Italian government slapped a double embargo on Iraq: no new loans. Iraq's only port on the Gulf. It was only the first of many Washington bashes hosted in the Iraqis' honor by U. primarily from U. he signed a pledge that obligated BNL Atlanta to fund $556 million of Iraqi government purchases of U. Some of them made steam for Alexandria. of the Atlanta law firm King & Spalding. BNL lawyers don't dispute these facts.S.S. it was no. grain products to Iraq. Sadiq Taha and Abdul Munim Rasheed.S. the four Lupo frigates and the six corvettes had gone down the slip at the Genoa shipyard. the Iraqis refused to pay. they got together with Iraqi Central bank officials.

"We tried to sell off as many as we could. Central Bank of Cooperatives [in Denver] bought some but they were restricted only to sales made with coop grains. BNL Atlanta's money market trader] had the idea of a gray book. where it emptied out into the Gulf." These consisted of a few file boxes and computer floppy disks. we received notice from Rome that our loans to Iraq exceeded approvals by about $500 million. the Iranians had managed to move four divisions -upwards of 30. yes!" With the flick of an eraser and the push of a few computer keys. Within a week. Drogoul and his colleagues referred to the off-book loans as "Perugina. Iraq's precarious financial situation was made worse by a disastrous turn of events on the battlefield with Iran. The Iraqi government had already slashed civilian development projects by 30% in 1984. the Iraqi loans were simply taken off the books. Iranian combat divers led the nocturnal assault. which they physically removed from the office when the auditors came. Defense Minister Adnan Khairallah rushed down to Basra to marshall the troops. a BNL Atlanta lending officer] and Mela [Mela Maggi. Few banks outside of the BNL in Atlanta were willing to confirm letters of credit issued by the Central Bank of Iraq. With them. The Iranian attack was dramatic. Britain. within gunshot range of Kuwait. and Geneva. So within one week's time we reduced our loan portfolio of three-year loans by $500 million. Drogoul and other BNL Atlanta employees kept a secret set of records they called the "gray book. The Iraqi Air Force was hindered in its attempts to bomb the Iranian positions. Funny. transporting them in the trunks of cars and sometimes keeping them out in their garages.com/news/tdl13." the name of a popular brand of Italian candy. so the only place Iraq could borrow money was through government-sponsored loans" such as those provided by BNL. swift. and effective. Whenever money was paid out to an Iraqi supplier. That is when Jean [Jean Ivey. To keep track of them. Whenever the Iraqis repaid part of the loans. Italy was not alone in reviewing its loan policy toward Iraq. But several days of bad weather complicated the counter-attack. "In about two weeks time. and dramatically reduced imports of food and consumer goods." The system worked so well that it really was a bit like taking candy from a baby.1/14/13 The Death Lobby: Chapter 13 quoting 15-25% interest rates for loans to Iraq. and the credit crunch hit hard in the early months of 1986. Overpowering the handful of Iraqi defenders in the palm groves surrounding the deserted town of Fao. and repeatedly failed to knock out the improvised pontoon bridges. the pontoons were sturdy enough to support trucks and small artillery pieces. His opinion of Iraq's credit-worthiness was confirmed in numerous interviews with international bankers and commodity traders in Paris.htm 3/14 . New York. no? Funny. as Iraqi debts contracted earlier in the war with Iran came due. The Iraqis immediately declared a national state of emergency.000 men--into the Fao Peninsula across those bridges. and were soon followed by thousands of well-trained Revolutionary Guardsmen in small fiberglass boats. On the night of February 8-9. Still. which were little more than blocks of Styrofoam roped together and covered with roofing tin. another chit was made out. Iranian troops did what all military observers until then had had hoped was impossible: they swept across the southern border with Iraq and occupied the industrial town of Fao. They crossed the Shatt al-Arab waterway down at the delta. they erected a pontoon bridge back to the Iranian mainland and dug in. along with a top Baathist General. as punishment for its brazen support of Iraq. All the resources of the Iraqi state were now going to what Saddam needed most: arms. France. despite a record 725 combat sorties in a single day. the Iranians began to shell Basra and neighboring Kuwait. and Iraq fell far behind in its debt payments. with no questions asked by our head office in Rome. London. Normal loans were called "non-Perugina. and arms manufacturing technology." Paul Von Wedel remembers. kentimmerman. and West Germany followed suit. the New York Regional Management or the Federal Reserve Bank. a chit went into the box. Saadi Tuma al-Jaboori.

But those supplies did continue. The prospects of an Iranian victory--however unrealistic they may have been--drove fear into the hearts of Iraq's creditors. "There are no clouds on the horizon of Franco-Iraqi relations. Iraq was a "friend and ally. hoping the Iranians would go away. When he came to Paris soon afterwards to sign the Jupiter project. equipped with a new generation anti-shipping missile (the AS-15TT). despite the lack of realistic financing. and on a daily basis. was the primary loading point for urgent deliveries of Frenchbuilt missiles." The threat of Iranian terrorism prompted Chirac to greater discretion. Chirac argued that it was no time to abandon Saddam Hussein." In case the message was not clear enough. "My visit has been crowned with success. the entire subject of French relations with Iraq became one of the closest held secrets of Chirac's second Premiership. Iraq needed the planes to replace war losses. In March. Iraq received its first piece of good news in months. They included a half dozen Aerospatiale Dauphin helicopters. and avionics. The deliveries became so intensive by mid-1986 that commercial flights linking Paris to Baghdad were also used to haul arms. despite the fact that Dassault had no more orders on its books. which sorely needed to announce a new export sale to restore investor confidence. who anxiously began calculating what an Iraqi default would mean to their balance sheets. he added: "You could call that concrete results. cluster bombs. Arms orders are following their normal course. across from Kuwait's Bubiyan Island." Chirac said. My objectives have all been attained. and "Jupiter" for the mortars. which flew to France just to load arms. The equipment was loaded on board Antonovs of the Iraqi Air Force. fuzes. built by the US Army Corps of Engineers at Chateauroux in central France. Chirac's first act as Prime Minister was to approve a major arms sale package for Iraq. Tarek Aziz could hardly restrain his enthusiasm at finding his old friend Jacques Chirac back at the Matignon palace. With the Iranians camped out on the Fao Peninsula (and with Iraq some $5 billion in debt to France). A former NATO airfield. The new deals were relatively modest compared to what the French arms industry had become accustomed to signing with Iraq. As the weeks went by. and the Iranians managed to shore up their bridgehead on the Fao Peninsula. Companies like Dassault. and totalled a mere $430 million. All the financial problems have been resolved.1/14/13 The Death Lobby: Chapter 13 On February 11..com/news/tdl13. and large numbers of highprecision 120 mm mortars made by Thomson-Brandt. radar equipment. In response to these direct threats. the Kuwaitis just shivered in their palaces as the guns boomed and kept quiet. and Saddam's "personal friend. there was real concern in Kuwait and the West that the Iran-Iraq war might be drawing to a close. he bubbled with praise for the returning Prime Minister. The Kuwaiti Emir knew he could not throw the Iraqis out of Bubiyan or prohibit Iraqi planes from using Kuwaiti air bases as staging areas for attacks on Iranian oil installations without greatly angering Saddam.htm 4/14 . Except for the periodic pilgrimages of Tarek Aziz to Paris. The French Socialists lost the Parliamentary elections. were ordered to keep silent as they continued to supply weapons to Iraq. Iranian President Ali Khamene'i sent a personal envoy to warn the Kuwaiti Emir that "Kuwait will bear the consequences" of any aid to Iraq. He pointed out that the advance of Iranian troops to the Khawr Abdallah Channel. with whom relations went much deeper than the pocketbook. Once the news of the "Jupiter" and "Jacinthe" deals was out. returned to power in Paris. Chirac also promised that France would keep open its production line for the Mirage F1. Although they kentimmerman. now made Iran and Kuwait neighboring countries." Jacques Chirac." he told a press conference on June 10. The contracts were given colorful code-names: "Jacinthe" and "Tulip" for the helicopters.. and warned against loaning Bubiyan to Iraq as a safe haven for its navy. he gave strict orders to keep future contracts under wraps.

At Saad 16. dunebuggies to pull the mortar across the desert. were building a gigantic complex that went by the codename of Project 9230. near Mosul. then it would manufacture them itself. it was called Project 33/85. A consortium of West German companies led by WTB Walter Thosti Boswau and a consulting outfit called Infraplan. By early 1986. where Iraqi technicians were hard at work fitting out assembly lines to manufacture solid rocket fuel and a wide variety of explosives. Baghdad would collapse. In addition to the huge Taji complex to the north of Baghdad. Water Engineering Trading (WET) of Hamburg. Even though Saddam had successfully diversified his supplies of weapons. Worse. In contractual documents. it appeared that Saddam was getting closer to this goal. was Iraq's principle munitions works. Thomson-Brandt mortars. The new guns. but expensive. harnesses and special parachutes to drop it from helicopters. even reinforced Zodiacs so the Iraqis could use it in the Howeiza marshes. The reports were sketchy. work on missile projects was advancing at a rapid pace. The tightening of international financial markets reinforced his determination to build an indigenous armaments industry in Iraq. Western diplomats in Baghdad were reporting back to their governments that Iraq was now using locally-manufactured ammunition and bombs in the war. Within the close confines of the defense community it became common knowledge that Iraq was now the biggest customer for the accurate. using its French-built warplanes and their Exocet missiles.com/news/tdl13. and had to refuel in Athens or Istanbul for what was normally a non-stop flight. and more technology. At nearby-by Iskandariyah." Unable to expel the Iranians from Fao. As time went on. meant that Iraq's Soviet tanks could now fire sophisticated new armor-piercing rounds bought in the West. The Iraqi order was so large that many companies were hoping to pick up the crumbs. They showed Iraqi delegations all manner of special devices they had concocted to go with it. Some 25 kilometers south of Baghdad at al-Yusufiah was the Badr factory. The French delivered nearly 270 Exocets to Iraq in 1986.1/14/13 The Death Lobby: Chapter 13 were virtually empty of passengers. believed to have been supplied by the West German arms-maker.htm 5/14 . other weapons-manufacturing lines would be added to the kentimmerman. news of weapons deals tended to leak and large. French intelligence sources estimated in mid-1986 that "if France cut off the arms pipeline to Iraq for a mere three weeks. A bit farther south. to disguise its military purpose from the German licensing authority at Eschborn. Iraq struck back hard against Iranian oil exports in the Gulf. Perhaps the most ambitious of all was the brand-new chemicals complex at al-Fallujah. Rheinmetall. If Iraq couldn't purchase the weapons it wanted on the open market. he resented even the limited political influence a weapons supplier could wield. but they confirmed what many arms salesmen had known for years: Iraq was buying fewer weapons. highly visible transfers of equipment and money could allow Saddam's enemies (the world was full of them) to discover his true intentions. which made "dumb" bombs and was gearing up to make artillery pieces. the Huteen State Establishment was tooling up to make the Cardoen cluster bombs under license. to make the weapons itself. near the industrial town of al-Hillah. turning them into effective tank-killers. the Iraqi Airlines jets were so heavily-laden they barely made it off the runway at Orly. a number of other weapons plants had gone into limited production. The core plant had been designed by an old hand from the Samarra gas works. the al-Qaqaa State Establishment. But the Iraqis were becoming less happy about buying arms. while at Saad 13 French-trained electronics technicians were assembling battlefield radios and radar gear. One embassy reported that Iraq had set up a special plant to re-equip its Soviet-made T-55 tanks with a more powerful 105mm main gun. or roughly 75% of Aerospatiale's total production. but the ruse was hardly necessary. 60 kilometers to the west of Baghdad on the road to Ramadi. to manufacture the type of nerve gas precursors whose export was now controlled throughout most of the European community.

Not a single piece of equipment Iraq purchased abroad fully met their expectations or requirements." This report situated it to the south of Akashat.com/news/tdl13. intelligence sources. but then he referred specifically to the Saad 13 electronics factory set up by Thomson-CSF. by using it in a different way. had few employees of its own so it had to purchase its expertise elsewhere. at repair depots built and equipped by West European companies. Iraq was already fitting French missiles onto Soviet aircraft. "They call us in when they have a kentimmerman. In an interview in Baghdad in February 1986. and vice-versa. these Iraqi claims were considered empty boasts. the Fallujah plant was capable of churning out 17. Fallujah was located near the Habbaniyah air base. the Iraqis no longer had to rely on suppliers in Europe or in the United States. and was developing its own electronics industry. we have yet to find any equipment that exceeded our expectations. Among the chemicals they asked the Germans to help them manufacture at Fallujah were Phosphorous trichloride and Phosphorous oxychloride. W. "This is a duplicate facility. but shadowy figure in the Iraqi defense establishment as Amer Rashid to speak on the record to a Western journalist.E. Other chemical weapons agents were being manufactured in significant quantities in a top secret plant near the Akashat-Al Qaim phosphate works. By making sarin and tabun precursors themselves." the sources said. gave a rare glimpse of this flurry of activity. In nearly six years of war. and was a crucial facility as far as Iraq's independence from any international embargo was concerned. a clear carbon copy of al Qaim. or technically." General Amer said. was actually little more than a shell company. a petrochemicals expert based in Duisburg. Even the foreign engineers maintaining some of Iraq's most sophisticated weaponry were not certain about the real status of Iraqi weapons programs.T. which lies close to the Jordanian border. General Amer Rashid." Stripped of the rhetoric. It was upgrading Soviet tanks. According to U. near the al-Rutbah Air Force base. Elf-Aquitaine). to cover the private deals that two employees of a major West German chemical producer. because of tight government security and compartmentization. The conventional wisdom among Iraq's arms suppliers was that they were scarcely capable of correctly using the sophisticated weaponry they had purchased in the West. "We are certainly trying to develop our own electronics industry. One hundred West German technicians and workers were sent to Iraq to supervise construction and installation of the production lines." he went on.S. "We know that chemical weapons are being manufactured at both the al Qaim and the Akashat plants. The Fallujah plant was managed by the al-Muthena State Establishment.E. It turned to a French chemicals manufacturer. not to become self-sufficient. When completed. W. So we will try to master whatever technology that can contribute to the development of our industry. to learn how to handle the extremely dangerous substances it was supposed to deliver to Iraq. Preussag AG. but to produce those parts or assemblies that will best contribute to our independence and free action now and in the future.6 tons of nerve gas precursor chemicals each day. "Technology has become a very important weapon for us in and of itself. let alone designing and building their own. "We systematically modify everything we buy." A report prepared by the House Republican Research Committee entitled "Iraq's Expanding Chemical Weapons Arsenal" called the Akashat plant "the most autonomous production unit currently operational in Iraq." It was already unusual for such a powerful. by actually modifying certain features.T. had made with Iraq. Everything. this plant was built in the early 1980s by Klöckner Industries Anlagen GmbH. Atochem (a wholly-owned subsidiary of the French national oil company.1/14/13 The Death Lobby: Chapter 13 Fallujah complex." For the most part. substances so toxic and of such little use outside of nerve gas production that even the Soviet Union controlled their export. West Germany. "And military technology has become one of our government's top priorities. "We do this operationally. what he meant was that Iraq intended to make what it could not hope to buy on the world market.htm 6/14 . the head of the Scientific Research Council.

Field Marshall Abdelhalim Abu Ghazaleh.1/14/13 The Death Lobby: Chapter 13 problem. Helmy was an American citizen of Egyptian origin. Although the United States had no current use for the FAE bombs. Austria. He called on an old friend who worked as a scientist with the Teledyne Corporation of Hollister. But if the Iraqis hoped to obtain particularly sensitive technology.htm 7/14 . On August 12. 1985. Riyadh. Egypt was a large-scale recipient of U. This was not a binding. Hazelrig was nothing if not thorough." one French engineer said.S. He introduced Khairat to another former Teledyne employee who had launched his own consulting firm. 'Security. government Top Secret security clearance. because of all that security the infrared seekers of our missiles are collecting dust. He provided a detailed chronology of the year-long effort to obtain the FAE bombs. Ankara. military aid. Khairat decided to turn elsewhere for help. Soon however he realized that the Egyptians needed a different sort of help. final rejection of an official request. but it clearly showed the Egyptians and their American suppliers that the proposed $14 million deal involved the national security of the United States.com/news/tdl13. the Egyptian request was turned down. He shared the office with IFAT and Consen." Much of the weapons-manufacturing technology was purchased on the open market. to cover his operations. Inc.' they shout. and investigate whether Egypt could manufacture its own. Abdelkader Helmy. and drew up a plan for the Egyptians on how best to approach the FAE deal. and Tel Aviv. Dr. the procurement people based in Monaco and in Zug. as his personal liaison officer with the clandestine procurement network operating in Europe. But since Smith was already working on Honeywell to get the plans to manufacture FAE explosives. and the United States. He appointed a member of his staff. the State Department's Office of Munitions Control issued a "negative advisory opinion" to the Pennsylvania exporter. Switzerland. California. more clandestine needs were required. the Iraqis and their Egyptian partners decided to make a head-on play to acquire FAE bombs directly from the Pentagon. Khairat and IFAT's Keith Smith worked together on a daily basis. because they are storing them in secret warehouses out in the open desert they won't let us visit. the UK. and kentimmerman. He also had a U. and spoke fluent Arabic. Well. Especially when the aim was the build a nuclear weapon. and a missile powerful enough to launch it against capitols throughout the entire region--Tehran. Court records show that Hazelrig submitted his strategy to the Egyptians in a final report on March 7.000 CBU-72/B FAE bombs were being stored at the Hawthorne military Depot in Nevada. "then they refuse to tell us what went wrong. Colonel Ahmed Hussam Khairat.S.S. Sam Hazelrig knew how the Munitions Control Office worked. these bombs had been manufactured by a Philadelphia munitions-packer called Day & Zimmerman The Egyptian Ministry of Defense told the Pentagon that they urgently needed the FAE bombs for clearing mines in the Egyptian desert. The Egyptians felt they had such a good chance of obtaining official U. and was the State Department's favorite because it had signed the Camp David peace treaty with Israel. Colonel Khairat rented an office in Salzburg. Madison Technical Services. The Condor II project was being run directly by the Egyptian Minister of Defense. because of his work at the Jet Propulsion Laboratory. and billed as "development" projects. Day & Zimmerman. It was a tried and true tactic that had served the Iraqis by making them them eligible for government-sponsored export credits from West Germany. security. Designed by Honeywell for the US Air Force during the Vietnam war. The Egyptians learned that some 9. Helmy agreed to help Egypt obtain copies of the American patents for the FAE bomb. approval for the sale that they even provided maps showing the areas they wanted to de-mine. Only months after Keith Smith went to Honeywell to acquire the plans for a fuel-air explosive warhead for the Condor II ballistic missile. 1986.

governments investigators. It is obvious. "The CBU-72/B FAE bomb is on the Munitions Control List inasmuch as it is classified a bomb. The Condor II shopping list would require four separate export licenses. Department of State to evaluate the military-politico requirements. Smith and Khairat went for gold. They had already revealed too much of their true plans. he managed to arrange an introduction. "The initiation of this procurement action should be taken by the Egyptian Ambassador to the United States through existing channels of communication adhering to established protocol.S. the CBU-72/B FAE bomb is not thought to be a consideration of foreign policy. and for analyzing and controlling in-flight trajectories." Hazelrig personally delivered his report to Khairat at the IFAT offices in Monaco. he understood that the FAE's were really intended for a ballistic missile project and not for mine-clearing. available only in the United States. Army's Strategic Defense Command. IFAT was having trouble procuring other technologies that were critical to the development of the Condor II. From these discussions. Alabama. Smith decided not to use his IFAT calling cards.. are made a matter of foreign policy. of Stony Stratford. therefore. foreign policy. instead of going through the exporter.1/14/13 The Death Lobby: Chapter 13 presented a detailed interpretation of the State Department's Munitions Control List. Abdelkader Helmy. His travel companion was Keith Smith. came to $6. and to design a program for optimizing warhead trajectories.com/news/tdl13. Helmy arranged for Khairat to explain his needs to a small software house located in Huntsville. Therefore. But he argued his conclusions in an extraordinary manner. Hazelrig told U. They asked Coleman to provide them with sophisticated software tailored for ballistic missile design..S. to help in the development phase of the missile. the home of the U. if they wanted to facilitate the licensing procedure. including the end-use and user. They also asked Coleman to quote a price for building an entire manufacturing facility for strapdown inertial guidance systems to be used on the missile. Just to keep things clean. and instead presented himself as a representative of Transtechno U. But there was a hitch. Khairat and Smith let the matter drop. that would allow the U.5 million for wind tunnel tests of a missile mock-up. "The President of the United States through his representative. In April 1986. It was a heady shopping list. "Four separate Letters of Intent are suggested. which was deeply engaged in transforming the Patriot missile into a ballistic missile killer.5 million. Munitions that could obviously upset the balance of power in the world.htm 8/14 ." Coleman wrote.. The most expensive portion by far was the "thrust termination" software.S. the Secretary of State. they kentimmerman.." His second point was argued just as dubiously. most personnel with little practical experience with FAE would have negative connotations [sic] on the subject. including General Abdel El Ghohari. a London suburb not far from Heathrow Airport. Day & Zimmerman. Instead. The whole package. makes U. Again. then travelled on to Cairo to meet with other Egyptian officers working on the Condor II project.. But Coleman wrote back almost immediately. the record shows. "that the sale of FAE bombs to Egypt would not compromise national security." he concluded. which included $1. he replied on May 22.K. Colonel Khairat called his compatriot in California. What he apparently failed to realize was that both the FAE and the missile project were really intended for Iraq. Milton Keynes." Hazelrig suggested that the Egyptian government renew its demand but on a more official basis.S. They especially needed specialized software. minus the inertial guidance equipment. the overall project manager. Transtechno was just another Consen front. without transition or further development. and again. It is easy to relate the FAE "ball of fire image" to the release of nuclear energy. the systems engineer. Khairat travelled to Huntsville to meet with members of Coleman Research Corporation. such as nuclear weapons. Through another former Teledyne colleague named Jim Huffman.

also controlled one of the top French defense companies.1/14/13 The Death Lobby: Chapter 13 took the Coleman proposal. Matra. Hachette's owner and Chief Executive Officer. Alwan also appears on the Panamanian commercial registry as the Secretary General of Montana Management. he served as Barzan's bagman. and conversant in French. and placing the money in special Swiss accounts. the Iraqis couldn't guarantee access to the latest Matra missiles. Inc. these Iraqi investment companies gradually acquired hundreds of millions of dollars worth of industrial stock. Jules Kroll. An estimated $1 billion went into bank accounts controlled by Saddam himself. Lagadère and his board say the Iraqis never wielded this weapon. Two Iraqi fronts. Barzan Ibrahim alTikriti. Saddam had been skimming an estimated 5% off the top of Iraq's $15 billion yearly oil revenues. This was another common Iraqi practise: buy the blueprints from one source. and Security Assistance. while Midco was created by Barzan in Switzerland in 1982. If the Iraqis sold short. and put it to practical use themselves as a procurement guide. As Undersecretary of State for Science.htm 9/14 . The Geneva commercial registry shows that the seed money-2. Over the years. In fact. If Egypt wanted a new squadron of F-16s. used to finance Iraqi development schemes. or if Israel wanted more helicopters. for his personal and family use. Jean-Luc Lagadère.4 billion in Iraqi-controlled deposits stashed away in fifty banks around the world. but their 8. Fluent in English. worth around $67 million. both companies were controlled from Baghdad by two frontmen working for Barzan. Since 1981. One of the companies that attracted Saddam's private investment purse was the West German industrial giant. Saddam's slush fund went to other. no matter how sophisticated the equipment that was demanded. was in fact a retired Major General in the Iraqi Army. Alwan. just as they took the Honeywell FAE study. and the equipment from several others. and Mohammed Turki Habib. revealed that the multi-billion dollar slush fund was controlled by Saddam's half-brother. they had to go through Schneider's shop on the ground floor of the State Department. and television networks. Hachette. kentimmerman. [TKTK with Dassault if Montana bought in] By buying into Hachette. Another was the French publishing conglomerate. named as Khalaf al-Doulimi. In a CBS 60 Minutes interview. That way there were fewer leaks. Matra never refused an Iraqi order.1 million Swiss francs--was paid in cash onto a numbered Swiss account by an Iraqi named Aladin Hussein Alwan. radio stations. Hachette stock would go tumbling down. and Montana Management. which controlled several French publishing houses and had stakes in newspapers. His investigators managed to locate $2. more secret projects as well. William Schneider was the Department's point man when it came to foreign military sales.5% kickback on contracts with Japanese companies.4% stake. and had worked out a scam on foreign letters of credit. organized the stock purchases. whose real name was Aladin Hussein Ali Maki Khamas. Daimler-Benz. He had also been taking a 2. Technology. But throughout the 1980s.com/news/tdl13. since no one understood the big picture. which owned missile and helicopter manufacturer MBB. was large enough to wield as a weapon of financial terror. Jules Kroll believes they salted away as much as $10 billion disguised as legitimate business investments--5% of the $200 billion Iraq earned during the 1980s. Wall Street financial investigator. Midco. Some of the money was invested in legitimate business concerns through front companies operating out of Switzerland. Montana had been set up as a mail box company in Panama shortly after Saddam took over as President in 1979.

S. "Murphy fought dogs and cats to get these computers and imaging systems approved. documents released by the Commerce Department now show. In a long interview in the fall of 1985 exclusively devoted to developments inside Iran. once Richard Fairbanks retired to private law practice and lobbying. diplomats said.S. "The State Department knew from explicit DoD warnings where that equipment was going. The U. So far.S. and to remind the Iraqis that we are still pursuing Operation Staunch. Schneider stood a bureaucratic head higher than the Pentagon's Steve Bryen. When he returned to Washington. but it would allow extensive technology sales. and with Trade Minister Hassan Ali. and the Iraqis wanted to know why. "Don't forget that Bell helicopter now has a full time rep right here in Baghdad. They are dead set against the sale of perfectly ordinary computers to Iraq. whom they saw as their archenemy when it came to high-tech sales to Iraq. The Iraqis complained to Schneider that they were not getting all the equipment they sought from the U. Richard Murphy and the NEA experts up on the 5th floor of the State Department were overjoyed. Schneider threw his considerable weight behind the "trade off" with Iraq. Tarek Aziz wanted to know." Bryen has since kentimmerman." But American high-tech goods were another matter entirely. would ship the Iraqis no weapons.S. How could Iraq believe that the U. As for the Bell 214. claimed it was not supporting Iran. one of Murphy's principal deputies found time to single out Bryen and Richard Perle for their obstructive behavior. this seems to be respected. U.-built weapons were still getting through to the Ayatollahs." Schneider went on to explain that he had received unequivocal information that these small. and machine-tools they needed for their steel factories were getting blocked. and yet U. The timing of Schneider's trip was deliberate. during an unpublicized visit to Washington in October 1985." The diplomats also suggested with a few winks and nods that Schneider might have entertained Iraqi requests to acquire U. He had put the same point in almost identical words only a few months earlier to Richard Murphy." Schneider's visit was significant for another reason as well." Bryen asserts." this Arabist lamented.S. "This is giving the Iraqis a taste of what U. In an interview shortly before his trip to Baghdad.S. who seemed to have a finger in every Iraqi arms purchase. nor was he a diplomat in the ordinary sense of the term. "They are not interested in the Gulf. trade with Iraq.htm 10/14 . when purely civilian sales of American computers to Iraq could not get approved? Aziz never missed an opportunity to hammer his message home.1/14/13 The Death Lobby: Chapter 13 Schneider had also taken over Operation Staunch.com/news/tdl13." Schneider met with Tarek Aziz. Just to remind him that there is an alternative to the USSR. U.S. weapons at some later date.S.000 lbs don't technically need our approval.S. as the manufacturer's literature suggests." The "perfectly ordinary computers" were in fact headed for the Saad 16 missile complex in Mosul. only days before the Iranian attack on Fao. He was not an Arabist. "He came to discuss expanding U. Schneider was clearly uncomfortable with the delivery of American-built helicopters to Iraq. which was what the Iraqis wanted most from the U. "except when it comes to technology transfer." although he wouldn't say whether or not the Iraqis had managed to equip them with TOW anti-tank missiles. battlefield observation helicopters had "definitely been diverted to military purposes. Computers they needed for their oil industry. and it certainly wasn't intended for university research. the Allied effort to block military supplies from reaching Iran.S. We wanted to make sure we were present in a very visible way when he returned.S. technology is all about. was supporting Baghdad." they pointed out. Schneider said the State Department only cleared this sale "with substantial Iraqi promises that they would not be used for military ends. diplomats in Baghdad said this is what brought Schneider to the Iraqi capitol during the first week of February 1986. His business was technology. They can be shipped with an ordinary Commerce Department license. because of all the bureaucratic red tape. "The Hughes 500 sneaked in under our noses because helicopters weighing less than 10. as he saw it: the U. "Saddam had just returned from an official visit to Moscow in January--one of the rare trips abroad he has taken since the beginning of the war.

htm 11/14 . he spent four days in the international spotlight later on when Saddam Hussein appointed him as the "interim leader of Kuwait. the U. Meanwhile. military men in Baghdad were not the ones running the show. At the request of the State Department. it was okay for U.S.S.-Iraqi alliance were the CIA. ambassador.S. "Before the U.S. had gone to Sandhurst in Britain. the Pentagon lost the turf battle on Iraq. The real masters of the U. he was also one of the principal operators of Saddam's clandestine financial network in Europe. the fight was joined in the corridors and lost at the conference table. at a meeting of President Reagan's National Security Council. In this case. Count Alexandre de Marenches).S." sources knowledgeable of the arrangement said.S. Saudi Arabia and kentimmerman. but to no avail. in which the Pentagon received a severe dressing down for its "obstruction" of Iraqi high-tech license requests.-manned AWACS planes flying out of Riyadh. After all. during a trip to Amman. At the Iraqis' request. companies to help Iraq design and build a ballistic missile. But a number of Saad 16 licenses they had rejected were listed as examples of the type of high-tech that ought to be allowed to reach Iraq." the top CIA officer in US Embassies abroad. were not mentioned by name. Bob Woodward of the Washington Post reported in August 1986 that the U. took to his new job with a passion. and was giving the Iraqis intelligence on Iranian troop formations and economic targets. enjoyed a privileged status among Saddam's cronies. Admiral Poindexter issued a National Security Decision Directive enjoining all government agencies "to be more forthcoming" on Iraqi license requests. to see how the intelligence link was operating.1/14/13 The Death Lobby: Chapter 13 tried to get the warnings he sent over to Commerce and the State Department released through the Freedom of Information Act. Some of the Iraqis. and later attended a 6-month armor training course at Fort Knox in the U. French intelligence officials say. military attaché in Baghdad in nearly twenty years. the first U." he commented wryly. As many Washington battles. Colonel Mark Pough. In July 1986. The COS. had established a secret intelligence link between Baghdad and Washington. An older generation officer ostensibly in charge of the Army's Historical Directorate. The Director made subsequent trips to Baghdad as time went by. "My own letters are now classified as state secrets. "The United States did in Baghdad what it did in other Arab capitals over the past three decades: it made the CIA station chief more important in local eyes than the U. derived from U." The satellite link came on top of a long-standing agreement to provide the Iraqis with information on Iranian Air Force movements. which backed the Commerce Department to the hilt.S.S. The Pentagon. as he was called. such as Major General Aladine Maki Khamas. CIA Director William Casey negotiated the intelligence sharing deal personally with Saddam's half-brother Barzan. and was generally consulted before Iraq launched a major offensive on the battlefield or on the diplomatic front. Jordan in 1982. General Ala was a tank driver who had commanded the only Iraqi armored division that reached Damascus before a UN ceasefire ended the 1973 Arab-Israeli war. (Casey stopped off in Paris on the way to meet Barzan. "it had a full time Chief of the Station." as he was called familiarly by his subordinates. and Bryen's DTSA.S. and was scouring the local papers for hints of what was going on at the front during the attack on Fao. the Iraqis were happily introducing Pough and other U. had a full-time ambassador in Baghdad. (A dedicated Baathist. to confer with the former head of French intelligence. satellite photographs. The message was clear. General "Ala. gathered by U. But the U.") Unbeknownst to those who became acquainted with him. exchanged defense attachés soon after the renewal of diplomatic ties. it might teach the Iranians a lesson.S.S.S. had been educated in the West.com/news/tdl13. officers to mid-level commanders and some senior staff officers at Staff Headquarters in Baghdad. He had gone on a crash Arabic-language course before arriving in Baghdad.

where Iran had shifted the bulk of its oil loading operations in an effort to get them off of Kharg Island and beyond the range of the Iraqi Air Force. satellite photographs probably helped the Iraqis plan their first air strike against Sirri Island at the head of the Gulf. 1985. To make the extra range. instead of just buying from the Germans and the Swiss as was their habit. Saddam Hussein: a new credit guarantee to finance British exports to Iraq. The credit package came despite an official trade embargo barring British firms from supplying Baghdad with arms. and failed to rule out the supply of weapons manufacturing machinery. this refusal was motivated by the very high number of licenses relating to equipment that directly fed the Iraqi war machine. Clark fully understood. It was less than what the United States was offering." as his Prime Minister. and like Commerce.S. it would bring British credits to Iraq since 1983 to more than $1. Alan Clark was no "wet. it was responsible for promoting trade. He wanted to convince the Iraqis to support the British machine-tool industry. and ushered into the VIP lounge for a brief champagne reception. DTI. offered by the DTI's Export Credit Guarantee Department (ECGD). as the American CCC credits were. The two jobs were frankly contradictory. and was so sensitive that "King Hussein of Jordan personally oversaw the transfer to Baghdad" of U. He was greeted by his Iraqi counterpart. That policy. a philosophy prominently on display in the conservative pantheon.htm 12/14 . information from U. kentimmerman. U. as his ministry was called. he was an outspoken advocate of free trade.S. and they bit hard.2 billion (£750 million). But trade promotion often conflicted with national security. half the Iraqi Mirage fighter-bombers served as fuel tanks for the planes launching the attack." It did not determine what "lethal" meant. using a special "buddy-buddy" refueling kit supplied by Dassault. but could and should be used to buy British manufactured and industrial goods. which specified that Her Majesty's Government "should maintain our consistent refusal to supply lethal equipment to either side. The lurid lights and blaring headlines of a major scandal were the last thing on Clark's mind as he strode down the red carpet at Baghdad's Saddam International Airport in November 1986. Clark's success went beyond his most imprudent dreams. intelligence data. was reiterated with force by Foreign Minister Sir Geoffrey Howe before the House of Commons on October 29. But the official position contained a loophole. In August 1986. ammunition or anything else that might "exacerbate or prolong" the 6-year old Iran-Iraq war. Margaret Thatcher.com/news/tdl13.S. it was the lead agency in licensing the export of sensitive technology. and like Commerce. In Clark's briefcase was a substantial "gift" for Iraqi leader. quietly determined at the start of the war. It was not tied to food or agricultural purchases. according to the official trade figures it supplied the OECD. called cabinet ministers suspected of latent liberalism. Commerce Department in many ways. Clark may not have realized it at the time. which Alan Clark was going to discover the hard way. Like Commerce. If Iraq accepted the terms. but he hastened to explain that the British money would have fewer strings attached. but Britain was about to get involved in building the Iraqi war machine. Like the Department of Commerce. Promoting trade and controlling trade created just as many conflicts of interest in Britain as they did in the United States. Alan Clark had come to Baghdad in November 1986 with a mission. DTI refused to publish a list of export licenses awarded to British manufacturers selling to Iraq. tactical intelligence of this sort allowed Iraq to counter potentially devastating Iranian human wave attacks in 1983 and 1984.1/14/13 The Death Lobby: Chapter 13 patrolling the Gulf.5 billion worth of high technology goods to Iraq. Over the next four years. Indeed. Trade Minister Hassan Ali. The Iraqis bit. paralleled the U. Alan Clark headed Britain's Department of Trade and Industry. Britain would supply more than $1.S.

sold for an average black market price of $10.com/news/tdl13. Thanks to the HAWKs (and to Swedish-supplied RBS-70 laser-guided missiles). As the story unravelled. had already begun to undercut the efforts of Ambassador Richard Fairbanks. the last restraints slowing the flow of U. government had violated its own embargo on arms sales to Iran in an effort to win the release of the hostages. deliveries revived the Iranian Air Force to a level it had not reached since 1982.000 to 12. Similarly. The military situation had radically. and areas to the north." Sounding the alarm on the renewed vigor of the Iranian Armed Forces was Richard Murphy's former deputy. The Kerbala 3-4-5 and 6 offensives of December 1986 and January 1987 revealed a strikingly more powerful Iranian military machine that most Western analysts believed still could exist. The "Iran Initiative" was revealed on November 4. This "private policy" which totally contradicted the U. the arsenal of American weapons sold to Iran in 1986 as part of the "Initiative" topped $650 million. Iraqi military sources said.000 TOW anti-tank missiles. Fish Lake. hoping to make a buck off of Iran. whose intensity and planning took the Iraqis by surprise. if momentarily." a former high-ranking State Department official said ruefully in January 1987. The Phoenix was responsible for the destruction of many of the new French Mirages.S technology to Iraqi weapons projects disappeared.8 million each. and due to Iranian TOWs. and because of the general discrediting of the public policy.000 each. McFarlane in May 1986 . • 246 HAWK missiles and radar sets worth $20 million. following the release by pro-Iranian terrorists in Beirut of American hostage David Jacobson. and included: • 10. increasing its capability by 80% to 110 combat aircraft.htm 13/14 . engines. worth upwards of $150 million. 1986. James Placke. at $1. Iraq's armored divisions were checked in counterattacks to the east of Basra. From then on. with all the might of trade and aide and technology sales. • Spare parts. who now worked with Fairbanks as a professional lobbyist on behalf of the Iraqi Embassy in Washington. U.S. The Iraqis noticed the difference on the battlefield and in the air. It soon became apparent that it also opened the flood gates to arms dealers all over the globe. the U.S. public policy of an arms embargo on Iran. With Irangate. "The Iranians have a far greater military capability than they did a year ago. and avionics for F-4 and F-14s. DC.up to twelve F-14s at once . By conservative estimates. The United States needed to swing fully behind Iraq. who had resigned as the head of Operation Staunch in September 1985 just as the NSC-sponsored arms deals began.1/14/13 The Death Lobby: Chapter 13 Shortly after Clark's visit to Baghdad.S. changed.​ kentimmerman. the Iranians launched a series of offensives against Basra. When this vast resupply operation was completed in late 1986. • 200 Phoenix anti-radar missiles. The secret to the Iranian comeback was a little publicized military resupply effort orchestrated initially by President Reagan's National Security Council staff. anything could go.S. satellite photos began detecting whole squadrons of Iranian F-14s in the air as of January 1987 . it became apparent that the U.whereas two years earlier Iran could barely keep two or three F-14s in the air at any given time. to prevent the Iranian brand of radical Islam from sweeping across the Mediterranean. The pro-Iraq lobby in Washington took the Irangate caper as the perfect justification of what they had been arguing all along. Iraq lost some 45-48 Soviet MiGs and Sukhois during the Kerbala offensives. "That is because of direct US action. it tipped the military balance momentarily in Iran's favor. some of which were delivered by former National Security Advisor Robert C.

htm 14/14 .com/news/tdl13.1/14/13 The Death Lobby: Chapter 13 kentimmerman.

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