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U.S. Export Policy Toward Iraq: An Agenda forTomorrow

by Kenneth R. Timmerman


Testimony before the Senate Committee on Banking,Housing, and Urban Affairs, Tuesday, Oct. 27, 1992


I am an author and independent journalist, and have specializedover the past ten years in Middle East security questions, withparticular emphasis on the proliferation of weapons of massdestruction.

My latest book, which was published last year by Houghton Mifflin,is called The Death Lobby: How the West Armed Iraq. It is the storyof how Western governments, companies and their bankers conspired inan orgy of greed and error to build up Saddam Hussein's militarycapability. In one review, the New York Times said the book was "in aclass by itself."

I began reporting on Iraq in 1984, and first met senior officialsin the Iraqi military-industrial establishment in 1986. I returned toIraq on several occasions after that, and published many earlywarnings on Iraqi military power and the growth of the Iraqi armsindustry. The Death Lobby details the contributions made by more than450 Western companies to Iraq's military buildup. (Oral: For the fullstory of how Saddam Hussein filled up his shopping cart with advancedweaponry and military production equipment and managed to pay for itall on credit, read my book.

Was the United States Iraq's principle supplier of arms oradvanced production technology? Certainly not. Those honors must goto France and Germany. Was the American contribution to SaddamHussein's military build-up significant? Absolutely, in financialterms, in terms of the technology actually supplied, and for thepolitical impact this had in emboldening the Iraqi regime.

From January 1985 through August 1990 the Department of Commerceapproved 771 license applications valued at $1.5 billion. Thefollowing statistics are drawn from an analysis of 474 of theselicenses, worth $1,272,466,525. My criteria for selecting licensesfor inclusion in this data base were their monetary value, the Iraqiend-user, and the sensitive nature of the equipment. While some itemshave invariably been missed, it is my belief that the conclusions ofthis analysis accurately reflect both the reality and the intent ofU.S. export licensing policy toward Iraq.


Conventional military sales


Contrary to claims that have been advanced here and there, theUnited States government did indeed approve conventional militarysales to Iraq.

The single largest sale was a $491 million proposal to sell Iraqseveral thousand military cargo trucks. This particular deal waslicensed on two separate occasions by the Department of Commerce, inApril 1986, and in April 1988, but major shipments never occurred.According to a report by the Commerce Department's Inspector General,the records on these licenses were falsified when they were submittedto Congress last year to delete the mention "military."

Notwithstanding the clear military nature of this sale, it is mybelief that Iraq never intended to purchase these trucks but insteadused the prospect of a major, relatively uncontroversial sale of thiskind as an enticement to American businessmen and to the Americangovernment. It was a tactic Saddam and his procurement agents usedagain and again: if Washington would just "play ball" on morecritical exports of sensitive technology, then a vast new marketwould open up in Iraq for American businessmen.

American military sales to Iraq began in December 1982, when theReagan Administration agreed to support the sale of 60 Hughes MD 500"Defender" helicopters to Baghdad, despite their obvious militaryapplications. The Hughes "Defender" was advertized by Hughes as adedicated anti-tank machine; an earlier version was used in Vietnamequipped with TOW missile launchers. A few Senators objected at thetime that the proposed sale was not in the interests of the UnitedStates, but the Commerce Department informed them that theirobjections were irrelevant, since the sale of aircraft weighing lessthan 10,000 pounds did not require an export license to countries notsubject to Foreign Policy restrictions. (Iraq was taken off theterrorism list that March). All 60 helicopters were delivered by theend of 1983. Iraq paid for them in a barter agreement through ChevronOil. The deal was brokered by the Lebanese-American intermediary,Sarkis Soghenalian, and is described in some detail in my book.

In February 1984, the Italian subsidiary of Bell Textron, AgustaBell, agreed to sell Iraq eight AB 212 military helicopters equippedfor anti-submarine warfare, worth a $164 million. They were intendedequip the Lupo class frigates Iraq had purchased from Italy fouryears earlier. This sale also required U.S. approval, but to myknowledge was never submitted to Congress.

Following its sister company in Italy, Bell Textron got into theact in late 1984 with a proposal to sell 48 Bell Textron 214 STutility helicopters. A version of this helicopter, sold around theworld as a military transport and commando support machine, had beenreclassified as a civilian aircraft, and arms broker SarkisSoghenalian proposed selling them to Iraq for "recreational" purposesand "VIP transport." This deal was approved by the ReaganAdministration.

When the delivery of these helicopters was discussed with U.S.Embassy officials in Baghdad in late 1984 and again in early 1985,they were concerned that these aircraft could be used for Medevacpurposes or as troop carriers. But in a written reply to Congress,Secretary of State Shultz stated in November 1984 that "increasedAmerican penetration of the extremely competitive civilian aircraftmarket [in Iraq] would serve the United States' interests byimproving our balance of trade, and lessening unemployment in theaircraft industry."

Here is a photograph I took of one of these helicopters at the alMuthana airbase outside Baghdad in April 1989. As you can see, it hasbeen painted in the colors of Iraq's Army Aviation Corps. The only"recreational" purpose it may have been used for is the gassing ofKurdish civilians in northern Iraq.

Probably in conjunction with the Bell Textron sale, the CommerceDepartment approved 13 other licenses, worth $102,758,428, for"civilian" helicopters and spare parts. One 1986 license isdescribed as "Navigation and support equipment to maintain the two[] helicopters exported to President of Iraq." During thewinds of Desert Storm Saddam Hussein could have fled the country onboard an American helicopter, and perhaps have escaped detection. Itis my understanding that the Defense Department protested these salesvigorously, but was overruled by State and Commerce during one of themany bureaucratic turf battles over Iraq licensing policy.

Another, particularly egregious case of U.S. military equipmentwinding up in Iraqi weapons systems involves a Dutch company calledDelft Instruments N.V. Delft purchased infra-red sensors and thermalimaging scanners from U.S. defense contractors, and re-exported themillegally to Iraq. The Iraqis used this equipment successfully duringtheir night attack across the border into the Saudi town of Kafji.U.S. intelligence had been unaware that Iraq possessed night visionequipment for its Soviet-built tanks, until it cost the lives ofAllied soldiers.


Dual-Use Equipment


The International Atomic Energy Agency (IAEA) has discovered avery broad range of U.S.-built equipment in Iraqi weaponsestablishments engaged in nuclear weapons development. Some itemshave been catalogued as "key equipment" for making the bomb, and havebeen destroyed by the IAEA. Other U.S.-built items will remain underlong-term IAEA monitoring, to ensure that the Iraqis do not use themin future attempts to build the bomb.

U.S. equipment found in Iraqi nuclear weapons establishmentsincludes:

• spectrometers, oscilloscopes, and other precisionscientific instruments

• electron beam welders to make uranium enrichmentcentrifuges,

• high-precision machine tools to make bomb cores

• sophisticated numerical controllers, and high-powercomputers

• neutron initiators and high-speed switches for nucleardetonation

• vacuum pumps for centrifuge and calutron enrichmentunits

• rare lubricants needed to make the centrifuges work.

One entire facility, a tungsten-carbide manufacturing plant thatwas part of the Al Atheer complex, was blown up by the IAEA in April1992 because it lay at the heart of the Iraqi clandestine nuclearweapons program, PC-3. Equipment for this plant appears to have beensupplied by the Latrobe, Pennsylvania manufacturer, Kennametal, andby a large number of other American companies, with financingprovided by the Atlanta branch of the BNL bank. .

To my knowledge the Kennametal sales were never subject tolicensing by the DoC; neither were sales of machine-tools by U.S.companies to numerous other Iraqi weapons plants . Furthermore, Iraqhas succeeded in hiding large quantities of machine-tools andadvanced production equipment, making it difficult to evaluate withany certainty the true extent of Iraq's unconventional andconventional weapons manufacturing capability, or how long it mighttake for Iraq to resume its nuclear weapons program once UN sanctionsare lifted.


Electron Beam Welders


When the President insisted on Oct. 19 that there was not "onescintilla" of evidence that U.S. equipment had made its way into theIraqi nuclear weapons program, many people including David Kay andGary Milhollin pointed immediately to the Leybold Heraeus electronbeam welder, which was licensed by Commerce for sale to the NassrState Establishment for Mechanical Industries in Taji, Iraq.

This particular piece of equipment had been used by the Iraqis intheir uranium enrichment program. Leybold's parent firm in Germanyapparently supplied what the IAEA called "application-specificfixtures," which enabled the welder to hold six centrifuge rotorssimultaneously while maraging steel end caps were welded in place - ahigh precision and vital step in building the most sensitive part ofthe enrichment centrifuge. Leybold's offices were searched by GermanCustoms on July 6, 1992, and the company is now subject to a criminalinvestigation.

But the IAEA found not one but three Leybold EB welders; and sofar, nobody has explained how they made their way to Iraq. ThePentagon is currently investigating whether these machines had infact been manufactured in the United States and exported to Germany,where Leybold modified them before shipping them on to Iraq. Documents seized in Iraq by the IAEA show that Leybold begandiscussing these sales directly with the Iraqi Atomic EnergyOrganization in 1982.


Main-frame computers


It is widely acknowledged today in scientific circles thatadvanced computers give the edge to Third World countries, such asIraq, who are seeking to develop a nuclear device without goingthrough the costly and political perilous process of a nuclear test.Using high-speed computers and graphics work stations it is nowpossible to simulate a nuclear blast, thus allowing designimprovements to be developed in a matter of months that used torequire long and arduous live testing. The IAEA discovered documentsin Iraq which proved beyond a doubt that Iraq was using mainframecomputers in precisely this way, and had gone through five majordesign upgrades of a nuclear explosive device, all withoutundertaking a live nuclear test. Those documents, as you may recall,saw the light of day thanks to the determination of David Kay, whodeserves a tribute from all of us who are concerned with theproliferation of unconventional weapons technology. Without David'swork on the ground with the UN inspection teams, we might never havepierced some of the secrets of the Iraqi nuclear weapons program.

My analysis of the Department of Commerce records shows that inthe United States alone, Iraq received a total of 370 export licensesfor computers and advanced scientific analysis equipment from May1985 through August 1990, worth a total of $114,637,902.

Of these, 167 licenses worth $58,095,322 concerned advancedcomputing systems. The most widely selling item were VAX machinesfrom Digital Equipment Corp. Other frequently sold items includedhigh-speed oscilloscopes, radio-spectrum analyzers, integratedcircuits, gas chromatography equipment, spectrophotometers, and awide range of electronics manufacturing and test equipment. All wereused in Iraqi weapons plants, many in the manufacture of ballisticmissiles and in nuclear weapons research and development. Typicalpurchasers were the Iraqi Ministry of Industry (and MilitaryIndustrialization), the Ministry of Defense, and known weaponsestablishments such as Saad 13, Saad 16, Huteen, Badr, and Nassr.

To date, however, Iraq has only acknowledged to possessing asingle IBM 370 mainframe, located at the Thuwaitha nuclear researchcenter. Earlier this year, an IAEA team visiting computer facilitiesin Baghdad discovered six other mainframes, four IBMs, a VAXIntergraph 6310, and a Hewlett Packard Model 3000.

But let's take a closer look at what was actually sold. HewlettPackard, for instance, received 57 licenses to export computersystems to Iraq from the United States, worth $3,147,608. HP systemswere sold to Thuwaitha, to the Saad 16 research and developmentcenter, and to a variety of heavy engineering complexes that weremanufacturing parts of uranium enrichment centrifuges and calutrons.Hewlett Packard maintained an office in Baghdad throughout most ofthe 1980s, and was a major exhibitor in the yearly Baghdadinternational trade fair. All these exports were approved by theDepartment of Commerce under the Reagan and Bush Administrations.

Iraq's second-largest computer supplier in the United States wasDigital Equipment. DEC operated in Iraq through a UK franchiseoutfit, International Computer Systems (London) Ltd, and its sistercompany, Computer and Communications Services (CCS) in Amman, Jordan.Both are controlled by a Jordanian of Palestinian origin, Isham FayezSamarra. ICS received 49 export licenses from the Department ofCommerce to sell computers to Iraq worth $16,377,132. Once again,these computers were sold to known Iraqi weapons establishments andprocurement fronts, including the Nassr State Establishment forMechanical Engineering, Saad 16, the Scientific Research Council, theMinistry of Industry and Military Industrialization, and the StateEstablishment for Heavy Engineering Industries (SEHEE). This latterwas deeply involved in manufacturing parts for uranium enrichmentcentrifuges and calutrons.


The Super Gun


Evidence is now beginning to emerge that American companies wereengaged in an effort to ship an entire production line to Iraq, tomanufacture large diameter gun barrels for the Super-Gun project.

U.S. manufacturing equipment for this project was shipped to theSaddam General Establishment, Faluja, Iraq in 1989 and 1990. Anexport license was awarded for at least some of these shipments toRD&D International, a Vienna, Virginia company which is undercriminal investigation. The RD&D license was "embargoed"following August 2, 1990, as were many other deals for advancedmilitary production equipment which had received Commerce Departmentapproval in application of the President's new Iraq policy. In otherwords, if Iraq had not invaded Kuwait, it would have received thegoods.

Among the equipment sold to the Saddam General Establishmentapparently for the supergun project was a 5-axis, 1250 mm CNCvertical turning, milling and slotting center; a 9000mm long CNCgantry mill ,worth $1,050,000; two 36 inch by 30 foot CNC lathes; a15 inch Chamber boring machine; and a 36 inch by 36 foot combinationboring and turning lathe. All of this equipment, of obvious militarypurpose, would have been prohibited for export to the Former SovietUnion. But apparently, not to Iraq.

The super-gun procurement package was worth tens of millions ofdollars. And like so many Iraqi purchases in the United States, itwas financed by the BNL in Atlanta.

A parallel effort by Iraq in June 1990 to purchase a large,refurbished forge from a Pennsylvania company, was apparently blockedby the Pentagon's Defense Technology Security Administration, inconjunction with the U.S. Customs Service. This forge had been used,decades earlier, to cast the barrels for the 16 inch guns on the foursurviving battleships of the US Navy.


What the Administration Knew


The Commerce Department knew as early as March 1985 that Iraq wasseeking advanced American scientific instruments and computers forSaad 16, a giant ballistic missile research and development centernear Mosul. How did Commerce know this? Simple. The Iraqis informedthem of their request in writing.

At the same time Commerce was nimbly approving export licenses forthe German contractor in charge of this scheme, other governmentagencies were attempting to win international agreement to set up theMissile Technology Control Regime, which would have outlawedprecisely this type of sale.

Nor did the United States government ignore the fact that Iraq wasdeveloping a broad-based chemical weapons manufacturing base. TheState Department delivered the first of more than 100 official"demarches" or protests to the West German governments on sales of CWtechnology to Iraq by German companies in 1983. Despite this, between1985 and 1989 the Commerce Department approved fourteen separateshipments described as "Bacteria, fungus, protozoa," most of whichwere sent directly to the Iraqi Atomic Energy Commission.

How about the nuclear weapons program? Records recently obtainedby Congressman Gonzales and the House Banking Committee show that theCIA was warning Commerce, the State Department, and presumably theWhite House, about Iraq's nuclear weapons program in 1989 if notearlier. By June 1989, according to a November 21, 1989 StateDepartment memo, the CIA had already reported to U.S. governmentagencies on the activities of Iraq front companies operating in theUnited States and Western Europe to purchase equipment for the Iraqinuclear effort. Furthermore, the memo states, the intelligencecommunity had developed a long list of "bad end users" known to beworking on nuclear, ballistic missile, and biological weaponsprojects . Despite this knowledge, the Administration went ahead withits policy to expand trade with Iraq. This policy was codified asNational Security Decision Directive 26 in October 1989.

The most active of the front companies operating in the U.S. wasMatrix Churchill, a wholly-owned Iraqi entity with manufacturingfacilities in Coventry, England, and a procurement office in Solon,Ohio. Matrix Churchill was used by Iraq starting in 1987 to procure awide range of advanced military production technologies, includingfour and five axis CNC machine-tools that even today would beforbidden for export to countries such as Russia.

In Great Britain, where the company was based, the governmentgranted export licenses to Matrix Churchill to sell 176 precisionmachine-tools to Iraq from 1987-1989, according to information I havecompiled from official records made available to the House of Commonslate last year. Most of these machines were shipped to the Taji andthe Huteen facilities, which contributed to Iraq's nuclear andconventional weapons programs as well as to the supergun project. TheIAEA has tagged some of these machines for long-term monitoring,because they had been used for manufacturing components for uraniumenrichment centrifuges.

In the United States, Matrix Churchill served as a "cut-out" forpurchases from more than fifty American manufacturers. It mademassive purchases of tungsten-carbide machine tool bits fromKennametal, of Latrobe, Pennsylvania; it purchased large quantitiesof platinium and rhodium; it jobbed out an advanced glass and ceramicfiber plant, suitable for manufacturing ballistic missile nose conesand perhaps centrifuge rotors to Glass International Inc, of Chino,California; it was working hand-in-hand with Industrias Cardoen ofChile to purchase zirconium sponge and special equipment to buildcluster bombs. And yet, this company was allowed to operate freelyuntil September 1990, when it was finally closed down by U.S.Customs.

I have mentioned the Matrix Churchill case to illustrate the factthat we are confronted here with two separate, but related problems.The first involves U.S. policy toward Iraq. The mountain of evidencenow available suggests that the Bush Administration was pursuingcovert policy objectives, yet to be revealed, which clearlycontradict the Administration's public committment tonon-proliferation. The United States made a major contribution to theexpansion of Iraq's military capabilities. This contributionincreased dramatically with the change of administration in January1989, and was formalized by NSD 26, which specifically authorizedsales to conventional military facilities in Iraq.

The second and larger problem concerns the gaping loopholes in ourexport control system, and what to do about them.


Reforming the Export Control System


Following the lead of President Reagan, who believed thatproliferation concerns should take a back seat to commercialimperatives, the Bush Administration has failed to provide leadershipto the international community in this area, actually vetoing severalCongressional bills that would have put the United States in theforefront in preventing the proliferation of mass destructionweapons. As paradoxical as this may seem, Germany today has thetoughest export controls on its books of any Western nation, whilethe United States is still wondering whether it has an export controlproblem.

Here are some of the steps I would take to fix the problem if Iwere in charge of U.S. export licensing policy.

1) Withdraw export licensing from the Commerce Department, whichis primarily responsible for promoting U.S. exports, and establish anindependent Export Control Agency.

I believe such an Agency should be subordinated directly to theWhite House, to ensure that everyone knows who will take the blame ifthere are mistakes in the future. Is it the President's policy tobuild up Iraq's military capabilities? The way the system works now,nobody can tell for sure; by placing export controls under WhiteHouse authority, there can be no doubt as to ultimateaccountability.

2) Proliferation concerns should determine what technologiesshould be subject to new export controls, since proliferation hasbecome the security problem of the 1990s and beyond.

For example, machine-tools that were not controlled in the 1980sbecause they fell below the standards of the Soviet military industryformed the backbone of Iraq's military industrial complex. If wecontinue to use Cold War standards, the net effect will be to bringthe military industries of countries such Iran, India, Pakistan,Syria and Iraq up to Cold War standards. This will result in anunacceptable financial burden on the American taxpayer, as America iscalled on time and time again to take out the very dictators failedgovernment policies helped to create.

3) Export licenses to countries of proliferation control should besubject to mandatory review by the Department of Defense and the U.S.Customs Service.

These agencies maintain lists of "bad end-users" against whichproposed exports should be checked on a routine, on-line basis, whichis not the case today.

4) Internationally, the United States should take the lead inestablishing a single, unified, multilateral Proliferation regime, toreplace the four separate regimes (nuclear, chemical, missile, anddual-use technology) that currently exist today. The new regimeshould review strategic exports to the Third World before they occur,much as COCOM reviewed strategic trade with the Soviet Union duringthe Cold war.

5) Lists of approved exports should be published by membercountries, to encourage greater "transparency" in the licensingprocess. (As it stands today, export licensing records remainclassified). Respectable companies doing business with reliablecustomers will have no shame in making their contracts public. It isprimarily the handful of violators who continue to lobby forsecrecy.

6) Russia, China, and other non-Western exporters of militaryproduction equipment and nuclear technology should encouraged tobecome partners in elaborating multilateral proliferation guidelines,and should be assisted in setting up effective export controlsystems.

Finally, I would support strong legislation that would imposemandatory sanctions on foreign companies which fail to respect thenew multilateral export controls, irregardless of where the violationoccurs. All too often when an American company refuses a lucrativeexport contract because it would violate U.S. law, a French, orGerman, or Japanese competitor leaps into the breach, because theirgovernments are lax on export control enforcement. Mandatorysanctions against violators would help to prevent foreign businessesfrom taking unfair advantage of U.S. companies who choose to play bythe rules.

I believe that the Iraqi experience is repeating itself incountries such as Iran, India, Pakistan, and Syria, even as we speak.There is still time to stem the flow of strategic technologies tosuch countries; but without a major reform of our current system,soon it will be too late.