S. Hrg. 102-996 UNITED STATES EXPORT POLICY TOWARD IRAQ PRIOR TO IRAQ'S INVASION OF KUWAIT HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED SECOND CONGRESS SECOND SESSION ON DID U.S. EXPORTS AID IRAQ'S MILITARY CAPABILITIES AND DID THE ADMINISTRATION ACCURATELY DISCLOSE ITS LICENSING OF DUAL- USE EXPORTS TO IRAQ? OCTOBER 27, 1992 Printed for the use of the committee on Banking, Housing, and Urban Affairs PENNSYLVANIA STATE UNIVERSITY MAY 4 1993 DOCUMENTS COLLECTION U.S Depository Copy S. HRG. 102-996 UNITED STATES EXPORT POLICY TOWARD IRAQ PRIOR TO IRAQ'S INVASION OF KUWAIT HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIKS UNITED STATES SENATE ONE HUNDRED SECOND CONGRESS SECOND SESSION ON DID U.S. EXPORTS AID IRAQ'S MILITARY CAPABILITIES AND DID THE ADMINISTRATION ACCURATELY DISCLOSE ITS LICENSING OF DUAL- USE EXPORTS TO IRAQ? OCTOBER 27, 1992 Printed for the use of the committee on Banking, Housing, and Urban Affairs U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1992 For sale by the U.S. Government Printing Office Superintendent of Documents. Congressional Sales Office. Washington. DC 20402 ISBN 0-16-040230-1 COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS DONALD W. RIEGLE, Jr., Michigan, Chairman JAKE GARN, Utah ALFONSE M. D'AMATO, New York PHIL GRAMM, Texas CHRISTOPHER S. BOND, Missouri CONNIE MACK, Florida WILLIAM V. ROTH, JR., Delaware PETE V. DOMENICI, New Mexico NANCY LANDON KASSEBAUM, Kansas ARLEN SPECTER, Pennsylvania ALAN CRANSTON, California PAUL S. SARBANES, Maryland CHRISTOPHER J. DODD, Connecticut ALAN J. DIXON, Illinois JIM SASSER, Tennessee TERRY SANFORD, North Carolina RICHARD C. SHELBY, Alabama BOB GRAHAM, Florida TIMOTHY E. WIRTH, Colorado JOHN F. KERRY, Massachusetts RICHARD H. BRYAN, Nevada STEVEN B. HARRIS, Staff Director and Chief Counsel LAMAR SMITH, Republican Staff Director and Economist KONRAD S. ALT, Counsel RICHARD S. CARNELL, Senior Counsel PATRICK A. MulLOY, Senior Counsel I International Affairs Adviser Mitchell Feuer, Counsel JOHN G. WALSH, Republican Staff Director / Subcommittee on International Finance and Monetary Policy Edward M. Malan, Editor (ID CONTENTS TUESDAY, OCTOBER 27, 1992 Page Opening statement of Chairman Riegle Prepared statement 4 Prepared statement of Senator Garn 58 WITNESSES Henry B. Gonzalez, Chairman, House Committee on Banking, Finance and Urban Affairs, Texas, 20th District , 11 Prepared statement 67 Theodore Jacobs, on behalf of Doug Barnard, Chairman, Subcommittee on Commerce, Consumer, and Monetary Affairs, House Committee on Govern- ment Operations 27 Prepared statement 64 Kenneth R. Timmerman, author and independent journalist, Paris, France 31 Prepared statement 72 Conventional military sales 73 Dual-use equipment 74 Electron beam welders 75 Main-frame computers 76 The Super Gun 77 What the administration knew 77 Reforming the export control system 79 David A. Kay, secretary general—Uranium Institute, Former Head of United Nations Weapons Inspection Team in Iraq 37 Prepared statement 81 Gary Milhollin, director, Wisconsin Project on Nuclear Arms, Washington, DC 43 Prepared statement 85 American exports that the U.N. has found 86 American exports licensed but not yet found 87 What did our Government know and when did it know it? 89 Henry M. Rowan, chairman, Inductotherm Industries, Inc., parent company of Consarc, Inc., Rancocas, NJ 48 Prepared statement 91 Congressman Henry B. Gonzalez, Chairman, Committee on Banking, Finance and Urban Affairs: Floor statement, July 27, 1992 120 BNL financed European firms known to be suppliers in Iraq's secret nuclear procurement 136 Iraqi weapons complexes and Government procurement fronts 151 Space research corporation's U.S. activities 159 Iraqi's train for Nukes in the U.S 221 Hearing on Nuclear Nonproliferation, April 24, 1991 222 BNL money funds cannon project at Taji steel complex 234 BNL's letters of credit to Iraq, October 23, 1992, Option A 235 BNL's loans to Iraq, October 26, 1992, Option B 308 BNL's loans to Iraq, October 27, 1992, Option C 357 Bureau of Oceans and International Environmental and Scientific Affairs, memo dated November 21, 1989 368 State Department memo dated Spring 1990 371 State Department press guidance sheet, dated February 11, 1991 380 State Department memo dated July 27, 1992 to Robert A. Mosbacher from James A. Baker, III 382 (III) IV Page Congressman Henry B. Gonzalez, Chairman, Committee on Banking, Finance and Urban Affairs—Continued White House letter dated July 7, 1992 from Gregory S. Walden Associate Counsel to the President 384 Letter to President George Bush dated May 2, 1991 390 Letter to President George Bush dated May 27, 1992 392 Department of Commerce memo for John R. Konfala from Iain S. Baird ... 398 Department of Commerce memo for Dennis Kloske from Iain S. Baird 400 Department of State, memo dated September 28, 1989 to Mr. Bartholo- mew from John H. Kelly 401 Department of State, action memo, dated July 19, 1990, to Ambassador Bartholomew 403 Additional Material Supplied for the Record Memorandum for the Secretary of Defense through: The Under Secretary for Policy dated July 1, 1985 408 Briefing memo from Paul J. Hare dated March 23, 1989 409 U.S. Department of Commerce, letter dated March 11, 1991 to Honorable Doug Barnard from Dennis Kloske 415 Statistics on U.S. licensing for Iraq (1985-1990) 416 Fact sheet on export licensing for Iraq 417 U.S. Department of State, action memo, dated July 19, 1990 to Ambassador Bartholomew 421 Cover sheet for NSD 26, addresses 425 The Secretary of State letter dated July 11, 1991 to Congressman Fascell 429 Memo from I rank DeGeorge to Robert A. Mosbacher dated June 4, 1991 432 Letter to Richard Thornburgh dated July 10, 1991, from Congressman Doug Barnard 439 U.S. Department of Justice, letter to Congressman Barnard dated August 20, 1991 440 New York Times news article dated October 21, 1992, entitled "U.S. Company Investigated in Iraq Arms Buildup" 441 Senator Patrick Leahy news release dated October 16, 1992 442 Senate Judiciary Committee, letter dated October 19, 1992 to Attorney Gen- eral William P. Barr 443 Senator David L. Boren, statement submitted for the record 448 Senator Patrick Leahy, statement submitted for the record 61 Dennis E. Kloske, statement to the House Judiciary Committee, June 25, 1992 96 Gary Milhollin, report entitled "Licensing Mass Destruction: U.S. Exports to Iraq, 1985-1990, June 1991 102 List of U.S. companies supplying weapon associations to Iraq 478 The Iraqi Bomb 483 The New York Times articles: "Building Saddam Hussein's Bomb," March 8, 1992 484 "Iraq's Bomb, Chip by Chip," April 24, 1992 488 Kenneth R. Timmerman: Selected Iraqi weapons plants using U.S. equipment, from the Mednews Archive 490 — Wall Street Journal news article, September 18, 1992, entitled "How Washington Armed Saddam" 496 Office of the Undersecretary of Defense, letter dated September 19, 1986 to Paul Freedenberg 452 U.S. Department of Commerce memo dated August 12, 1985 453 U.S. Department of State; letters to Congressman Henry Gonzalez: February 26, 1992 463 March 20, 1992 464 UNITED STATES EXPORT POLICY TOWARD IRAQ PRIOR TO IRAQ'S INVASION OF KUWAIT TUESDAY, OCTOBER 27, 1992 U.S. Senate, Committee on Banking, Housing, and Urban Affairs, Washington, DC. The committee met at 10:12 a.m., in room SD-538 of the Dirksen Senate Office Building, Senator Donald W. Riegle, Jr. (chairman of the committee) presiding. OPENING STATEMENT OF CHAIRMAN DONALD W. RIEGLE, JR. The Chairman. The committee will come to order. Let me wel- come all those in attendance this morning. This morning the committee is conducting an oversight hearing on the United States export licensing policy toward Iraq prior to Iraq's invasion of Kuwait on August 2, 1990. This committee has formal jurisdiction over Commerce Department licensing of U.S. ex- ports tnat could be used for military purposes by other countries. It is this area that will be the focus of today's hearing, and I have asked our witnesses to address the following questions: Did Iraq utilize United States licensed exports of sensitive technologies to strengthen its military capabilities? And, second, to what extent has the administration accurately disclosed the degree to which its licensing of these exports with possible military uses served to strengthen Iraq's military capabilities. Now since July 1990, the House Banking Committee Chairman Henry Gonzalez, who is here with us this morning, has been inves- tigating the activities of the Atlanta branch of the now celebrated Banca Nazionale del Lavoro, BNL as it is called, a large Italian government owned bank. During the course of his investigation of the BNL Bank, as it is called, Chairman Gonzalez discovered docu- ments suggesting that our Government, prior to the August 1990 invasion of Kuwait by Iraq, approved over 700 licenses for the ex- port of dual-use items from the United States that may well have strengthened Iraq's military capabilities. Now dual-use items, as the phrase is used, are those high tech- nology items that can be used for either civilian or military pur- poses, depending upon how they are put to use. It is clear from the public record now available that for many years prior to Iraq's in- vasion of Kuwait, both the Reagan and the Bush administrations knew that Iraq was aggressively pursuing the capability of making nuclear weapons. As early as 1985 the administration received warnings that Iraq might be using United States equipment for its nuclear weapons (l) 2 program. In fact, a July 1985 memorandum to Secretary of Defense Caspar Weinberger from Under Secretary of Defense Richard Perle stated: There is a body of evidence indicating that Iraq continues to actively pursue an interest in nuclear weapons. Iraq has been somewhat less than honest in regard to the intended end use of high technology equipment. Yet in November 1989, only 9 months before Saddam Hussein in- vaded Kuwait, the State Department recommended the approval of United States exports with nuclear applications to Iraq on "condi- tions of no nuclear use," based apparently on a promise by Saddam Hussein to use the items only for peace fill means. In March 1989, a briefing memorandum was sent to Secretary of State James Baker which stated that Iraq was "working hard at chemical and biological weapons and new missiles." In September 1989, another State Department memorandum, written after the raid on this BNL Bank's Atlanta office, said that the BNL loans "appear to have been used" to finance the purchase of sensitive military tech- nology. "^Despite these numerous serious warnings, we now know that be- tween January 1985 and August 1990, when the invasion of Ku- wait took place, the executive branch of our Government approved 771 different export licenses for sale of dual-use sensitive equip- _ ment to Iraq. According to a State Department review of some 73 of those export licenses that were granted by the Departments of Commerce and Defense between the years 1986 and 1989, approv- als were given "for equipment with dual or not clearly stated uses for export to probable proliferation related end users in Iraq." Now that is sort of written in Government speak, but let me go on to indicate what that same document reveals that gives mean- ing to the line that I just quoted from that document. At least 17 licenses were issued for the export of bacteria or fungus cultures to either the Iraqi Atomic Energy Commission or the University of Baghdad. Licenses to export computers to a missile activity, and computers and electronic instruments to the Iraqi Atomic Energy Commission, were issued to a known procurement agent for Iraqi missile programs. A license was issued to export equipment for "general military applications such as jet engine repair, rocket cases, et cetera." ->The records also indicate that the U.S. Government understood exports that it was licensing could enhance Iraq's conventional military capability. The President issued National Security Direc- tive No. 26 on October 2, 1989, stating, and I quote: We should seek opportunities for United States firms to participate in the recon- struction of the Iraqi economy. The United States should consider sales of non-lethal forms of military assistance. 1989 State Department memo stated: Although United States policy precludes approval of munitions control licenses for Iraq, exports of dual-use commodities for conventional military use may be ap- proved. Now the record indicates that dual-use sensitive exports, through which Iraq strengthened its military capabilities, were in place and were not halted by our Government until literally 1 week before Iraq invaded Kuwait, i We now know that after that invasion, the Commerce Department tried to cover up the fact that these offi- cially licensed sensitive dual-use goods to Iraq had strengthened Iraq s conventional and non-conventional military capabilities. I In September 1990, almost immediately after Iraq's invasion of Kuwait in August 1990, a House Government Operations Sub- committee chaired by Congressman Barnard began investigating those export licenses to Iraq. I might say that Congressman Bar- nard recently underwent heart surgery and could not be with us here this morning, and we certainly wish him the best. He has sub- mitted testimony to us today, and he has authorized Theodore Ja- cobs, who is the chief counsel of the subcommittee, to present that testimony here after Chairman Gonzalez, and that will be done. Chairman Barnard's testimony notes that he requested the infor- mation regarding these dual-use export licenses to Iraq that had been approved by the Department of Commerce between the years 1985 and 1990. The Commerce Department provided a summary of the licenses that it issued to the subcommittee in August 1990, with a letter from Under Secretary of Commerce for Export Admin- istration, Mr. Dennis Kloske. But at about the same time the sub- committee received an anonymous tip that the licensing informa- tion that they were being given by the Commerce Department had been altered prior to its submittal to the subcommittee. After press reports appeared discussing these alterations, the Commerce Department Inspector General was asked to formally in- vestigate the preparation of the information and get to the bottom of why the records had been falsified. The Commerce Department Inspector General issued a report on June 4, 1991, stating, and I quote: Bureau of Export dministration personnel changed permanent records on the ex- port control automated support system data base, compromising the integrity of the Iraqi licensed records. That means they changed the records to make them something different than what they really were. The Inspector General report concluded that information on 68 licenses provided to the subcommittee had been altered. For exam- ple, descriptions of trucks were changed to eliminate references to military use. Referrals of licenses to other agencies that had to check on it, including the Defense Department, were removed. Statements on the end use of the exports were changed, and com- ments by other agencies were altered or deleted. I have one document here now that is an illustration of that, and I have attached it to a copy of my statement. All of the documents I am referring to, by the way, are available today, particularly to press people who need them for reference. But in terms of the first Commerce list, the accurate initial list- ing of this, it says here on this particular export license, which in- volves an American company, it says in the original records, "Ac- cording to our information, the end user is involved in military matters," and that is of course what needed to be known and why it should have thrown a red flag. But the second Commerce list that was actually submitted to the Congress had been altered and falsified, and that reference to mili- tary use was taken out, so you only have the remainder of the com- ment on here. And the line, "According to our information, the end 4 user is involved in military matters," was erased, not just in this document which presented a false picture that was sent to the Con- gress, but also in the basic records that were being maintained, so it would be very hard to find out that the change had been made. The Inspector General determined in some instances that the de- letions were, and I quote his report, "unjustified and misleading"— that is from the Inspector General—and in other cases "not clearly justified." On July 10, 1991, Congressman Barnard formally asked the Jus- tice Department to investigate the alteration of these documents. By a letter dated August 20, 1991, Assistant Attorney General Raul stated, "The Public Integrity Section of the Criminal Division will conduct an appropriate inquiry." But as we meet today, the Justice Department still has not communicated to Congressman Barnard's subcommittee any decision on whether a crime has been committed in this instance. After the altered information was submitted to Congress but be- fore the Inspector General completed his report, the Subcommittee on International Economic Policy and Trade of the House Commit- tee on Foreign Affairs held a hearing on United States exports of sensitive technologies to Iraq. Now at that hearing, which took place on April 8, 1991, Mr. Kloske and a Mr. William Rudman, who was serving as Deputy Under Secretary of Defense for Trade Secu- rity Policy, both testified on the public record about export licenses to Iraq. When they were asked if the technologies exported by the United States to Iraq helped Iraq's military forces, Mr. Kloske replied, and I quote him: think in some instances it is quite clear that it probably contributed to his mili- tary capability. Mr. Rudman, from the Defense Department, his response to the question was, "I would answer yes."' Mr. Kloske went on to testify that in the spring of 1990 he at- tended two high level interagency meetings of the Bush adminis- tration. He recommended at those meetings that the United States either impose economic sanctions on Iraq, curtail the flow of tech- nology to Iraq, or greatly expand and enhance the missile tech- nology control requirements on any further shipments to Iraq. He also testified that his recommendations had been rejected by the State Department and by the National Security Council. Mr. Kloske also confirmed that some licenses were issued for ex- ports directly to the Iraqi Ministry of Defense and the Iraqi Air Force, including heavy trucks to transport tanks and missile com- mand and control equipment. For his part, Mr. Rudman testified that the Department of Defense had expressed concern about issu- ance of these licenses, but he said, and I quote: It was adjudicated within the administration that it was outside the purview of the Department of Defense's role. And then on April 10, 1991, 2 days after he gave this public tes- timony, Mr. Kloske was forced to resign from the Commerce De- partment. And then, just a day later, the New York Times reported that he had been dismissed because of what he had said in his tes- timony. Commerce Secretary Robert Mosbacher denied the story. 5 Both Mr. Kloske and Mr. Mosbacher were invited to testify on these matters today, and both declined to do so. Now in November 1990, 3 months after Saddam Hussein invaded Kuwait, Congress passed the Iraq Sanctions Act. I might say that Congress had attempted to put sanctions on Iraq prior to the inva- sion of Kuwait, but those were opposed by the administration. At any rate, the November act charged the President to prepare a report on these past transfers or sales to Iraq of nuclear, biologi- cal, chemical, or ballistic missile technology. In the report that the administration later submitted to the Congress, which came in Sep- tember 1991, 5 months after it was due, the President stated this: Reflecting both U.S. Government policy and responsible sales practices of Amer- ican firms, United States suppliers did not contribute directly to Iraq's conventional or non-conventional weapons capabilities. Then on June 13, 1992, the President said: We did not enhance Saddam Hussein's nuclear, biological, or chemical weapons capability, a charge recklessly made in this election year. In July 1992, on the CBS "This Morning" program, the President again stated, and I quote him: We did not enhance his—meaning Saddam Hussein's-1—nuclear, biological, or chemical capability. I have an Executive Order out on specifically that, and you have repeated something that isn't true. And the most recent on October 19, 1992, during the third presi- dential debate, many of you hearing this today will recall, I am sure, this statement. The President said, and I again quote: The nuclear capability in Iraq has been searched by the United Nations, and there hasn't been one single scintilla of evidence that there is United States tech- nology involved in it. Unfortunately, these statements that I have just cited were not accurate, as today's hearing will make clear. Last Wednesday an American nuclear expert, Mr. David Kay, who has led three U.N. inspection teams to Iraq, said that President Bush had been wrong in asserting that no United States technology was involved in Iraq's nuclear program. Mr. Kay, who is here this morning and will be one of our witnesses, has been to Iraq three times as a nuclear expert for the United Nations, and he has said—he will speak for himself today, but he has previously said, "There was U.S. equip- ment there, and certainly U.S. technology." Now the President has changed his position some since the third debate. Last Thursday on a morning talk show he said, and I again quote: —~> Maybe I overstated a little bit, but there has been approved what they call dual- use technology. Send a computer over, and if it has dual-use, it could end up in a nuclear facility of some sort, but the stuff that was cleared was dual-use. I don't believe anything other than dual-use has been found. That comment frankly obscures the critical fact, and that is that the reason that we license these dual-use items and try to control them very carefully is because they have the potential to be used for military purposes. That is exactly why this whole system is in place and why that special designation has been established, and - I will have more to say about that a little bit later this morning. Our witnesses at today's hearing will testify that export licenses were issued by the Commerce Department permitting the export of 6 sensitive United States equipment which was used by Iraq to strengthen its military capability in nuclear and biological weap- ons, and to develop the missile capability to use those weapons against neighboring countries. Mr. Kay, who I cited here as having led these three U.N. inspec- tion teams in Iraq, will state in his testimony today that because Western nations, including the United States, sold Saddam Hus- sein high technology equipment, he was, and I quote Mr. Kay, "Frightfully close, on August 2, 1990, the date of the invasion of Kuwait, to be able to make a nuclear weapon." He and other wit- nesses will call for tighter controls by our Government and other industrialized nations on sensitive dual-use exports to countries such as Iraq. Now various Senate committee chairmen have reviewed different aspects of the BNL-Iraq affair within their respective jurisdictions, and have concluded that an independent counsel needs to examine this entire matter. For example, Senator Leahy, the Agriculture Committee Chair- man reviewed the Commodity Credit Corporation's agricultural loan guarantees to Iraq, and after doing so called for an independ- ent counsel. Senator Leahy said: "A I have been looking at United States aid to Iraq for 2 years, and I don't know if it was a policy mistake or criminal activity, but American taxpayers deserve to know why they are stuck with a $1.9 billion bill to bail out Saddam Hussein's bad debts. Senator Leahy has sent us a statement this morning and it will be included in tne record. Judiciary Committee Chairman Joseph Biden, by letter dated Oc- tober 19, 1992, just a few days ago, requested along with seven other members of that committee that Attorney General Barr "seek appointment of an independent counsel to investigate the possibil- ity that high-ranking officials of the Department of Justice, the FBI, and the Central Intelligence Agency engaged in obstruction of justice with regard to the prosecution of Christopher Drogoul, and may have violated other provisions of Federal criminal law." And the Senate Select Committee on Intelligence Chairman David Boren, also just a few days ago on October 14, 1992, called for the appointment of a special prosecutor on the BNL matter in light of recent information concerning activities of both the Justice Department and the CIA. I would note that these various calls for a special prosecutor or an independent counsel have each been made since the Congress recessed on October 8, 1992. In addition, on October 16, 1992, just 11 days ago, Attorney General Barr himself moved to appoint re- tired Judge Frederick Lacey as an independent counsel to review a number of the issues related to the BNL-Iraq case. These sepa- rate requests did not include a request to review matters relating to United States export licensing policy prior to the invasion of Ku- wait, and what appears to be an attempted cover-up of that policy. These are matters within the jurisdiction of this committee, and they are the topic of our hearing this morning. It is my intention to transmit today's hearing record, as it is fully developed, to Judge Lacey and ask him to review fully the various matters that have been brought to our attention and that will be 7 presented here today. It is also my intention to work with the other Senate committee chairmen just named, Senators Leahy, Biden and Boren, as well as the Majority Leader, to see that these mat- ters are fully reviewed, that any violations of law are pursued, and that we determine whether new laws that are much stronger are needed in this area to protect our national interests. This morning we are going to hear from a number of experts re- garding our export licensing policy. Our first witness will be Chair- man Gonzalez from the House, who has been in the forefront, real- ly the national leader in bringing these issues to the country's at- tention. We will then receive Chairman Barnard's statement. Then we will hear from a panel of independent experts, including Mr. David Kay, who I have referenced, the secretary general of the Uranium Institute, a leading nuclear expert; Mr. Kenneth Timmerman, publisher of the Middle East Defense News and au- thor of a book called "Death Lobby: How The West Armed Iraq"; Mr. Gary Millhollin, director of the Wisconsin Project on Nuclear Arms Control, who has been calling for tighter controls on nuclear exports for a number of years; and then Mr. Henry Rowan, who is chairman of Inductotherm Industries, who will discuss how he was encouraged to export nuclear related technologies to Iraq as an American business firm. Finally, formal letters of invitation were also sent to General Brent Scowcroft, President Bush's National Security Advisor, who has written a number of recently published op ed pieces defending the administration's export licensing policy toward Iraq, and also an invitation was sent to Robert Mosbacher, former Secretary of Commerce during the period of time in question, and to Mr. Dennis Kloske, who as I say served as the Under Secretary of Commerce for Export Administration. Each of these gentlemen have declined to testify, and the administration has offered us no alternative wit- ness. It takes a little bit of time to put that on the record. I think it is essential that it be there as we start today. Now let me just say, Chairman Gonzalez, what a great privilege and pleasure it is to have you before the Senate Banking Commit- tee today. We have worked together on a number of matters over a great many years, both in the House and Senate, and I want to just say again how much I appreciate your leadership on many is- sues, and very particularly your very strong leadership on this issue. And so let me invite you now to make your statement. We will make your full statement a part of the record. I want you to take whatever time you need to present the material you brought for us today. PREPARED STATEMENT OF CHAIRMAN DONALD W. RIEGLE, JR. This morning the committee will conduct an oversight hearing on United States export licensing policy toward Iraq prior to Iraq's invasion of Kuwait on August 2, 1990. This committee has formal jurisdiction over Commerce Department licensing of U.S. exports that could be used for military purposes. It is this area that will be the focus of today's hearing and I have asked our witnesses to address the follow- ing questions: 1. Did Iraq utilize United States licensed exports to strengthen its military capa- bilities? And, 8 2. To what extent has the administration accurately disclosed the degree to which its licensing of exports with possible military uses strengthened Iraq's military capa- bilities? Since July 1990, House Banking Committee Chairman Henry Gonzalez has been investigating the activities of the Atlanta branch of the now celebrated Banco Nazionale de Lavoro [BNL], a large Italian government-owned bank. During the course of his investigation of BNL, Chairman Gonzalez discovered doc- uments suggesting that our Government, prior to the August 1990 invasion of Ku- wait by Iraq, approved over 700 licenses for the export of dual-use items that may have strengthened Iraq's military capabilities. Dual-use items are those high tech- nology items that can be used for either civilian or military purposes, depending on how they are employed by the end user. It is clear from the public record now available that for many years prior to Iraq's invasion of Kuwait, both the Reagan and Bush administrations knew Iraq was ag- gressively pursuing the capability of making nuclear weapons. As early as 1985, the administration received warnings that Iraq might be using United States equipment for its nuclear weapons program. A July 1985 memorandum to Secretary of Defense Casper Weinberger from Under Secretary of Defense Richard Perle stated: There is a body of evidence indicating that Iraq continues to actively pur- sue an interest in nuclear weapons . . . Iraq has been somewhat less than honest in regard to the intended end-use of high technology equipment.1 Yet in November 1989, only 9 months before Saddam Hussein invaded Kuwait, the State Department recommended the approval of United States exports with nu- clear applications to Iraq on "conditions of no nuclear use"2—based apparently on a promise by Saddam Hussein to use the items only for peaceful means. In March 1989, a briefing memorandum was sent to Secretary of State James Baker which stated Iraq was "working hard at chemical and biological weapons and new missiles."3 In September 1989, another State Department memorandum, writ- ten after the raid on BNL's Atlanta office, said BNL's loans "appear to have been used" to finance the purchase of sensitive military technology.4 Despite these numerous serious warnings, we now know that between January 1985 and August 1990 the executive branch approved 771 export licenses for sales of equipment to Iraq.5 According to a State Department review of 73 of those export licenses granted by the Departments of Commerce and Defense between 1986 and 1989, approvals were given "for equipment with dual or not clearly stated uses for export to probable pro- liferation related end users in Iraq."6 That same document reveals: —At least 17 licenses were issued for the export of bacteria or fungus cultures to either the Iraqi Atomic Energy Commission or the University of Baghdad. —Licenses to export computers to a missile activity and computers and electronic instruments to the Iraqi Atomic Energy Commission were issued to a known pro- curement agent for Iraqi missile programs. —A license was issued to export equipment for "general military applications such as jet engine repair, rocket cases, etc." The records also indicate the U.S. Government understood exports it licensed could enhance Iraq's conventional military capability. The President issued National Security Directive 26 on October 2, 1989 stating: We should . . . seek opportunities for U.S. firms to participate in the re- construction of the Iraqi economy . . . the United States should consider sales of non-lethal forms of military assistance. . . .7 A 1989 State Department memo stated: 1 Memorandum for the Secretary of Defense through the Under Secretary for Policy, "Subject: High Technology Dual-Use Exports to Iraq," dated July 1, 1985. ^Memorandum to OES/N from OES/NEC, "Subject: SNEC Cases of Interest," dated November 21 1989. ^Memorandum from Paul J. Hare, Acting Assistant Secretary for Near Eastern and South Asian Affairs, to Secretary Baker, "Subject: Meeting with Iraqi Under Secretary Nizar Hamdun," dated March 23, 1989. 4Memorandum from Assistant Secretary Kelly to Under Secretary Bartholomew, "Subject: The Banca del Lavoro Scandal and Trade With Iraq," dated September 22, 1989. 6Attachment to Letter from Under Secretary Kloske to Congressman Barnard dated March 11 1991. "Attachment to Memorandum to Secretary Baker through Ambassador Bartholomew, dated July 19, 1990. 'National Security Directive #26, dated October 2, 1989. 9 . . . Although United States policy precludes approval of Munitions Con- trol licenses for Iraq, exports of dual-use commodities for conventional mili- tary use may be approved.8 The record indicates that dual-use exports, through which Iraq enhanced its mili- tary capabilities, were not halted until 1 week before Iraqinvaded Kuwait. We now know that after the invasion the Commerce Department tried to cover- up the fact that these officially licensed dual-use goods to Iraq had strengthened Iraq's conventional and non-conventional military capabilities. In September 1990, almost immediately after Iraq s invasion of Kuwait in August 1990 a House Government Operations Subcommittee, chaired by Congressman Bar- nard, began investigating those export licenses to Iraq. Congressman Barnard re- cently underwent heart surgery and could not be here this morning. I wish him a speedy recovery. He has submitted testimony to us on this matter, and has author- ized Theodore Jacobs, Chief Counsel to his Subcommittee, to present that testimony here this morning. Congressman Barnard's testimony notes that he requested information regarding "dual-use" export licenses to Iraq that were approved by the Department of Com- merce between 1985 and 1990. The Commerce Department provided a summary of the licenses it issued to the Subcommittee in October 1990, under cover of a letter from the Under Secretary of Commerce for Export Administration, Dennis Kloske. At about the same time, the Subcommittee received an anonymous tip that the li- censing information was altered prior to its submittal by Commerce. After press reports appeared discussing the alterations, the Commerce Depart- ment Inspector General was asked to formally investigate the preparation of the in- formation and get to the bottom of why the records had been falsified. The Commerce Department Inspector General issued a report on June 4, 1991 stating: "Bureau [of Export Administration] personnel . . . changed per- manent records on the Export Control Automated Support System database, compromising the integrity of the Iraqi license records."9 The Inspector General report concluded that information on 68 licenses provided to the Subcommittee had been altered. For example, • descriptions of trucks were changed to eliminate references to military use; • referrals of licenses to other agencies, including the Defense Department, were re- moved; • statements on the end use of the exports were changed; and • comments by other agencies were altered or deleted. I have a document that shows one of those alterations. In this instance, the Com- merce Department deleted a statement that the end user of the sensitive export was "involved in military matters." The Inspector General determined in some instances the deletions were 'unjustified and misleading" and in other cases "not clearly justi- fied." By letter dated July 10, 1991, Congressman Barnard formally asked the Justice Department to investigate the alteration of the documents.10 By letter dated August 20, 1991, Assistant Attorney General Rawls stated "the Public Integrity Section of the Criminal Division . . . will conduct an appropriate inquiry."11 The Justice De- partment still has not communicated to Congressman Barnard's Subcommittee any decision on whether a crime had been committed. After the altered information was submitted to Congress, but before the Inspector General completed his report, the Subcommittee on International Economic Policy and Trade of the House Committee on Foreign Affairs held a hearing on United States exports of sensitive technologies to Iraq. At that hearing on April 8, 1991, Mr. Kloske and William Rudman, Deputy Under Secretary of Defense tor Trade Se- curity Policy, testified about export licenses to Iraq. When asked if the technologies exported by the United States to Iraq helped Iraq's military forces, Kloske replied, "I think in some instances it is quite clear that it probably contributed to his military capability." Rudman's response to the ques- tion was, T would answer yes." 8 Memorandum to OES/N from OES/NEC, "Subject: SNEC Cases of Interest," dated November 21 1989. ■Memorandum for Secretary Robert A. Mosbacher from Inspector General Frank DeGeorge, "Subject: Report on Iraqi Export License Information, Bureau of Export Administration," dated June 4, 1991. 10 Letter from Congressman Doug Barnard, Jr. to Attorney General Richard Thornburgh, dated July 10, 1991. 11 Letter from Assistant Attorney General Lee Rawls to Congressman Doug Barnard, Jr., dated AuguBt 20, 1991. 10 Mr. Kloske went on to testify that in the spring of 1990, he attended two high- level interagency meetings. He recommended that the United States either impose economic sanctions on Iraq, curtail the flow of technology to Iraq, or greatly expand and enhance the missile technology control requirements on further shipments to Iraq. He further testified that his recommendations were rejected by the State De- partment and the National Security Council. Mr. Kloske also confirmed that some licenses were issued for exports directly to the Iraqi Ministry of Defense and the Iraqi Air Force, including heavy trucks to transport tanks and missile command and control equipment. Mr. Rudman testified that DOD had expressed concern about issuance of these licenses but "it was adju- dicated within the administration that it was outside the purview of DOD's role." On April 10, 1991, 2 days after he testified, Mr. Kloske was forced to resign from the Commerce Department. On April 11, 1991, the New York Times reported that Kloske was dismissed because of his testimony. Commerce Secretary Robert Mosbacher denied it. Both Mr. Kloske and Mr. Mosbacher were invited to testify today on these matters—and both declined to do so. In November 1990, 3 months after Saddam invaded Kuwait, Congress passed the Iraq Sanctions Act. Congress had attempted to put sanctions on Iraq prior to its in- vasion of Kuwait, but the Bush administration opposed them. At any rate, the No- vember Act charged the President to prepare a report on past transfers or sales to Iraq of nuclear, biological, chemical, or ballistic missile technology. In that report submitted to Congress in September 1991, 5 months after the date it was due, the President stated: Reflecting both U.S. Government policy and responsible sales practices of American firms, United States suppliers did not contribute directly to Iraq's conventional or non-conventional weapons capabilities.12 On June 13, 1992, the President said, "We did not enhance [Saddam Hussein's] nuclear, biological, or chemical weapons capability, a charge recklessly made in this election year. In July, on the CBS "This Morning" program, the President stated: We did not . . . enhance his nuclear, biological or chemical capability. I have an Executive Order out on specifically that. And you have repeated something that isn't true. And on October 19, 1992, during the third Presidential debate, the President said: The nuclear capability (in Iraq) has been searched by the United Nations, and there hasn't been one single scintilla of evidence that there is U.S. technology involved in it. Unfortunately, these statements were not accurate as today's hearing will make clear. Last Wednesday an American nuclear expert, Mr. David Kay, who led three U.N. inspections teams to Iraq, said that President Bush has been wrong in asserting that no United States technology was involved in Iraq's nuclear program. Mr. Kay, who is one of our witnesses this morning, and who has been to Iraq three times as a nuclear expert to the United Nations, has said, "There was U.S. equipment there, and certainly U.S. technology."13 The President's has changed his position since the third debate. Last Thursday on a morning talk show he said: Maybe I overstated a little bit, but there has been approved what they call dual-use technology. . . . Send a computer over, and if it has dual-use, it could end up in a nuclear facility of some sort, but the stuff that was cleared was dual-use ... I don't believe anything other than dual-use tech- nology has been found. Witnesses at today's hearing will testify that export licenses were issued by the Commerce Department permitting the export of sensitive United States equipment which was used by Iraq to strengthen its military capability in nuclear ana biologi- cal weapons—and to develop the missile capability to use those weapons against neighboring countries. Mr. Kay, who I noted has lead three U.N. inspection teams into Iraq, will state in his testimony today that because Western nations, including the United States, sold Saddem Hussein high-technology equipment he was "frightfully close on August 2, 1990 to being able to make a nuclear weapon." He and other witnesses will call 12 Report to the Congress in Accordance with PL 101-513 on the International Export to Iraq of Nuclear, Biological, Chemical, and Ballistic Missile Technology. 13 The New York Times, "U.S. Company Investigated in Iraq Arms Buildup," by Elaine Sciolino, October 22, 1992. 11 for tighter controls by our Government and other industrialized nations on sensitive dual-use exports to countries such as Iraq. Various Senate Committee Chairmen have reviewed different aspects of the BNL/ Iraq affair within their respective jurisdictions and have concluded an Independent Counsel needs to examine this whole matter. For example, Senate Agriculture Committee Chairman Patrick Leahy reviewed the Commodity Credit Corporation's [CCC] agricultural loan guarantees to Iraq and called for an Independent Counsel. In doing so, Senator Leahy said, "I've been look- ing at United States aid to Iraq for 2 years. I don't know if it was a policy mistake or criminal activity, but American taxpayers deserve to know why they are stuck with a $1.9 billion bill to bail out Saddam Hussein's bad debts."14 Judiciary Committee Chairman Joseph Biden, by letter dated October 19, 1992, requested, along with 7 other members of that committee, that Attorney General Barr "seek appointment of an Independent Counsel to investigate the possibility that high-ranking officials of the Department of Justice, the Federal Bureau of In- vestigation, and the Central Intelligence Agency engaged in obstruction of justice with regard to the prosecution of Christopher E. Drogoul and may have violated other provisions of Federal criminal law." 1!> And Senate Select Committee on Intelligence Chairman David Boren on October 14 called for the appointment of a Special Prosecutor on the BNL matter in light of recent information concerning activities of the Department of Justice and the CIA.16 These various calls for a Special Prosecutor or Independent Counsel have each been made since the Congress recessed on October 8. In addition on October 16, just 11 days ago, Attorney General Barr appointed retired judge Frederick Lacey as an Independent Counsel to review a number of the issues relating to the BNL/Iraq case. These separate requests did not include a request to review matters relating to United States export licensing policy prior to the invasion of Kuwait and what ap- pears to be an attempted cover-up of that policy. These are matters within the juris- diction of this committee and are the topic of our hearing this morning. It is my intention to transmit today's hearing record to Judge Lacey and ask him to review fully the various matters that have been brought to our attention and that will be presented today. It will also be my intention to work with the other Senate Committee Chairmen—Senators Leahy, Biden, and Boren, as well as Majority Lead- er Mitchell—to see that these matters are fully reviewed, that any violations of law are pursued, and that we determine whether new laws are needed in this area to protect our national interests. This morning we will hear from a number of experts regarding our export licens- ing policy. Our first witness will be House Banking Committee Chairman Henry Gonzalez, who has been at the forefront of bringing these issues to the Nation's at- tention. We will then receive Chairman Barnard's statement. Then we will hear from a panel of independent experts including David Kay, Secretary General, The Uranium Institute, a leading nuclear expert; Kenneth R. Timmerman, Publisher of the Middle East Defense News and author of the Death Lobby: How the West Armed Iraq; Gary Milhollin, Director of The Wisconsin Project on Nuclear Arms Control, who has been callingout for tighter controls on nuclear exports for a number of years; and Henry M. Rowan, Chairman, Inductotherm Industries, Inc, who will dis- cuss how he was encouraged to export nuclear related technologies to Iraq. Formal letters of invitation were also sent to General Brent Scowcroft [Ret.], President Bush's National Security Adviser who has written a number of op-ed &ieces defending the administration's export licensing policy toward Iraq, Robert losbacher, Former Secretary of Commerce, and Dennis Kloske, former Under Sec- retary of Commerce for Export Administration. Each of these gentlemen has de- clined to testify and the administration has offered us no alternative witness. Chairman Gonzalez, I welcome you to our hearing this morning and thank you for coming. STATEMENT OF HENRY GONZALEZ, CHAIRMAN, HOUSE COMMITTEE ON BANKING, FINANCE, AND URBAN AFFAIRS Chairman GONZALEZ. Thank you very much, Mr. Chairman. "Committee on Agriculture, Nutrition and Forestry, News Release dated October 16, 1992. 16 Letter to Attorney General William Barr, dated October 19, 1992. 16 Statement of David L. Boren, dated October 14, 1992. 12 First let me thank you for inviting me. I think this is a most timely hearing. The Chairman. Could I ask you to pull that mike just a little closer so the people in the back of the room can hear you? Thank you. Chairman Gonzalez. As I said, I am very grateful to you for this opportunity to appear on the Senate side and particularly before you. It is very timely. On top of that, as a former member of the Texas State Senate, my election to it I think was my high point. It is a tremendous body with a great tradition, and I feel a little bit awed in the U.S. Senate and have a feeling of, you could truly say, almost reverence for this institution. I feel very honored that you would have me testify. I also want the record to reflect our very harmonious and friend- ly, cooperative relationship as respective chairmen of the con- ference on housing, for instance. I happen to be the chairman of the subcommittee on Housing and Community Development of the Banking Committee of the House, and have been chairman of that subcommittee since 1981, and it grieves me to see that very impor- tant subject which is crucial to our well-being in our country kind of get submerged, and this, which is a latecomer issue to me, takes the prominence that it does. I wish I could get credit for the work we have done, and particularly with your help, in producing com- prehensive housing and community development legislation. And our relationship goes even further back than that, when you were a Member of the House, unfortunately part of that time as a Republican, but you saw the light, and here you are. [Laughter.] I was delighted when you were elected to the Senate. And then during the rather harsh and arid days for housing, when the Mi- nority was the Majority, you were my co-equal on the Senate side on housing, and we communicated then. So I think that adds to the respect and my personal feelings of warmth and friendship that I feel toward you. The Chairman. Thank you very much. Chairman Gonzalez. The matter here before us is, of course, of critical importance. I say this from the banking standpoint. Now I am here testifying with respect to the export licensing as- pect. Over on our side in the House, we don't have strict jurisdic- tion over that matter, any more than we have on the policy. We stumbled into these (areas), and then I immediately communicated with my colleagues, Mr. Rose in the case of the Agriculture Com- modity Credit Corporation guarantees and Mr. Gejdenson, the sub- committee chairman of Foreign Affairs, with respect to export li- censing policy, because both impacted on the critical thing that is of deep concern to me today, and I think equally to you as chair- man of the Banking Committee of the Senate, and that is how our country continues to be so exposed because of the lack of proper regulatory oversight and control of now almost $1 trillion worth of this kind of money, a small chunk of which, comparatively, actually financed these transactions. I want to explain that my main thrust has been that, but we did become very concerned when we found out, of the 771 export li- censes, for instance, more disturbing than that of the 771, only one 13 follow through as to end use, ultimate residual end use, was ever done by the U.S. Government. It is pathetic. So the export licensing process, which is squarely within your ju- risdiction and not so much ours over in the House, played a key role in the Reagan and Bush administrations' policy to coddle and buddy-up to Saddam Hussein. Whether this policy was pursued as a result of incompetence or complete complicity, one thing is clear: There is overwhelming evidence to show that the policy enhanced Iraq's military capability. There is no question of that. The House Banking Committee's 27-month-old investigation into the operations of the Atlanta agency of the Banca Nazionale del Lavoro, or BNL, has uncovered evidence showing that dozens of United States firms, many holding United States export licenses, contributed directly to Iraq's ballistic missile and nuclear weapons programs, let alone its chemical weapons. Certainly our leaders were aware of the fact that in 1988 when Iran's military captured the city in that section of Iraq with a dod- ulatio7T~of about 6Tffl)U, that the Iraqi Air Force—with thf> ns^nf planes~and supplies given to it tHrougKja combination of nations, European, from Britain to France to Spain to the United States, Germany, and even China in some other^ases—but in this case the Air Force went in and, using cyanide^ gas bomhs, whatever you want to call them, killed at least 5,000 or 6.C00 civilians and Ira- nian soldiers. They knew that. They knew that Saddam Hussein had used everything he had in the course of that war with Iran. Given that, and given the coexisting relationship, not only with our intelligence agency supplying Saddam Hussein with the Ira- nian capability but other sensitive information and to think that the CIA would say that I had risked national security, when they gave it away in the real sense, is just absolutely not only insulting, it is maddening. I just can't get over that. So that 27 months actually is the date after we completed the legislation known as FIRREA in August. That was 1989, but at least a month before that I had read about the issuance of these letters of credit out of Atlanta, $3 billion. You know, I knew some- thing wasn't quite right—and then when it became known that these letters of credit were to Iraq, I knew that there had to be a much more complicated story than a small agency bank in Atlanta, when the headquarters bank in New York would have been the natural location. Very typically of the effort to support Saddam Hussein, the Bush administration approved export licenses for the Space Research Corporation, the company operated by the famous ballistic expert— in fact, he was a genius—Gerald Bull. Not enough has been relat- ed. He worked with the CIA, and in fact he was involved with evi- dence adduced thus far—not in the United States, of course, the American people are the last to know, but everybody else outside of the United States knows what the CIA is doing—but with the help of the CIA and Israel, he enabled South Africa to obtain their tremendous military capability. He was a genius. He was the inventor of the 155 millimeter how- itzer, and lesser known was the 208 or 218 millimeter, which Sad- dam obtained, both, through not only Gerald Bull but through the help of a British firm which, as far as I know, hasn't been men- 14 tioned too much. The one we have heard a lot about is Matrix- Churchill, but this other firm actually went to Iraq and set up. And it was irpnic_that our soldiers and the Britishsoldiers par- ticularly_wereluslng^the same w^ Sad- dam Hussein to haveTTor example the artillery sheiranctthat they wOTrhHje facing lhe~same capability that had been given from their technology to Iraq in the war. The only thing that saved them was that they were superior technicians. That is, the armed services personnel of Great Britain had the know-how which Saddam Hus- sein's men had not obtained as yet. This is where countries like France and others had come in to help in giving the training that would have to accompany the actual supplying of weapons and/or technology to produce them. when Saddam Hussein was not on the throne itself. He was actu- ally the power behind the scene but he hadn't reached the official position he has today. It goes back a long time, because his plans also have been very well developed, and Iraq really developed a very, very intricate, sophisticated network not only of procurement but know-how. So in providing the export licenses to Gerald Bull's Space Re- search Corporation, the effect was to purchase software and sophis- ticated computers that were used to design Iraq's space launch rocket, as well as designing the projectile fired from the renowned super gun. This was Gerald Bull's dream, that instead of using rocket propulsion you could use a super gun to throw people up, or whatever, into space. Despite overwhelming evidence that the United States helped en- hance Iraq's military capability, the President and his top advisors, as you pointed out a while ago, continue to mislead the public about the United States role in arming Iraq. For example, on No- vember 5, 1990, President Bush signed into law the Iraq Sanctions Act of 1990, which contained a provision requiring the President "to conduct a study and report on the sale, export, and third party transfer or development of nuclear, biological, chemical, and ballis- tic missile technology to or with Iraq." The report, which is supposed to be classified, lays the blame for enhancing Iraq's military capability squarely on the shoulders of the European Community, while wholly disregarding the United States role in arming Iraq. Despite well-known facts to the con- trary, the President's report concludes, and I quote: Reflecting both U.S. Government policy and responsible sales practices by Amer- ican firms, United States suppliers did not contribute directly to Iraq's conventional or non-conventional weapons capability. Now in my prepared statement I say this claim is patently false. I want to strike that and say the President obviously was mis- infonned. I have respect for the office of the presidency, no matter what I think of the incumbents. While there is no doubt that European firms provided Saddam Hussein with dangerous technology, that fact neither eliminates nor excuses the fact that the United States firms, at the urging of the administration, played a considerable role in arming Iraq. Con- trary to the President's assertions, I will now show how our Na- But remember that this i that had been initiated 15 tion's export licensing policy was used to enhance Iraq's military capability. The main goal of the export licensing process is to control the flow of dual-use equipment, as you said, to countries that pose a security threat to the United States or that are significant pro- liferation threats. The first and most important step to achieving the goal is to correctly identify proliferation threats. While the in- telligence community and other parts of the executive branch iden- tified Iraq as a major proliferation threat, it was a policy of both the Reagan and the Bush administrations to treat Iraq as our close ally. This special "friend of the United States" status enabled Iraq to obtain sophisticated equipment that was denied to the likes of the Soviet Union, for example, and Eastern Bloc nations, as well as major proliferation threats such as Iran, Syria, and North Korea. The tilt toward Iraq not only short circuited many of the export li- censing controls that could have been used to deny Iraq sophisti- cated United States technology, it was pursued despite ever-grow- ing evidence that Iraq was using United States technology to en- hance its non-conventional weapons capability. In fact, between 1985 and the Iraq invasion of Kuwait, the Com- merce Department approved at least 220 export licenses for the Iraqi armed forces, major weapons complexes, and enterprises iden- tified by the Central Intelligence Agency as diverting technology to weapons programs. There are numerous export licensing docu- ments showing that the United States helped to arm Iraq. The fol- lowing quotes are taken from a sample of the more pointed docu- ments. They illustrate the Bush administration policy of arming Iraq. A November 21, 1989, State Department memorandum states, and I am going to quote: United States policy as confirmed in National Security Document 26 has been to improve relations with Iraq. Although United States policy precludes approval of munitions control licenses for Iraq, exports of dual-use commodities for conventional military use may be approved. The willingness to approve export licenses for conventional mili- tary use is also shown by a May 28, 1990 Commerce Department document related to Iraq which states, and I quote: We assume that the U.S. Government policy acknowledging the right of govern- ments to produce conventional weapons still holds. The Reagan and the Bush administrations both approved export licenses destined for known Iraqi conventional weapons complexes, but as quotes from the following documents will show, the policy did not preclude the approval of export licenses even for the more dangerous weapons programs. There are numerous recently declas- sified documents which show that the State Department was aware that the export licensing process helped to enhance Iraq's non-con- ventional weapons capability. For example, a 1990 State Department memo states, and I quote: An initial review of 73 cases in which licenses were granted by the Department of Commerce or Department of Commerce and Department of DeftmBefmrn 19ftfi tn 1382.shows that licenses were granted for equipment with d1!"1 "r Pot daarift ■tatod uses for export to probabl^prolileration^IatedenS-uaore in Iraq. 16 There is no doubt that President Bush's mandate to improve re- lations with Iraq was contrary to the thinking of those in the ad- ministration who saw Iraq as a major proliferation threat. This confusion is evidenced in several State Department memoranda. A November 21, 1989 State Department memorandum discusses how to proceed on licensing exports that could be used in Iraq's nu- clear program, and it states: We are still left with no clear indication of how to proceed on the majority of cases. The problem is not that we lack a policy toward Iraq. We have a policy. How- ever, the policy has proven very hard to implement. The memorandum goes on to state, and again I am going to quote: Complicating factors in decision making include, (1) a presumption by the intel- ligence community and others that the Iraqi government is interested in acquiring a nuclear explosiveness capability; (2) evidence that Iraq is acquiring nuclear relat- ed equipment and materials without regard for immediate need; (3) the fact that State enterprises are involved in both military and civilian projects. Well, that was obvious, and there was no reason why there should have been any doubt about that. I will continue: (4) indications of at least some use of fronts for nuclear related procurement; (5) the difficulty in successfully demarching other suppliers not to approve exports of dual-use equipment to State enterprises and other ostensibly non-nuclear end users. This confusion did not abate. A May 1990 State Department memorandum discussing the inherent conflicts in the export licens- ing policy toward Iraq states, and I quote: Formulating such a policy will be complicated because end users which engage in legitimate non-nuclear and non-missile related end uses also procure commodities on behalf of Iraq's nuclear missile program. Because the Iraqi procurement network serves both nuclear and missile programs, one cannot distinguish purchasers of nu- clear concern and those of missile concern. The dangers posed by the Iraqi export licensing policy is best captured in a May 1990 State Department memorandum which states, and I'm going to quote: At present, no foreign policy controls exist which permit the United States to con- trol nuclear related dual-use commodities across the board to Iraq. In December 1988, Iraq successfully launched a rocket into orbit. This event sparked great interest in curbing exports of sophisti- cated technology to Iraq. Those concerns are recorded in a spring 1990 State Department memorandum which states: The operation of Iraq's procurement network inevitably raises concerns about the potential for unauthorized diversion of commodities in Iraq and raises doubts about the veracity of the information provided on the Iraq license applications. While concern over Iraq's activities was growing, high level Na- tional Security Council meetings in April and May 1990, failed to produce any legal changes in that policy. In fact, it was not until Iraq had already amassed an attack force on the Kuwait border that the State Department at last officially proposed changes to the export licensing policy. By far, the most effective means of ensuring that the United States dual-use technology is not diverted to weapons projects is to perform post-installation checks. Which means visiting the end user to check on how the equipment is being used. The United States did not adopt a policy of conducting post-installation checks in Iraq. 17 Almost unbelievably, out of the total 771 export licenses ap- proved for Iraq between 1985 and 1990, only one post-installation check was conducted. Even then, Iraq was warned well in advance of the visit. And our visitors couldn't speak Arabic, so they were addressed in Arabic and the documents were all in Arabic, so that was the one end-use visit. In summary, the United States export licensing policy toward Iraq clearly permitted the approval of licenses for conventional military uses. This occurred despite ample evidence that Iraq de- veloped and used conventional weapons such as long-range Howit- zers and helicopters to deliver chemical weapons. In addition, while many export licenses were denied, the decision to treat Iraq as a close ally of the United States made it practically impossible to stem the flow of weapons and related technology to Iraq, despite clear evidence showing that Iraq used and continued to use technology for non-conventional weapons purposes. There is a plethora of evidence, a good deal already on the public record, showing that U.S. dual-use technologies helped to enhance Iraq's military capability. The House Banking Committee's BNL investigation has uncov- ered a dozen of U.S. and European firms that exported equipment to Iraqi weapons projects including the Condor II ballistic missile program, the Al Abid space launch rocket, Gerald Bull's super gun, and the secret nuclear weapons program. The case most illustrative of the United States role in enhancing Iraq's military capability is the export licenses approved for the Space Research Corporation. As I said before, Gerald Bull's world renowned corporation. Gerald Bull was assassinated in Brussels where he had this fairly substantial space there in which he worked. And he was professionally hit. And we've had speculation ranging from the Israel secret Mosad to the CIA, to certain others in between. So you can take your guess. That's a world in which when we used to be scared by the spy stories and the counter-spies, makes that look like the Boy Scout Troop Court of Honor, when it comes to the world of these muni- tions and technological procurement networks working in the neth- erworld between officialdom and officialdom. And sometimes occu- pying a dual or triple role. The Bush administration approved licenses for Space Research Corporation for the export of sophisticated computers and missile design software which, according to several Space Research em- ployees was used to design the projectile that was to be shot from the super gun. The super gun, as pretty much developed for Iraq, would have had a range of 1,000 miles. The computer and software were also used to design Iraq's space launch vehicle called the Al Abid, which was successfully launched in December 1989. Former Space Research employees have also told the committee that the software and computer were also used to design the ar- mored vehicle that carries a Space Research Corporation's 155 and 210 millimeter self-propelled Howitzer called the VSP for the "vehi- cle self propelled." That 210 millimeter, again, both of them Gerald Bull's invention. For the 155 millimeter shell casing, that was obtained from the 18 United States blueprints of a corporation that had a contract with the Army. And a portion of whose stock had been bought by Iraqi agents, some of them obviously intelligence agents. Once you have that, and this is why we're so honeycombed with holes in our domestic policy regulatory and oversight, not only in banking but in such things as agriculture and the ability of foreign interests, and particularly with the decline of the dollar, the heavy procurement, both direct asset as well as indirect asset, in purchas- ing into these corporations that have, as in the case of Iraq, cor- porations that have contracts, say, with the U.S. Army or Defense Department. By virtue of that, they had access to blueprints which they ob- tained for the casing. Then, in the diplomatic pouch, which is im- mune, they sent it over to Baghdad. So the 210 was perfected in Iraq in its complex with the help of the expertise from this re- search system developed by Bull that previously had a limited range. So the range was extended quite a bit, to over 500 miles, but they had to reduce the payload for the 210. But this is what we could have faced in a different context under different cir- cumstances. And our soldiers, as the British did in the case of that 155. And the U.S., because what they have is what the U.S. has, the 155. The Chairman. Might I just stop you there? I think, too, that tne record will show that with respect to the application of this technology, part of which they were getting from us along the lines that youve just described, that this was being applied not just in their nuclear and biological areas, but they were using it in their other weapons systems, even in the SCUD missile, for example, which was used against our people. I think it is fair to say that also made some use of these technologies and matters of assistance. Is that right? Chairman Gonzalez. There's no question of it. The SCUD is Russian, because you know even Russia got in the act. And Iraq had as its substantial source and particularly what the Russians call the SS-1, which is what we call the SCUD. I'm going to end up by saying with all these denials and every- thing else, it just proves to me that we have learned nothing from experience. We're like the Bourbon kings, learn nothing and forget nothing. And no sooner had the war ended in the Persian Gulf in the spring when, through North Korea, Syria had obtained about 300 improved SCUD's. But beneath all of the planning, of these activities you have banking, behind all of this big gun and the Howitzer development, you have the genius of Gerald Bull, who got very bitter after the deal in arming South Africa was revealed. He made money in all those deals. And the CIA threw him overboard, he says. And he was convicted and sentenced to about 6 or 7 months. And he got very bitter after that and went to Belgium. He was very bitter to- ward the CIA and the United States. The computer and software were also used to design the space vehicle which I say and repeat called the Al Abid in Baghdad. Former Space Research employees have also told us that the soft- ware and computers were used to design the armored vehicles tha carried the self-propelled guns. The export licenses for the computer and software were approved despite the State Department's knowledge that the Space Research Corporation was engaged in numerous military projects in Iraq and that Space Research and one of its affiliates had been identified in 1989 as important players in Iraq's military technology procure- ment apparatus. In fact, the U.S. firm that received the licenses to sell the software to Space Research clearly informed the Commerce Department that the software could be used for the missile and satellite design and other military uses. The end user for the computer was listed as the Al Qadisiyah State Enterprise. Prior to the licensing being approved, the CIA had identified this establishment as a comprehensive weapons manufacturing complex. The end user for the software was listed as the Space Research Corporation of Belgium. Not surprisingly the State Department misled the public about export licenses approved for the Space Research Corporation. In the press guidance released February 11, 1991, the State Depart- ment said, and I quote: The Department of State has not approved exports of equipment or technology by Bull or companies associated with Bull to Iraq. Despite its knowledge that in fact, they had. The State Department shares a subcommittee on nuclear export coordination, known as SNEC. The SNEC approved the Space Re- search Corporation licenses on September 21, 1989. Obviously, the State Department continues to dissemble information about their role in helping arm Iraq. I will now quickly summarize some of the additional evidence that reveals that the United States helped to enhance Iraq's mili- tary capability. United Nations inspectors have identified dozens of United States firms, some that received United States export licenses, that supplied Iraq with equipment used in missile programs and chemi- cal, biological, and nuclear weapons programs. The Reagan and Bush administrations together approved over 80 export licenses for equipment shipped directly to the Iraqi Air Force and the other branches of the Iraqi military. Fifteen of the licenses were approved by the Bush administration directly to the military in Iraq. The Reagan and Bush administrations issued 15 licenses for the sale of United States munitions equipment to Iraq. Three of those licenses were approved by the Bush administration. The Reagan and Bush administrations approved dozens of export licenses for the sale of equipment to over half a dozen Iraqi end users despite CIA reports identifying the end users as major weapons manufac- turing facilities. I will, with your permission, append all the documentation in support. You will have a little booklet that I will submit for the record. The Chairman. We will make it part of the record. And as I say, when the record is complete, we are going to send it all over to Judge Lacey. Chairman Gonzalez. All right, sir. 20 A March 1990 General Accounting Office report found that the Reagan administration had approved 16 export licenses for Iraq's primary missile research center called SAAD 16. Several current and former Government officials from the Department of Defense, the Commerce Department, and the Customs Service, have testi- fied during the past 2 years that United States firms enhanced Iraq's conventional and non-conventional weapons capabilities and we have in our appendix of documents the supporting documents. Dozens of United States firms participated in Petrochemical Complex II, many with export licenses, which provided Iraq with the capability to produce ethylene oxide, a major ingredient in ex- plosive bombs as well as being a precursor for certain chemical weapons. PC II was also a major front for the procurement of super gun components. The Commerce Department approved a license for Iraqi front company Matrix-Churchill, despite a plethora of CIA reports show- ing that the firm was part of Iraq's nuclear procurement network and despite ample evidence showing that the listed end user of the technology, a firm called Techcorp was in charge of Iraq's ballistic missile and secret nuclear weapons program. Again, you can refer to the appendix for the supporting documents. The Export Import Bank financed the sale of United States equipment to several Iraqi weapons complexes, the Condor II bal- listic missile program and Iraq's covert nuclear weapons program. The Export Import Bank financed the sale of armored ambulances and communications equipment directly to the Iraqi military. Again, the appendix has the documents. In 1986 and 1987, two Iraqi scientists were permitted to visit the Los Alamos national laboratory, a major United States nuclear weapons facility. Incredibly, in 1989, three employees of Iraq's main explosive factory, called the Al Qaqaa, were permitted to at- tend a U.S. Government sponsored seminar on nuclear weapons detonation. We have in the appendix the documents supporting that. Contrary to the President's report to the Congress, and his recent public pronouncement, there is an overwhelming body of evidence that clearly shows the Bush administration made a conscious deci- sion to enhance Iraq's military capability. The policy is best illus- trated by the export licenses granted to Gerald Bull's Space Re- search program. Did we sell Iraq bombs? Well, as I said before, the policy was if it blows up or ticks, no you don't ship it. But anything else that goes to make it up, yes, it's OK, send it on. It is clear that we sold Iraq the equipment and the know-how needed to make conventional weapons and equipment which was clearly useful in developing nuclear bombs and long-range ballistic missiles. It is also obvious that, from day one, it has been the pol- icy of the highest levels of the Bush administration to mislead the Congress and, more importantly, the public into thinking that our Government played no role in arming Iraq. Given this attitude, I can only conclude that we have not yet learned from our mistakes. And, in fact, we have plenty of evidence that it's being repeated in the case of other countries. 21 The Chairman. Chairman Gonzalez, thank you very much for laying that out as you have done this morning. I would like to first of all draw your attention to a letter that was sent by Secretary of State Baker to Mr. Mosbacher. This is what the actual memo looks like, and I have had it—because the print is so small, I have had it retyped so it is easier to read. But I want to read the memo to you and I want to pose a question to you. Secretary of State Baker writing to Commerce Secretary Mosbacher wrote as follows on July 25, 1990. This is 8 days before Saddam Hussein took his military forces into Kuwait. This is 8 days before the war started. Now, here is the Secretary of State saying: I have just had a memorandum forwarded to your executive secretary requesting that additional controls be placed on items that could contribute to Iraq's chemical and biological weapons and missile programs. Iraq's extraordinarily aggressive weapons proliferation efforts make this situation urgent. The war is 8 days away. I therefore ask that these controls be instituted as quickly as possible. Best per- sonal regards, sincerely yours, James A. Baker. When I read that memo, coming right before the war started, it's obvious that there is a sort of sense of alarm and panic in terms of the change in direction on policy. But, in reading this, it seems obvious to me that he is acknowledging directly the fact that we have been providing items that did, in fact, contribute to Iraq's chemical and biological weapons and missile programs, because I mean it is built right into the language of his comment that he now thinks it's time to establish additional controls, noting—again quot- ing from the letter: Iraq's extraordinarily aggressive weapons proliferation efforts makes this situa- tion urgent. Now, it seems to me if we were to believe that somehow, you know, this dawned on everybody literally 8 days before the war started, where they had been embarked on a policy stretching back over many years of allowing all this to happen and then finding that it was about to blow up in their face that this was about to be used really in a fashion that we would have to confront at some point. And so at the last possible minute this memo was sent, say- ing, you know, let's suddenly clamp down 8 days before the war started. Isn't that what this letter is saying? Chairman GONZALEZ. I agree with that surmised conclusion. I don't see how you could conclude any other way. He would not have seen any need to do that unless he knew that there was some pol- icy on the issuance of export licenses that somehow or other was contributing to this danger. The Chairman. Exactly. Chairman Gonzalez. It is interesting to note as I was coming over here, the staff had picked up this article from the Financial Times. And the headline is DTI admits M-16 role of Matrix-Churchill. The story goes on to say that the British intelligence decided that they would have somebody planted in Matrix-Churchill, and there- fore they were kind of looking the other way with what Matrix- 22 Churchill was doing with respect to supplying Iraq in order to find out what was going on. Now, whether this is something yet to be determined at some fu- ture time or whether this is a destabilizing release or not, I don't know. M-16 isn't the CIA. They've developed over the course of many more years than we have a most intricate system. But I think it is interesting to note that now we can understand why the connection is there, obviously between what we couldn't understand about our Government, and both the State Depart- ment, as well as the executive branch generally. And I would like to show you that because this just appeared today. Britain traded export permits for Iraqi arms data. What hasn't been brought out is the British firm, unlike Matrix-Churchill where the British intelligence did move in partially and stop one export, this other firm actually went so far as operating in Iraq and setting up everything from the necessary road complex construction to some of the weaponry that was developed. But it's still difficult to understand, to think that our leaders in the executive branch—Secretary Baker, Mosbacher and President Bush—were well aware of this situation and to allow this illegal activity to continue over oil—I can't find any logic to it. You recall before the hot shooting phase just before the President announced in November 1990, the doubling of the expeditionary force, that Secretary Baker said, do you want to know what this is all about? It's jobs. Now, I placed in the record in the House the relationship that oil had and how they were desperate in maintaining their supply of Iraqi oil. Now, the President also signed a release, so to speak, from a con- flict of interest right in the middle of all of this, at the height of it, in 1990, releasing the ten highly placed members of the Cabinet and Subcabinet from the conflict of interest provisions of the law. Obviously it had to have reference to such things as oil. I wouldn't even dare to hypothesize after the testimony that to my astonishment I heard from the Deputy Secretary at tnat time, now the acting Secretary Eagleburger. In fact, one of my minority members of the committee asked him a question about what we had brought out in the documentation that he said, well I didn't even know these documents existed until they were shown to me in the Congressional Record. So how can that be? They're signed by you? So he looks at them and in the last portion he said—this was a cable to the ambassador in Baghdad, this is for your information, under no circumstances let anybody back home know about this. I put that in the record. Signed Acting Secretary of State. I guess that Secretary Eagleburger was out of the country. He looks at it and he says, well, you know that I would have never signed this. Somebody signed my name to this. If that can happen, Mr. Chairman, I wouldn't dare hypothesize as to what President Bush, Secretary Baker, and everybody over there, including the Attorney General signed and later doesn't even know they signed it. 24 Ethics Committee of all things. You don't have to have a plea of personal privilege. The rules in trie House provide for anybody to have access to the Ethics Committee. Before that, Scowcroft had gone over and tried to pressure the Speaker about what could they do about me. But that came after I put in the record the number of corporations on which he is still on the board of directors, ever since he worked for Henry Kissinger and Associates. And the same thing with Eagleburger. Now, with great protestation, he said, oh, we've been insulted and whatnot. But in facing the substantial segment known as the Minority in the House, what I see is that they've done more dam- age to the integrity of the House than did General George Colburn, the British general who burned down the House and destroyed the mace (the symbol of authority), and then invaded Washington in the War of 1812. He couldn't have done more harm. Because, what has happened is the independence and the co- equality of this branch of Government, and what is inherently in- volved nere. When the administration says, we're not only going to refuse to give you information in whicn the Congress has the paramount duty to know, but we're going to lie to you and brag about it. The Chairman. Well, is there any doubt in your mind with re- spect to these export licenses when Chairman Barnard asked for those and the Commerce Department sent them over and they were doctored and changed to hide the truth, was there any doubt in your mind that an effort was made to conceal what had hap- pened here? Chairman Gonzalez. Absolutely none whatsoever. It was obvious it was an act of criminal culpability under our statutes. There's no doubt of that. Naturally, with the corrupt Justice Department we have, we're not about to get the Attorney General to appoint us a real inde- pendent special investigator. They're too vulnerable. They're not about to do it. And I foresaw that. As a matter of fact, I thought, all's well that ends well because we will have greater freedom to continue unre- stricted as far as the committee is concerned. Now, the fact that documents were altered with the full intent to deceive the Congress in this case and that export licenses and information to the subcommittees were concealed, clearly, it was an act of criminal culpability. No question of that. They're vulnerable in other areas, too, I might say. The Chairman. Finally, it seems to me that the public has a right to the facts and the right to the truth. And as awkward as it may be for some who, for whatever reasons, followed these poli- cies and have tried to obscure that now, I think both in terms of understanding what happened here, we've got to have these facts out on the table in the full light of day. But I am concerned, and we will get into this with our next set of witnesses, if this could happen in the case of Iraq, where else is it happening and where else might it happen? You know, I think that is a concern for the future, and how do we change these policies and get them restructured so that we 25 don't end up helping to create monsters like Saddam Hussein that we then have to send tens of thousands of Americans over to have to confront and put their lives on the line. Chairman Gonzalez. I couldn't agree with you more. That is the main question and what do we do about it. And I think from our standpoint, what I have been trying to do is seek the legislation that will give this country what every other main industrialized na- tion has in place, and that is the proper regulatory oversight and control. There is no telling how many BNL's and BCCI's are out there. Only the lord knows. I do know that you have close to $1 trillion worth of this kind of money in this country circulating and per- colating through the arterial system of our financial and banking system with great danger there to its safety and stability. There is nobody who can tell you any more than they could in 1989 than what is going on now. My personal interest is that the 1978 International Banking Act was enacted as a result of the hearings that I caused to bring in San Antonio, my home district, in 1975, in which we had the clear indication of what happened later on in the 1980's, and that there was no law and there was no system to gauge these heavy volume of money transactions across the border in our area. So I was given information on how they were being used to take over and to clean off some of the S&L's and small banks. Those hearings in 1975 led to the indictment and conviction of two individuals. It led to the downfall of one S&L south of San An- tonio. But it also took 3 years before we got the 1978 act, which was the first one enacted and it, unfortunately was watered down. Since 1978, although I didn't belong to the subcommittee that had actual direct jurisdiction, I endeavored to try to strengthen it because I could see that there were things going on. It wasn't until we had the first cash transaction law, and then the perfection of that on the drug money laundering. But we still have I would say a good portion of that near $1 trillion very much directly and indirectly involved in the illicit drug money laundering traffic. The Chairman. I think the money laundering bill that we just managed to get enacted will help us here in some degree. Chairman Gonzalez. It will help very much. But I really wel- come this opportunity to solicit your help when we reconvene in January and the staff has been working on some strong laws. Since we have jurisdiction of the multinational lending institu- tions or banks, I had a hearing in which we had all of the executive branch representatives involved testifying. And they were ada- mantly against it. What the bill would do—it would say that if the country's bene- ficiaries of these international multinational banking institutions in which we belong to were engaged in weapons of mass destruc- tion proliferation it would not be permitted to receive financing from these international multinational banking institutions. Every one of the administration agents represented said, abso- lutely not. We're against that. It will hurt our policy, et cetera, et cetera. 26 So you have an idea of the tremendous task we'll have in even getting a reduced or a watered down version of what I think is ur- gently needed. And that is, in the case of our banking system, to perfect the laws so that our regulators will at least have no excuse for not knowing what's going on. The fact that you could have the Federal Reserve, which is sup- posed to have direct and indirect control over foreign transactions, have no idea what was going on in a branch or an agency in Geor- gia that was chartered by the Georgia commission. Early in 1990, we had the Georgia commissioner who didn't know that the States don't have the capacity. Because, as was proven in the BNL case in Atlanta, you could nave these huge amounts of money percolat- ing through these small agencies that are chartered by the State commissions. Then the BNL, we must recall, has agencies in Miami, Chicago, and in California. The Federal Reserve Board had no idea, because they had no coordination of regulatory oversight or accounting or anything like that. So it's pretty bad. And the other thing is, we fail to see, and sometimes I get the impression that our executive branch and Federal Reserve Board officials don't quite comprehend that when we deal with an entity involved in international financial transactions, that most of these entities are operated and owned by their respective governments. Which means there is a potential in a given case where any U.S. policy can be frustrated by some activity here which is not being regulated by our regulators. The Chairman. And a related part is if we are trying to work out something with that country or another or with the U.N., we might overlook some other problem that they have. That has happened before. Let me say to you again how grateful I am for your testimony this morning, and for your work over a great length of time to lay these issues out. I am going to invite you to come up and sit here with us if you are able to do so, and if you can't I will understand, but that invitation is open. Chairman Gonzalez. Mr. Chairman, I will take a rain check on that. I would love to come back at some time if you see fit. I am going to have to go back because I came up for the hearing. It is a week before the election. I have been very fortunate this very mixed-up year. I give a daily prayer of thanks that I didn't get an opponent this year. [Laughter.] Chairman Gonzalez. So I could come here, but I do have some commitments back home with others locally The Chairman. I understand. Chairman Gonzalez.—and I'm afraid I am going to have to go, because I have to get back to the office and arrange to leave. The Chairman. I understand. Chairman Gonzalez. But I want to thank you, and I would love nothing more than to hear the testimony, particularly from the wit- nesses that I had the pleasure of meeting before I sat down. Before I finish I would also like to recognize our staff. I have the staff director of the Banking Committee, Mr. Kelsey Meek, under whose general guidance—Mr. Meek is a very self-effacing individ- 27 ual, but brilliant, and has been absolutely indispensable to me. He and I have worked together for the 31 years I have been here in the House of Representatives. And with him is Dennis Kane, whom you have met. The Chairman. Yes. Chairman GONZALEZ. Our chief investigator and sleuth. You know, we have a very limited budget for the Banking Committee, and I don't mind that, because if you have a hard-hitting crew, I have always said it isn't the number of hands you can get, it is what those hands are doing, the hands you have. Also, Mr. Kane—who has done a superb job, I don't know how he has done it, he has collated, worked night after night and all through the night in looking up documents, connecting documents that anybody else looking at them wouldn't have seen the connec- tion—and with him is Debra Carr, a counsel, a young lady, who is a lawyer as well, who helps him. And that is it. I wanted to recognize them because without their help, it would have been impossible. I am very grateful to you for your continuing cooperation. I have been so fortunate to have become chairman coinciding with you being chairman of the Banking Committee in the Senate. You know how I feel and the respect I have for you and your ability. The Chairman. Thank you very much. Chairman Gonzalez. So thank you again. The Chairman. It is a mutual feeling, I assure you, Mr. Chair- man. Thank you. Let me now call our next witness up, Mr. Ted Jacobs, who is here on behalf of Congressman Barnard, who as I mentioned before is recovering from surgery. He has brought a statement from Con- gressman Barnard today with respect to the alteration of these records. Mr. Jacobs, you serve as chief counsel of the Subcommittee on Commerce, Consumer and Monetary Affairs of the House Commit- tee on Government Operations, and we would be pleased to have you now deliver Mr. Barnard's statement to us. STATEMENT OF DOUG BARNARD, JR., CHAIRMAN, SUB- COMMITTEE ON COMMERCE, CONSUMER AND MONETARY AFFAIRS, HOUSE COMMITTEE ON GOVERNMENT OPER- ATIONS, PRESENTED BY THEODORE JACOBS, CHffiF COUN- SEL, SUBCOMMITTEE ON COMMERCE, CONSUMER AND MON- ETARY AFFAIRS Mr. Jacobs. Thank you, Mr. Chairman. This is Mr. Barnard's statement as he prepared it: Mr. Chairman, members of the committee, I am pleased to sub- mit this statement today concerning the experience of the sub- committee which I chair, the House of Representatives Commerce, Consumer and Monetary Affairs Subcommittee, in obtaining docu- ments from the Department of Commerce. In pursuit of our oversight jurisdiction for the Commerce Depart- ment, the Commerce, Consumer and Monetary Affairs Subcommit- tee has a long and sustained interest in the general subject of ex- Eorts as well as the export administration programs administered y the Commerce Department. As you know, the Commerce De- 28 partment licenses all dual-use exports to certain countries. These are exports of goods which have either peaceful or military uses. When the troubles with Saddam Hussein began, it was apparent that Iraq had obtained much of its war potential from the West, including companies located in the United States. There were alle- gations that furnaces utilized in the manufacture of nuclear weap- ons were seized by the Customs Service on the dock in Philadel- phia, on the verge of being sent to Iraq. In fact, on July 18, 1990, I wrote to General Brent Scowcroft in nis role as Assistant to the President for National Security Affairs, requesting that the Presi- dent intervene to prevent the shipment of these furnaces. A copy of my letter to General Scowcroft is reproduced at pages 220-221 of the printed record of the hearing held by the Commerce, Consumer and Monetary Affairs Subcommittee on September 27, 1990. Incidentally, we have submitted copies of this hearing, and other documents wnich I will refer to, to your committee. The Chairman. They will all be part of our record. Mr. Jacobs. Given this and other cases, there was ample reason to hold a hearing on the U.S. Government's export control laws, particularly with respect to sales and attempted sales to Iraq of materials which might have been used for nuclear, biological, and missile related equipment. The subcommittee did hold such a hear- ing on September 27, 1990, on U.S. Government controls on sales to Iraq. A copy of the printed record of this hearing has been sub- mitted. The full Government Operations Committee, on July 2, 1991, ap- proved a report prepared by the subcommittee on this subject. It is entitled "Strengthening the Export Licensing System," and a copy of this report nas also been submitted. After the hearing, at subsequent meetings of the subcommittee it was agreed unanimously to request documents from the Com- merce Department concerning sales to Iraq licensed by the Com- merce Department from 1989 to 1990. To reinforce our seriousness about this matter, the subcommittee voted two subpoenas for these documents. The documents concerning dual-use sales licensed by the Commerce Department were subsequently delivered to the sub- committee during October and December 1990. If it is OK with the committee, I will skip part of Mr. Barnard's prepared statement. The Chairman. That is fine. Mr. Jacobs. And tell you that during October 1990, at about the time the subcommittee first received printouts from the Commerce Department, the subcommittee received an anonymous telephone call informing us that the caller had been instructed to make cer- tain alterations in the documents before they were delivered to the subcommittee. The fact of this call and the substance of the allega- tions concerning the alteration of the documents appeared in trie media. Because of these allegations in the media, the General Counsel of the Commerce Department asked the Commerce Department In- spector General to review the matter. By a report dated June 4, 1991, the Commerce Inspector General filed a report with then Sec- retary of Commerce Mosbacher regarding the alterations on the 29 documents supplied to the subcommittee. The report, a copy of which again has been made part of the record, finds among other things that Bureau personnel changed information on 68 licenses; that references to military end uses were deleted and the designa- tion "military truck" was changed. This was done on licenses hav- ing a total value of over $1 billion or approximately two-thirds of the total value of the approved export licenses for Iraq for the pe- riod under review. With respect to the changes in military truck designations, the Inspector General concluded that the changes were unjustified and misleading. With respect to 19 deletions of referral notations to other agencies, the Inspector General concluded, "These actions were not clearly justified." In 31 of the 39 additional changes, the Inspector General determined that these changes "were not sup- ported by reliable independent documentation." However, the Inspector General did not designate the official or officials responsible for the alterations of the documents, nor did he adequately explore the motivation for the changes in documents supplied to the Congress. Accordingly, on July 10, 1991, I wrote to the then Attorney General asking him to open an investigation of this matter to determine if any law of the United States was vio- lated in the course of the handling of this matter. I subsequently inquired as to the status of this matter, and was informed in January 1992, that the investigation is still ongoing and that I will be notified if the Department of Justice determines that no criminal charges will be brought. I again inquired of the Justice Department as to the status of this matter recently, on Sep- tember 14, 1992. I received a reply dated October 6, 1992, and I responded to this letter on October 20, 1992. All of these copies have been made available to this committee. As I stated in several of my letters, I believe the Department of Justice has had ample time to make a determination of the guilt or innocence on this question. It has been 1 year and 3 months since Justice opened its investigation. One can only conclude that this matter is too sensitive to decide before the upcoming presi- dential election. I should note that the Commerce Department did indeed, in fact, it is a vast understatement in light of previous testimony, did in- deed license materials which were later utilized by the Iraqi regime for nuclear missile and chemical purposes. Among many examples I can give, one stands out. That is license number B286904, dated December 21, 1989, for export to Iraq of an electron beam welder. This item was exported to Iraq even though there were clear indi- cations that lower level personnel in the Bureau of Export Admin- istration were determined to prevent its being licensed. The conclusion I draw from this experience is that export con- trols are too important a matter to be left solely to the discretion of the Commerce Department, which has jurisdiction for encourag- ing exports. There must be greater involvement of the Pentagon in what is essentially a military issue. I am convinced that the De- fense Department, which has a very able Defense Technology Secu- rity Administration, should play a greater role in exports of sen- sitive materials to foreign designations. For a detailed study of this matter and suggested remedies, I respectfully refer the committee 60-509 0-93-2 30 to the study referred to above, "Strengthening the Export Licensing System." This concludes Mr. Barnard's testimony. I handed all of the items involved referred to as submissions to the committee. I would be glad to answer any questions you may have. The Chairman. Very good. Let me just ask you two or three things. Are you clear in your own mind in terms of what you have just laid out here that a deliberate effort was undertaken to alter these documents and mislead the Congress? Mr. Jacobs. Oh, it's quite clear a deliberate effort was made to alter the documents. There is no doubt about it. And Mr. Kloske was primarily responsible for making the alterations in the docu- ments. The Chairman. Now, as I understand it, in a March 21, 1991, interview by the staff of the Commerce Inspector General's office that Mr. Kloske was asked if there were standing orders from the office of the Secretary of Commerce to silently "take the heat" for export license controversies. And he would only answer, "Orders are orders." That sort of sounds like he was operating under the instruction from above from somebody to take the fall here. Is that Mr. Jacobs. I think that's accurate, Mr. Chairman. In the part of Mr. Barnard's statement which I didn't read, he describes how Mr. Kloske had extensive negotiations with our subcommittee re- garding disclosure of some of the documents to the public. We felt in the subcommittee that the public has a right to know what was sent to Iraq before the war. And we negotiated extensively with ref- erence to disclosing this information to the public. Mr. Kloske maintained over and over again that "my hands are tied in this matter. You will have to deal with the White House on this question." The Chairman. Why should the White House have been involved on something like this. This is within the jurisdiction of the Com- merce Department. Kloske was the guy who was presumably the person most directly involved. Why would they have—why would he have asserted that he would have to be Mr. Jacobs. I think by now the war had started, the war with Saddam Hussein had started and matters of this nature were taken from his jurisdiction into the White House. As a matter of fact, we subsequently dealt with the National Security Council ex- tensively and, as a result of our dealing with the National Security Council once the war ended, they released the documents without the names of the exporters. So that's how we get the 771 number that's a public item. The Chairman. Well, I think it's clear from what you've pre- sented from Congressman Barnard today that clearly a very spe- cific effort was undertaken to cover up the real facts, to alter the documents. As I understand it, they actually not only altered the documents that they sent to you of the kind that I was illustrating earlier, but they actually went into the permanent files and changed the per- manent files. 31 Mr. Jacobs. That's correct. Not only that, but they continued to disseminate false information to the Congress. I had discussion with a staffperson for Senator Hollings and requested her to re- quest the documents from Commerce many months after this was all disclosed publicly. And what happened was that she did, she re- quested the documents. They gave her the false documents. The Chairman. The phony documents. Mr. Jacobs. The phony documents, uncorrected, many months after it was disclosed. Now, as far as I know, as of today, they would still be giving out the phony documents. So the permanent records were changed. The tapes were changed. The Chairman. Thank you very much for coming. And please, again, thank Chairman Barnard. We understand he's in this medi- cal recovery period and I know he wanted to come. But I appreciate very much the statement that he has sent and that you have deliv- ered. Mr. Jacobs. Thank you. The Chairman. Thank you very much. Let me now call our next and final panel of witnesses today. Mr. David Kay, Mr. Kenneth Timmerman, Mr. Gary Milhollin, and Mr. Henry Rowan. Take a minute to get situated here. We will take just a 60-second break and then we will start. [Recess.] The Chairman. We'll now resume. I might just say, Chairman Gonzalez has been trapped in a large group of reporters in the hallway that have additional questions that they've wanted to ask him. And so he is having a hard time leaving, understandably so. Our next four witnesses are each very important in their own way and I've referenced earlier each one and I will introduce each one as we start. And I think for the moment we are going to start, Mr. Timmerman, with you, and then I am going to go to David Kay, Gary Milhollin, and then finally Henry Rowan. We will make your full statements a part of the record. Let me just say again that Mr. Timmerman is the publisher of the Middle East Defense Lobby, the author of "Death Lobby: How the West Armed Iraq." He is here from Paris, France. We are pleased that he has come. Mr. Timmerman, let us take your statement now and then we'll go to Mr. Kay. Mr. Timmerman. I would ask that we put the charts up that we prepared for the testimony. The CHAmMAN. Very good. STATEMENT OF KENNETH R. TIMMERMAN, AUTHOR AND INDEPENDENT JOURNALIST, PARIS, FRANCE Mr. Timmerman. Thank you, Mr. Chairman. As you mentioned, I am an author and independent journalist based in France. I run a specialized news service, Middle East De- fense News, which focuses on the proliferations of weapons of mass destruction. Was the United States Iraq's principal supplier of arms or ad- vanced production technology? Certainly not. 32 Was the American contribution to Saddam Hussein's military buildup significant? Absolutely. In financial terms and in terms of the technology actually sup- plied and for the political impact this had in emboldening the Iraqi regime, without the across-the-board support and encouragement from the United States, Saddam Hussein would never have felt se- cure enough to invade Kuwait. January 1985 through August 1990, the Commerce Department approved 770 license applications. The figures I'd like to present to you here are drawn from an analysis of 474 of these licenses, worth about $1.3 billion. I have done a statistical analysis, of which I would like to give you a few conclusions. Conventional military sales. Contrary to claims that have been advanced here and there, the U.S. Governmentjid indeed approve conventional military sales to Iraqj_weapons. The single largest sale was a $491 million proposal to sell Iraq several thousand military cargo trucks. This particular deal was li- censed on two separate occasions by the Commerce Department in April 1986 and April 1988. When the Commerce Department first submitted licensing records to Congress, they deleted the reference to military use, as Mr. Jacobs has mentioned. American military sales to Iraq began in December 1982 when the Reagan administration agreed to support the sale of 60 Hughes MD 500 Defender helicopters to Iraq. The Defender was advertised by Hughes as a dedicated anti-tank helicopter. An earlier version was used in Vietnam equipped with TOW missile launchers, anti- tank missiles. Despite the obvious military application of these hel- icopters, all 60 units, all 60 were delivered by the end of 1983. In February 1984 the Italian subsidiary of Bell Textron, agreed to sell Iraq eight AB 212 helicopters equipped for anti-submarine warfare This sa^- wft^-worth |164 million The sale required U.S. Tjovernment approval but, to myTchawTeoTge, it was never submit- ted to Congress. Similarly, sales of anti-tank helicopters designed by MBB of Ger- many but manufactured in the United States were never notified to Congress. Some of these sales were, however, licenced by the Commerce Department. MBB shipped them to Iraq from the Unit- ed States to avoid German export control laws that prevented arms exports to the Middle East. In late 1984, Bell Textron got into the act with a proposal to sell 48 Bell 214 utility helicopters. A version of this helicopter is sold around the world as a military transport and commando support machine, had been reclassified as a civilian aircraft. Arms broker Sarkis Soghenalian proposed selling them to Iraq for recreational purposes and "VIP transport." This deal was approved by the Reagan administration. Where the delivery of these helicopters was discussed, U.S. em- bassy officials in late 1984 and early 1985, they were concerned that these aircraft could be used for medevac purposes or as troop carriers. But in a written reply to the Congress, Secretary of State Schultz stated that increased American penetration of the increas- ingly competitive civilian aircraft market in Iraq would serve the United States interest by improving our balance of trade and less- ening unemployment in the aircraft industry. 33 On the top here, you can see a photograph of one of these heli- copters taken at the al Muthana airbase outside Baghdad in April 1989. I took the photograph myself. As you can see, the United States helicopter, this Bell 214 ST, has been painted in the colors of Iraq's army aviation corps. The only rexreational purpose it may have been used for is the gassing of Kurdish civilians in northern Iraq, alth oughthat was its stated end use-:' In April 198b through August 1989, Commerce approved 13 other licenses worth a little bit over $102 million for civilian heli- copters and spare parts. In fact, the real value of these sales was much higher since many of the helicopters were approved for sale by the U.S. Government without a license. It is my understanding that the Defense Department protested these sales vigorously but was overruled by State and Commerce during one of the m^ny^ur^ucratiFfurt baIHeXover TracO[c£nJing policy. In retaliation, Commerce failed to consult DOt) on a $9 miT- lion sale directly to the Iraqi Air Force and on an $8 million con- tract to supply modified Sikorski Blackhawk helicopters to the president of Iraq. Just imagine, had allied troops marched on Baghdad, Saddam Hussein could have fled across the border to Iran on board an American helicopter painted to look just like one of ours. Dual-use equipment. The IAEA has discovered a very broad range of United States built equipment in Iraqi weapons establish- ments engaged in nuclear weapons development. Some of the items have been catalogued as key equipment for making the bomb and have been destroyed by the IAEA. You'll find enumeration of these in my written testimony. One entire facility, a tungsten-carbide manufacturing plant that was part of the Al Atheer complex—Al Atheer was one of the hearts of Iraq's nuclear weapons development program and David Kay visited it—was blown up by the IAEA in April 1992 because it lay—it was key to the Iraqi nuclear weapons program. Equipment for this plant appears to have been supplied by the Latrobe, Pennsylvania, manufacturer Kennametal, and by a large number of other American corporations with financing provided by the Atlanta branch of the BNL bank. When the President insisted on October 19 that there was not "one scintilla" of evidence that United States equipment had made its way into the Iraqi nuclear weapons program, many people in- cluding David Kay and Gary Milhollin, who are seated here with me, immediately pointed to the Leybold Heraeus electron beam welder. In fact, I can tell you now that the IAEA found not one of these welders in Iraq, but three of them. So far, nobody has ex- plained how they made their way to Iraq. An interagency task force is currently investigating whether these machines had in fact been manufactured in the United States and exported to Germany where Leybold modified them before shipping them to Iraq. Documents seized in Iraq by the IAEA show that Leybold began discussing these sales directly with the Iraqi Atomic Energy Organization in 1982. I would like to just mention briefly the role of computers in nu- clear weapons development. If you have highly advanced comput- ers, high speed computers, you do not need to carry out a nuclear 34 test. Not carrying out a nuclear test means that you can have a good chance of developing a bomb in secret. Computers are abso- lutely key. High speed computers are absolutely key to a clandes- tine nuclear weapons program and the United States was the prin- ciple source of high speed computers to Iraq. In my analysis of Department of Commerce records, it shows that the United States—that Iraq received a total of 370 export li- censes for computers and advanced scientific analysis equipment worth a total of $114 million. In other words, half of all the licenses approved by Commerce involved very sophisticated electronics equipment. Of these, 167 of the licenses concerned advanced computing sys- tems. The most widely selling items were VAX machines from Digi- tal Equipment Corporation and a lot of equipment from Hewlett Packard. I think those two American corporations alone probably are responsible for fueling and running production in about 20 Iraqi weapons facilities engaged in nuclear weapons development. American companies were also engaged in an effort to ship an entire production line to Iraq to manufacture large diameter gun barrels for the super gun project. Equipment for this project came in part from U.S. Government arsenals built at the end of World War II which cast the 16-inch guns for our battleships, those bat- tleships which in fact were used off the coast of Kuwait to launch— to shell the Kuwaiti coastline and also to launch cruise missiles against Baghdad. Some of this equipment was licensed, but the vast majority was not. Because it fell beneath technology guidelines. This selloff of our national defense establishment began in 1988 and continued right up through Operation Desert Shield. The only thing limiting Saddam Hussein's effort to buy up defense manufacturing equip- ment in the United States was his own stupidity in invading Ku- wait. The Commerce Department knew as early as 1985 that Iraq was seeking advanced American scientific instruments and computers for SAAD 16, a giant ballistic missile research and development center near Mosul up in the north of the map of Iraq, as you can see on the map. How did the Commerce Department know this? Simple: The Iraqis informed them of the request in writing. In March 1985, the Commerce Department received this letter from the head of the SAAD 16 project saying, look, we want to pur- chase advanced American scientific equipment, high-speed comput- ers for our SAAD 16, our weapons establishment. We're working on things such as ballistic missile trajectory and advanced aerodynam- ics. It's incredible. And that document, by the way, is in the record. Nor did the United States Government ignore the fact that Iraq was developing a broad based chemical weapons manufacturing base at Samarra, at Al-Fallujah there on the left, and at Salman Pak, which is just south of Baghdad, a bit to the right. They delivered the first of more than 100 demarches or protests to the West German government on sales of CW technology to Iraq by German companies in 1983. Despite this, the Commerce Depart- ment approved 14 separate shipments to Iraq described as bacteria, fungus, and protozoa. 35 How about the nuclear weapons program? As Congressman Gon- zalez has shown, the CIA was warning Commerce, the State De- partment, and the White House about Iraq's nuclear weapons pro- gram in 1989 if not earlier. Furthermore the CIA had developed a long list of bad end users known to be working on nuclear ballistic missile and biological weapons projects in Iraq. Despite this, the administration approved the sale of advanced computers, machine tools, and other sensitive goods to these very same Iraqi weapons establishments. Here are just a few of the weapons plants that have received sig- nificant contributions of U.S. technology. I have prepared a map here. The map will be on the record. And instead of enumerating these, perhaps for time now, I will simply refer you to my written testimony. There is a list of Iraqi weapons plants, which you can find on the map, which shows the type of weapons activity they were engaged in, nuclear weapons developments, conventional arms manufactur- ing, ballistic missile manufacturing, and it also gives you a list of the American manufacturers whose equipment sales to those estab- lishments were licensed by the Commerce Department. There are over 20 weapons establishments that we now know, that the U.N. Special Commission has visited, where U.S. dual-use equipment was licensed. I'd like to end on a note of how we can fix the export control mess, because I think the most important thing is the future and not the past. I would like to propose a number of steps to reform the problem. No. 1, I think the export licensing should either be withdrawn from Commerce or completely rebuilt from the bottom up. One pro- posal would be to create a separate export control agency that would be politically dependent and responsible, accountable, to the White House. The reason for making it accountable to the White House is precisely so we know what the President's policy is. Today, nobody can tell. The President will not say what his policy was toward Iraq. The policy was secret. There is no accountability. If export control licensing is the political responsibility of the President, it will be much more difficult in the future for the ad- ministration to evade responsibility and accountability. No. 2, I believe that proliferation control should determine what technologies should be subject to new export controls since pro- liferation has become the security problem of the 1990's and be- yond. One example: Machine tools that were not controlled in the 1980's because they fell below the standards of the Soviet military industry formed the backbone of Iraq's military and industrial com- plex. If we continue to use Cold War standards, the net effect will be to bring the military industries of countries such as Iran, India, Pakistan, Syria, and once again Iraq, up to the Cold War standards of the former Soviet Union. This will result in an unacceptable fi- nancial burden on the American taxpayer as America is called on time and time again to take out the very dictators failed govern- ment policies helped to create. No. 3, export licenses to countries of proliferation concern should be subject to mandatory review by the Department of Defense and 36 by the U.S. Customs Service. These agencies maintain lists of bad end users against which proposed exports can be checked on a rou- tine online basis. This is not the case today. In fact, many of the licenses that we're going to speak about on this panel were never even referred to the Department of Defense. No. 4, internationally the United States should take the lead in establishing a single unified multilateral proliferation regime to re- place the four separate regimes you have today. You have a regime for nuclear weapons, dual-use equipment, chemical, and ballistic missile equipment. The new regimes should review strategic exports to the Third World before they occur, such as COCOM reviewed strategic trade with the Soviet Union during the Cold War. No. 5, lists of approved exports should be published by member countries to encourage greater transparency in the licensing proc- ess. As it stands today, export licensing records remain classified as Ted Jacobs explained. Respectable companies doing business with reliable customers will have no shame in making their contracts public. It is primarily the handful of violators who continue to lobby for secrecy. No. 6, Russia, China, and non-western exporters of military pro- duction equipment and nuclear technology should be encouraged to become partners in elaborating multilateral proliferation guide- lines. They should be assisted in setting up effective export control systems. Finally, I would support strong legislation that would impose mandatory sanctions on foreign companies which fail to respect the new multilateral export controls, irregardless of where the viola- tions occur. All to often, when an American company refuses a lu- crative export contract because it would violate United States law, a French, German, or Japanese competitor leaps into the breach, because their governments are lax on export enforcement. Mandatory sanctions against violators would help prevent foreign businesses from taking unfair advantage of U.S. companies who choose to play by the rules. It is not a question, as some charge, of handing over lucrative export contracts to our competitors. In- stead, the goal is to create a level playing field, a common set of rules by which all must play. Finally, I believe that the Iraqi experience is repeating itself in countries such as Iran, India, Pakistan, and Syria, even as we sit here today. There is still time to stem the flow of strategic tech- nologies to such countries, but without a major reform of our cur- rent system soon it will be too late. Thank you. The Chairman. Thank you very much, Mr. Timmerman. I appre- ciate the time and effort that has gone into preparing this review and bringing it to us today. Next, I am going to go to David Kay, Secretary General of the Uranium Institute, the former head of the United Nations Weapons Inspection Team in Iraq and now based in London. Mr. Kay, am I correct in understanding that on this issue, this will be the first time that you have testified before a committee of Congress on what happened in the area that we're focused on today? Is that correct? 37 Mr. Kay. That is correct, Senator. The Chairman. And I understand it now, you have led three team efforts into Iraq at some probable danger to yourself and probably your teammates in going in there to try to figure out ex- actly what had been going on and to try to make sure that in the end the nuclear capacity that Saddam Hussein was enveloping was being identified in and destroyed; is that correct? Mr. Kay. That's correct, as well. The Chairman. All right. Before you start your statement, any other background information about yourself that relates to your insight on this issue I would have you also mention before you go ahead with your formal statement. We'd like to hear from you now. STATEMENT OF DAVID KAY, SECRETARY GENERAL, URANIUM INSTITUTE, LONDON, ENGLAND Mr. Kay. Thank you very much, Senator. I would like to preface my comments with simply saying that although I disagree rather vocally with the President's statement the other night, I am cer- tainly not here to seek narrow partisan advantage over that state- ment. The issue is too important. And, if anything, I had some sympathy for the President. I was born in Texas, largely educated in Texas. As*a young child in Texas, there is one thing you learn. That is, watch out when you are around bulls. They are dangerous regardless of which end you approach them. Never more dangerous than small bulls. The President was clearly provoked. Now, it's a matter of judg- ment, skill, and balance when you're around bulls to be careful that you don't put your foot in it. That happened during the debate. And I have a certain sense of sympathy. On the other hand, I feel the issue is far broader than that. And I think the administration's inept handling of the response to that debate only demonstrates the problem. I have been invited to share my views with you here, and I am happy to do that. I should indicate that I am doing that in my per- sonal capacity and really based primarily upon my experience in leading three teams for about 7 weeks in Iraq during the period of June to October 1991. We inspected a Nebraska of sites, the major sites, some of whom you can see on Ken Timmerman's map. Al Thuwaitha Nuclear Re- search Center, which is really the heart of the research and devel- opment program of the Iraqi clandestine program. Al Atheer, which is where weapons were going to be manufactured, assembled, and readied. Tarmiya, a uranium enrichment facility, a multibillion dol- lar facility in itself. Al Qaqaa, the major center for the development of high explosive testing. Hatten, which was an actual high explo- sive testing site itself. Jesira, which is where uranium enrichment activities, production of uranium tetrachloride took place. Al Radwan, engineering and manufacturing site. Al Amir, engineering and manufacturing site. Al Furat, centrifuge manufacturing plant. Daura, manufacturing. Salladin and Badr are also engineering and manufacturing sites. Nassar, works. And finally PC-3 head- quarters, where documents were seized. This list is even more impressive, I must say, when you're there. This is a multibillion dollar effort spread all over the country. It 38 was not a small, clandestine proliferator trying to develop one or a small Nebraska of nuclear weapons in a garage. It was a country dedicated to a long term nuclear weapons production facility. It is hard to believe that it was missed. Others who have testified today have spent a lot more time digging through the voluminous and I must admit not easily acces- sible documentation of United States exports to Iraq in the period leading up to Saddam's invasion of Kuwait. They will, I suspect, have a more complete picture than I do. All that I can offer is some ground truth derived from walking the fields, looking at the facilities, and personally testifying to where some of the equipment came from. The simple answer to the question of whether U.S. produced equipment and technology has been found to be part of the Iraqi nuclear weapons program is, yes. It was there, it was an essential part. The volume of U.S. produced The Chairman. You saw it with your own eves? Mr. Kay. I saw it with my own eyes, held it in my own hands very often. The volume of U.S. produced equipment is not great when meas- ured against the multibillion dollar scale of the nuclear weapon program. On the other hand, it was modern and it was essential to the Iraqi effort. The U.S. produced equipment was exclusively dual-use equip- ment. But so was most of the equipment that came from other countries. No one sold Saddam a nuclear weapon, thank God, but a lot of people sold him equipment that put him frightfully close on August 2, 1990, to begin making a nuclear weapon. In addition, technology has been referred to along with equip- ment. It should be acknowledged that technological information from the United States formed the foundation of Iraq's initial ura- nium enrichment program, the so-called calutron process. It was a U.S. developed technology. It has long been declassified and Iraq simply and quite legally bought the equipment here. The Iraqi documentation seized indicates a number of other areas where old United States technology was acquired by Iraq. And here I would like to emphasize and really echo something that Ken Timmerman said. Just because technology is old; that is, old from the perspective of the United States or the former Soviet Union, does not mean it isn't quite good for the purposes of Third World dictators. We have not begun to close in on this problem and understand that in the terms of a colleague, bronze metal tech- nology is perfectly adequate for many military purposes. The equipment we found and I personally saw includes a large number of high precision machine tools for fabricating nuclear weapons components. These were found in places like Al Atheer solely dedicated to the nuclear weapons program. So there can be no doubt as to their real as opposed to declared end use. Computers and computer workstations used in designing ura- nium enrichment equipment and nuclear explosives. The Iraqis had, in many ways, gone beyond our own program. That is, they had learned and pioneered ways, in some regard, in which you do not have to use high end supercomputers but quite adequately some workstations, VAX computers, high end personal computers 39 can run codes. While they are not as good as those run at Los Ala- mos or Lawrence Livermore, they are, let me tell you, every bit bet- ter than codes available during the buildup of the U.S. nuclear weapons program in the 1950's and 1960's. The sad fact which we have not come to terms with is that per- sonal computers readily on the market—an Apple Powerbook I have next to my leg—are far better than the computers that the U.S. military program had available in 1950 and 1960. High voltage power supplies. The initial high voltage power sup- plies for the uranium enrichment program, the calutron method, came from the United States. The Iraqis then back-engineered these power supplies and produced them themselves. Vacuum pumps for the calutrons and for the centrifuges, many were ac- quired from the United States. High precision oscilloscopes, sci- entific instruments measuring instruments, also from the United States. Electron beam welding machine used in centrifuge produc- tion which has already been referred to. Nuclear grade fluorinated vacuum oil for centrifuges. The best in the world is produced in the United States. And the Iraqis acquired it. And various items of metalworking equipment for the large Tungsten Carbide plant that Mr. Timmerman has already referred to used at the Al Atheer weapons plant. As I noted earlier and would like to emphasize, this equipment is what is commonly called dual-use equipment. The term doesn't indicate the equipment is unsophisticated or should be freely avail- able. It does indicate that an item has both civilian and military related uses. In the technological world that we really live in, what we are talking about, there are very few items of military production that are purely military. Most of the equipment has dual-uses. Other than a relatively small number of actual munitions items them- selves. In probably no case is this as true as in the area of computers and modern high accuracy machine tools and associated measuring equipment. The fact that Iraq was able to obtain from the United States only dual-use equipment is not a cause for self-congratula- tion or delusion or to relax. That is what Iraq principally sought from everyone, dual-use equipment in order to produce their own military equipment. The Chairman. Let me just stop you there. And isn't that why, in theory at least, we had this special procedure to require licenses for the dual-use equipment, so we would have a way to look at each one, monitor each one, say yes or no, the Government could say yes or no, and then as they accumulated you could look for patterns, you could see if somebody was ordering this today and something else a month from now, you could start to see how it might be put together to create a particular kind of military threat? The notion that because it's dual-use somehow means it's benign and we don't have to worry about it is absolutely false. The whole reason we have the classification in the first place is because it has the potential to be highly dangerous. Mr. Kay. That is absolutely right, Senator. There could be no greater delusion than patting one's self on the back because any dictator obtained only dual-use equipment. That is the reason spe- 40 cial procedures, at least in theory if not always in practice, exist for controlling this type of equipment. Iraq pursued an extensive procurement program aimed at obtain- ing foreign material and technology necessary to advance its whole range of military industrial procurement. Although I must say re- peated inspection trips to Iraq tend to dull one's sense of astonish- ment at much that you discover. The procurement maze that the IAEA and the U.N. Special Com- mission has seen in Iraq still amazes me. It is, just in the nuclear area, leaving aside extensive chemical and missile area, which is even larger in many ways, a multibillion dollar program in a coun- try the size of Iraq. Iraq has gone and as we still sit here today is still continuing to go to great lengths to prevent the weapons in- spectors from unraveling its procurement networks. It has refused for example to comply with the repeated demands that I and my successors have made for them to turn over procurement records. Much of the equipment found and even packing material had all identification marks defaced. Iraq employed very complex and devi- ous procedures for procurement strategies. Let me just list a few of these, because they are interesting although frustrating when you try to deal with them. They used other Iraqi establishments to order the equipment and as the purported destination for the equipment. You might have the Ministry of Health, a perfectly benign institution one thought, or an automobile assembly plant as the declared use. They used other buyers and contractors outside of Iraq. They used foreign intermediaries. They also placed orders directly with the manufac- turer and denied access of sales engineers to Iraqi facilities. So the manufacturer was often very much in the dark as to what the ac- tual facility where the equipment was going looked like. Very un- usual situation. They also sourced various pieces of equipment from various com- panies in different countries. Now this, in many ways, is the fright- ening aspect of the Iraqi program. The Iraqis had succeeded to a very high level of project manage- ment. That is, they could order a piece of equipment from the Unit- ed States, match it with software or measuring equipment from an- other country, a third piece of equipment integrated when it got to Iraq. So literally, no single manufacturer really knew what the equipment was being used or would be used for in Iraq. A very high level of skill. The Iraqi procurement strategies were very successful. And I must say that I believe it extremely urgent that steps be taken now to reinvigorate export control approaches. This will require that the United States recognize the problem. And this, I must say, if I can step aside, is what worried me most about the statements during the third debate and the few days afterwards. We have to understand that the Iraqis defeated international control procedures and assure that we and our allies take effective steps to address this problem. I hope that the current interest in Iraq manages to come close to producing—how close it came to pro- ducing the nuclear weapon does not obscure the fact that the threat of proliferation today is undiminished. I personally believe that it is more serious than it was in 1990. Simply repeating old 41 nostrums, marginally reinforcing old policies, will not meet this challenge. Indeed, to a considerable extent that current efforts have been focused on doing exactly that, they are undermining the re- maining shreds of viability of the current nuclear nonproliferation system in the eyes of both those states intent on considering the acquisition of nuclear weapons and those policy makers most con- cerned with controlling the further spread of nuclear weapons. I will very quickly terminate this. I know the full statement is on the record, and you have a very full schedule. But I would like to stress two aspects of the problem, Senator Riegle. I know it is easy to believe that, having stopped Saddam and having won the Cold War, that we are now free of the nuclear threat. I hope that Iraq tells us that there are potential motives, both military and symbolic, for states to develop and threaten the use of nuclear weapons. Stopping further proliferation, along with the challenge of assisting the transition to democratic forms of gov- ernment in those countries ruled and ruling by communism, will be the two defining foreign policy challenges for at least the next dec- ade. And we must address ourselves in a principled and energetic fashion toward that. In the last 5 years, in Afghanistan, and certainly more recently in Eastern Europe, Soviet troops have been quite willing to sell an extraordinary range of military equipment. The economic chaos that is now descending upon the former Soviet Union and associ- ated states is one that ought to give pause to every Western policy maker as to what now or very near in the future will be offered by poverty struck states on the international market. I also should say that I think we have allowed what is being of- fered by China to escape international scrutiny too long. There is a dual problem today: It is the Russian Federation and China offer- ing both officially and unofficially a range of military equipment quite unlike anything available in the last two decades. I have often thought, although it gives me a certain joy, that if Saddam Hussein is suffering any discomfort at this moment in Baghdad, it must be comparing the prices he has to pay for his military establishment with the prices offered today for equipment far in advance of what he bought. But putting that brief feeling of glee that he may be suffering some discomfort aside, let me say that the next administration, whoever it may be, must address the issue of the flow of this equip- ment out on the world market. Otherwise the proliferation problem will get out of hand. I think that that point is probably as good as any to end. The statement is on the record, and I would close. The Chairman. Very good. Let me, before we go next to the next witness, I want to ask you your professional judgment, as nearly as you can make one here, as to how far away was Iraq from having a nuclear device that it might have been able to deliver, by one means or another on an- other country, when the war broke out? Mr. Kay. If the standard is not a nuclear device that I or others would be happy to see in the U.S. inventory, but you're talking about nuclear equipment? The Chairman. Equipment. Yes. Right. 42 Mr. Kay. That would give a fissile yield. I think that on August 2, 1990, they were no more than 18 months away from the acquisi- tion of a crude nuclear weapon. The only limiting factor, Senator, from a gun assembly type of device, the type that quite adequately, in the hard terms that that word denotes, destroyed Hiroshima, was not the high explosive nec- essary to bring the uranium charges together, not the gun barrel type of material necessary for the design, not electronics. The only thing missing was the fissile material, nigh enriched uranium-235, RP-239, plutonium 239. And that, I must say, is why the problem is far greater today than it was 2 years ago. We have seen already from Eastern Eu- rope and the former Soviet Union, nuclear material beginning to leak. Unless vigorous steps are taken to ensure that that material and the associated electronics do not get out, we may not be so lucky and we may have virtually no warning period. The Chairman. That is another way of saying that if Saddam Hussein had not invaded Kuwait and had continued on with his building of his military machine, building these nuclear capacities and so forth and so on, that by essentially this date, had there not been an intervention, he would have now a nuclear warhead that he could detonate on a target? Mr. Kay. That is absolutely correct, Senator, in my judgment. The Chairman. Now, the fact that he was that far along—and as you say, you were astonished when you got there to find out how elaborate this whole complex was, how many different places it was, all the things that he had going on and so forth—how conceiv- ably could our own Government here, I mean we have a CIA, we try to keep track of these things presumably, how could something as extensive as that be missed? Is it conceivable that it could have been missed? I mean logic would suggest to me that anything that was as substantial as this, been going on for so long, and the fact that we try to monitor these things, that we must have had some knowledge in our Government that this was happening. Mr. Kay. Logic certainly would suggest that. There were 20,000 people—we know because we have their personnel files seized in the document raid—who were employed in the clandestine pro- gram. The Chairman. 20,000? Mr. Kay. 20,000. This does not include people who worked in the military, civilian contractors. The Chairman. Right. Mr. Kay. Just 20,000 people working under the title PC-3, which was the cover title of the Iraqi nuclear weapons program. One would certainly presume that that's a large enough number to get communication. I don't know, Senator. I think that is the key ques- tion, in many ways, that comes out of Iraq. We were very lucky. Saddam revealed himself. We didn't reveal it. And we've got to be sure that we don't count on that type of luck in the future. The Chairman. And I would draw from your last comments that because, you know, we don't have an effective control mechanism established now, there are other countries in the world today that are moving down this track. 43 Mr. Kay. There are certainly other countries that I worry about. They include North Korea, declared nuclear proliferators, for all practical purposes. Pakistan and India. But as well, certainly, I would put Iran, I would put Libya, Algeria possibly, on that watch list. There are a number of other countries around. There is not a shortage. There are probably nine or ten countries at least that I think would be of heightened concern for anyone concerned with this area. The Chairman. Let me move to Mr. Milhollin. Thank you also for coming and testifying today. We will make your full statement a part of the record, and we would like to hear your comments now. STATEMENT OF GARY MILHOLLIN, PROFESSOR, UNIVERSITY OF WISCONSIN LAW SCHOOL, AND DIRECTOR, WISCONSIN PROJECT ON NUCLEAR ARMS CONTROL Mr. Milhollin. Thank you very much, Senator. I would like to begin by offering some additional materials for the record. I have been working on this subject for a long time, as you probably know. In fact, I was the person who suggested to Con- gressman Barnard's committee that it get a list of United States exports to Iraq, and then I assisted the committee in achieving that goal. And after the Commerce Department finally, under the tnreat of subpoena, released the documents, I made a study of it, which I would like to offer now for inclusion in the committee's hearing record. The Chairman. Very good. Mr. Milhollin. Also, I published in the New York Times a list in April 1992 of over 40 American companies that got more than 100 licenses to supply sensitive dual-use equipment to Iraqi nu- clear and ballistic missile sites. The article identifies the nuclear weapons sites, it identifies the ballistic missile sites, and then it lists the U.S. exports to each of those sites by company and by amount. This was in April of 1992. Earlier, I published an article in March 1992, in the New York Times magazine, in which I included a design of Saddam's first nu- clear weapon, based on documents found in Iraq. And I also listed the companies that had been identified at that time that were con- tributing to the various components of the bomb. So already, I think for me the question that you have asked today was answered. In fact, I guess I answered it for myself a long time ago, based on our own records. And then this was confirmed by what the United Nations found in Iraq. The answer is: Yes, American equipment contributed vitally to the Iraqi nuclear program, the missile program, and the chemical program, and I am afraid I also believe that we knew that the risk was very high, if not certain, that it would contribute when it was licensed. What we are looking at, really, is a pattern of licenses for 5 years, which requires companies to go through a lot of waiting and requires buildings full of people to consume our tax dollars to re- view these applications. And then we see that even though they knew the risk was very high, even though they knew that the risk of diversion in some cases was very, very high and the equipment 44 was very dangerous, they approved it anyway. A lot of it went right to Iraqi military units. The Chairman. Yes. Mr. Milhollin. There wasn't even a question of routing it through some third parties. It went right directly to Iraqi military units. In a moment I am going to just outline some of the more spec- tacular licenses. They went to their Ministry of Defense, the Air Force. It was guidance equipment to the Air Force, for example. I don't think, if you look at the whole pattern, you can say that our export licensing system worked. It, again, consumed a lot of dollars and a lot of time, and it didn't produce any—well, it may have held up a few things, but in the case of Iraq, it's hard to see what they were. And David Kay has just mentioned a number of things that he found in Iraq, and as he was mentioning them, they clicked off a series of buttons in my memory, and almost all of them, I think, were licensed. I have licensing records showing that almost every- thing was sent out. Saddam, it turns out, didn't need to smuggle from the United States, and probably didn't need to smuggle from very many other places. It was too easy to get it licensed. And I suppose that if he were getting advice or the exporters were getting advice from law- yers, well, lawyers would say, "Well, look, why take a risk? Why smuggle it? If you can export it with a license, let's do it the right way." And they did. So now we nave this tremendous list, which I think is a list of failures that the Commerce Department finally put out. We also know, of course, that the Commerce Department itself must have recognized that the list was damning, because somebody, in the middle of the night, persons yet unknown, changed the records be- fore they were submitted to Congress. I would like to say that right now at the other end of Pennsylva- nia Avenue there are people sitting in the Commerce Department who know the answer to this question. But nobody seems to be talking to them. The Chairman. We invited the people that were in charge at the time to appear here today, and they didn't come. We also invited the operative official today in the administration who would have the most knowledge, and he declined to come. So they have been given an opportunity to come. We asked them to come. And I think it's fair to say the reason they're not here is that they find it impos- sible to address these issues, quite frankly. I mean it's one thing to put an op-ea piece in the newspaper, which one or two of them have done, it's quite another thing to come in here and make a presentation in an open public hearing and have to respond to questions about it. They are obviously not prepared to do that, and I think it's clear why. Mr. Milhollin. Well, I agree with you, Senator. But, you know, this seems to have been a criminal act, or at least there is a good question whether it was or not. And if you have people who did it sitting at their desks and you have a Justice Department and an FBI, one would assume that somebody would go do an investigation from the bottom up and start with the licensing control system and 45 start with the computer records, and you can find out who did the deletion and who got the orders. I mean that is a simple investiga- tive matter. I am amazed that it hasn't been done. As Ted Jacobs says, it's been a long time. I was contacted by the lawyers in the case when it first began. I have their names and phone numbers. But I haven't heard from them for over a year. The Chairman. You are talking about the Justice Department lawyers? Mr. Milhollin. Yes, I am talking about the Justice Department lawyers. The Chairman. I think I feel exactly as you do. 1 think that we have to get to the bottom of this. It certainly on the face of it ap- pears that laws were broken. The people who did it have to be identified. And now that Judge Lacey has been asked to serve as an independent counsel—he is not an independent prosecutor where he is free to operate solely on his own—many of us feel that we ought to have an independent prosecutor. But what we are aggregating here today in terms of this hearing record, which documents step by step what happened, will be pre- sented when we finish this hearing to Judge Lacey for precisely this purpose. And I think it's fair to say that the delay cannot go on indefinitely here. There is going to have to be answers given to those questions, and if this Attorney General and Justice Depart- ment doesn't do it, then another one will. We are going to get to the bottom of this one way or the other. Mr. Milhollin. I would just like to go through some of the more spectacular export cases, the ones that shed light on how the proc- ess works. The electron beam welder has been mentioned here this morning. That was an essential item in the production chain for nuclear weapon material. It turned up in Iraq with a special fixture for holding centrifuge bodies. Centrifuges are used to make nuclear weapon material, and Saddam was counting on centrifuges to make his first bomb. Well, let's look at how this export was handled by the Govern- ment. The exporter was Leybold Vacuum Systems, a Connecticut company. Leybold had already been in the newspapers 6 months before because it was being investigated for trying to smuggle blue- prints for uranium enrichment to Pakistan. The newspaper stories were out there. Six months later, Leybold applied for its licenses. Both were approved without any referral to the Pentagon or the State Department. Was there anything about the application that should have tipped anybody off? As you have said yourself, the end-user state- ment indicated that it was going to be used for military repairs to rocket cases. In fact, as we know, the Iraqis cut up Russian Scuds, and rewelded them so they would hold more fuel, so they could go farther. We perhaps didn't know that then but The Chairman. Some of which landed on our people. Mr. Milhollin. Some of which landed on our people. That's right. We do know that it went to Nassr State Establishment, an end user who was in charge of that project and an end user who was also buying equipment for making centrifuges. 46 What we have is a known nuclear smuggler sending strategic U.S. equipment straight into the Iraqi bomb and missile programs, even after the Commerce Department is told that the export is going to help make military rockets. Also, I think we have heard this morning that lower level people at the Commerce Department objected. One was quoted by NBC News as saying that, "It is difficult to be a consenting party to a transaction such as this." So we have a system. It's supposed to work. It's supposed to stop this sort of export. But it seems to me that it was undermined from the top. The second item that I would like to mention is the mass spec- trometers. These are used to measure the quality of nuclear weap- on fuel as it is being produced. There were two licensed mass spec- trometers in the Iraqi nuclear weapon program. Mr. Kay has mentioned the vacuum pump oil. This is special oil used to lubricate vacuum pumps which move uranium gas through the enrichment process. All of this was listed as "important" by the United Nations, which also said it was all being used in the Iraqi bomb program. Finally, there is the matter of training, know-how. In 1989, the Pentagon and the Department of Energy invited three Iraqi sci- entists, with the blessing of the Department of State, to attend a detonation conference in Portland, Oregon. There they learned from experts all over the world how shock waves detonate nuclear weapons. These three Iraqis came from Al Qaqaa, the site that pro- duced the first components for Iraq's high-explosive portion of Iraq's first nuclear weapon. If you look at the nuclear weapon program, you can see that if Saddam Hussein had not invaded Kuwait, Iraq would be very close to making a bomb today with American machine tools, American instruments for controlling the quality of nuclear weapon material, American computers for nuclear design, and Iraqi scientists trained in America in the techniques of nuclear detonation. Also, the U.N. found American equipment at chemical and ballis- tic missile sites. The U.N. early this year sent the U.S. State De- partment a confidential list of American equipment that had turned up in chemical and ballistic missile programs. I plan to make that list public and to put it in the record. They found air compressors, pressure and temperature regu- lators, power supply components, air filters, and buffer vessels made by a company in North Carolina. They also reported finding a filling system for projectiles, to fill the projectiles with chemical agents, made by a company in Con- necticut. And they also found process control equipment made by a large American electronics manufacturer. So there we are. U.S. equipment is turning up in not only nu- clear sites but chemical weapon sites and ballistic missile sites. Given the amount of equipment that we licensed, it was inevitable that this would happen. You can't license hundreds and hundreds of sensitive products to known—well, to sites that were all working on ballistic missiles and nuclear weapons and chemical weapons, without having some of it turn up. Arid Mr. Kay has pointed out 47 that some of it has turned up so far. I expect as the inspections continue, more will turn up. I mentioned earlier also that a lot of this equipment went di- rectly to military end users. We supplied guidance equipment, for example, to the Iraqi Air Force. This equipment was on the missile technology control list, which came into effect before the approvals were made. The Commerce Department approved them, anyway. The Iraqi Atomic Energy Commission got computers. The Ministry of Defense got over $2 million worth of computers and over $1 mil- lion worth of guidance equipment. Al Qaqaa, which has been mentioned this morning, got $200,000 worth of American computers. It was making the high explosive components that were going to detonate Saddam's first bomb. And it sent the three scientists to Portland, Oregon, to be trained in detonation techniques. Salah al Din was a military radar factory for which the United States supplied components even though the end-user statement clearly said that they were components for a radar system. We also supplied equipment to develop radar, even though it said on the application that the equipment would be used for calibrat- ing, adjusting, and testing of surveillance radar. There were also cases in which the Commerce Department said that no licenses were required, when they should have been. The most spectacular case is what I call the "flying tractor case." In 1991, the Los Angeles Times discovered that a New Jersey com- pany had contacted the same Commerce representative that had advised Consarc. Mr. Rowan is going to testify about Consarc. The company said that the Iraqis wanted some relays that would operate at 350,000 feet above the Earth; that's 66 miles high. An employee of the company told the Los Angeles Times, "When I heard 350,000 feet, I thought, 'missile.'" The employee said he told the Commerce Department that, "They're not putting tractors 350,000 feet in the air." Nevertheless, Commerce said that since the application stated a civilian use, there was no way it could be blocked. And so out it went. I think these examples show what our Government knew and that this export control disaster was not really an accident. The last case I would like to talk about is Sa'ad 16. That was the largest missile development site in Iraq. U.S. pilots bombed it during the Gulf war. In 1985, the Commerce Department received an Iraqi list of the laboratories at Sa'ad 16. The list clearly tells you what Sa'ad 16 was doing: It was a missile plant. You can't read the list without recognizing that. In November of 1986, the Pentagon sent the Commerce Depart- ment a letter telling the Commerce Department that Sa'ad 16 was a missile site. The letter was sent on November 6, 1986. Yet after that, many exports continued to go to Sa'ad 16. I have a little package here, which I will give the committee, of the relevant letters, showing that the Commerce Department knew in 1985 what Sa'ad 16 was doing, that the Pentagon told the Com- merce Department in November 1986 that Sa'ad 16 was a missile site, and then after that a series of very important exports went out to Sa'ad 16. 48 So, again, we have a system which really was not allowed to work, which was systematically either maladministered or under- mined by the Government. And I would like to echo what the other witnesses have said about what lessons should be learned. It seems to me the administration is still refusing to face the facts. Our Gov- ernment must face the fact that the system was defeated by Sad- dam, or we have no hope of stopping the Iranians. The Iranians have a lot of money, they're going for the bomb. The Chairman. Right. Mr. MlLHOLLlN. We have very little influence over them. They are going to appeal to the same end-user network that Saddam did. The Chairman. Sure. Mr. Milhollin. So unless we figure out a way to shut it down, we are going to face additional problems. We are going to have to use the Pentagon as the last-ditch export controller. We are going to be sending our bombers to bomb things that weren't stopped ear- lier. I don't see why we should risk lives of soldiers and risk our treasure to do that, when the alternative is so simple. That is, just improve the export control system. I have advocated for a long time, probably a couple of years, that we ought to open the export licensing process up to public scrutiny. But so far, Congress has not seen fit to take that course. I think the Commerce Department should be required to publish a list of its approvals of dual-use exports within 3 months after granting them. I think the Pentagon should be given a veto over dual-use exports. And most important, I think we should establish that persons who break the law should be investigated and pros- ecuted. The issues in this matter go far beyond this election campaign. They have to do with the security of everyone in the world and the rule of law in this country, and those two important objectives should be vindicated. Thank you. The Chairman. Thank you very much. I appreciate all the work you've done and what you have brought us today and the addi- tional materials which you have just referenced, which I am very interested in having. Mr. Rowan, you nave been very patient, and we appreciate that. We will make your full statement a part of the record, and we would like to have your comments now. STATEMENT OF HENRY M. ROWAN, PRESIDENT, INDUCTOTHERM INDUSTRIES, INC. Mr. Rowan. After all this intrigue and subversion, I am not sure the committee will be keenly interested in what I have to say. This is my first experience in testifying before a Senate committee. And whereas I don't know much about these proceedings, I am very happy to tell you of our experience on these matters. The Chairman. We appreciate that. Mr. Rowan. Our subsidiary, Consarc, is a team of about 100 highly motivated people who compete very successfully worldwide against larger competitors in Germany and Japan in the manufac- ture of sophisticated metal processing furnaces. In late 1988, 49 Consarc was approached by an Iraqi ministry, which was inter- ested in purchasing some of our equipment for the manufacture— allegedly—for the manufacture of prosthetic limbs for victims of the Iraqi and Iranian war. We saw this opportunity as a good one to supply our products, and although we were concerned with the dual-use of our furnaces, we brought these concerns to the attention of the Government in early 1989, before entering into a contract with the Iraqis. The furnaces were allegedly for melting titanium, the material used in the prosthetic limbs. But we had advised the Department of Commerce that any furnaces which will melt titanium can also be used to melt zirconium, a material that is largely used for coat- ing nuclear fuel rods. Consarc is export oriented. A good part of its business is for ex- port, and we took up the challenge in 1989 of competing against European companies in sales to Iraq. In so doing, we wanted to make absolutely sure that the goods and technology we were sell- ing had the full approval of the U.S. Government. We wanted Gov- ernment backing because we had no independent way to verify how Iraq would use this equipment. Our equipment is dual-use. Just as it can be used for legitimate and laudable civilian purposes, such as the sophisticated prosthetic limbs, it can also be used for military purposes. The Iraqis told us from the beginning that they were interested primarily in produc- ing medical appliances to treat postwar victims. They also said that they hoped to be able to do scientific research with this hardware. But even though they appeared to be sincere, we wanted to make absolutely sure that we vetted the proposed contract with the De- partment of Commerce and that we obtain the necessary approvals and licenses. We did not sugarcoat the facts about the equipment we proposed to sell. We wanted our licensing authorities to under- stand the equipment was dual-use and had military as well as ci- vilian applications. For example, on February 15, 1989, we talked by telephone to a representative of the Office of Technology and Policy Analysis of the Department of Commerce, informing him as follows: The equipment is said to be used for melting titanium for medical body parts. However, there is nothing to stop them from melting zirconium, the major use of which is cladding material for nuclear fuel rods. Then on February 22, about a week later, following this phone conversation, a representative of the export enforcement arm of the Department of Commerce visited Consarc in Rancocas, and he was further advised the equipment could be used to process titanium, as indicated, or could melt zirconium-reactive alloys. And second, we advised him that Iraq requested directional solidification, usu- ally required for turbine blades for aircraft. Interestingly, nothing further came of this meeting. In March of 1989, the Iraqis supplied us with an end-use certifi- cate, which we forwarded to the Department of Commerce. This certificate indicated that our equipment would be used for material science technology. Since we never received any indication from the Government that this end-use certificate was either fraudulent or misleading, we continued contract negotiations. 50 Finally, in April 1989, when Baghdad approved our proposal and signed the contract, the U.S. Embassy representative in Baghdad we had been working with sent us a telex. He said in the telex, "Hooray for you." And he offered any support that the embassy could give us. We felt that the Government was supporting our ex- port opportunity. What we did not know, and maybe the Commerce Department of- ficials did not either, was that American export control authorities in other agencies were apparently very concerned about Iraq's po- tential nuclear ability. Yet during 1989 and the first 6 months of 1990, these concerns did not reach us. According to press reports concerns expressed by the Defense De- partment that there was a potential nuclear end use reached the White House and led, on July 23, to a decision by President Bush to formally block our exports. The Chairman. This is July 23, 1990? Mr. Rowan. That's correct. Yes. The Chairman. All right. Mr. Rowan. Prior to July 23, we had been asked to voluntarily delay the shipment, some of which was already at the dock. And we did indeed comply with that request. It was about 3 weeks later that the official embargo came through. So we did hold up the ship- ment about 3 weeks, waiting for the official investigation. The Chairman. Yes. And of course this is just before the war started. Mr. Rowan. That's right. The Chairman. This is just before. Mr. Rowan. We're dealing now with a few weeks, originally a few weeks before the war started, when we were asked to volun- tarily delay the shipment. The Chairman. Right. Mr. Rowan. And then a few days, really, a week or 10 days, when the final embargo came through. The Chairman. But prior to that time, you had had nothing but green lights? Mr. Rowan. That's correct. The Chairman. You know, "Go right ahead. Hurrah for you," as the person in Baghdad said to you, at our embassy. Mr. Rowan. After the deal was suspended, but because we had completed our part of the contract, we had hoped to be paid the millions of dollars owed to us. Our case was pretty straightforward. We had acted in good faith. We had provided the Government with all the information it asked for, and then some. We had even warned the Government of the risks, but still received the necessary export licenses. We had re- ceived written end-use assurances from Iraq. The Iraqis had clearly misrepresented the use they had in mind. Iraq had deposited $6.4 million in a prepaid letter of credit ac- count in a New York bank. But to get this money, we had to get a judgment against Iraq, since the furnaces, which were custom built at great expense, were never delivered. To do this, we had to bring suit against Iraq. As the funds were in a blocked account, we needed Treasury Department approval. They gave us that approval in September 1990. 51 Federal Judge Stanley Sporkin, who heard the case, said that our company, Consarc, "nad clearly done everything that you would expect a law-abiding American corporation to do.' He ruled that the $6.4 million in frozen Iraqi assets in the Bank of New York should go to us and later forbade the Treasury Department from transferring these funds to the United Nations. The court's judgment against Iraq is highly significant and prece- dent shattering because it found that Iraq had misrepresented the end use intended for the equipment. Along with the $6.4 million, Consarc was awarded a large damage claim. Last week, we were back in court because the Treasury Depart- ment, instead of supporting us, was trying to persuade Judge Sporkin to reverse his ruling that forbade them from transferring our funds to the United Nations. Judge Sporkin was not persuaded. Indeed, he appeared to be dis- mayed as we have been treated so badly by the Treasury Depart- ment. One would have thought that Treasury would have seen our success against Iraq in the courts as a great achievement. This ruling, if backed by Treasury, would have served notice on all regimes who would abuse our laws and cause harm to our com- panies, as Saddam Hussein did, to many other American firms. But, no, Treasury did the reverse: Instead of backing Consarc, Treasury moved to pay off banks, including the Gulf International Bank. Before the Gulf war, the Gulf International Bank was one of the biggest lenders to Saddam Hussein's Iraq. Even more surprising, Treasury authorized the payment at a time when two Gulf Bank board members were government offi- cials of Iraq. And the bank was partly owned by Iraq. We believe we have been victimized, first by Saddam Hussein, and then by our own administration and in particular the Treasury Department, which sought unsuccessfully to have our entire judg- ment voided. We don't understand why the Treasury Department continues to harass its own citizens and block us from receiving payment due us. Judge Sporkin last week called the Treasury's actions uncon- scionable. This committee and the Congress have an interest in an effective export control system. American companies share that interest. But an effective program requires close cooperation between industry and Government. Mistakes were probably made in the past, and perhaps our laws were not tight enough. But even if they are im- proved and our anti-proliferation policies strengthened, will that be enough? The system can only work, I believe, when there are good laws and regulations, effective administration, and a close partnership between Government and industry. As things stand now, and in the light of the shabby treatment we continue to receive, the system to support exports and yet pre- vent proliferation is not working. One final word I would like to add is that it is useless to limit exports of technology and equipment from the United States if these same restrictions, same laws, same inspections are not ap- plied to other countries that obtain and have the same high tech- nology. 52 Thank you very much. The Chairman. Thank you very much. I fully agree with you. We have got to have a multilateral, multi- national control system here, and I think our other witnesses have given us very powerful supporting evidence for that. And I am going to set this committee on a course to help develop that, begin- ning next year, with the convening of the new Congress. Mr. Rowan. In that link, Senator, it's very frustrating for our people to study an opportunity to supply sophisticated furnaces and have it quite properly turned down by our Government and then see a German company, for example, shipping that same order, perhaps worth millions of dollars, to the same customer that we ei- ther declined to quote altogether or were turned down quite prop- erly by the Department of Commerce. The Chairman. We have situations over in other areas where foreign suppliers are bidding on contracts here in the United States, getting export financing help from their government, land- ing contracts here that are putting American firms out of work. You know, there is no overall rational plan. That is one of the rea- sons why our job base is shrinking and why the economy is in such deep trouble here. But let me ask three of you, if I may. In September 1991 the ex- ecutive branch of the Government here was required to submit a report to Congress pursuant to the Iraq Sanctions Act of 1990. And as you may know, that act required the President to prepare a re- port on the transfer or sale to Iraq of nuclear, biological, chemical, or ballistic missile technology. And so that report was written, it was formally conveyed to the Congress, and I want to read you one sentence from that report, and I quote. That report to us said: Reflecting both U.S. Government policy and responsible sales practices of Amer- ican firms, United States suppliers did not contribute directly to Iraq's convention or non-conventional weapons capability. Was that an accurate statement, Mr. Kay? Mr. Kay. No. I think that's a very inaccurate statement. The Chairman. Inaccurate statement? Mr. Kay. Inaccurate statement. Wrong, to put it simply. Even in terms of other statements by the administration during the same period, certainly in terms of information found during the course of the inspection. Mr. TlMMERMAN. Mr. Chairman, I would add to that simply that it was in fact the administration's policy, a secret policy that was put down in National Security Directive 26, to encourage U.S. com- panies precisely to do the opposite; in other words, to sell equip- ment that would go into conventional weapons manufacturing in Iraq. The Chairman. Right. So your statement is that this statement that I just read to you is false? Mr. Timmerman. That's correct, Senator. Mr. Milhollin. I would take another step. It seems to me that by September 1991, the administration, if it read its own export records, should have realized that the statement at that time was false, that by September 1991, the Government knew about which Iraqi end users were making nuclear and chemical weapons and 53 ballistic missiles, and knew that there had been many exports to those entities. So I don't see how they could say that. The Chairman. Yes. Well, if you go back to Baker's letter dated July 25, 1990, when he wrote to Mosbacher and said, you know, we've got to quit sending these things over there, 8 days before the war started, it says: Requesting that additional controls be placed on items that could contribute to Iraq's chemical and biological weapons and missile programs. I mean when you read this letter, the clear implication is that they had an understanding that that could happen, and presum- ably was happening. But the records were all over the place that it was happening. I mean their own Commerce Department's records which later got doctored make it clear that that happened. The end users were military end users in Iraq. I mean there was no mystery about this. You know, the statement out of this executive branch report from the President is just absolutely false. Mr. MlLHOLLUM. Some of the cases, at least, went to an inter- agency group which went back and forth on them. So all the agen- cies were involved in some of the most sensitive cases, and if the group can't agree, then it's bucked up to the Security Council. I can't understand how the White House can say that it didn't know this. The Chairman. Well, let's take the Security Council. General Scowcroft, whom we invited to come today and who declined to come, who is the President's National Security Adviser, just wrote an article that appeared in the Washington Post. So he's elected to comment directly on this issue. And it's very current. It was pub- lished on October 10, 1992. It was published just a few days ago. In that article, over his signature, he makes this comment, and I am quoting now General Scowcroft. He said: Perhaps the most egregious falsehood that our political critics have forced on the public is that the Bush administration sold high technology to Saddam to enhance his nuclear, chemical, and biological weapons program. As I hear your testimony today, what you have told me is that our Government did in fact allow those kinds of sales to go on and that they did enhance the nuclear and chemical and biological weapons programs. Isn't that the fact? Mr. Kay. I certainly think it is, Senator. I think the disturbing aspect of this, other tnan the fact that it is a falsehood on the pub- lic record, is that in fact that we should go beyond defending a pol- icy that clearly didn't work. The Chairman. Right. Mr. Kay. And create a policy that would work. It is extremely disturbing to hear something like Mr. Rowan's story. Let me tell you, regardless of what laws this Congress passes or any adminis- tration tries to administer on export control laws, unless you have the collaboration and close cooperation of companies such as his, who come to you with early warning, you will never have a hope of effective export control partnership with American industry, which in the vast majority, have no interest at all in harming U.S. national interests, only ask for consistency of policy and guidance. Unless you have that, we will never address this problem. 54 The Chairman. Mr. Timmerman, is Mr. Scowcroft's statement true or false? Mr. Timmerman. I think the record shows that there was signifi- cant discussion of these export licenses within the administration. Some of the documents that Representative Gonzalez has put on the record show that the State Department warned that there was nuclear, biological, or in some cases ballistic applications of United States technology going to Iraq. The Defense Department objected on several occasions. The CIA also objected. Regardless of this, the licenses were approved, the technology went to Iraq, this equip- ment went into Iraqi weapons programs, into unconventional weap- ons programs. And it was approved by the White House. Now, it seems to me we are talking about a secret policy. We don't really know what the aim was, what the administration was trying to do. The Chairman. There is no question that it happened, though, is there? Mr. Timmerman. There is absolutely no question that it hap- pened. The Chairman. Doesn't that make Mr. Scowcroft's statement false? Mr. Timmerman. Senator, it seems General Scowcroft did not represent the facts. The Chairman. What about you, Mr. Milhollin? Mr. Milhollin. I agree. I don't think there is any basis for say- ing that the United States suppliers did not contribute directly to Saddam's nuclear, chemical, or ballistic missile programs. I think Mr. Scowcroft should have just read my article in the New York Times in April. He would have seen a tremendous list, a multi- million dollar list, of companies and sites that as National Security Adviser he should know about. The Chairman. Let me raise with you another letter, even more current, just published in the New York Times on October 21, just a few days ago, by Acting Secretary of State Lawrence Eagleburger. Now he is the top person over at the State Depart- ment. And let me read you what he wrote: The more than 40 inspections conducted in Iraq since the Gulf war by the Inter- national Atomic Energy Agency and the United Nations Special Commission have demonstrated conclusively that the United States technology made no significant contribution to Iraq's military capabilities. Is that a truthful statement, Mr. Kay? Mr. Kay. As much as I have a regard for Secretary Eagleburger—particularly anyone who would tell the Washington Post, as he did, that his Government decorated office looks like a Moroccan house of ill repute, has considerable appreciation for me—but I must say that statement does not, I think, coincide with the record that is available to the U.S. Government both from the inspection as well as from his own sources. The Chairman. You led those inspection teams? Mr. Kay. Yes. The Chairman. You went in there, you saw the equipment with your own eyes? Mr. Kay. The equipment was there. It was being used. It contrib- uted to the Iraqi nuclear weapons program. 55 The Chairman. Mr. Timmerman? Mr. Timmerman. I could add one thing, Senator. In the fall of 1989, the Iraqis opened up a lot of their weapons establishments to the outside. I was there as a correspondent. There weren't very many of my colleagues who decided to go. The picture that I showed you of the U.S. helicopter was taken at the Baghdad arms fair in April 1989. The Iraqis openly told me, and I am sure they told other people, that they were negotiating with the United States to buy advanced production machinery, spe- cial presses that could be used in producing ballistic missiles and producing nuclear weapons. They boasted of this. They boasted of now much they were able to get out of the United States and of other Western companies. In fact, the individual in charge of this one here is General Amir Al Rashid. He was in charge of all electronics programs, all of the ballistic missile programs, and today General Rashid is negotiating with the U.N. Special Commission on how to maintain the manu- facturing capability in Iraq. He told UNSCOM about 2 months ago that really you don't have to worry about some of these machines because we won't make interballistic long-range missiles, just short, less than 150 kilometers. So let's keep the equipment. And that, by the way, is still up in the air. We don't know whether it's going to be destroyed. So the U.S. Government definitely knew at that time in April 1989. The press knew. I was there. I was photographing it. And there were other journalists there as well. The Chairman. Mr. Milhollin, your reaction to Mr. Eagleburger's statement that I just cited? Mr. Milhollin. I am surprised by the statement because infor- mation I have is that Mr. Eagleburger himself has been actively in- terested in individual licensing cases, which is unusual for someone at his level. So, given his interest in licensing cases, and given the clear pub- lic—or not public—the record showing United States exports going to virtually every mass-destruction weapons site in Iraq, especially computers, there is hardly a site in Iraq that I know of that didn t get a United States computer at one time or another, I am sur- prised that, given his knowledge of the licensing system, that he could say that. The Chairman. So his statement is clearly false on the facts? Mr. Milhollin. It seems to me that it's false on the facts. The Chairman. Yes. Now, I think also, in light of what you have said, each of you, about each of these three statements I have cited—one from the President's report to the Congress, the other now from General Scowcroft in the newspaper, and now from Mr. Eagleburger in the newspaper—there is a pattern here. There is a pattern here of them repeating information to the public, which each of you know and are able to demonstrate is clearly false. I mean it seems to me you have to take these statements sepa- rately and then you have to take them together. You've got three top officials of our Government just as recently as just a week or so ago putting out false information on this issue, information that you nave been able to show as false with the facts and the testi- mony that you brought today. 56 I mean it is astonishing that they are doing that and they are doing that in the face of the evidence. Do you have any sense as to why they would be doing that at this point in light of the fact that we know what they're saying is false? Mr. Milhollin. I have one comment on that. The Chairman. Yes. I would like to hear it. Mr. Milhollin. I was asked frequently just before the war with Iraq and during it to comment on the status of Saddam's nuclear weapon program. And I was frankly astonished to find that the in- formation coming out of the administration seemed to be unreli- able, and I think it is because the top officials who are making the announcements were badly advised by people below them. Just before the war, President Bush said that Saddam could be something like months away from the bomb, which I thought was an exaggeration at the time. Then during the war, after we had bombed a couple of small reactors that were irrelevant to the nu- clear program, there was an announcement that we had destroyed and nullified Saddam's nuclear weapon threat. Of course we discov- ered after the war that we didn't even know about most of it. And then later on, we got other statements that seemed not to be based on reliable information. So I must say that these latest statements seem to be a part of a pattern and don't surprise me. I think the importance of this question is such that before the administration makes an announcement on the nearness of a coun- try to the bomb or on whether products help make the bomb or move a country toward the bomb, that the administration should check to make sure that the information is accurate because this is an important issue. I don't think it serves the public interest to come out with ill-considered statements that are based on appar- ently faulty staff work. The Chairman. When you take this illustration of one of these doctored records on these export licenses of these very sensitive materials and you see where someone went back into the records and they took out this language that made it clear that the end user of this particular licensed item that we were going to ship from the United States was involved in military matters so some- one—I think you said yourself—who is presumably still down at the Commerce Department, who was the person who went in and falsified these records, now I look at that at the one end and I look at these three statements that I have just cited to you on the other end from the three ranking officials in our Government, and it looks to me like you are seeing the same tactics being applied at both ends. This is presenting a false picture. These three quotations that I just gave you are also providing a false picture. We have been given a false picture, and the effort is being made to continue that literally right up to this moment. And I think that probably is why, when we issued an invitation to these individuals to come and to testify about it directly today, they elected not to do that and then to have to confront the kinds of evidence and the kinds, of docu- ments and the kind of record that has now been developed that is out into the light of day and which cannot be answered by these kinds of assertions that they are making here. 57 So I think the lesson for the future—and we have spent some time on that, and I am going to ask you for additional information as we go down the track on this—we obviously have got to put in place a different kind of system. We cannot afford to be creating more Saddam Husseins. It is obvious from the record that our own Government fostered the development of the military strength of Saddam Hussein, which we then had to turn around and go and confront directly with American military forces. And lives were lost in the process. And an enormous amount of money was spent as well. This very same thing may very well be going on some other place. Now, you cite the possibility of Iran. There is Iran sitting there with huge oil revenues. It could be proceeding in the same fashion. We may find that they are following the same approach that Iraq has taken here. Or whether we are talking about North Korea. There are other places too. And the notion of having nuclear warheads or chemical weapons or biological weapons or even so- phisticated other missiles, I mean the Scud missiles killed a lot of our people, killed a lot of our people. We've got testimony here today that things that came from the United States helped in their missile program in Iraq. So this has got to stop. And clearly, the people who are still defending it and pretending it didn't happen and are putting out a false story I don't think are the ones to clean up the mess. And I resent the kind of false information that is being put out now. I appreciate all of you coming forward with the information that you have and appearing here today in open public testimony and laying it on the table. I especially appreciate, Mr. Kay, the fact that you have been over there, different ones of you have, but you have been there I think most recently and have actually examined these nuclear sites in Iraq. You have seen American equipment there with your own eyes, and you are here to testify in the first person about it, and I appreciate very much that work. I appreciate that work on behalf of civilized people around the world that want to end this arms race before some other terrible tragedy occurs. I also appreciate the fact that you have come to give us the truth about this matter, which you have done today. And I say that as well to you, Mr. Timmerman, to you, Mr. Milhollin, to you, Mr. Rowan. Thank you all very much. We are going to take this full record and any additions to it, and we are going to be sending it over to Judge Lacey to pursue the items that nave been mentioned, and we will continue on as well beyond that. Thank you very much. The committee stands in recess. [Whereupon, at 1:28 p.m., the committee was adjourned.] [Prepared statements of witnesses and additional material sup- plied for the record follow:] 58 PREPARED STATEMENT OF SENATOR JAKE GARN Mr. Chairman, I must register serious objection to the convening of this hearing with the Congress out of session. The Members are back home where they belong meeting with their constituents. The hearing is being called in the full knowledge that they will be un- able to attend or participate in the debate. But its objective here is not policy debate but political effect. It is a forum for a bunch of critics of the Administration led by that recognized expert on ex- port controls and proliferation policy, Chairman Henry Gonzalez. Administration witnesses were not even invited to the hearing until after the panel of critics was announced. I view this hearing as an abuse of the Banking Committee and a misuse of taxpayer dollars purely for partisan political purposes. I am sorry to be so blunt but, in light of the performance of the Congress on critical nonproliferation issues in the period this hear- ing intends to examine, I can draw no other conclusion. Beyond the obvious political abuse this hearing represents, I am deeply offended that this Committee, where I worked so hard to strengthen U.S. export control policy for 18 years, should be associ- ated with these outrageous charges that the Bush Administration armed Iraq and assisted that country's development of weapons of mass destruction. I am offended not only because the charges are untrue but especially because they are coming from Democrats in the House of Representatives who have been intent for years on dismantling our export control system, damn the consequences for national security or proliferation. This outrageous accusation against the Bush Administration is based on the fact that U.S. export licenses were issued for ship- ments to Iraq in the period prior to the invasion of Kuwait. While such an attack makes good headlines, it only hits home if our li- censing policy was blind to the proliferation problem and actually permitted the transfer of items critical to Iraqi weapons develop- ment. When we judge performance on this basis, U.S. control policy has been courageous rather than craven. For years, the United States had to go it alone in the non- proliferation arena. Many of our nonproliferation controls were uni- lateral and therefore doomed to be ineffective. It was only in the late 1980's, largely through the efforts of the Bush Administration, that progress was made in achieving consistent multilateral en- forcement of controls on missile, nuclear, chemical and biological weapons technologies. I was in the forefront of efforts to achieve stronger controls and tough sanctions to stop proliferators. While the systems now in place remain far from perfect, the United States has reached agreement width other supplier nations on the technologies that have to be controlled and who the bad guys are. Despite this considerable achievement, U.S. actions to stem pro- liferation are being attacked as a failure because U.S. computer workstations, test equipment, centrifuge oil and a welding machine were licensed to, or found in, Iraq. Is this a fair criticism? To an- swer the question, one has to understand the targeted nature of nonproliferation controls. They are intended to ban the export of military equipment and those items with specific application to weapons of mass destruction to countries like Iraq. 59 While nonproliferation controls are targeted in this way, as any- one who understands export control policy knows, the licensing sys- tem in the years before the Iraqi invasion covered a substantial fraction of all high technology that the United States exports. A very large number of items were licensed because of concern about their use by a sophisticated Soviet military establishment. Within the context of this broader system, the evidence I have seen indi- cates that U.S. licenses were denied for the export of all military equipment and any technology specifically controlled for prolifera- tion purposes to Iraq. However, our nonproliferation policy never contemplated, nor is it remotely possible, to ban the export of the many items that are not key to production of weapons of mass destruction but could still be useful at a military facility. Because some items such as mid- level computers and test equipment do not exceed that criticality threshold, they could be delivered after case by case review. Many other U.S. goods could and can be sold without any review at all because of their lack of sophistication, including computers, com- munications, testing and transport equipment but they could cer- tainly be useful at a military facility. One can always debate whether the right items are on the non- proliferation control list but the issue here is how U.S. export per- formance measured up to the requirements of the system? While I have not reviewed every license, it seems clear to me that in the areas that mattered our policy was focused and effective. Critical items did not get through. This is the appropriate measure of success, not whether some computer workstations, many now completely decontrolled, made their way into an Iraqi military facility. But tne attack being made here is based on the fact that any U.S. technology was found or any export licenses granted at all. The political game being played here highlights a critical prob- lem for the future of our export control system. We cannot possibly have a successful policy if we set out to deny a short list of critical goods and technology to specific projects of concern but then later judge the policy on whether any goods, even if they are not multi- laterally controlled as critical to weapons of mass destruction, are ever found to have been licensed to a problem country. If our goal is to deny all high technology goods to any country with which the United States may ever have a proliferation concern in the future, then any policy short of a total export ban is doomed to failure. If we decide that our export control policy toward Iraq is a fail- ure because we sold some computer workstations to them, then the United States must tell our most competitive high tech companies that they are pretty much banned from exporting to half the world. No more air traffic control systems, commercial aircraft, commu- nications satellites, computers or test equipment to the Middle East, South Asia, China, or many parts of the former Soviet Union. We will have to leave that business to the Europeans and the Japa- nese. They may have been embarrassed into abandoning their sup- port for Iraqi and Libyan weapons programs, but they will cer- tainly not blush over billions of dollars worth of legitimate, civilian exports, regardless of the destination. 60 As unfair as I find the charges being leveled at this hearing, I am even more offended by the political perpetrators of this witch hunt. I fought for years to stop the Democrats in the House of Rep- resentatives from dismantling our export control system. In the late 1980's, the very period in question, conferees from this Com- mittee repeatedly battled the House Democrats on two key points. As recently as late 1990, the House passed legislation that would have required massive decontrol of some of the very technologies they are now so upset have been licensed to Iraq, and would have taken the Defense Department out of the license review process for countries like Iraq. They wanted no one checking up on U.S. ex- porters, and certainly not those nay-sayers from Defense. As re- cently declassified documents have shown, it was Defense that was the consistent opponent of even low level trade with Iraq. Chair- man Gonzalez voted for that House bill. I am proud that the Senate Banking Committee conferees worked with the Bush Administration on these issues and fought the House to a standstill. We held the line on decontrol, giving the Administration time to negotiate multilateral nonproliferation agreements and institute its Enhanced Proliferation Control Initia- tive. And we strengthened the role of the Defense Department in reviewing licenses to Iraq. If the very people who are now such vocal critics of the Administration had their way a few years back, much of the equipment we are discussing here, and even some items that are of real concern, would have gone to Iraq, and our enforcement agencies would never have known a thing about it. Furthermore, some of the key House critics, who are so ready to criticize the President's performance, have abdicated their own leg- islative responsibility for the export control system. For two full years, the Export Administration Act has been out of force and the President has had to maintain our export control system using emergency authorities under the International Emergency Eco- nomic Powers Act. For two full years, the House of Representatives has done nothing to get the law back on the books. Two weeks ago the House was unable even to take a vote on an EAA conference report and, in the face of that failure, would not even consider en- acting a simple extension of the law to restore a statutory basis for our export control system. I offered the House a third legislative alternative to protect our export control system. I had an amendment included in the Senate version of the Eximbank reauthorization that would have required Congress to vote within 180 days to put the EAA back on the books or to support or oppose the President's use of IEEPA authority to keep the expired EAA in force. The House could not accept any di- rective of this kind that interfered with their prerogative to do nothing. If these House critics really believe that Rome is burning, what conclusion should we draw from their endless fiddling? The result of this inaction is that our export control system con- tinues to operate under emergency authorities that are a very poor substitute for legislative authorization and are under challenge in the courts. These outraged critics of the President's policy have told George Bush to do whatever he wants with the export control sys- completely outrageous that legislators who have been out to gut the tern—run it at his whim under authorities. I find it 61 system, and who cannot even provide a legal basis for it, have the nerve to criticize a President who has succeeded in building a mul- tilateral consensus to block proliferation. I am not arguing that there have been no failures of our non- proliferation policy. I hate finding any U.S. high technology in Iraq's military establishment, even if it got there because it was not critical enough to be controlled or through some error or diver- sion. I wish Germany, Japan and many other countries had not en- thusiastically supported the weapons programs of Saddam Hussein. I wish Congress had done its job. But the question here is whether the President has failed in his responsibilities to carry out U.S. ex- port control policy. In my view, the Bush Administration has been on exactly the right course—attempting to define a system of targeted controls that are multilaterallv supported and multilateral!/ enforced. Be- cause of the hard work of the Administration in achieving substan- tial multilateral consensus on nonproliferation controls and gaining pledges of cooperation from Russia and China, there is hope that a new targeted proliferation control system can succeed. Success in export controls is a relative thing. I was a constant critic of COCOM over the years for its failure to stop the flow of high technology to the Soviet military. As in the case of Iraq, the United States had the toughest policy and relatively little U.S. technology got through. Some Europeans and the Japanese were less committed and shipped more. But despite leakage on many fronts, I would have to say that the policy was successful in con- straining the sophistication of Soviet weaponry and the general level of technological advance in the society. I believe those controls contributed to the collapse of the Soviet economic system. I am con- vinced that we can also severely restrict the flow of dangerous tech- nology in the nonproliferation field if we aggressively pursue our current policies. The alternative is a piecemeal policy of country-of-the-month trade embargoes, unilateral on the part of the United States, that imposes high costs on U.S. industry with no offsetting security ben- efit. It is clear that Iraq represented a dismal failure of non- proliferation policy precisely because controls were not multilater- ally applied. Rather than following the U.S. lead in denying critical weapons technology to Saddam Hussein, other major suppliers such as Germany and France happily supplied Iraq with military technology and very nearly gave Saddam a nuclear arsenal and other fearsome weapons that could have destabilized the entire Middle East region. We may produce just such a perverse outcome in our export control policy if we draw the wrong lessons from Iraq. STATEMENT OF SENATOR PATRICK LEAHY (D-VT) Despite increasing evidence that Saddam Hussein was acquiring nuclear weapons technology and sponsoring worldwide terrorism, President Bush signed a top secret directive, 10 months before Iraq's tanks rolled into Kuwait, ordering closer ties with Baghdad and continuing U.S. economic and political aid to the dictator. On January 16, 1991—just hours after allied forces began their air attack against Iraqi troops in Operation Desert Storm—Presi- 60-509 0-93-3 62 dent Bush spoke about the reasons for going to war. "We are deter- mined to knock out Saddam Hussein's nuclear bomb potential," he told the Nation in a televised address. Americans clearly understood the bottom line—if Saddam Hus- sein ever got nuclear weapons, he would be a threat to world peace. But there was something the President did not tell the country at the time. Our own Administration had enhanced Saddam's nu- clear potential. Most Americans were unaware that the United States had used the Department of Agriculture CCC program to guarantee billions of dollars in bank loans to Saddam Hussein. Instead of buying food, U.S. aid helped him spend more of his precious cash on up to $20 billion of nuclear technology and weapons of mass destruction. Most Americans were unaware that the Administration had ap- proved exports that found their way into Iraq's missile, nuclear, poison gas, and germ warfare programs. And most Americans were unaware that just 10 months before Saddam Hussein's tanks rolled into Kuwait City, President Bush had signed a top secret directive, overruling objections by high ranking officials opposed to continuing economic aid to Iraq. Sadly, the American people are just beginning to learn the truth. They are learning that when Saddam Hussein defaulted on $1.9 billion of U.S.-backed bank loans, American taxpayers were stuck with the bill. And they are learning that Saddam was much closer to building a nuclear bomb than previously thought—perhaps only 18 to 24 months away from completion when the fighting began. The ending of the Iran-Iraq war meant a time for the Adminis- tration to reevaluate its policy toward Iraq. Unfortunately, that did not seem to happen. The Administration had ample evidence in 1989 that Saddam Hussein was using a worldwide network of Iraqi front companies to secretly obtain nuclear technology and weapons of mass destruc- tion. In March, Secretary Baker was warned by State Department offi- cials that Iraq was "working hard" on chemical and biological weapons and that terrorists were still operating from Iraq. Addi- tional reports were made in April and June, 1989. And in August, FBI agents raided and shut down the Atlanta, Georgia branch of the Banca Nazionale del Lavoro (BNL), after dis- covering that it had funnelled $5 billion in loans to Iraq, a substan- tial portion of which were guaranteed by the U.S. government. It was then revealed that at least part of the illegal loans were used to finance Iraq's worldwide military procurement network. And the next month, according to the Los Angeles Times, the CIA warned Secretary Baker that Iraq was developing a "nuclear weapons capability." Throughout this period of time the Administration was divided over U.S. aid toward Iraq. Several federal agencies opposed con- tinuing the agricultural program with Iraq because of Baghdad's abysmal credit rating and allegations arising from the BNL inves- tigation including diversion of commodities for arms and kickbacks. It was during these turbulent times—ten months before Iraq in- vaded Kuwait—that President Bush signed the secret National Se- 63 curity Directive 26 (NSD 26), focusing the full power of the United States government toward the goal of forging closer ties with Sad- dam Hussein. NSD 26 overrode dissent. Better judgment was put aside. Aid to Iraq was the cause. Damn the torpedoes, full speed ahead was the order of the day. Despite NSD 26, some within the Administration still fought ad- ditional aid to Iraq. But dissent was not considered fatal at the time, it was merely an impediment to be removed. But even after NSD 26 was signed, the warning signs could not be ignored. At that time, Justice investigators were pursuing leads that Iraq used BNL funds to buy nuclear weapons, extorted kickbacks from food suppliers, and may have been diverting U.S.-backed loans to buy weapons. BNL investigator Gale McKenzie briefed USDA at- torney Kevin Brosch of the situation on October 11, 1989. The news was so distressing that the next day, USDA withdrew an offer of $400 million in additional loan guarantees to Baghdad and suspended further negotiations with Iraqi representatives. However the following day, a senior Administration official was told of USDA's decision, ana according to minutes of the meeting, the official said the withdrawal of $400 million "is [a] step in the wrong direction," and ordered "get it back on the table." Then the official called Agriculture Secretary Clayton Yeutter to order that he free up the aid. In the ensuing months, tensions built. In April, Saddam bragged that he had chemical weapons and threatened to "burn half of Israel." But the Los Angeles Times re- ported that in the same month, White House aides worked to pre- vent governmental agencies from imposing tighter restrictions on Saddam's access to dual-use equipment. In May 1990, a mere three months before the Iraqi invasion of Kuwait, the Administration shared intelligence information on Ira- nian troop movements with Iraq. Some speculate this later helped Iraq learn how to shelter its weapons from U.S. surveillance during Operation Desert Storm. And less than a week before Iraq invaded Kuwait, the Adminis- tration opposed congressional efforts to impose sanctions on Iraq. When Saddam invaded Kuwait, he defaulted on $1.9 billion in loans owed to American and international banks. Under the terms of the CCC program, the United States was required to pay back the debt. The warning signs were there, but the Administration chose to ignore them. • In the face of evidence that Saddam Hussein was using front companies to obtain nuclear technology • In the face of evidence of a massive bank fraud funding the Iraqi military buildup • In the face of repeated violations by the Iraqis of our agricultural aid programs • In the face of evidence that Hussein was spending so much on weapons, he could not repay his debts President Bush and his Administration made the decision to con- tinue U.S. economic aid to Iraq. 64 STATEMENT OF HON. DOUG BARNARD, JR. CHAIRMAN, SUBCOMMITTEE ON COMMERCE, CONSUMER AND MONETARY AFFAIRS COMMITTEE ON GOVERNMENT OPERATIONS U.S. HOUSE OF REPRESENTATIVES Mr. Chairman, Members of the Committee, I am pleased to sub- mit this statement today concerning the experience of the sub- committee which I chair, the House of Representatives, Commerce, Consumer and Monetary Affairs Subcommittee, in obtaining docu- ments from the Commerce Department. I regret that I am unable to be with you personally today, but health reasons prevent my re- turn to Washington at this time. In pursuit of our oversight jurisdiction for the Commerce Depart- ment, the Commerce, Consumer and Monetary Affairs Subcommit- tee has had a long and sustained interest in the general subject of exports as well as the export administration programs adminis- tered by the Commerce Department. As you know, the Department of Commerce licenses all "dual-use" exports to certain countries. These are exports of goods which can have either peaceful or mili- tary uses. When the troubles with Saddam Hussein began, it was apparent that Iraq had obtained much of its war potential from the West, including companies located in the United States. There were alle- gations that furnaces utilized in the manufacture of nuclear weap- ons were seized by the Customs Service on the dock in Philadel- phia on the verge of being sent to Iraq. In fact, on July 18, 1990, I wrote to Gen. Brent Scowcroft, in his role as Assistant to the President for National Security Affairs, requesting that the Presi- dent intervene to prevent the shipment of these furnaces. A copy of my letter to Gen. Scowcroft is reproduced at pp. 220-1 of the printed record of the hearing held by the Commerce, Consumer and Monetary Affairs Subcommittee on September 27, 1990. Given this and other cases, there was ample reason to hold a hearing on the U.S. government's export control laws, particularly with respect to recent sales and attempted sales to Iraq of materials which might have been used for nuclear, biological, and missile-related equip- ment. The Subcommittee did hold a hearing on September 27, 1990 on "U.S. Government Controls on Sales to Iraq." A copy of the printed record of this hearing is submitted and I request that it be made part of your hearing record. The full Government Operations Com- mittee on July 2, 1991 approved a report prepared by the sub- committee on this subject, entitled, "Strengthening the Export Li- censing System." A copy of this report is also submitted herewith. After the hearing, at subsequent meetings of the subcommittee, it was agreed unanimously to request documents from the Com- merce Department from 1985 to 1990. To reinforce our seriousness about this matter, the subcommittee voted two subpoenas for these documents. The documents concerning "dual-use" sales licensed by the Commerce Department were subsequently delivered to the sub- committee during October and December of 1990. However, the law (Section, 12(c) of the Export Administration Act) prohibits the release to the public, without the approval of the 65 Secretary of Commerce, of data so received by a congressional com- mittee. The ostensible reason for this provision of the law is to pro- tect proprietary information of a company doing business requiring a license. The majority of our subcommittee believed that the pub- lic interest in knowing how much and what kind of materials had been delivered to Iraq outweighed any proprietary interest of a par- ticular company. Moreover, the subcommittee majority believed that it was not absolutely necessary to disclose the names of the companies doing business with Iraq, so long as we could disclose sufficient information to the public about what had been delivered to Iraq by American companies during the period before the war. During this period, extensive negotiations were held between my- self, Rep. Hastert, the ranking Republican on the subcommittee, our staffs, and Under Secretary of Commerce for Export Adminis- tration, Dennis Kloske, and his staff, concerning the subcommit- tee's desire to see the public release of at least cumulative data on sales to Iraq which had been licensed by the Commerce Depart- ment. Under Secretary Kloske informed us that the decision on re- lease of data was out of his hands and in the hands of the White House. Mr. Kloske informed us that he would be willing to see the release of cumulative data, but the White House had control of this matter, and that any further negotiation should be held with the appropriate White House officials. Accordingly, the subcommittee directed our staff to begin nego- tiations with the National Security Council, with a view to as much public disclosure. as possible of information which had been sup- plied to the subcommittee. The following is based on information supplied to me by the subcommittee staff. Mr. Theodore J. Jacobs, the subcommittee chief counsel, discussed this matter with Mr. Richard Barth, a member of the NSC staff. Mr. Barth informed Mr. Jacobs that several meetings of NSC staff had been convened, but Mr. Jacobs got the distinct impression that no solution to this mat- ter would be reached until hostilities were over in the Gulf War. Mr. Jacobs also got the impression from Mr. Barth that the matter was in the hands of then assistant director of the NSC, Robert Gates. Attached is a copy of Mr. Jacobs' letter to Mr. Barth of Feb- ruary 12, 1991. I am informed that this letter was "faxed" to Mr. Barth on that date. On March 11, 1991 the subcommittee received a letter and print out from Under Secretary Kloske responding to the subcommittee's request for Iraq licensing information that can be made public. Section 12(c) had been waived. During October, 1990, at about the time the subcommittee first received prints from the Commerce Department, the subcommittee received an anonymous telephone call informing us that the caller had been instructed to make certain alterations in the documents before they were delivered to the subcommittee. The fact of this call and the substance of the allegations concerning the alteration of documents subsequently appeared in the media. Because of these allegations in the media, the General Counsel of the Commerce De- partment asked the Commerce Department Inspector General to review the matter. By report dated June 4, 1991, the Commerce General filed a re- port with then Secretary of Commerce Mosbacher regarding the al- terations of the documents supplied to the subcommittee. The re- 66 port, a copy of which is submitted herewith and made a part of this statement, finds, among other things, that: 1. Bureau personnel changed information on 68 licenses; 2. References to "military" end uses were deleted; 3. The designation "military truck" was changed. This was done on licenses having a total value of over $1 billion, or approximately two-thirds of the total value of the approved export licenses for Iraq for the period under review. With respect to the changes in "military truck" designations, the Inspector General concluded that the "changes were unjustified and misleading." With respect to the 19 deletions of referral nota- tions to other agencies, the Inspector General concluded, "those ac- tions were not clearly justified." In 31 of 39 additional changes the Inspector General determined that these changes "were not sup- ported by reliable independent documentation." The Commerce Inspector General, however, did not designate the official(s) responsible for the alterations in the documents, nor did he adequately explore the motivation for the changes in documents supplied to tne Congress. Accordingly, on July 10, 1991, in my ca- pacity as chairman of the subcommittee on Commerce, Consumer and Monetary Affairs, I wrote to the then Attorney General asking him to open an investigation of this matter to define if any law of the United States was violated in the course of the handling of this matter. I subsequently inquired as to the status of this matter, and was informed, on January 31, 1992, that "the investigation is still ongo- ing" and that I will be notified if the Department of Justice deter- mines that no criminal charges will be brought. I again inquired of the Justice Department as to the status of this matter on Sep- tember 14, 1992. I received a reply dated October 6, 1992, and I responded to this letter on October 20, 1992. Copies of the sub- committee's file on this matter are annexed hereto. As I stated in several of my letters, I believe the Department of Justice has had ample time to make a determination of guilt or innocence on this question. It has been a year and three months since Justice opened its investigation. One can only conclude that this matter is too sen- sitive to decide before the upcoming presidential election. The subcommittee staff did receive a visit in August, 1991 from two attorneys from the Criminal Division's Public Integrity Section who were handling this matter. The staff suggested certain inves- tigative approaches, but, I am informed, subsequent inquiries dis- closed that the Justice Department had not followed-up on the sub- committee staff suggestions. In addition, after a subsequent inquiry of the Justice Department, the staff was visited by two Federal Bu- reau of Investigation agents assigned to this matter. I am informed that the two FBI agents were asks questions of dubious value and were pursuing investigative leads which appeared to be futile. I should note that the Commerce Department did indeed license materials which were later utilized by the Iraqi regime for nuclear, missile, and chemical purposes. Among many examples I can give, one stands out. That is license B286904 dated December 21, 1987 for export to Iraq of an electron-beam welder. This item was ex- ported to Iraq even though there were clear indications that lower 67 level personnel in the Bureau of Export Administration were deter- mined to prevent its being licensed. The above states the extent of my knowledge on this subject and reflects information about which I have been advised by the sub- committee staff. The conclusion I draw from this experience is that export con- trols are too important a matter to be left solely to the discretion of the Commerce Department, which has jurisdiction for encourag- ing exports. There must be greater involvement of the Pentagon in what is essentially a military issue. I am convinced that the De- fense Department, which has a very able DTSA—Defense Tech- nology Security Administration, should play a greater role in ex- ports of sensitive materials to foreign destinations. For a detailed study of this matter and suggested remedies, I respectfully refer the committee to the study referred to above, "Strengthening the Export Licensing System." STATEMENT OF HENRY B. GONZALEZ U.S. EXPORT LICENSING PROCESS USED TO ENHANCE IRAQ'S MILITARY CAPABILITY OCTOBER 27, 1992 Thank you for inviting me to testify about the United States role in enhancing Iraq's military capability through the export licensing process. This is a very timelv hearing given the recent misleading statements on this topic made by President Bush, Brent Scowcroft, Lawrence Eagleburger and other high level Administration offi- cials. The export licensing process, which is squarely within the juris- diction of the Senate Banking Committee, played a key role in the Reagan and Bush Administration's policy to coddle Saddam Hus- sein. Whether this policy was pursued as a result of incompetence or complete complicity, one thing is clear, there is overwhelming evidence to show that the policy enhanced Iraq's military capabil- The House Banking Committee's twenty-seven month old inves- tigation into the operations of the Atlanta agency of the Banca Nazionale del Lavoro ("BNL") has uncovered evidence showing that dozens of U.S. firms, many holding U.S. export licenses, contrib- uted directly to Iraq's ballistic missile and nuclear weapons pro- grams. Very typically of the effort to support Saddam Hussein, the Bush Administrations approved export licenses for the Space Re- search Corporation, the company operated by famous ballistics ex- pert Gerald Bull. Space Research received U.S. export licenses to purchase software and sophisticated computers that were used to design Iraq's space launch rocket as well as designing the projectile Despite overwhelming evidence that the U.S. helped enhance Iraq's military capability, the President and his top advisors con- tinue to mislead the public about the United States' role in arming Iraq. For example, on November 5, 1990, President Bush signed into law the "Iraq Sanctions Act of 1990," which contained a provi- sion requiring the President "to conduct a study and report on the ity. 68 sale, export, and third party transfer or development of nuclear, bi- ological, chemical and ballistic missile technology to or with Iraq. The report, which is classified, lays the blame for enhancing Iraq's military capability squarely on the shoulders of the Euro- pean Community while wholly disregarding the U.S.'s role in arm- ing Iraq. Despite well known facts to the contrary, the President's report concludes: "Reflecting both U.S. Government policy and responsible sales practices by Amer- ican firms, United States suppliers did not contribute directly to Iraq's conventional or nonconventional weapons capability." This claim is patently false. While there is no doubt that Euro- pean firms provided Saddam Hussein with dangerous technology, that fact neither eliminates nor excuses the fact that U.S. firms, at the urging of the Administration, played a considerable role in arming Iraq. Contrary to the President's assertions, I will now show how our nation's export licensing policy was used to enhance Iraq's military capability. The main goal of the export licensing process is to control the flow of dual-use equipment to countries that pose a security threat to the United States or that are significant proliferation threats. The first and most important step to achieving the goal is to cor- rectly identify proliferation threats. While the intelligence commu- nity and other parts of the executive branch identified Iraq as a major proliferation threat, it was the policy of both the Reagan and Bush Administrations to treat Iraq as our close ally. This special "friend of the United States" status enabled Iraq to obtain sophisti- cated equipment that was denied to the likes of the Soviet Union and eastern bloc nations as well as major proliferation threats such as Iran, Syria, and North Korea. The "tilt" toward Iraq not only short circuited many of the export licensing controls that could have been used to deny Iraq sophisti- cated U.S. technology, it was pursued despite ever growing evi- dence that Iraq was using U.S. technology to enhance its nonconventional weapons capability. In fact, between 1985 and the Iraqi invasion of Kuwait, the Commerce Department approved at least 220 export licenses for the Iraqi armed forces, major weapons complexes and enterprises identified by the Central Intelligence Agency ("CIA") as diverting technology to weapons programs. There are numerous export licensing documents showing that the United States helped to arm Iraq. The following quotes are taken from a sample of the more pointed documents that illustrate the Bush Administration's policy of arming Iraq. • A November 21, 1989 State Department memorandum states: "U.S. policy as confirmed in NSD 26, has been to improve relations with Iraq . . . although U.S. policy precludes approval of Munitions Control licenses for Iraq, ex- ports of dual-use commodities for conventional military use may be approved." The willingness to approve export licenses for conventional mili- tary use is also shown by a May 28, 1990 Commerce Department document related to Iraq which states: "We assume that the U.S. government policy acknowledging the right of govern- ments to produce conventional weapons still holds." The Reagan and Bush Administrations both approved export li- censes destined for known Iraqi conventional weapons complexes. But as quotes from the following documents show, the policy did 69 not preclude the approval of export licenses even for more dan- gerous weapons programs. There are numerous recently declassified documents which show that the State Department was aware that the export licensing process helped to enhance Iraq's nonconventional weapons capabil- ity. For example, a 1990 State Department memo states: "An initial review of 73 cases in which licenses were granted by Department of Commerce (DOC) or DOC/DOD from 1986-1989 shows that licenses were granted for equipment with dual or not clearly stated uses for export to probably prolifera- tion-related end-users in Iraq." There is no doubt that President Bush's mandate to improve re- lations with Iraq was contrary to the thinking of those in the Ad- ministration who saw Iraq as a major proliferation threat. This confusion is evident in several State Department memoranda. A November 21. 1989 State Department memorandum discussing how to proceea on licensing exports that could be used in Iraq's nu- clear program states: ". . . we are still left with no clear indication of how to proceed on the majority of cases . . . The problem is not that we lack a policy toward Iraq; we have a policy. However the policy has proven very hard to implement . . ." The memorandum goes on to state: "Complicating factors in decision making include: (1) A presumption by the Intel- ligence Community and others that the Iraqi government is interested in acquiring a nuclear explosives capability; (2) Evidence that Iraq is acquiring nuclear-related equipment and materials without regard for immediate need; (3) The fact that state enterprises . . . are involved in both military and civilian projects; (4) Indications of at least some use of fronts for nuclear related procurement; (5) The difficulty in successfully demarching other suppliers not to approve exports of dual-use equip- ment to state enterprises and other ostensibly non-nuclear end users." This confusion did not abate. A May 1990 State Department memorandum discussing the inherent conflicts in the export licens- ing policy toward Iraq states: 'formulating such a policy will be complicated because end-users which engage in legitimate non-nuclear and non-missile related end uses also procure commodities on behalf of Iraq's nuclear and missile programs. Because the Iraqi procurement network serves both nuclear and missile programs, one cannot distinguish between purchasers of nuclear concern and those of missile concern." The dangers posed by the Iraq export licensing policy is best cap- tured in a May 1990 State Department memorandum which states: "At present, no foreign policy controls exist which permit the U.S. to control nu- clear-related dual-use commodities across the board to Iraq." In December 1989 Iraq successfully launched a rocket into orbit. This event sparked great interest in curbing exports of sophisti- cated technology to Iraq. Those concerns are echoed in a Spring 1990 State Department memorandum which states: 'The operation of Iraq's procurement network inevitably raises concerns about the potential for unauthorized diversion of commodities in Iraq and raises doubts about the veracity of the information provided on Iraqi license applications." While concern over Iraq's activities was growing, high-level Na- tional Security Council meetings in April and May of 1990 failed to produce any legal changes in the policy. In fact, it was not until Iraq had already amassed an attack force on the Kuwait border that the State Department at last officially proposed changes to the export licensing policy. By far the most effective means of ensuring that United States dual-use technology is not diverted to weapons projects is to per- form post-installation checks which means visiting the end user to 70 check on how the equipment is being used. The U.S. did not adopt a policy of conducting post-installation checks in Iraq. Almost unbe- lievably, out of a total of 771 export licenses approved for Iraq be- tween 1985 and 1990, only one post-installation check was con- ducted. Even then Iraq was warned well in advance of the visit. In summary, United States export licensing policy toward Iraq clearly permitted the approval of licenses for conventional military uses. This occurred despite ample evidence that Iraq developed and used conventional weapons such as long-range howitzers and heli- copters to deliver chemical weapons. In addition, while many export licenses were denied, the decision to treat Iraq as a close ally of the U.S. made it practically impos- sible to stem the flow of weapons related technology to Iraq despite clear evidence showing that Iraq used and planned to continue to use U.S. technology for nonconventional weapons purposes. There is a plethora of evidence, a good deal already on the public record, showing that U.S. dual-use technologies helped to enhance Iraq's military capability. The House Banking Committee's BNL investigation has uncov- ered dozens of U.S. and European firms that exported equipment to Iraqi weapons projects including the Condor II ballistic missile program, the Al Abid space launch rocket, Gerald Bull's Super Gun, and the secret nuclear weapons program. The casde most illustrative of the U.S. role in enhancing Iraq's military capability is the export licenses approved for the Space Re- search Corporation, the company run by the world renowned and now deceased ballistics expert Gerald Bull. The Bush Administration approved licenses for Space Research Corporation for the export of sophisticated computers and missile design software which, according to several former Space Research employees, was used to design the projectile that was to be shot from the Super Gun. The computer and software were also used to design Iraq's space launch vehicle called the Al Abid which was successfully launched in December 1989. Former Space Research employees have also told the Committee that the software and com- puter were used to design the armored vehicle that carries the Space Research Corporation's 155 and 210 millimeter self propelled howitzer called the "VSP" for Vehicle Self Propelled. The export licenses for the computer and software were approved despite State Department knowledge that the Space Research Cor- poration was engaged in numerous military projects in Iraq and that Space Research and one of its affiliates had been identified in 1989 as important players in Iraq's military technology procure- ment apparatus. In fact, the U.S. firm that received the license to sell the software to Space Research clearly informed the Commerce Department that the software could be used for missile and sat- ellite design and other military uses. The end user for the com- puter was listed as the Al Qadisiyah State Enterprise. Prior to the license being approved the CIA had identified this establishment as a weapons manufacturing complex. The end user for the software was listed as the Space Research Corporation of Belgium. Not surprisingly, the State Department misled the public about export licenses approved for Space Research Corporation. In press guidance released February 11, 1991 the State Department said: 71 The Department of State has not approved and exports of equipment or tech- nology by Bull or companies associated with Bull to Iraq." The State Department chairs the Subcommittee on Nuclear Ex- port Coordination ("SNEC"). The SNEC approved the Space Re- search Corporation license on September 21, 1989. Obviously the State Department continues to dissemble about their role in help- ing to arm Iraq. I will now quickly summarize some of the additional evidence that reveals that the United States helped to enhance Iraq's mili- tary capability. • U.N. inspectors have identified dozens of U.S. firms, some that received U.S. export licenses, that supplied Iraq with equipment used in missile programs and chemical, biological and nuclear weapons programs. • The Reagan and Bush Administrations together approved over 80 export licenses for equipment shipped directly to the Iraqi Air Force and other branches of the Iraqi military. Fifteen of the li- censes were approved by the Bush Administration. • The Reagan and Bush Administrations issued 15 licenses for the sale of U.S. munitions equipment to Iraq. Three of those licenses were approved by the Bush Administration. • The Reagan and Bush Administrations approved dozens of export licenses for the sale of equipment to over a half a dozen Iraqi end users despite CIA reports identifying the end users as major weapons manufacturing facilities, (see Appendix) • A March 1990 General Accounting Office report found that the Reagan Administration had approved 16 export licenses for Iraq's primary missile research center called SAAD 16. • Several current and former government officials from the Depart- ment of Defense, the Commerce Department and the Customs service have testified during the past two years that U.S. firms enhanced Iraq's conventional and nonconventional military capa- bility, (see Appendix) • Dozens of U.S. firms participated in Petrochemical Complex II, many with export licenses, which provided Iraq with the capabil- ity to produce ethylene oxide, a major ingredient in fuel air ex- plosives bombs as well as being a precursor for certain chemical weapons. PC-2 was also a major front for the procurement of Super Gun components, (see Appendix) • The Commerce Department approved a license for Iraqi front company Matrix Churchill despite a plethora of CIA reports showing that the firm was part of Iraq's nuclear procurement network and despite ample evidence showing that the listed end user of the technology, a firm called Techcorp, was in charge of Iraq's ballistic missile and secret nuclear weapons program, (see Appendix) • The Export-Import Bank financed the sale of U.S. equipment to several Iraqi weapons complexes, the Condor II ballistic missile program, and Iraq's covert nuclear weapons program. The Ex- port-Import Bank financed the sale of armored ambulances and communications equipment directly to the Iraqi military, (see Ap- pendix) • In 1986 and 1987 two Iraqis scientists were permitted to visit the Los Alamos National Laboratory, a major U.S. nuclear weap- 72 ons facility. Incredibly, in 1989 three employees of Iraq's main explosives factory, called Al Qaqaa, were permitted to attend a U.S. government sponsored seminar on nuclear weapons detona- tion, (see Appendix) Contrary to the President's report to Congress and his recent public pronouncements, there is an overwhelming body of evidence that clearly shows the Bush Administration made a conscious deci- sion to enhance Iraq's military capability. That policy is best illus- trated by the export licenses granted to Gerald Bull's Space Re- search Corporation. Did we sell Iraq bombs? Maybe not—but it is clear that we sold Iraq the equipment and know-how needed to make conventional weapons, and equipment that was clearly useful in developing nu- clear bombs and long-range ballistic missiles. It is also quite clear that from DAY ONE it has been the policy of the highest levels of the Bush Administration to mislead the Congress and more importantly the public into thinking that our government played no role in arming Iraq. Given this attitude I can only conclude that we have not yet learned from our mistakes. TESTIMONY BY KENNETH R. TIMMERMAN U.S. EXPORT POLICY TOWARD IRAQ: AN AGENDA FOR TOMORROW OCTOBER 27, 1992 I am an author and independent journalist, and have specialized over the past ten years in Middle East security questions, with par- ticular emphasis on the proliferation of weapons of mass destruc- tion. My latest book, which was published last year by Houghton Miff- lin, is called The Death Lobby: How the West Armed Iraq. It is the story of how Western governments, companies and their bankers conspired in an orgy of greed and error to build up Saddam Hus- sein's military capability. I began reporting on Iraq in 1984, and first met senior officials in the Iraqi military-industrial establishment in 1986. I returned to Iraq on several occasions after that, and published many early warnings on Iraqi military power and the growth of the Iraqi arms industry. The Death Lobby details the contributions made by more than 450 Western companies to Iraq's military buildup. Was the United States Iraq's principle supplier of arms or ad- vanced production technology? Certainly not. Those honors must go to France and Germany.1 Was the American contribution to Sad- dam Hussein's military buildup significant? Absolutely, in financial terms, in terms of the technology actually supplied, and for the po- litical impact this had in emboldening the Iraqi regime. From January 1985 through August 1990 the Department of Commerce approved 771 license applications valued at $1.5 bil- 1 During the 1980's, France delivered advanced weaponry worth more than $16 billion to Iraq—more in dollar terms, in fact, than the former Soviet Union. For its part, West Germany exported $5 billion worth of advanced production machinery and plant equipment between 1985 and 1989, according to OECD statistics. 73 lion.2 The following statistics are drawn from an analysis of 474 of these licenses, worth $1,272,466,525. My criteria for selecting li- censes for inclusion in this data base were their monetary value, the Iraqi end-user, and the sensitive nature of the equipment. While some items have invariably been missed, it is my belief that the conclusions of this analysis accurately reflect both the reality and the intent of U.S. export licensing policy toward Iraq. Conventional Military Sales Contrary to claims that have been advanced here and there, the United States government did indeed approve conventional mili- tary sales to Iraq. The single largest sale was a $491 million proposal to sell Iraq several thousand military cargo trucks. This particular deal was li- censed on two separate occasions by the Department of Commerce, in April 1986, and in April 1988, but major shipments never oc- curred. According to a report by the Commerce Department's In- spector General, the records on these licenses were falsified when they were submitted to Congress last year to delete the mention "military." Notwithstanding the clear military nature of this sale, it is my belief that Iraq never intended to purchase these trucks but in- stead used the prospect of a major, relatively uncontroversial sale of this kind as an enticement to American businessmen and to the American government. It was a tactic Saddam and his procurement agents used again and again: if Washington would just "play ball" on more critical exports of sensitive technology, then a vast new market would open up in Iraq for American businessmen. American military sales to Iraq began in December 1982, when the Reagan Administration agreed to support the sale of 60 Hughes MD 500 "Defender" helicopters to Baghdad, despite their obvious military applications. The Hughes "Defender" was advertised by Hughes as a dedicated anti-tank machine; an earlier version was used in Vietnam equipped with TOW missile launchers. A few Sen- ators objected at the time that the proposed sale was not in the in- terests of the United States, but the Commerce Department in- formed them that their objections were irrelevant, since the sale of aircraft weighing less than 10,000 pounds did not require an export license to countries not subject to Foreign Policy restrictions. (Iraq was taken off the terrorism list that March.) All 60 helicopters were delivered by the end of 1983. Iraq paid for them in a barter agreement through Chevron Oil. The deal was brokered by the Lebanese-American intermediary, Sarkis Soghenalian, and is de- scribed in some detail in my book. In February 1984, the Italian subsidiary of Bell Textron, Agusta Bell, agreed to sell Iraq eight AB 212 military helicopters equipped for anti-submarine warfare, worth a $164 million. They were in- tended equip the Lupo class frigates Iraq had purchased from Italy four years earlier. This sale also required U.S. approval, but to my knowledge was never submitted to Congress. Following its sister company in Italy, Bell Textron got into the act in late 1984 with a proposal to sell 48 Bell Textron 214 ST util- 2Three of licenses were for military cargo trucks worth just over $1 billion that were never shipped to Iraq. 74 ity helicopters. A version of this helicopter, sold around the world as a military transport and commando support machine, had been reclassified as a civilian aircraft, and arms broker Sarkis Soghenalian proposed selling them to Iraq for "recreational" pur- poses and "VIP transport." This deal was approved by the Reagan Administration. 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 Medevac purposes or as troop carriers. But in a written reply to Congress, Secretary of State Shultz stated in November 1984 that "increased American penetration of the extremely competitive civilian aircraft market [in Iraq] would serve the United States' interests by im- proving our balance of trade, and lessening unemployment in the aircraft industry." Here is a photograph I took of one of these helicopters at the al Muthana airbase outside Baghdad in April 1989. As you can see, it has been painted in the colors of Iraq's Army Aviation Corps. The only "recreational" purpose it may have been used for is the gassing of Kurdish civilians in northern Iraq. Probably in conjunction with the Bell Textron sale, the Com- merce Department approved 13 other licenses, worth $102,758,428, for "civilian" helicopters and spare parts.3 One 1986 license is de- scribed as "Navigation and support equipment to maintain the two [] helicopters exported to President of Iraq." During the winds of Desert Storm Saddam Hussein could have fled the country on board an American helicopter, and perhaps have escaped detection. It is my understanding that the Defense Department protested these sales vigorously, but was overruled by State and Commerce during one of the many bureaucratic turf battles over Iraq licensing policy. Another, particularly egregious case of U.S. military equipment winding up in Iraqi weapons systems involves a Dutch company called Delft Instruments N.V. Delft purchased infra-red sensors and thermal imaging scanners from U.S. defense contractors, and re-exported them illegally to Iraq. The Iraqis used this equipment successfully during their night attack across the border into the Saudi town of Kafji. U.S. intelligence had been unaware that Iraq possessed night vision equipment for its Soviet-built tanks, until it cost the lives of Allied soldiers. Dual-Use Equipment The International Atomic Energy Agency (IAEA) has discovered a very broad range of U.S.-built equipment in Iraqi weapons estab- lishments engaged in nuclear weapons development. Some items have been cataloged as "key equipment" for making the bomb, and have been destroyed by the IAEA. Other U.S.-built items will re- main under long-term IAEA monitoring, to ensure that the Iraqis do not use them in future attempts to build the bomb. U.S. equipment found in Iraqi nuclear weapons establishments includes: 3Case numbers: B008610, B102270, B112354, B113803, B119035, B119031, B140440, A898309, B092489, B093948, B137173, B203744, D046481. 75 • spectrometers, oscilloscopes, and other precision scientific instru- ments • electron beam welders to make uranium enrichment centrifuges • high-precision machine tools to make bomb cores • sophisticated numerical controllers, and high-power computers • neutron initiators and high-speed switches for nuclear detonation • vacuum pumps for centrifuge and calutron enrichment units • rare lubricants needed to make the centrifuges work. One entire facility, a tungsten-carbide manufacturing plant that was part of the Al Atheer complex, was blown up by the IAEA in April 1992 because it lay at the heart of the Iraqi clandestine nu- clear weapons program, PC-3. Equipment for this plant appears to have been supplied by the Latrobe, Pennsylvania manufacturer, Kennametal, and by a large number of other American companies, with financing provided by the Atlanta branch of the BNL bank.4 To my knowledge the Kennametal sales were never subject to li- censing by the DoC; neither were sales of machine-tools by U.S. companies to numerous other Iraqi weapons plants.5 Furthermore, Iraq has succeeded in hiding large quantities of machine-tools and advanced production equipment, making it difficult to evaluate with any certainty the true extent of Iraq's unconventional and conventional weapons manufacturing capability, or how long it might take for Iraq to resume its nuclear weapons program once UN sanctions are lifted. Electron Beam Welders When the President insisted on Oct. 19 that there was not "one scintilla" of evidence that U.S. equipment had made its way into the Iraqi nuclear weapons program, many people including David Kay and Gary Milhollin pointed immediately to the Leybold Heraeus electron beam welder, which was licensed by Commerce for sale to the Nassr State Establishment for Mechanical Industries in Taji, Iraq. This particular piece of equipment had been used by the Iraqis in their uranium enrichment program. Leybold's parent firm in Germany apparently supplied what the IAEA called "application- specific fixtures," which enabled the welder to hold six centrifuge rotors simultaneously while maraging steel end caps were welded in place—a high precision and vital step in building the most sen- sitive part of the enrichment centrifuge. Leybold's offices were searched by German Customs on July 6, 1992, and the company is now subject to a criminal investigation. But the IAEA found not one but three Leybold EB welders; and so far, nobody has explained how they made their way to Iraq. The Pentagon is currently investigating whether these machines had in fact been manufactured in the United States and exported to Ger- many, where Leybold modified them before shipping them on to 4 Kennametal documents show that the company sold metalworking equipment to several Iraqi military plants, including the Saddam State Establishment, the al Qaddissiya State Estab- lishment, and the Hutteen State Establishment, but do not mention the Al Atheer plant. Equip- ment may have been shipped through Industrias Cardoen of Chile. "IAEA records show that none of the fifteen U.S.-built machine-tools catalogued by the IAEA had been subject to export controls. 76 Iraq.6 Documents seized in Iraq by the IAEA show that Leybold began discussing these sales directly with the Iraqi Atomic Energy Organization in 1982. Main-Frame Computers It is widely acknowledged today in scientific circles that ad- vanced computers give the edge to Third World countries, such as Iraq, who are seeking to develop a nuclear device without going through the costly and political perilous process of a nuclear test. Using high-speed computers and graphics work stations it is now possible to simulate a nuclear blast, thus allowing design improve- ments to be developed in a matter of months that usea to require long and arduous live testing. The IAEA discovered documents in Iraq which proved beyond a doubt that Iraq was using mainframe computers in precisely this way, and had gone through five major design upgrades of a nuclear explosive device, all without under- taking a live nuclear test. Those documents, as you may recall, saw the light of day thanks to the determination of David Kay, who de- serves a tribute from all of us who are concerned with the pro- liferation of unconventional weapons technology. Without David's work on the ground with the UN inspection teams, we might never have pierced some of the secrets of the Iraqi nuclear weapons pro- gram. My analysis of the Department of Commerce records shows that in the United States alone, Iraq received a total of 370 export li- censes for computers and advanced scientific analysis equipment from May 1985 through August 1990, worth a total of $114,637,902. Of these, 167 licenses worth $58,095,322 concerned advanced computing systems. The most widely selling item were VAX ma- chines from Digital Equipment Corp. Other frequently sold items included high-speed oscilloscopes, radio-spectrum analyzers, inte- grated circuits, gas chromatography equipment, spectropho- tometers, and a wide range of electronics manufacturing and test equipment. All were used in Iraqi weapons plants, many in the manufacture of ballistic missiles and in nuclear weapons research and development. Typical purchasers were the Iraqi Ministry of In- dustry (and Military Industrialization), the Ministry of Defense, and known weapons establishments such as Saad 13, Saad 16, Huteen, Badr, and Nassr. To date, however, Iraq has only acknowledged to possessing a single IBM 370 mainframe, located at the Thuwaitha nuclear re- search center. Earlier this year, an IAEA team visiting computer facilities in Baghdad discovered six other mainframes, four IBMs, a VAX Intergraph 6310, and a Hewlett Packard Model 3000. But let's take a closer look at what was actually sold. Hewlett Packard, for instance, received 57 licenses to export computer sys- tems to Iraq from the United States, worth $3,147,608. HP systems were sold to Thuwaitha, to the Saad 16 research and development center, and to a variety of heavy engineering complexes that were manufacturing parts of uranium enrichment centrifuges and 8The second welder was found at the Tuwaitha Atomic Research Center, and the third was discovered still in packing crates at the State Establishment for Heavy Engineering Equipment (SEHEE), a major contributor to the Iraqi nuclear weapons effort. 77 calutrons. Hewlett Packard maintained an office in Baghdad throughout most of the 1980s, and was a major exhibitor in the yearly Baghdad international trade fair. All these exports were ap- proved by the Department of Commerce under the Reagan and Bush Administrations. Iraq's second-largest computer supplier in the United States was Digital Equipment. DEC operated in Iraq through a UK franchise outfit, International Computer Systems (London) Ltd, and its sister company, Computer and Communications Services (CCS) in Amman, Jordan. Both are controlled by a Jordanian of Palestinian origin, Isham Fayez Samarra. ICS received 49 export licenses from the Department of Commerce to sell computers to Iraq worth $16,377,132. Once again, these computers were sold to known Iraqi weapons establishments and procurement fronts, including the Nassr State Establishment for Mechanical Engineering, Saad 16, the Scientific Research Council, the Ministry of Industry and Mili- tary Industrialization, and the State Establishment for Heavy En- gineering Industries (SEHEE). This latter was deeply involved in manufacturing parts for uranium enrichment centrifuges and calutrons. The Super Gun Evidence is now beginning to emerge that American companies were engaged in an effort to ship an entire production line to Iraq, to manufacture large diameter gun barrels for the Super-Gun project. U.S. manufacturing equipment for this project was shipped to the Saddam General Establishment, Faluja, Iraq in 1989 and 1990. An export license was awarded for at least some of these shipments to RD&D International, a Vienna, Virginia company which is under criminal investigation. The RD&D license was "embargoed" follow- ing August 2, 1990, as were many other deals for advanced mili- tary production equipment which had received Commerce Depart- ment approval in application of the President's new Iraq policy. In other words, if Iraq had not invaded Kuwait, it would have re- ceived the goods. Among the equipment sold to the Saddam General Establish- ment apparently for the supergun project was a 5-axis, 1250mm CNC vertical turning, milling and slotting center; a 9000mm long CNC gantry mill worth $1,050,000; two 36 inch by 30 foot-CNC lathes; a 15 inch Chamber boring machine; and a 36 inch by 36 foot combination boring and turning lathe. All of this equipment, of obvious military purpose, would have been prohibited for export to the Former Soviet Union. But apparently, not to Iraq. The super-gun procurement package was worth tens of millions of dollars. And like so many Iraqi purchases in the United States, it was financed by the BNL in Atlanta. A parallel effort by Iraq in June 1990 to purchase a large, refur- bished forge from a Pennsylvania company, was apparently blocked by the Pentagon's Defense Technology Security Administration, in conjunction with the U.S. Customs Service. This forge had been used, decades earlier, to cast the barrels for the 16 inch guns on the four surviving battleships of the U.S. Navy. What the Administration Knew 78 The Commerce Department knew as early as March 1985 that Iraq was seeking advanced American scientific instruments and computers for Saad 16, a giant ballistic missile research and devel- opment center near Mosul. How did Commerce know this? Simple. The Iraqis informed them of their request in writing.7 At the same time Commerce was nimbly approving export li- censes for the German contractor in charge of this scheme, other government agencies were attempting to win international agree- ment to set up the Missile Technology Control Regime, which would have outlawed precisely this type of sale. Nor did the United States government ignore the fact that Iraq was developing a broad-based chemical weapons manufacturing base. The State Department delivered the first of more than 100 official "demarches" or protests to the West German governments on sales of CW technology to Iraq by German companies in 1983. Despite this, between 1985 and 1989 the Commerce Department approved fourteen separate shipments described as "Bacteria, fun- gus, protozoa," most of which were sent directly to the Iraqi Atomic Energy Commission. How about the nuclear weapons program? Records recently ob- tained by Congressman Gonzales and the House Banking Commit- tee show that the CIA was warning Commerce, the State Depart- ment, and presumably the White House, about Iraq's nuclear weap- ons program in 1989 if not earlier. By June 1989, according to a November 21, 1989 State Department memo, the CIA had already reported to U.S. government agencies on the activities of Iraq front companies operating in the United States and Western Europe to purchase equipment for the Iraqi nuclear effort. Furthermore, the memo states, the intelligence community had developed a long list of "bad end users" known to be working on nuclear, ballistic mis- sile, and biological weapons projects.8 Despite this knowledge, the Administration went ahead with its policy to expand trade with Iraq. This policy was codified as National Security Decision Direc- tive 26 in October 1989. The most active of the front companies operating in the U.S. was Matrix Churchill, a wholly-owned Iraqi entity with manufacturing facilities in Coventry, England, and a procurement office in Solon, Ohio. Matrix Churcnill was used by Iraq starting in 1987 to pro- cure a wide range of advanced military production technologies, in- cluding four and five axis CNC machine-tools that even today would be forbidden for export to countries such as Russia. In Great Britain, where the company was based, the government granted export-licenses to Matrix Churchill to sell 176 precision machine-tools to Iraq from 1987-1989, according to information I have compiled from official records made available to the House of Commons late last year. Most of these machines were shipped to the Taji and the Huteen facilities, which contributed to Iraq's nu- clear and conventional weapons programs as well as to the supergun project. The IAEA has tagged some of these machines for 71 have described the events described here in detail in The Death Lobby, chapter 12, "The DoC Missile Caper." 8The "bad end-users" included most of the State Establishments and procurement fronts to which Commerce habitually granted export licenses. 79 long-term monitoring, because they had been used for manufactur- ing components for uranium enrichment centrifuges.9 In the United States, Matrix Churchill served as a "cut-out" for purchases from more than fifty American manufacturers. It made massive purchases of tungsten-carbide machine tool bits from Kennametal, of Latrobe, Pennsylvania; it purchased large quan- tities of platinum and rhodium; it jobbed out an advanced glass and ceramic fiber plant, suitable for manufacturing ballistic missile nose cones and perhaps centrifuge rotors to Glass International Inc, of Chino, California; it was working hand-in-hand with Industrias Cardoen of Chile to purchase zirconium sponge and spe- cial equipment to build cluster bombs. And yet, this company was allowed to operate freely until September 1990, when it was finally closed down by U.S. Customs. I have mentioned the Matrix Churchill case to illustrate the fact that we are confronted here with two separate, but related prob- lems. The first involves U.S. policy toward Iraq. The mountain of evidence now available suggests that the Bush Administration was pursuing covert policy objectives, yet to be revealed, which clearly contradict the Administration's public commitment to nonprolifera- tion. The United States made a major contribution to the expansion of Iraq's military capabilities. This contribution increased dramati- cally with the change of administration in January 1989, and was formalized by NSD 26, which specifically authorized sales to con- ventional military facilities in Iraq. The second and larger problem concerns the gaping loopholes in our export control system, and what to do about them. Reforming the Export Control System Following the lead of President Reagan, who believed that pro- liferation concerns should take a back seat to commercial impera- tives, the Bush Administration has failed to provide leadership to the international community in this area, actually vetoing several Congressional bills that would have put the United States in the forefront in preventing the proliferation of mass destruction weap- ons. As paradoxical as this may seem, Germany today has the toughest export controls on its books of any Western nation, while the United States is still wondering whether it has an export con- trol problem. Here are some of the steps I would take to fix the problem if I were in charge of U.S. export licensing policy. (1) Withdraw export licensing from the Commerce Department, which is primarily responsible for promoting U.S. exports, and es- tablish an independent Export Control Agency. I believe such an Agency should be subordinated directly to the White House, to ensure that everyone knows who will take the blame if there are mistakes in the future. Is it the President's pol- icy to build up Iraq's military capabilities? The way the system works now, nobody can tell tor sure; by placing export controls under White House authority, there can be no doubt as to ultimate accountability. 9 Of the 262 machine-tools licensed by the British authorities to Iraq between 1987 and 1989, the IAEA has found 79, of which 50 were Matrix Churchill machines. 80 (2) Proliferation concerns should determine what technologies should be subject to new export controls, since proliferation has be- come the security problem of the 1990's and beyond. For example, machine-tools that were not controlled in the 1980's because they fell below the standards of the Soviet military indus- try formed the backbone of Iraq's military industrial complex. If we continue to use Cold War standards, the net effect will be to bring the military industries of countries such Iran, India, Pakistan, Syria and Iraq up to Cold War standards. This will result in an un- acceptable financial burden on the American taxpayer, as America is called on time and time again to take out the very dictators failed government policies helped to create. (3) Export licenses to countries of proliferation control should be subject to mandatory review by the Department of Defense and the U.S. Customs Service. These agencies maintain lists of "bad end-users" against which proposed exports should be checked on a routine, on-line basis, which is not the case today. (4) Internationally, the United States should take the lead in es- tablishing a single, unified, multilateral Proliferation regime, to re- place the four separate regimes (nuclear, chemical, missile, and dual-use technology) that currently exist today. The new regime should review strategic exports to the Third World before they occur, much as COCOM reviewed strategic trade with the Soviet Union during the Cold War. (5) Lists of approved exports should be published by member countries, to encourage greater "transparency" in the licensing process. (As it stands today, export licensing records remain classi- fied.) Respectable companies doing business with reliable cus- tomers will have no shame in making their contracts public. It is primarily the handful of violators who continue to lobby for secrecy. (6) Russia, China, and other non-Western exporters of military production equipment and nuclear technology should encouraged to become partners in elaborating multilateral proliferation guide- lines, and should be assisted in setting up effective export control systems. Finally, I would support strong legislation that would impose mandatory sanctions on foreign companies which fail to respect the new multilateral export controls, irregardless of where the violation occurs. All too often when an American company refuses a lucrative export contract because it would violate U.S. law, a French, or Ger- man, or Japanese competitor leaps into the breach, because their governments are lax on export control enforcement. Mandatory sanctions against violators would help to prevent foreign busi- nesses from taking unfair advantage of U.S. companies who choose to play by the rules. I believe that the Iraqi experience is repeating itself in countries such as Iran, India, Pakistan, and Syria, even as we speak. There is still time to stem the flow of strategic technologies to such coun- tries; but without a major reform of our current system, soon it will be too late. 81 TESTIMONY OF DAVID A. KAY UNITED STATES EQUIPMENT AND TECHNOLOGY AND THE IRAQI NUCLEAR WEAPONS PROGRAM I have been invited to share my thoughts with the Committee on the question of whether exports from the United States found their way into Iraq's large, clandestine nuclear weapons program. I would like to be clear that what I have to say today is based primarily upon my experience in leading three UN/IAEA inspection teams into Iraq in the period June-October 1991. The major sites inspected included: • Al Tuwaiha Nuclear Research Center (R&D center for clan- destine nuclear weapons program) • Al Atheer (major nuclear weapon production and assembly site) • Al Tarmiya (uranium enrichment) • Al Qaqaa (high explosive development center) • Hatten (high explosives test site) • Al Jesira (uranium processing and UCU production site) • Al Radwan (engineering/manufacturing complex) • Al Amir (engineering/manufacturing complex) • Al Furat (centrifuge production) • Daura (manufacturing) • Badr (engineering/manufacturing complex) • Salladine (engineering/manufacturing complex) • Nassar Works (engineering/manufacturing complex) • PC-3 Baghdad locations (documents) Others who will testify today have spent more time digging through the voluminous, and not always easily accessible, docu- mentation of U.S. exports to Iraq in the period leading up to Saddam's invasion of Kuwait and they may well have a more com- plete picture. All that I can offer is some "ground truth" about whether U.S. exports were diverted or otherwise found their way into Iraq's multi-billion Dollar nuclear weapons program. The simple answer to the question of whether U.S. produced equipment and technology has been found to be part of the Iraqi nuclear weapons program is yes. The volume of U.S. produced equipment is not great when measured against either the multi-bil- lion Dollar scale of the Iraqi effort or against what was obtained from other sources, but it was modern and essential to the Iraqi effort. The U.S. produced equipment was exclusively dual-use equipment, but so was most of the equipment that came from other countries. No one sold Saddam a nuclear weapon, but a lot of peo- ple sold him the equipment that put him frightfully close on 2 Au- gust 1990 to being able to make a nuclear weapon. In addition as technology has been referred to along with equip- ment, it should be acknowledged that the technological information that formed the foundation of Iraq's initial clandestine uranium en- richment program—the so-called Calutron process—was a U.S. de- veloped technology. It has long been a declassified process and Iraq simply, and quite legally, bought the plans for this process and fur- ther developed it. The Iraqi documents that were seized during the sixth mission in September 1992 contained several other examples of "old," declassified technology that was similarly acquired. The equipment that has been found includes: 82 • High percision machine tools for fabricating nuclear weapon com- ponents • Computers and computer workstations used in designing ura- nium enrichment equipment and nuclear explosives • High voltage power supplies for calutrons • Vacuum pumps for calutron and centrifuges • High percision oscilloscopes and scientific instruments • Electron beam welding machine for use in centrifuge production • Nuclear grade fluorinated vacuum pump oil for centrifuges • Various items of metal working equipment for a large tungsten- carbide plant at the Al Atheer nuclear weapons plant As I noted earlier this equipment is what is commonly called dual-use equipment. This term does not denote that an item is harmless, trivial, unsophisticated or should be freely available. It does indicate that an item has both civilian and military-related uses. In the technological world in which we live, there are very few items found in military production programs, other than actual munitions themselves, that are not dual-use. In probably no case is this as true as with computers and modern, highly accurate ma- chine tools and their associated measurement equipment. The fact that Iraq was able to obtain from the U.S. only dual- use equipment is not a cause for self-congratulations or to relax— that is what Iraq principally sought and obtained from everyone else and that is what allowed it to develop a missile, chemical, bio- logical and nuclear military capability that threatened to overturn regional and global stability. Iraq pursued an extensive procurement program aimed at obtain- ing the foreign material and technology necessary to advance its weapons program. Although repeated inspection trips to Iraq tends to dull one's sense of astonishment at much of the Iraq nuclear weapons program, the successful procurement efforts uncovered by the UN Special Commission and the IAEA still amaze. Iraq has gone and this is still continuing—to great lengths to prevent the weapons inspectors from unraveling it procurement networks. It has refused to comply with the repeated demands to turn over pro- curements records. Much of the equipment found—and even pack- ing material—had all identification defaced. It employed complex and devious procurement strategies: use of other Iraqi establish- ments as buyers and contractors; the use of foreign intermediaries; the placing of orders directly with the manufacturers; and sourcing various equipment parts with companies in different companies. The Iraqi procurement strategies were very successful and steps must be taken to reinvigorate export-control approaches, and this will require that the United States recognize the problem, accept that Iraq managed to defeat international export control proce- dures, and that it ensure that we and our allies take effective steps to address this problem. Future I hope that the current interest in how Iraq managed to come so close to producing a nuclear weapon does not obscure the fact that the threat of proliferation today is undiminished. Simply repeating old nostrums and marginally reinforcing old policies will not meet these challenges. Indeed to the considerable extend that current ef- 83 forts have been focused on doing just that they are undermining the remaining shreds of viability of the current nuclear non-pro- liferation system in the eyes of both those States intent or consider- ing the acquisition of nuclear weapons and those policy makers most concerned with controlling the further spread of nuclear weapons. I know that it is easy to believe that having stopped Saddam and having "won the War" that we are now free of the nuclear threat. Iraq snould tell us that there are potential motives—both military and symbolic—for states to develop and threaten to use nuclear weapons. Stopping further proliferation along with the challenge of assisting the transition to democratic forms of government in those countries ruled and ruined by Communism will be the two defining foreign policy problems for at least the next decade. A concern now impacting directly upon the prospects for the spread of nuclear weapons is the break-up of the former Soviet Union. While much has been justifiably made of the dangers posed by the prospect of Soviet nuclear scientists selling their skills to the highest bidder, much less attention has been paid to the more immediate dangers of nuclear bomb material and associated hard- ware being smuggled across the now porous borders of the collaps- ing empire. In the case of Iraq, the greatest barrier to their nuclear ambitions was not any lack of technical skills—this they readily ac- quired from the West either surreptitiously or quite openly from the mass of declassified material now available. Their greatest dif- ficulty was in obtaining fissile material and some of the associated electronics necessary to ensure that a nuclear explosion takes place. In the last five years in Afghanistan and in East Europe Soviet troops have been quite willing to sell an extraordinary range of military equipment. The economic chaos that is now engulfing the former Soviet Union should give pause to Western policy makers as to what is now or may in the future be offered by poverty struck employees, many of whom are not the high ranking researchers that current Western proposals aim to employ. We are also now seeing both Russia and China officially offering for sale a range of military and dual-use equipment that unless soon checked will make the acquisition of nuclear weapons and effective delivery ve- hicles a much less daunting and expensive task than that faced by Saddam. Given this discouraging picture, what are the priority tasks that now need to be taken to diminish the pressure toward nuclear pro- liferation. First and foremost, no effort must be spared to ensure that all of Saddam's program is rooted out. It is worrying enough that some states may have already drawn the lesson that the only mistake that he made was to attack before his nuclear program had pro- duced several weapons. It would be far more serious if they were now to draw the lesson that the world community would not, even in the face of overwhelming evidence of the scale of his efforts, stay the course and ensure that his capacity for mass destruction was thoroughly and convincingly eliminated. Second, the Security Council now needs to take a forthright and clear stand that any further acquisition or attempted acquisition of 84 nuclear weapons by any state will be considered by it as a threat to international peace and security under Chapter VII of the UN Charter to which the Council will respond with its own inspection and elimination programs. I can say from first hand experience that the knowledge that the Security Council stood behind the Iraqi inspections changed both the quality of the inspection and their outcome from what would have existed if they had only been carried out under the mandate of the IAEA—the inspectors real- ized this and, more importantly, so did Iraq. There is every reason to be hopeful that such action by the Secu- rity Council is now possible. After all the U.S. and former Soviet Union are in the midst of a scaling back of their nuclear forces whose only parallel is their rush to acquire these weapons in the 1960-1980 period. And even those states that remain suspicious of the power of the U.S. have a fresh reminder of how close Saddam's madness came to bringing disaster for themselves. Third, the Western dialogue now underway with the CIS on the nuclear weapons of the former Soviet Union must give much more attention to the security and ultimate fate of the large inventory of fissile material that they control and with critical pieces of asso- ciated electronics. Much of this material has not yet been placed into warheads and its diversion is easier than generally appre- ciated. Adequate security guarantees can probably not be given without the continuous presence of at least some inspectors from the nuclear weapons states themselves. This dialogue must also be expanded to cover Russian and Chinese efforts to export equipment and technology that can only accelerate the pressures toward pro- liferation of weapons of mass destruction in some of the most un- stable and dangerous areas of the world. Fourth, more effort and money must be placed into improving the technical means for detecting clandestine programs. Indeed, this would be an ideal area of collaboration with scientists in the former Soviet Union. We have discovered in the inspection effort in Iraq that many of the analytical and intelligence methods that have been developed to support international safeguards program are woefully inadequate when the clandestine proliferator is ac- tively engaged in sophisticated deception activities. It does not have to be so and this imbalance needs to be addressed. Fifth, and finally, the difficult problem posed by the success of Saddam extensive—and largely successful—foreign procurement program must be squarely faced. Export control programs have up to now been largely nationally administered with a uneven pattern of international coordination and cooperation and essentially no on- the-ground inspection to ensure that stated end uses turn out to be actual end uses. This did not work in the case of Iraq. Let me be clear as to my views on the effectiveness of export con- trol regimes. Even the best run ones can only hope to accomplish three objectives. First they can buy time and delay a determined proliferator. Second they can add to the expense of a clandestine nuclear weapons program. And thirdly they may increase the prob- ability of early detection of a clandestine weapons program—if na- tions will share the information gained through their individual ex- port control programs. All of these are worthwhile objectives, but none are a panacea for preventing further nuclear proliferation. 85 I should emphasize that I believe that the Iraqi program would have proceeded even if more effective export controls has been ap- plied—but it would have cost Saddam more, delayed the program and, most importantly, raised the probability of timely detection of the scale of this massive program. PREPARED STATEMENT OF GARY MILHOLLIN PROFESSOR, UNTVERSITY OF WISCONSIN LAW SCHOOL AND DIRECTOR, WISCONSIN PROJECT ON NUCLEAR ARMS CONTROL I am pleased to appear here today before this Committee to dis- cuss United States exports to Iraq. I am a member of the University of Wisconsin law faculty, and I direct a research project here in Washington that is devoted to tracking and inhibiting the spread of nuclear weapons to additional countries. The Committee has asked me to answer the question whether American exports aided Iraq's effort to build weapons of mass de- struction. The answer is "yes" Saddam Hussein is the first monster with imported fangs. Although the West Germans supplied the canines, Americans supplied some lesser teeth. Both governments knew what was going on, but chose not to stop it. I have been working on the problem of exports to Iraq for almost three years. In September 1990, in testimony before Congressman Barnard's subcommittee, I recommended that the subcommittee ob- tain a list of the dual-use exports that the U.S. Commerce Depart- ment had approved for Iraq since 1985. The subcommittee then did so with my continuing advice and assistance. After the list was re- leased, I prepared a study analyzing it, which was completed in June 1991. I would like to offer the study today for inclusion in this committee's hearing record. In April 1992, I also published an article in the New York Times that listed over forty American companies that got more than one hundred licenses to supply sensitive, dual-use equipment to Iraq. All of these licenses were for Iraqi nuclear weapon and ballistic missile development sites. This April article followed an earlier one that I had published in March 1992 in the New York Times Maga- zine. The March article showed which companies had contributed to developing the individual components of the first bomb Saddam was trying to build. I would also like to offer these two articles for inclusion in the hearing record. All of these publications are based squarely on official records kept by the U.S. Commerce Depart- ment. The records show beyond any doubt that American equipment went directly into Iraqi mass-destruction weapon programs. The records also show that our officials knew it was going there, but held their noses and waived it through. Today I am going to talk about two categories of American ex- ports: first, the ones that the U.N. inspectors actually found in Iraqi mass destruction weapon programs, and second, the ones that the Commerce Department licensed to these programs but that the U.N. has either not found or not included in its reports. 86 AMERICAN EXPORTS THAT THE U.N. HAS FOUND The electron beam welder. The inspectors found a giant electron beam welder at an Iraqi nuclear weapon plant. It was an essential part of Saddam's production line for making centrifuges, which Saddam was counting on to make his first critical mass of nuclear weapon material. The welder even had a special fixture for holding the centrifuges in place. The inspectors included it on a list of "the more important equipment" that they found. This case sheds a lot of light on how the export licensing system worked. The exporter was the Connecticut branch of a German company called Leybold Vacuum Systems. In May 1987, Leybold had already made the newspapers. It was being investigated for trying to smuggle blueprints for uranium enrichment to Pakistan. And another German firm was suing it for stealing the blueprints. According to a German official, the evidence against the company was "very incriminating." The newspaper stories appeared only six months before the company applied for its two U.S. export licenses in December 1987. Despite the applicant's notoriety, Commerce ap- proved both licenses in January and February 1988. Neither case was referred to the Pentagon or the State Department for review. What were the Iraqis going to do with the welder? The applica- tion said, in plain English, that they wanted it for "general military repair applications such as jet engines, rocketcases, etc." So Com- merce explicitly approved military repairs, and work on rocketcases. And who was buying the welder? Nassr State Enterprise for Me- chanical Industries. One of Nassr's main jobs was to buy equip- ment for Project 1728, devoted to increasing the range of Iraq's SCUD missiles. The Iraqis did that by cutting up and rewelding the rocketcases to make them hold more fuel. Nassr also bought equipment for making centrifuges, which Saddam hoped would make his first atomic bomb. So the Commerce Department allowed a known nuclear smuggler to send strategic U.S. equipment straight into the Iraqi bomb and missile program even after being told that the export was going to help make military rockets. NBC News later discovered an internal Commerce memo show- ing that Commerce staffers had objected to the license. One em- ployee wrote that "it is difficult to be a consenting party to a trans- action such as this." The mass spectrometers. The U.N. found two U.S.-licensed mass spectrometers in the Iraqi nuclear weapon program. These instru- ments are used to measure the quality of uranium as it is being enriched to nuclear weapon grade. The Commerce Department li- censed one in December 1988 to the Ministry of Heavy Industries, a front company that bought equipment for Iraqi nuclear weapon development sites, and another to Sa'ad 16 in 1985. The vacuum pump oil. The U.N. also found vacuum pump oil made by Dupont in the nuclear program. Vacuum pumps move uranium gas through the enrichment process, while the uranium is being raised to nuclear weapon grade. The gas is corrosive, so spe- cial pumps are needed to move it. The oil is a restricted item be- cause it is used to lubricate these special pumps. The Commerce Department licensed the pump oil in February 1989. 87 In addition to this American equipment, which the U.N. listed as "important," and which it said was actually being used in the atom- ic bomb program, there was also a transfer of know-how. The detonation conference. In 1989, the Pentagon and the Depart- ment of Energy invited three Iraqis to attend a "detonation con- ference" in Portland, Oregon in August. Financed by American tax- payers, the meeting brought together experts from around the world to explain to the Iraqis how to produce shock waves in any desired configuration. There were even lectures on "H.M.X.," the hjgh explosive of choice for nuclear detonation, and on flyer plates, used to help produce the precise shock waves needed to ignite A- bombs. The U.N. found both H.M.X. and flyer plates at Iraq's main nuclear weapon development site. The three Iraqis who attended the conference came from the laboratory that provided parts for Iraq's first high-explosive nuclear detonator. Chemical and missile items. In February 1992 the U.N. sent the U.S. State Department a list of American equipment that had been found in Iraq's chemical and missile programs. The list reveals a number of interesting things. At the al-Muthanna State Establishment at Samarra, the largest Iraqi site for producing chemical weapons, the U.N. inspectors found American equipment during UNSCOM 17, the fifth chemical weapon inspection. They found air compressors, pressure and tem- perature regulators, power supply components, air filters for ensur- ing a clean and dry working environment, and buffer vessels, all made by a company in North Carolina. They also reported finding a filling system for projectiles—to fill the projectiles with chemical agents—made by a company in Connecticut and process control equipment made by a large American electronics manufacturer. In addition, they reported finding a generator, some motors, and an ion-exchange machine at al-Fallujah, another chemical weapon site. The U.N. said that all of these items were made by American companies. The U.N. also said in its letter that it had not deter- mined how the equipment had found its way to Iraq, so it was pos- sible that it had got there without the companies' knowledge. AMERICAN EXPORTS LICENSED BUT NOT YET FOUND The second category I want to talk about is the equipment that the Commerce Department licensed, but that the U.N. has either not found or not mentioned in its reports. It should be clear by now that U.S. export controls on Iraq suf- fered a massive breakdown in the period preceding the Gulf War. Front companies for every known nuclear, chemical and missile site in Iraq bought American high-speed computers and electronics. Computer exports alone exceeded $96 million. The Commerce De- partment also licensed equipment for making such things as mili- tary radar, and even told one company that it did not need a li- cense for equipment that the Iraqis had specified as being able to operate 66 miles above the surface of the earth. I will mention here only a sample of the licenses that were approved. The Iraqi Air Force. This is obviously a military institution, yet it was licensed to get $57 million worth of high-tech American ex- ports, including navigational, radar, and air communication equip- ment and almost a million dollars' worth of compasses, gyroscopes, 88 and accelerometers. Compasses, gyroscopes and accelerometers are used in the guidance systems ofmissiles as well as aircraft. The Commerce Department approved them despite the fact that they were on the U.S. missile technology control list, which came into effect before the approvals were made. They fell under export con- trol category 1485. All items under that category are controlled as missile items. Commerce also approved them without referral to the State Department, which was required for missile-tech items. Iraqi Atomic Energy Commission. It was directly in charge of nu- clear weapon research in Iraq, yet it was licensed to get several American computers that were fast enough to require licenses for export. Ministry of Defense. Obviously another military organization. It got over $2 million worth of computers, over $1 million worth of guidance equipment, and almost $300,000 worth of navigation, radar, and airborne communication equipment. Many of these items were approved without referral to the Pentagon, even though the buyer was clearly a military enterprise. Ministry of Industry and Military Industrialization (MIMI). This was another military organization, run by Saddam Hussein's son- in-law Hussein Kamil al-Majid. It built Al Atheer, Iraq's primary nuclear weapon development and testing site. It also ordered the now celebrated furnaces from Consarc that the White House blocked in June 1990 because of Iraq's plan to divert the furnaces to nuclear weapon production. MIMI was licensed to get roughly $8 million worth of computers and a half million worth of computer- controlled machine tools. Al-Qaqaa. Part of MIMI and part of Iraq's nuclear weapon pro- gram. It sent the three experts I mentioned above to the detonation conference, and was the buyer of the nuclear weapon triggers that the Iraqis got caught smuggling out of the United States in March 1990. It was licensed to get $200,000 worth of American computers. Badr. This organization was jointly in charge of all the centrifuge production in Iraq. It was also one of the few places I know of that actually got a "pre-license check" by the U.S. embassy in Baghdad. After U.S. officials toured the plant, Ambassador Glaspie cabled in September 1989 that Badr was "a reliable recipient of sensitive U.S.-origin technology." It was licensed to get $1.6 million worth of American computers. Salah al Din (Sa'ad 13). U.N. inspectors visited this plant and reported that it manufactured radar for the Iraqi army. It also sup- plied control panels for machines that enriched uranium for nu- clear weapons. Commerce licensed it to get over $1 million worth of quartz crystals—essential for making radar—from Zeta Labora- tories despite the fact that the crystals were on the missile tech- after the list went into effect. The stated end use was "components for a radar system." As late as November 1989, Commerce also li- censed Hewlett Packard to sell frequency synthesizers used to de- velop radar, despite the clear statement on the application that they would be used for "calibrating, adjusting and testing of a sur- veillance radar." These are only some of the licenses. There were other dangerous exports that went out without licenses. This happened because the nology control list and the license anted in January 1988— 89 Commerce Department inexplicably told exporters that no license was required. One of the most mystifying is what I call the case of the "nying tractor." The flying tractor. In 1991 the Los Anaeles Times discovered that a New Jersey company had contacted the same Commerce Depart- ment representative, Michael Manning, who had advised Consarc about the furnaces. Iraq wanted to buy "time-delay relays." These have civilian uses but are also used to separate the stages of ballis- tic missiles in flight. Iraq wanted a special model, "tested for shock and vibration," that would perform at 350,000 feet. That is 66 miles above the earth. An employee of the company told the Los Angeles Times that "when I heard 350,000 feet, I thought mis- sile."1 The employee also said that he told Manning about the high-alti- tude specifications, which were military-grade. They contradicted the Iraqis' claim that the relays were for "heavy industrial use." The employee said he told Manning that "they're not putting trac- tors 350,000 feet in the air."2 Nevertheless, U.S. officials told the company that if a civilian use was stated, there was no reason to bar the export. I think these examples show an unmistakable pattern. Our gov- ernment allowed a mountain of dangerous equipment to go to Iraq, and now some of it is turning up at mass-destruction weapon sites. Rather than deny the facts, the government should try to learn something from them. WHAT DID OUR GOVERNMENT KNOW AND WHEN DID IT KNOW IT? 'Did our government actually know what Saddam was up to? And did it know early enough to stop these dangerous exports? The an- swer is clearly "yes." Sa'ad 16. In November 1986, the Pentagon sent the Commerce Department a letter stating that the Pentagon had intelligence in- formation linking a giant Iraqi site called "Sa'ad 16" to missile work.3 The letter also said that Sa'ad 16 was working on other weapons of mass-destruction. As we now know, Sa'ad 16 was the biggest missile development site in Iraq. U.S. pilots were sent to bomb it during the Gulf War. We also know that Commerce had even more information about Sa'ad 16 earlier. In May 1985, the general contractor for Sa'ad 16, a West German company called Gildemeister, filed an application for a $60,000 computer for the Sa'ad General Establishment, which Commerce approved six weeks later (case A897641). With the ap- plication was an Iraqi letter listing 78 laboratories at Sa'ad 16, in- cluding four for testing "starting material and feel mixtures," two for "calometric testing of fuels," two for developing "control systems and navigation" equipment and one for "measuring aerodynamic quantities on models.' On May 3, 1986 a second letter from Sa'ad revealed that the Sa'ad General Establishment was a part of the "State Organization for Technical Industries (SOTI)" and that an- other name for Sa'ad 16 was the "Research and Development Cen- ter."4 Commerce undoubtedly received this second letter—an inter- nal Commerce memo mentions it.5 These two letters from Sa'ad, combined with the November 1986 message from the Pentagon, 90 should have barred any of these organizations from receiving sen- sitive U.S. exports after November 6, 1986. But the Sa ad General Establishment got over half a million dol- lars' worth of U.S. computers in eight cases, seven of which were approved after November 1986. Sa^ad also got $290,000 worth of precision electronic and photographic equipment, approved in Feb- ruary 1987, three months after Commerce received the Pentagon letter and more than a year after receiving the letter describing Sa'ad 16's laboratories. The second Iraqi organization mentioned in the Sa'ad letter, SOTI, got high-speed U.S. oscilloscopes in March 1988, a year and a half after Commerce received the Pentagon's letter (case B259524). SOTI is part of the Iraqi Ministry of Defense. It directed the construction and equipping of a solid rocket motor production plant called "DOT," and it also procured equipment for at least two SCUD missile enhancement projects. High-speed oscilloscopes are essential to maintain radar, computers and missile guidance sys- tems, all of which have internal electronics that operate in short time frames. Oscilloscopes are also used to capture the brief signals from a nuclear weapon test, which occur in a microsecond or less. Only high-speed oscilloscopes need a license for export. The third organization mentioned in the Sa'ad letter was the "Research and Development Center," which the letter said was an- other name for Sa'ad 16. The "Center" was allowed to buy $850,000 worth of high-performance measuring, calibrating, and testing equipment (cases B060729 and B075876), all approved in January 1987, three months after the Pentagon's letter and more than a year after the Iraqi letter describing Sa'ad 16's laboratories. The Defense Department apparently objected at the staff level but did not escalate its objections to a higher level before Commerce approv,ed the exports. The Center also got communicating and tracking equipment valued at $3,000 in 1989 (case B382561). In addition to the letters from Sa'ad and the Pentagon, there were other warnings. According to U.S. officials, American intel- ligence began to brief other U.S. agencies on the Iraqi end user net- work at least as early as 1987. The briefings continued throughout 1988. In the open press, the earliest detailed accounts of Sa'ad 16 emerged in January 1989, when the German magazine Stern pub- lished a list of the Sa'ad 16 laboratories. Over the next several months, the German press published several stories linking Sa'ad 16 to Iraqi missile, nuclear and chemical weapon development. But even these press reports did not stop Commerce from approving the tracking equipment in June of 1989. Thus, the Commerce Department continued to let sensitive American equipment flow to Iraqi front companies even after it knew that the equipment was likely to be diverted. Internal U.S. government memos. Due to the excellent investiga- tive work done by Representative Henry Gonzalez, we now have documents showing that U.S. intelligence knew about, and was re- porting on, Iraq's nuclear weapon effort well before many of the most dangerous exports went out. As early as June 28, 1985, a Pentagon memo referred to a CIA report, attached to a letter from Secretary of State George Shultz, 91 stating that "there is a body of evidence indicating that Iraq contin- ues to actively pursue an interest in nuclear weapons, . . . [and] that Iraq has been somewhat less than honest in regard to the in- tended end-use of high-technology equipment." Despite the CIA re- port, Shultz asked the Pentagon's help in licensing exports to Iraq "without impractical conditions." On April 3, 1986, a State Department complained about the Pen- tagon's effort to hold up licenses to Iraq. It said that the Pentagon's evaluation of the Iraqi proliferation threat "differed radically from all other agencies," and that "DOD has simply found a device for blocking legitimate high-tech sales to Iraq while appearing to take the high ground on nonproliferation." On February 22, 1989, Director of Naval Intelligence, Rear Admi- ral Thomas Brooks, explicitly told the House Armed Services Com- mittee that Iraq was "actively pursuing" nuclear weapons. On March 23, 1989, a State Department memo stated that Iraq was "working hard at chemical and biological weapons." Despite all this, on October 2, 1989, President Bush issued NSD 26, stating that "normal relations between the United States and Iraq would serve our longer-term interests and promote stability in both the Gulf and the Middle East. The United States Government should propose economic and political incentives for Iraq to mod- erate its benavior and increase our influence in Iraq." Only a month later, on November 6, 1989, the CIA reported that "Baghdad has created complex procurement networks ... to ac- quire technology for its chemical, biological, nuclear and ballistic missile development programs." Endnotes 1. Henry Weinstein, "Despite Warning, U.S. Okd Sale of Missile Part to Iraq," Los Angeles Times, April 9, 1991. p. A7. 2. Id. 3. United States Government Accounting Office, "Arms Control: U.S. Efforts to Control the Transfer of Nuclear-Capable Missile Technology" (Report to the Honorable Dennis DeConcini, U.S. Sen- ate), GAO/NSIAD-90-176, p. 14. 4. Sa'ad General Establishment, letter of May 3, 1986 from H.A. Al-Dahan to Gildemeister Projecta. 5. U.S. Department of Commerce, Memorandum to John Konfala from Willard A. Workman, August 12, 1986. PARTIAL TEXT OF REMARKS OF MR. HENRY N. ROWAN PRESIDENT, INDUCTOTHERM INDUSTRIES INC. In late 1988 our subsidiary, Consarc Corporation, a manufac- turer of high technology industrial furnaces, was approached by an Iraqi government ministry which was interested in purchasing some of our equipment for use in manufacturing prosthetic limbs for the victims of the Iran-Iraq war. We saw the opportunity as a good one, although we were concerned about the potential dual-use of our furnaces—concerns which we brought to the attention of the government in early 1989 before entering into a contract with the Iraqis. 93 To make matters worse, I now understand that the administra- tion is proposing legislation to Congress which would assure that, in all likelihood, no American company would ever receive com- pensation for its losses in Iraq. Exactly what motivates those in the administration escapes me? Just last week, for example, the administration, pursuant to an Executive Order of the President, committed $200 million in frozen Iraqi funds under U.S. control to relief operations conducted by the United Nations. Will the Iraqi assets be dissipated in this way, leaving American companies holding the bag? One would think that the State Department, before making com- mitments at the United Nations, would have consulted with those who have legitimate claims on the blocked Iraqi assets. They did not. Everyone seems to forget that if American companies are unable to collect payments derived from international business deals, jobs will be lost here at home. I suspect others, just as Consarc, are wondering what is being done with their money. How will they compete effectively in the future, particularly when our competitors abroad are backed up by their governments and are aggressive in the international market-place? *** *** *** Let me now turn to a more detailed review of Consarc's experi- ence—how we worked with the government, and events after the furnaces were detained and our export blocked. 4Consarc, is export oriented and took up the challenge in 1989 of competing against European companies for sales in Iraq. But, in doing so, we wanted to make sure that the goods and technology we were selling had the full approval of the U.S. government. We wanted government backing because we had no independent way to verify how Iraq would finally use our equipment. Our equipment is "dual-use.' Just as it can be used for legitimate and laudable civilian purposes—such as producing sophisticated prosthetic appliances for the medical community—it can also be used for military purposes. The Iraqis told us, from the beginning, they were interested pri- marily in producing medical appliances to treat post-war victims. They also said they hoped to be able to do scientific research with our hardware. But even though they appeared sincere, we wanted to make absolutely sure that we vetted the proposed contract with the Department of Commerce and that we obtained all necessary approvals and licenses. We did not sugar-coat the facts about the equipment we proposed to sell. We wanted our licensing authorities to understand that our equipment was "dual-use" and had military, as well as civilian, ap- plication. We told export licensing officials about the possible nuclear appli- cation of our equipment. We had meetings, held at Consarc, with government export control specialists. But these government ex- perts did not seem to think that either we, or they, had a problem. For example, on February 15, 1989, we talked by telephone to Mr. Jeff Tripp, Office of Technology and Policy Analysis of the De- partment of Commerce informing him as follows: 60-509 0-93-4 94 'The equipment is said to be for melting titanium for medical body parts. How- ever, there is nothing to stop them for melting zirconium, the major use of which is cladding material for nuclear fuel-rods." Then on February 22, 1989, following up on this phone conversa- tion with Mr. Tripp, a Mr. Alan Stoddart, Export Enforcement arm of the Commerce Department, visited Consarc in Rancocas, New Jersey. He was further advised: (a) the equipment could be used to process titanium as indicated, or could melt zirconium reactive alloys; and (b) Iraq requested directional solidification, usually required for turban blades for aircraft. Nothing further came of this meeting. In March, 1989 the Iraqi's supplied us with an End-User Certifi- cate which we forwarded to the Department of Commerce. This cer- tificate indicated that our equipment would be used for "material science technology." Since we never received any indication from the government that this End-User Certificate was either fraudulent or misleading, we continued contract negotiations. Finally, in April 1989 when Bagh- dad approved our proposal and signed the contract, the U.S. Em- bassy representative in Baghdad we were working with, Mr. R. Smith, sent us a telex. He said in the telex: "Hooray for you" and offered any support from the Embassy we needed. We felt that the government was supporting our export oppor- tunity. Just before this cable was sent, we received some worrisome in- formation from our partners in Britain. They were scheduled to in- stall the furnaces in Iraq if the contract was approved. They had heard Iraq had a long range missile program that could be associ- ated with weapons of mass destruction. They sought advice from their government and asked us to contact Washington. We did so immediately. We asked for instructions based on this additional in- formation from our British colleagues. We received a reassuring re- sponse and since Iraq had pledged that the end-use was civilian and that no nuclear end use was intended, we proceeded with man- ufacture. What we did not know—and maybe the Commerce Department officials did not either—was that American export control authori- ties in other agencies were apparently very concerned about Iraq's potential nuclear ability. Yet, during the whole of 1989 and the first six months of 1990, those concerns did not reach us. But, according to press reports, concerns expressed by the De- fense Department that there was a potential nuclear end-use reached the White House and led, on July 23, 1990, to a decision by President Bush formally blocking our export. We were embarrassed by the publicity surrounding our sale to Iraq and the seizure of our equipment. We had followed all the rules and regulations. We had met with export control representa- tives and filled them in on the capabilities of our equipment. We had obtained an End-Use Certificate the Commerce Department accepted it. American Embassy representatives in Baghdad had supported the sale. How could it be, then, that we were made to look like the "bad guy?" How many other companies, acting in good faith, were trapped by Iraq's deception? 95 After the deal was suspended we hoped to be paid the millions of dollars Iraq owed us. Our case was straightforward. We had acted in good faith. We had provided the government with all the information it asked for, and then some. We had even warned the government of the risks, but still received the necessary export li- censes. We had received written end-use assurances from Iraq. The Iraqis had clearly misrepresented the use they had in mind. Iraq had deposited $6.4 million owed to us in a pre-paid letter of credit account in a New York Bank. But, to get this money we had to get a judgment against Iraq, since the furnaces—which were custom built at great expense—were never delivered. To do this we had to bring suit against Iraq. As the funds were in a blocked ac- count, we needed Treasury Department approval. They gave it to us in September 1990. Federal District Judge Stanley Sporkin, who heard the case, said that our company, Consarc, "has clearly done everything that you would expect a law abiding American corporation to do." He ruled that the $6.4 million in frozen Iraqi assets at the Bank of New York should go to us. And, later, forbade the Treasury Department from transferring those funds to the United Nations. The court's judgement against Iraq is highly significant and precedent shattering because it found that Iraq had misrepresented the end use intended for the equipment. Along with the $6.4 mil- lion, Consarc was awarded a large damage claim. Last week we were back in court because the Treasury Depart- ment, instead of supporting us, was trying to persuade Judge Sporkin's to reverse his ruling that forbade them from transferring our funds to the United Nations! Judge Sporkin was not persuaded—indeed, he appeared as dis- mayed as we have been at the treatment meted out to us by the Treasury Department. One would have thought Treasury would have seen our success against Iraq in the courts as a great achieve- ment. The ruling, if backed by Treasury, would have served notice on all regimes who would abuse our laws and cause harm to our companies, as Saddam Hussein did to many American firms. But, no. Treasury did the reverse. Instead of backing Consarc, Treasury moved to pay off banks including the Gulf International Bank. Be- fore the Gulf war, GIB was one of the biggest lenders to Saddam Hussein's Iraq. Even more surprising, Treasury authorized the pay- ment at a time when two Gulf Bank Board Members were Govern- ment of Iraq officials. We believe we have been victimized—first by Saddam Hussein— after that, by our own administration, and in particular the Treas- ury Department, which sought—unsuccessfully—to have our entire judgment voided. We do not understand why the Treasury Depart- ment continues to block us from receiving payments due to us. Judge Sporkin, last week, called Treasury's actions "unconscion- able." This Committee and the Congress have an interest in an effec- tive export control system. American companies share that interest. But an effective program requires close cooperation between indus- try and government. 96 Mistakes were probably made in the past, and perhaps our laws were not tight enough. But even if they are improved, and our anti- proliferation policies strengthened, will that be enough? The system can only work, I believe, when there are good laws and regulations, effective administration, and a close partnership between Government and Industry. As things now stand, and in light of the shabby treatment we continue to receive, the system to support exports, and yet prevent proliferation is not working. STATEMENT OF DENNIS E. KLOSKE TO THE HOUSE COMMITTEE ON THE JUDICIARY JUNE 25, 1992 My name is Dennis Kloske. I am pleased to have this opportunity to submit a statement to this Committee. I work as an investment banker in international finance in Eu- rope and in Asia where I advise companies on buying and selling and turning around corporations. The nature of my work takes me overseas for long periods of time. Indeed, I just returned from Eu- rope on Saturday evening, June 20, 1992, and arrived in Washing- ton on Monday morning, June 22. I served as Under Secretary of Commerce for Export Administra- tion from September 1989 until I resigned from that position effec- tive May 1, 1991. On June 22, 1992, I was invited by the Chairman to appear before this Committee to provide testimony. I respectfully declined the invitation to appear because I simply had not had the time in one day to review testimony given by others or to thor- oughly review possibly relevant documents. I therefore requested the opportunity to submit a written statement, and I appreciate tie kindness and courtesy of the Committee in affording me that op- portunity. There have been press reports and testimony about the role of the Department of Commerce and my role in connection with the preparation of summaries of information prepared for the Sub- committee on Commerce, Consumer, and Monetary Affairs of the House Government Operations Committee in the fall of 1990. I would like to make the following points that I believe will clarify the debate. First, as Under Secretary of Commerce for Export Administra- tion, one of my principal objectives was to strengthen U.S. export control policies concerning tne proliferation of missile technologies, biological agents and nuclear-related capabilities throughout the Third World, which, in my view, was posing a rapidly growing dan- ger to the security of the United States and its allies. From Sep- tember 1989 onward, I had the opportunity to repeatedly express this concern about the dangers of proliferation of weapons of mass destruction in the Third World, and I recommended that we change our export policy toward Iraq to shut down or seriously restrict the flow of sensitive military technologies to Iraq. Second, I would like to state for the record that during Secretary Mosbacher's tenure, the Commerce Department took increasingly restrictive actions toward the flow of sensitive military technologies to Third World countries. It is important, therefore, to note that the approval of the export of certain vehicles now in contention 97 here took place under a different Administration in the mid-1980's. It is also important to note for the record that those vehicles were never in fact shipped to Iraq. Third, I would like to point out that during the period when I was dealing with various congressional inquiries concerning ex- ports to Iraq, I made it very clear to my colleagues, to members of Congress and to their staffs that it was essential to provide a full picture of how the U.S. export control system operated with respect to Iraq. I felt this was particularly important to allay congressional fears about allegations that the U.S. export control system had been undermined by the Commerce Department acting as a rogue agency. Let me now address the process of preparing the information re- quested by and produced for Chairman Barnard concerning export licensing to Iraq. First, the guidance that I received from the De- partment's legal and policy advisors concerning this request was that the Department was to be responsive to the request but was to provide only the information that was strictly responsive and certainly not to volunteer any information beyond that which the Subcommittee had requested. I should add that the Subcommittee's first request was for items of information about export licensing to Iraq and that no documents were requested by the Subcommittee. Rather, the Subcommittee sought generic kinds of factual informa- tion from Commerce. Specifically, the Subcommittee asked for seven types of generic information: • Disposition of each license application; • Requestor of each license application; • Product to be exported; • Approximate value of sale; • End-Use; • End-User; and • Export Commodity Control Number (ECCN). To understand the process we went through to compile this infor- mation for the Subcommittee, let me first explain what I believe to be the differences between several types of records maintained in the Department of Commerce. First, there are the so-called perma- nent files of the Bureau of Export Administration, some of which are "hard copy" and others of which are contained on microfiche. These permanent files include the original applications for export licenses; the export licenses themselves; correspondence and memo- randa relating to export licenses and applications;, and the ulti- mate dispositions of the applications, including interagency posi- tions and discussions. I did not authorize changes to the permanent files, and I certainly did not intend that the permanent files be modified. Second, there is what has been referred to as the "database." The database refers to the Bureau's computer database that includes certain items of information entered into the computer system from the permanent files. It is my understanding that this database is continually updated and expanded and that, quite obviously, not all information from the permanent files is included in the database. One can retrieve information in various ways from this database in the form of computer printouts. I did not authorize changes in 98 the database and certainly did not intend that the database be modified. In order to respond to Chairman Barnard's request for informa- tion, we assembled a computer summary which did not previously exist of information that was generated from the database. As the summary was in the process of being prepared and revised, I au- thorized several editorial changes and modifications to this sum- mary. In my view, the purpose of this editing process was to make the printout of information, which ultimately became the summary produced to Chairman Barnard, accurate and understandable. I asked the technical experts of the Bureau to pull together the information from the Bureau's database and to assemble a com- puter printout. Once the information was compiled, a process that took the technical experts about two weeks to accomplish, this summary was annotated to clarify technical information, to correct mistakes or misleading information and to delete information that the Subcommittee had not asked for. The resulting summary of in- formation was transmitted to Chairman Barnard's staff in October 1990 to familiarize them with U.S. export licensing to Iraq. Let me emphasize that no documents were requested by the Sub- committee; no documents were provided to the Subcommittee; and no documents were altered in the preparation of the summary of information. All that was done was to edit and modify the printouts generated to produce summaries of the information requested by Chairman Barnard, and the editing was done in order to assure that accurate information was provided. Furthermore, I instructed the technical staff to ensure that a record of the modifications made to the summary printouts was maintained. I did not instruct anyone to change the information already in the database. Two important decisions were made as the summary of informa- tion was prepared for the Subcommittee. When I was first informed that the Commerce Department in the mid-1980's had approved the licensing of approximately $1 billion of military vehicles to Iraq, described in the database as "vehicles specially designed for military purposes" or "military trucks," I asked the technical ex- perts (in response to a query from a senior Commerce official) if these vehicles were armored assault vehicles to be used in combat, and whether, by approving these licenses, the Commerce Depart- ment had broken the arms embargo that the U.S. had imposed on Iraq. The response was negative to both questions. I was told by the technical experts that these vehicles were not combat equipment but were dual-use equipment that had been modified for non-combat military applications. I asked the technical experts if there was a more specific description of these vehicles that would accurately connote their dual-use, non-combat capabil- ity. The technical experts told me that both the Department of Commerce and the State Department shared commodity jurisdic- tion over military vehicles and that the State Department licenses combat vehicles on the munitions list, while the Commerce Depart- ment licenses vehicles that have non-combat uses or applications. They informed me that in adjudicating a commodity jurisdiction for these vehicles, both the State and Commerce Departments had used the description "commercial utility cargo vehicles" and that there was supporting documentation for this description. 100 I was informed by the General Counsel that he had made a round of telephone calls to other agencies and that other agencies were opposed to releasing this information. I then asked the Gen- eral Counsel to call the Counsel to the President, and we were in- formed that the White House would not approve the transmission of agency positions to Chairman Barnard. I was then instructed by the Commerce Department General Counsel to delete the inter- agency positions from the first summary printout that went to Chairman Barnard's Subcommittee. I did as I was instructed. It is also important to note that when the first summary of infor- mation was provided to Chairman Barnard in October 1990, his staff was explicitly informed that the information being provided was a summary of the information requested by Chairman Bar- nard; that this summary was designed only to familiarize the staff with the record of export licensing to Iraq; and that briefings and eventual access to the Bureau's permanent files would be provided to the staff, with the approval of the Administration's lawyers. Very shortly after the first summary printout had been delivered to Chairman Barnard's staff, the Department received a second Subcommittee request, demanding the interagency positions on ex- ports to Iraq. This second request generated a tremendous amount of discussion within the Administration and intense legal and tech- nical scrutiny of the first summary printout that had gone to Chairman Barnard in October 1990. There were two main issues: First, whether the additional information requested concerning interagency positions formed part of the deliberative process and, if so, whether it could be refused to the Subcommittee. Second, and in parallel, an intense technical review of the accuracy of the origi- nal summary of the prepared (but not submitted) interagency posi- tions took place. We again generated from the computer the summary printout previously provided to Chairman Barnard, this time, however, also including information about the interagency positions. I was subse- quently informed by my technical staff and the Commerce Depart- ment lawyers that the State Department, the Energy Department and the Department of Defense all had requested modifications to the portions of the summary printout now reflecting interagency positions. The State Department even insisted on an annotated version of the summary printout containing interagency positions. I told the technical and legal staff that modifications could be made to the depicted interagency positions provided that they were accu- rate, that all agencies agreed to these modifications and that the interagency legal body sanctioned these modifications. The delay and the lengthy review process clearly irritated the Subcommittee, and the threat of a subpoena emerged once again. The State Department was still reluctant to provide the informa- tion, and I asked the Commerce Department's General Counsel to intervene with State. The response that came back was that the State Department was still reviewing the material, that it consid- ered the interagency positions to be within the framework of the deliberative process, and that State was most reluctant at this stage to release the requested information. The Commerce Depart- ment's second summary of information with interagency informa- tion included was finally, submitted to the Subcommittee in De- 101 cember, 1990. At that time a major interagency review mechanism involving all the major agencies was established to review the in- coming requests by the Subcommittee for specific files. In late January 1991, I received a telephone call from the Com- merce Department's General Counsel who expressed concern to me that the summaries of information provided to the Congress were not accurate and that he wanted the Bureau to document and ex- plain the changes made in developing the summaries of informa- tion. As a result of this request, I asked the Bureau's technical ex- perts, and specifically the Director of the Office of Export Licens- ing, to prepare a report on the preparation of the summaries that had been transmitted to Chairman Barnard and to document these changes. That report was submitted to me and then forwarded to the Commerce Department's General Counsel on February 26, 1991. Among other things, the Director's report noted that in reviewing the printouts prior to the first submission to Chairman Barnard, the technical staff had compared for accuracy each entry on the printout with the information that was available on the microfiche records. The staff found 65 instances (out of 1126 licenses proc- essed) where the database did not correctly reflect the disposition of the application in the permanent file. The Director of the Office of Export Licensing reported that based on concrete and specific documentation available on microfiche the technical staff had cor- rected the database by including additional information. It was only when I received this report that I first became aware that Bureau personnel had made changes to the database itself. When I then asked the Director of the Office of Export Licensing and the Director of the Office of Information Resources Manage- ment about these changes in the database, I was told that these recommendations for changes had been carefully reviewed and fully documented before any changes to the database had been made. I was also assured by both the Director of the Office of Information Resources Management and the Director of the Office of Export Li- censing that the permanent files of the Bureau had not been al- tered or tampered with. I was satisfied with these explanations and forwarded the report to the Commerce Department's General Coun- sel. Several weeks later, the General Counsel informed me that, in view of continuing press allegations about the summaries prepared for Chairman Barnard's Subcommittee, he had requested the In- spector General to carry out an audit of the preparation of the summaries of information for the Subcommittee. I later spoke with the Inspector General and assured him that we would cooperate fully with his review and that the Bureau's technical staff was looking forward to meeting with him. During my interview with the Inspector General's staff, I fully explained the guidance I had received with respect to the prepara- tion of the summaries for Chairman Barnard. I also detailed the rationale for the description "commercial utility cargo vehicles" and noted the concern we had at the time that this non-combat equip- ment would be portrayed, incorrectly, as designed for combat use. I also stated to the Inspector General's staff that I was unaware of any modifications by the technical staff to the permanent files. 102 Before I left the Department on May 1, 1991, I spoke twice to the Inspector General, and he indicated on both occasions that he saw no major issues that I or the Bureau needed to be concerned about. The Inspector General's main concern was the possibility that someone might have destroyed permanent files and he said that had not taken place. I would like to close with the following observations. First, with respect to my own motives and intentions, I favored an open proc- ess on agency positions in dealing with Congress and giving con- gressional access to records. Second, I had formally expressed my deep reservations about a liberal policy regarding export of sen- sitive technologies to Iraq. Finally, neither I nor anyone else in- volved in this process, to my knowledge, had any desire to or at- tempted to deceive. While there may have been misunderstandings or miscommunications between and among lawyers, policy experts and technical staff during the intense, short-term and confusing process of compiling the complicated technical data requested by the Subcommittee, I have complete confidence in the integrity and good intentions of all of those involved in this particular process. Licensing Mass Destruction U.S. EXPORTS TO IRAQ: 1985-1990 BY GARY MELHOLLIN JUNE 1991 INTRODUCTION The U.S. Department of Commerce licensed more than $1.5 bil- lion worth of sensitive U.S. exports to Iraq from 1985 to 1990.1 Most were "dual-use" items, capable of making nuclear weapons or long-range missiles if diverted from their claimed civilian purposes. On March 11, 1991, the Commerce Department released a list of those licenses. The list showed the equipment approved, the date, the value, the buyer in Iraq and the claimed Iraqi end use. This report is an analysis of the list. It shows, beyond any doubt, that U.S. export controls suffered a massive breakdown in the period preceding the Gulf War. When U.S. planes were sent to destroy Iraq's strategic sites, much of the equipment they bombed was made in the United States. The report finds that: —The Commerce Department knew that millions of dollars' worth of sensitive American equipment would wind up in Iraq's missile and other military programs, but approved the licenses anyway. —The Commerce Department failed to refer missile technology ex- port cases to the State Department and nuclear technology cases to the Energy Department, in violation of its own procedures. —Front companies for every known nuclear, chemical and missile site in Iraq bought American computers, with total American computer exports exceeding $96 million. —American machine tools may have helped build the SCUD mis- siles that hit Tel Aviv and killed U.S. troops in Saudi Arabia. —American radar components may have helped shoot down U.S. aircraft and develop long-range missiles. 103 Based on these findings, the study recommends that Congress take dual-use licensing away from the Commerce Department, ap- point a Congressional committee to oversee the licensing process, and open dual-use licensing to public view. EXPORTS TO IRAQ: THE U.S. RECORD Dangerous Technology Rocket Casinas—"general military repair applications such as jet engines, rocket cases, etc." This was the declared purpose of two U.S. exports to Iraq, valued at $1.4 million and approved on January 20 and February 10, 1988. The first was for precision machine tools, the second for la- sers. The Iraqi buyer was a procurement agent for the Iraqi SCUD missile program. With this equipment, Iraq would be able to make precision parts for missiles, and also be able to rework the cases of its short-range SCUD missiles, enabling them to carry more fuel and fly farther. Indeed, the stated use on the application was to work on "rocket cases." With the longer range, the new Iraqi SCUDS could hit Tel Aviv and kill U.S. soldiers in Saudi Arabia. The exporter was a German company, exporting from the United States. The company, whose name the Commerce Department re- fused to disclose, first came to the attention of German officials in early 1984, when German intelligence reported that the company was suspected of selling Pakistan equipment for making nuclear weapon fuel. In May 1987, the firm was cited in news reports, this time for trying to smuggle blueprints for uranium enrichment to Pakistan through Switzerland. To make matters worse, another German firm, Uranit, was suing this company for stealing the blue- prints. According to a German official, the evidence against the company was "very incriminating."2 The company was also sus- pected of hiring a Swiss firm to produce special equipment for Pakistan that could enrich uranium to nuclear weapon grade. The press reports appeared only six months before the company applied for its two U.S. export licenses on December 1 and 22, 1987. Despite the exporter's notoriety, the Commerce and Energy De- partments took only two months to approve the first application (case B281441) and less than a month to approve the second (case B286904). Neither was referred to the State or Defense Depart- ments for review. The importer was the "Nesser Establishment for Mechanical In- dustries," also known as the "Nassr State Enterprise for Mechani- cal Industries." One of Nassr's main jobs was to procure equipment for Project 1728, devoted to increasing the range of Iraq s SCUD missiles. Nassr was part of the Iraqi Ministry of Industry and Mili- tary Industrialization (MIMI), run by Saddam Hussein's son-in-law Hussein Kamil al-Majid. MIMI was generally in charge of Iraq's missile and chemical weapon efforts. Nassr also served as the pro- curement arm for Taji, a site used to produce chemical munitions and, according to Western intelligence documents, "responsible for the development and manufacture of gas centrifuges for uranium enrichment."3 In addition, Nassr ran artillery ammunition plants, purchased "high-capacity driving nozzles" for missiles from a Ger- man company,4 and was linked to the Condor II intermediate- range missile project. 104 Thus the Commerce Department approved sensitive U.S. equip- ment that would go directly to Iraqi nuclear weapon, chemical weapon, and missile sites, despite the fact that the exporter was suspected of nuclear smuggling, and despite the fact that the im- porter declared an intention to work on rocket bodies. Commerce knew that the exporter was unreliable, and knew that the end use was improper, but approved the export anyway. This equipment may well have helped build the SCUD missile that killed American troops in Dhahran. The buyer represented the SCUD program, the equipment was used to rework rocket casings, and Iraq used a long-range SCUD with a reworked casing to reach the U.S. troops in Saudi Arabia. Radar In January 1988, the Commerce Department approved more than two million dollars' worth of quartz crystals to the "Salah al Din Establishment" (case B290664) and the "Iraqi Trading Com- pany" (case B346115), both of which frankly said tnat they wanted the crystals for "components in a ground radar system." Salah al Din was a military electronics factory built by the French company Thomson-CSF. It manufactured three-dimensional early warning radars and may have made components for missile guidance and radar jamming equipment. Quartz crystals perform a vital function in radar: they measure time accurately in small units. Because the position of an object is determined by the time it takes a radar pulse to reach the object and return, accurate time measurement is essential. Military-level quartz crystals are defined as those with high stability over a wide operating temperature, or with the ability to withstand accelera- tion forces up to 20 times gravity, or shock greater than 10,000 times gravity, or very high radiation. Lower grade crystals do not need a license. The crystals carried commodity control number 1587, identifying them as especially useful for missile production. All items on the U.S. Commodity Control List require an individual license for ex- port, but some of the items, such as quartz crystals, are singled out as sensitive for missiles. In such cases, the State Department is supposed to be consulted because State chairs the Missile Tech- nology Export Committee (MTEC), an interagency group that eval- uates export applications subject to missile controls. This means that the Commerce Department should have referred the two appli- cations to State for interagency review. Instead, Commerce itself approved both in only ten days. Commerce claimed that the cases were "not restricted for MTCR [missile], chemical/biological, or nu- clear non-proliferation." Salah al Din also needed advanced equipment to operate its ra- dars. In late 1989, it bought American frequency synthesizers val- ued at $140,000 to "calibrate, adjust, and test surveillance radar" (case D055821). This would apparently include the radar used to shoot down U.S. aircraft in the Gulf War, and radar used as ground support for missiles capable of delivering nuclear weapons. The frequency synthesizers carried commodity control number 1531, also on the missile technology control list when used for mis- sile "launch and ground support equipment." Commerce did not 105 refer this case to the State Department either, as it should have done for a missile technology item. It approved the application uni- laterally in only nineteen days, claiming again that the export was "not restricted for MTCR [missile], chemical/biological, or nuclear non-proliferation." In fact, Commerce knew that Salah al Din was building military radar. When Commerce compiled its internal records on the fre- quency synthesizers, it noted that "according to our information, the end user [Salah al Din] is involved in military matters." Com- merce then deleted this statement before it released the export list to the public. Thus, Commerce approved vital parts for a surveillance radar that Commerce knew was military. The effect was to provide ground support for Iraqi missiles, and to help Iraq detect and shoot down U.S. planes in the Gulf War. It is not surprising that Com- merce concealed this knowledge from the public. Guilty Knowledge Sa'ad 16 In November of 1986, the Defense Department sent an important letter to the Commerce Department.5 The letter informed Com- merce that the Pentagon had intelligence information linking a Eiant Iraqi site called "Sa'ad 16" to missile development. Later, the os Angeles Times reported that the exact date of the letter was November 6, and also said that according to government sources fa- miliar with the letter, it revealed that Sa'ad 16 was working on other non-conventional weapons as well. Thus, by November 6, 1986, the Commerce Department should have stopped approving dual-use exports for Sa'ad 16. There is also compelling evidence that Commerce knew what was going on at Sa'ad 16 much earlier. In February 1985 the Director of the Sa'ad General Establishment sent a letter to Gildemeister Projecta, the German company in charge of buying equipment for Sa'ad 16.6 The letter, which described the Sa'ad 16 project in de- tail, was reportedly sent to Commerce along with the first license requests from the Sa'ad organization in 1985. Indeed, on May 8, 1985, Gildemeister filed an application for a $60,000 computer for the Sa'ad General Establishment, which Commerce approved six weeks later (case A897641). The letter listed 78 laboratories, in- cluding four for testing "starting material and fuel mixtures," two for "calometric testing of fuels," two for developing "control systems and navigation" equipment and one for "measuring aerodynamic quantities on models." On May 3, 1986 a second letter from Sa'ad revealed that the Sa'ad General Establishment was a part of the "State Organization for Technical Industries (SOTI)" and that an- other name for Sa'ad 16 was the "Research and Development Cen- ter." 7 Commerce undoubtedly received this second letter—an inter- nal Commerce memo mentions it.8 These two letters from Sa'ad, combined with the November 1986 message from the Pentagon, should have barred any of the organizations named from receiving sensitive U.S. exports after November 6, 1986. But that was not the case. The Sa'ad General Establishment got over half a million dollars' worth of U.S. computers in eight cases, seven of which were approved after November 1986. These comput- 106 ers went directly to Sa'ad 16, Iraq's largest and most important missile research site. None of the cases was referred to the Depart- ment of Energy, as required for items on the Nuclear Referral List such as computers. As explained below, the Nuclear Referral List consists of items that are especially useful for making nuclear weapons if diverted from their civilian purpose. Sa'ad also got $290,000 worth of precision electronic and photographic equipment, approved in February 1987, three months after Commerce received the Pentagon's letter and two years after the letter describing Sa'ad 16 was signed. SOTI, the second Iraqi organization mentioned in the Sa'ad let- ter, got high-speed U.S. oscilloscopes in March 1988, a year and a half after Commerce received the Pentagon's letter (case B259524). SOTI is part of the Iraqi Ministry of Defense. It directed the con- struction and equipping of a solid rocket motor production plant called "DOT," and it also procured equipment for at least two SCUD missile enhancement projects. High-speed oscilloscopes are essential to maintain radar, computers and missile guidance sys- tems, all of which have internal electronics that operate in short time frames. Oscilloscopes are also used to capture the brief signals from a nuclear weapon test, which occur in a microsecond or less. Only high-speed oscilloscopes need a license for export. The third organization mentioned in the Sa'ad letter was the "Research and Development Center," which the letter said was an- other name for Sa'ad 16. The "Center" was allowed to buy $850,000 worth of high-performance measuring, calibrating, and testing equipment (cases B060729 and B075876), all approved in January 1987, three months after the Pentagon's letter and almost two years after the Iraqi letter describing Sa'ad 16 was signed. These cases were not referred to the Department of Energy either, despite the fact that the items exported were on the Nuclear Referral List. The Defense Department apparently objected at the staff level but did not escalate its objections to a higher level before Commerce approved the exports. The Center also got communicating and tracking equipment valued at $3,000 in 1989 (case B382561), again without referral to the Department of Energy as required for an item on the Nuclear Referral List. In addition to the letters from Sa'ad and the Pentagon, there were other warnings. According to U.S. officials, American intel- ligence began to brief other U.S. agencies on the Iraqi end user net- work at least at early as 1987. The briefings continued throughout 1988. By early 1989, the intelligence warnings had become clear and urgent. At that time the CIA called all the U.S. agencies con- cerned with exports together for a special meeting on Iraq. Com- merce, however, refused to attend on the ground that its "judgment might be contaminated." In the open press, the earliest detailed accounts of Sa'ad 16 emerged in January 1989, when the German magazine Stern pub- lished a list of the Sa'ad 16 laboratories. Over the next several months, the German press published several stories linking Sa'ad 16 to Iraqi missile, nuclear and chemical weapon development. But even these press reports did not stop Commerce from approving the tracking equipment in June of 1989. 107 Thus the Commerce Department continued to approve sales of sensitive American equipment to Iraqi front companies even after it knew that the equipment was likely to be diverted. Violations of Procedures Commerce also failed to refer cases to other agencies for review, in violation of its own procedures. The quartz crystals mentioned above were on the missile tech- nology list—the list of items deemed especially useful for missile production.9 Both that list and a second one, known as the Nuclear Referral List, are subsets of the U.S. Commodity Control List (CCL). All items on the CCL require an individual validated license for export. Under Commerce Department regulations, quartz crys- tals are defined as missile items if "usable as launch and ground support equipment." This they clearly were, because the Iraqi buyer stated that they would be used as "components in a ground radar system." Ground radar is essential to support the launching, testing and tracking of missiles. The frequency synthesizers were also on the missile technology list if "usable as launch and ground support equipment." They clearly were also, because the buyer ad- mitted that they would be used to "calibrate, adjust, and test sur- veillance radar." Thus, Commerce should have referred both of these cases to the State Department for review by the Missile Technology Export Committee, the interagency group responsible for licensing missile-related exports. The Commerce Department also failed to refer millions of dollars' worth of compasses, gyroscopes and accelerometers to the State De- partment. Some of these items were sold to Iraqi Airways, which the U.S. Treasury identified in April 1991 as a "front company" in Iraq's "arms procurement network." Some also went to the Iraqi Air Force and some went to the Iraqi Ministry of Defense—both military organizations. All items in this category (ECCN 1485) are defined as missile-related because they can be used to make missile guidance systems.10 Commerce nevertheless approved them with- out consulting the State Department, as required by its own proce- dures. Thus when Commerce stated on March 11, 1991 in a press re- lease that "no license applications for any MTCR [missile tech- nology) items have been approved for export to Iraq," it contra- dicted its own export records. Commerce also violated its statutory obligation to refer nuclear cases to the Department of Energy. Section 309(c) of the Nuclear Non-Proliferation Act of 1978 requires that the executive branch develop a special list of items that "could be of significance for nu- clear explosive purposes" if diverted from civilian use. The list is known as the "Nuclear Referral List." All items on the list require export licenses, and all license applications must be "reviewed by the Department of Commerce in consultation with the Department of Energy."11 In fact, Commerce licensed numerous items on the list without referring them to the Department of Energy. The most common item was computers, which carry CCL number 1565. Computers operating above a certain speed are regulated by the Nuclear Re- ferral List, and some special computers are also on the missile 108 technology list. Commerce approved the following 20 computer cases, with a total value of over $5 million, without referring any of them to the Department of Energy. The fact that these comput- ers required licenses shows that the computing speed must have been high enough to be regulated by the list. Thus, in all 20 cases, Commerce violated its own procedures as well as Section 309(c) of the Nuclear Non-Proliferation Act. Case Importer Value A800390 $3,600,000 A843654 13,000 A844783 488,000 A847302 500,000 A849514 389,000 A892228 11,000 B050974 25,900 B061971 87,800 B069513 210,600 B072960 40,810 B073687 2,000 A853710 40,700 A854382 Arab Petroleum 37,500 A857954 48,000 A862229 13,000 A862232 22,400 A866566 1,900 A866912 32,000 A887265 10,000 A887266 11,000 Commerce also approved several military items to military buy- ers without consulting the Department of Defense. These included the machine tools and lasers, discussed above, which are used to fabricate rocket casings, the quartz crystals discussed above which are used as components in ground radar, and the navigation, radar and airborne communication equipment sold to the Iraqi Air Force and Ministry of Defense. Exports of such clearly military items to military buyers should have been referred to U.S. security experts. The Defense Department, in fact, played only a minor role in the export approval process. The Pentagon saw an export case for only two reasons. First, it was consulted for its opinion whether an item was likely to be diverted to a Cocom-proscribed country (primarily the East Bloc). For these cases, the Pentagon had no power to de- cide whether the export might contribute to nuclear, missile or chemical weapon proliferation. Such a decision was outside the scope of its review. Second, the Pentagon saw a handful of nuclear cases because it participated in the Subgroup on Nuclear Export Coordination (SNEC), the interagency group that evaluates nuclear-related ex- ports. But the SNEC reviewed only 24 of the 771 cases approved from 1985 to August 1990—three percent of the total. Commerce essentially bypassed the SNEC by failing to refer cases to it. Thus, for the vast majority of the exports—roughly 97%—the Pentagon 109 did not participate in judgments about the risk of proliferation. Neither did the Arms Control and Disarmament Agency or the in- telligence agencies. They had no role beyond their participation in the SNEC. Thus, in 97% of the cases, Commerce alone decided, or decided with the concurrence of Energy or State, whether an item increased the risk of nuclear or missile proliferation. Commerce did not follow a consistent pattern in selecting the few cases it did send to the SNEC. The Iraqi Atomic Energy Commis- sion, for example, bought a large computer, valued at $2.8 million (case B175217) which was not referred to the SNEC, and also bought $87,000 worth of precision electronic and photographic equipment (ECCN 6599) with no external review at all (case D042767). But a second computer, worth only $24,390 (case B108166), was referred to the SNEC, indicating that the SNEC may not have received the most important cases. Ten of the items approved for the Iraqi Atomic Energy Commission were on the Nu- clear Referral List, but only three were submitted to the SNEC. Commerce also approved $200,000 worth of computers for Al Qaqaa, the Iraqi nuclear weapon design laboratory. Commerce did not refer the computers to either the Department of Energy or the SNEC. Violations of Policies The Commerce Department had full authority to reject every ap- plication discussed above. Under Commerce regulations, dual-use exports must satisfy specific criteria. The criteria include the fol- lowing tests: whether the stated end use is acceptable, whether the item could aid nuclear weapon or missile development, whether the importing country has a nuclear or missile development effort, and whether the recipient country has good "non-proliferation creden- tials." 12 Iraq never came close to passing those tests. The "stated end use" of some of the items was explicitly to produce rockets and radar. The items exported, such as machine tools and radar compo- nents, were obviously powerful enough to aid missile and nuclear development. It was also clear that Iraq had nuclear and missile development programs. Iraq had been trying to build nuclear weap- ons since at least 1981, when Israel bombed the Osirak reactor near Baghdad, and Iraq had been known since the mid-1980's to be working with Argentina and Egypt on nuclear-capable missiles. In addition, U.S. intelligence knew by the mid-1980's that many of the importers listed on the licenses were fronting for Iraqi nuclear and missile sites. If the Commerce Department had applied its own criteria, it would have denied many of the Iraqi applications. Dangerous End Users The annex to this report lists Iraq's known military and nuclear end users. The sixteen buyers listed either built, equipped or oper- ated Iraq's nuclear, missile and chemical weapon sites. Given the centralized control of all important activity in Iraq, and the su- preme importance of the Iraqi military, the true list of military users is surely longer. Any sensitive export to a buyer in Iraq must have been available to the military, regardless of what the export application said. 110 Nevertheless, the sales to these sixteen buyers tell an important story. All sixteen imported U.S. computers, the indispensable tool of modern research and manufacture. These computers must have aided the work of virtually every Iraqi nuclear, missile and chemi- cal weapon site. Altogether, about $25 million worth of U.S. com- puters went to the sixteen military or nuclear buyers identified in this report. Iraq's total purchases of U.S. computers amounted to more than $96 million, one fourth of all the Iraqi dual-use imports from the United States. Exports were also licensed that—for reasons known only to Com- merce—did not appear on the list released to the public. In 1987, Electronic Associates of Long Branch, New Jersey sold Sa'ad 16 a "hybrid digital-analog computer," specially designed for wind tun- nel experiments on missiles. The computer is reportedly identical to a computer now operating at the U.S. government's White Sands missile mange in New Mexico. The sale went to MBB and Gildemeister, the two German companies that were Sa'ad 16's main missile technology suppliers. The Department of Defense op- posed the sale and had the license brought before the National Se- curity Council in September 1987. Although the NSC decided to block the export, the computer had been shipped eight months ear- lier in January, without the Pentagon's knowledge. Commerce also approved exports informally that do not appear on the public list. In response to an exporters request, Commerce can approve a shipment by stating that no license is required. Two of these cases have recently come to light. In 1989, the Consarc Corporation of New Jersey notified Com- merce that it wanted to export a "skull" furnace to Iraq. Consarc explicitly told Commerce that the furnace could aid a nuclear pro- gram. The furnace could melt zirconium for nuclear fuel rods, could melt titanium for missile nose cones and other critical missile parts, and might be able to melt plutonium and uranium for nu- clear bomb cores. The skull furnace was to be accompanied by three other furnaces: an electron beam furnace from Consarc, and furnaces for vacuum induction and heat treatment from Consarc's subsidiary in Scotland. Used together, the four furnaces would have far exceeded Iraq's stated purpose, which was to manufacture artificial limbs for vic- tims of the Iran-Iraq War. According to U.S. officials, Iraq would have had a "Cadillac" production line for atomic bomb and ballistic missile parts, even better than the facilities at American nuclear weapons labs. Commerce nevertheless told Consarc that no export license was needed. In June 1990, a person outside the government told the Pentagon about the sale. This set off a chain of official reactions that led the White House to block the shipment. It turns out that equipment accompanying the furnaces needed export licenses. In June 1989, Commerce licensed special comput- ing equipment to control the furnaces' operation (case D030956) and in January 1990, Commerce licensed numerical control equip- ment to make new crucibles for the furnaces (case D064342). This latter export was crucial. One of the main reasons for thinking that the original skull furnace might not be used to make A-bombs was that the original crucible was not suited for melting heavy metals Ill such as uranium. But when Commerce licensed the equipment for making additional crucibles, Iraq got what it needed to make A- bomb cores. Also in 1989, another New Jersey company, Struthers, Dunn, Inc. of Pitman, contacted the same Commerce representative, Mi- chael Manning, who had advised Consarc. Iraq wanted to buy "time-delay relays," devices that have civilian uses but are also used to separate the stages of ballistic missiles in flight. Iraq want- ed a special model, "tested for shock and vibration" that would per- form at 350,000 feet—66 miles above the earth. Ronald Waugaman, who handled the case for Struthers, Dunn, said "when I heard 350,000 feet, I thought missile."13 Waugaman said he toLd Manning about the high-altitude speci- fications, which were military grade. They contradicted Iraq's offi- cial claim that the relays were for "heavy industrial use." Waugaman said he told Manning that "they're not putting tractors 350,000 feet in the air."14 Nevertheless, Waugaman said that U.S. officials told him that if a civilian end use was stated, there was no reason to bar the export. RECOMMENDATIONS Strengthening U.S. Export Controls The U.S. export control system has broken down for three rea- sons: the wrong people are in charge of it, Congress has ignored it, and it is secret. Remove Export Control from the Commerce Department It has frequently been said that there is a conflict between the Commerce Department's duty to promote exports and its duty to regulate them—that Commerce has conflicting missions in the ex- port field. The licenses to Iraq prove that this is true. Commerce licensed items that did not meet its export criteria, that it knew would be diverted from their supposed civilian purposes, and that it knew would help Iraq's nuclear and missile programs. Commerce even excluded the State and Energy Departments from the licens- ing process, in violation of its own procedures. The best known example of a federal agency that tried to pro- mote and regulate at the same time is the old Atomic Energy Com- mission, which had the job of both promoting and regulating nu- clear energy until 1974, when Congress decided to split the func- tions. The Nuclear Regulatory Commission now regulates; the De- partment of Energy promotes. Everyone agrees that nuclear regula- tion gained great credibility and effectiveness from this separation. Congress should now follow this precedent for dual-use licensing. It should take this function away from Commerce and give it to an independent regulatory agency such as the Nuclear Regulatory Commission or to some other department, such as Defense, that has no export promotion function. The Commerce Department, which specializes in trade, is not the place to decide strategic ques- tions. An agency that specializes in national security should have that task. It is essential to recognize that the real significance of dual-use items is strategic, not economic. The number of items on the control list is small; well over 90% of the applications to export 112 them are granted; and the value of the few applications denied is tiny compared to the overall value of U.S. foreign trade. It has been suggested that Congress should create a new agency to handle all export licensing. Such a move would be sound if Con- gress could insure that industrial interests would not take the agency over, as they have the Commerce Department. Industry would have a great incentive to pack such an agency with person- nel loyal to its interests. It would be safer and more logical to make the Defense Depart- ment the "hub" for controlling all exports relevant to nuclear, chemical, biological and missile proliferation. Most of the expertise is already in the Pentagon, and any additional expertise could be transferred from other agencies and obtained through the national laboratories. Commerce, which has no substantive expertise on dual-use technology, should retain only a record keeping function. Commerce should refer applications to the Pentagon, which would make the final licensing decision in consultation with the Com- merce, Energy, and State Departments, and with the Arms Control and Disarmament Agency and the intelligence agencies. This change would put military experts in charge of exports with mili- tary applications. Impose Congressional Oversight Congress essentially ignored export licensing to Iraq until the in- vasion of Kuwait. Oversight was entirely lacking during the period preceding the Gulf War. If Congress had looked into what the Com- merce Department was doing, Congress would have learned quickly that Commerce was not following the rules. A Congressional reac- tion might have stopped some of the worst exports from going out. Congress should now impose an effective form of oversight. A Congressional committee with jurisdiction over national security matters should be given the task of overseeing and evaluating ex- port licensing. That committee could be a subcommittee of one of the Armed Services committees, or of the Governmental Affairs or Government Operations committees, or of the Joint Economic Com- mittee. The committee or subcommittee should receive complete re- ports on pending or approved licenses and should have sufficient staff to oversee export controls. If necessary, it could receive assist- ance from the General Accounting Office or the Office of Tech- nology Assessment. Open Export Licensing to Public View The other important lesson we can draw from nuclear regulation is the great benefit of making decisions in public. All of the Nuclear Regulatory Commission's export licenses are granted on the public record and in the light of day. This is the main reason why there are no horror stories about U.S. nuclear exports to Iraq. Neither exporters nor regulators want to defend such transactions in pub- lic, so they do not happen. The Commerce Department's process is secret. Neither Congress nor the public is permitted to examine Commerce licensing in the open. This is true despite the fact that dual-use licenses are sup- posed to be for civilian items restricted to peaceful use. 114 2. Navigation, radar and airborne communication equipment (ECCN 1501) valued at $5 million in five cases. Approved without external review in four of the five cases. 3. Computers (ECCN 1565) valued at $5 million. 4. Aircraft, helicopters, engines and equipment valued at $23,000,000. 5. Aircraft parts, boats, diesel engines, underwater cameras, and submersible systems valued at $28 million. Many of the items ap- proved for Iraqi Airways fell into categories that are listed, by their commodity control numbers, as useful in the development, testing, production and deployment of missiles capable of delivering nuclear weapons. Items sucn as compasses, gyroscopes, accelerometers, computers, radars and navigational equipment all fall into this cat- egory. It is possible that some of these items aided the Iraqi SCUD program. Tne procedures by which missile technology exports are approved are not available to the public. It is widely assumed that at least the Department of State reviews and approves these sensitive ex- ports. However, the Department of Commerce approved at least six exports that appear to be on the missile technology list with no ex- ternal review. In one case (B373514), the Commerce Department approved over a million dollars' worth of compasses, gyroscopes, and accelerometers without consulting either the State or Defense Departments. All items in category 1485 are missile items and should have been referred to the State Department. Iraqi Air Force: Total approvals: $57 million, including: 1. Navigational, radar, and air communication equipment (ECCN 1501) valued at more than $200,000 in nine cases. No external re- view in five of the cases (A839273, A858162, A866417, B200489, B222433). State Department approved three of the cases. 2. Compasses, gyroscopes, and accelerometers (ECCN 1485) val- ued at $957,500. Commerce Department approved without external review in March 1989, despite the fact that these are missile tech- nology items. 3. Oscilloscopes (ECCN 1584) valued at $12,391 (case A826888). Approved by State Department in May 1985. 4. Computers (ECCN 1565) valued at $11,394 (case B236580). No referral to Energy Department, as required for items on the Nu- c1g3.t* Rf6f*6n*cil T ji st 5. Aircraft and helicopters (ECCN 6460) valued at $45.8 million. Approved by the State and Energy Departments from April to June, 1988. Iraqi Atomic Energy Commission: Responsible for nuclear re- search in Iraq, including Iraqi work on nuclear weapons. Total ap- provals: over $3 million, including: 1. Computers (ECCN 1565) valued at $2.9 million. The largest computer export, valued at $2.8 million (case B175217) was ap- proved by the Energy Department without referral to the SNEC, whereas a second computer, worth only $24,390 (B108166) was re- ferred to the SNEC, indicating that the SNEC did not receive the most important cases. A third computer was approved without re- ferral to the Energy Department, which is required for a commod- ity on the Nuclear Referral List being exported to a nuclear end user for a nuclear end use. This violated export control procedures. 115 2. Precision electronic and photographic equipment (ECCN 6599) valued at $87,000 (case D042767). No referral for external review. Ten of the items approved for this end user were on the Nuclear Referral List, but only three were submitted to SNEC for inter- agency review. Ministry of Defense: In charge of Iraqi defense operations. Re- sponsible for the State Organization for Technical Industries (SOTI) and the Sa'ad General Establishment (both described below). Total approvals: over $567 million, including: 1. Computers (ECCN 1565) in eighteen cases valued at $2.1 mil- lion. Commerce referred only two of the eighteen cases to the En- ergy Department, as required for items on the Nuclear Referral List. Of the two cases referred to Energy, only one was referred to the SNEC. 2. Compasses, gyroscopes and accelerometers (ECCN 1485) in three cases valued at over $1 million. These items are subject to missile technology controls. Commerce did not refer one case (B204774) valued at $60,136 for external review, although the ap- proval was in May 1987 after the establishment of the missile con- trol list in April 1987. 3. Navigation, radar, and airborne communication equipment (ECCN 1501) valued at $291,000. These items may be subject to missile technology controls. The bulk of the value of this approval was for case B353226, valued at $264,000, which Commerce did not refer for external review, despite the fact that the approval was in September 1988 after the establishment of the missile control list in April 1987. Commerce licensed this sale of dual-use military equipment to a military end user without external review by the Defense Department. State Organization for Technical Industries (SOTI): Sub- division of the Ministry of Defense. Commissioned the building and equipping of DOT, a solid rocket motor production plant built as part of the Condor II project. Also procured, according to U.S. offi- cials, equipment for the Al-Hillah and Al-Fallujah SCUD modifica- tion projects and the space launch facility at Karbala. Total approv- als: $1.4 million, including: 1. Oscilloscopes (ECCN 1584) valued at $20,000. Commerce ap- proved three applications, two without the external review required for items on the Nuclear Referral List. One oscilloscope went to Mansour, a military site described below. 2. Computers (ECCN 1565) valued at $380,000 in five cases. Only one of the five cases was reviewed by the Energy Department, as required for items on the Nuclear Referral List. 3. Measuring, calibrating, and testing equipment (ECCN 1529) valued at over $143,000 in three cases (B052572, B156528, B311058). Commerce licensed the largest approval (B052572), val- ued at over $132,000, without an end use statement. Commerce re- ferred only one of the three cases to the Energy Department, al- though all three were on the Nuclear Referral List. Commerce made no referral to the State Department, despite the fact that this item appears to be on the missile technology control list, and one of the cases was approved in 1988 after the list went into ef- fect. 116 Sa'ad General Establishment: A division of SOTI. Self-de- scribed as "a state organization specialized in the planning and erection of large industrial complexes for the Government of Iraq," Sa'ad does not operate any of the contracted facilities itself.15 Ac- cording to MidEast Markets, Sa'ad only does work on military projects. Contracted for the construction of Sa'ad 16 at Mosul. Total approvals: $1.1 million, including: 1. Computers (ECCN 1565) valued at more than $450,000 in seven cases (B177669, B224682, B265627, B271629, B350736, E000057, E002881). No referral to the Energy Department, as re- quired for items on the Nuclear Referral List. 2. Precision electronic and photographic equipment (ECCN 6599) valued at $290,000. Mo n sour Factory (or Al Man sour): Linked to SOTI and served as a procurement agent, according to U.S. officials, for the SCUD enhancement facilities at Al-Fallujah and Al-Hillah, and the space launch center at Al-Anbar. According to press reports, pur- chased a high-speed oscilloscope from Tektronix. Total approvals: $5.2 million, including: 1. Electronic manufacturing equipment (ECCN 1355) valued at $4.2 million. No referral to the State or Energy Departments. This equipment enables domestic production of transistors and diodes for use in computers and other electronics, including military sys- tems such as communications and radar. 2. Electronic measuring, calibrating and testing equipment (ECCN 1529) valued at $644,000. No referral to the Energy De- partment, as required for items on the Nuclear Referral List. No referral to the State Department, despite the fact that this item ap- pears to be on the missile technology list and was approved in Oc- tober 1989 after the list came into effect. 3. Computers (ECCN 1565) valued at $354,000 and $12,000. No referral to the Energy Department, as required for items on the Nuclear Referral List. 4. Superconductive electromagnets (ECCN 1574) valued at $8,280. No referral for outside review. Ministry of Industry and Military Industrialization (MIMI), formerly Ministry of Industry and Minerals: Run by Saddam Hussein's son-in-law Hussein Kamil al-Majid, with overall responsibility for Iraq's nuclear, missile and chemical weapon pro- grams. MIMI ordered furnaces, the sale of which was blocked by the White House in June 1990 because of Iraq's plan to divert the furnaces to nuclear weapon production. Total approvals: $8.5 mil- lion, including: 1. Computers (ECCN 1565) in twenty cases valued at almost $8 million. No referral of 19 of the cases to the Energy Department, as required for items on the Nuclear Referral List. Commerce re- ferred one case, valued at $29,300, to the Departments of State and Energy, but approved another valued at $488,000 unilaterally. 2. Computer-controlled machine tools (ECCN 1091) valued at $525,000 (case D064342). Departments of State and Energy ap- proved in January 1990. Nassr State Enterprise for Mechanical Industries (or Nesser Establishment for Mechanical Industries): Part of the Ministry of Industry and Military Industrialization (MIMI), de- 117 scribed above. Nassr procured equipment for Project 1728, a SCUD modification effort; was involved in Iraq's nuclear program; was the procurement arm for Taji, a site used to produce chemical muni- tions; and, according to Western intelligence documents, was "re- sponsible for the development and manufacture of gas centrifuges for uranium enrichment."16 Nassr also ran artillery ammunition plants; purchased "high-capacity driving nozzles" for missiles from a German company; may have been a part of the European pro- curement network run by Iraqi front company TDG in London; was the main customer of Matrix Churchill, another Iraqi front com- pany in England; and was linked to the Condor II intermediate- range missile project. Total approvals: $1.8 million, including: 1. Computers (ECCN 1565) valued at $1 million. State Depart- ment approved in mid-1988. No referral to the Energy Department, as required for items on the Nuclear Referral List. 2. Computer-controlled machine tools (ECCN 1091) valued at $888,000 (case B281441). Energy Department approved in Feb- ruary 1988. Al-Qaqaa State Establishment: Part of MIMI. Responsible, at least in part, for Iraq's nuclear weapon program. According to Western intelligence, this center was "concerned with the develop- ment of the non-nuclear components of nuclear weapons." 17 The in- telligence report also states that Al-Qaqaa had experience with modern high explosives and high-speed measurements, both of which are necessary to develop nuclear weapons. In March 1990, customs officers at Heathrow Airport in London seized a case of ca- pacitors bound for Al-Qaqaa that were especially designed for deto- nating nuclear warheads. Total approvals: over $200 thousand, in- cluding: 1. Computers (ECCN 1565) in three cases valued at $200,000. No referral to the Energy Department, as required for items on the Nuclear Referral List. Technical Corporation for Special Projects (Techcorp): Also part of MIMI. Operated Sa'ad 16. Responsible for the SCUD modification project and development of the Condor II missile. Also purchased parts for the Iraqi supergun. Total approvals: $61,300, including: 1. Two computers (ECCN 1565) valued at $16,980 and $44,320. No referral to the Energy Department, as required for items on the Nuclear Referral List. University of Mosul: Site of and procurement agent for Sa'ad 16 (also referred to as "Research & Development Center"), Iraq's major missile research and development center, where work was done on the Condor II and SCUD modification as well as research on chemical and nuclear weapons. According to European news re- ports, the German company that supplied Sa'ad 16 described the project as a "laboratory and workshop complex [that] will be run in cooperation with Mosul University."18 Total approvals: over $1.8 million, including: 1. Equipment for enhancing satellite images, including comput- ers (ECCN 1565) valued at $1 million and related equipment (ECCN 4590) valued at $27,800. Commerce Department approved the related equipment (ECCN 4590) in June 1985 without external review. This equipment enhances photographs taken by satellites. 118 The enhanced photos can be used to improve targeting by missiles or aircraft, or for other reconnaissance objectives. The licensee, International Imaging Systems of Milpitas, California, did not ship the equipment approved in 1990. However, on two previous occa- sions, International Imaging sent shipments to Iraq. In 1981, an image processing system went to the Iraqi Directorate General for Geological Survey and Mineral Investigation, and in 1987 a similar system went to the Space and Astronomy Research Center in Bagh- dad.19 2. Viruses and viroids (ECCN 4997) valued at $1. Commerce De- partment approved in December 1987 without external review. 3. Computer (ECCN 1565) valued at $483,000. Approved (case B062253) without referral to the Energy Department, as required for items on the Nuclear Referral List. Research and Development Center: Another name for Sa'ad 16, Iraq's main missile research and development site at Mosul. Total approvals: $927,000, including: 1. Measuring, calibrating, and testing equipment (ECCN 1529) valued at $870,000 in two cases (B060729 and B075875). No refer- ral to the Energy Department, as required for items on the Nuclear Referral List. The Defense Department objected at the staff level but did not escalate its objections before Commerce approval. This equipment can be used to test and develop microwave circuits for missile guidance radars and microwave communications. One li- censee, Wiltron of Morgan Hill, California, sold a scalar network analyzer using a radio frequency of up to 40 GHz to test and de- velop these circuits. According to one report, the Department of De- fense tried to stop an approval valued at $49,510 in November 1986, but the Commerce Department licensed the export the follow- ing January. 2. Communicating and tracking equipment (ECCN 1502) valued at $3,000. No referral to the Energy Department, as required for items on the Nuclear Referral List. 3. Radio spectrum analyzer (ECCN 1533) valued at $45,664. 4. Computers (ECCN 1565) valued at $10,228. Hutteen General Establishment: Iraqi government organi- zation that purchased large-caliber artillery shell cases from Spain and Germany that could be filled with chemical payloads. Total approvals: over $1 million, including: 1. Computers (ECCN 1565) in four cases (B249146, B322679, D030887, D014317) valued at over $1 million. No referral to the Energy Department, as required for items on the Nuclear Referral List. Badar Establishment of Mechanical Engineering (or Bader General Establishment): A military enterprise responsible for producing aerial bombs. Total approvals: $2 million, including: 1. Computer (ECCN 1565) valued at $1.6 million. Departments of Energy and State approved from March 1988 to June 1988. 2. Technical model (ECCN 9999) valued at $373,708. No referral for external review. Salah al Din Establishment (originally called Saad 13; ap- parently also called University of Salahaddin): A military electronics factory built by the French company Thomson-CSF. Manufactures three-dimensional early warning radars under li- 119 cense from Thomson as well as other Thomson military tele- communications equipment. Some electronic countermeasures and inertial guidance components were also made here. Total approv- als: over $1.6 million, including: 1. Quartz crystals and assemblies (ECCN 1587) valued at $1.1 million (case B290664). Commerce approved without external re- view, despite the fact that this item is on the missile technology control list and was approved in January 1988 after the list went into effect. The stated end use was components for a radar system. 2. Frequency synthesizers and equipment (ECCN 1531) valued at $140,000 (case D055821). Approved without external review, de- spite the fact that this item is on the missile technology control list and was approved in November 1989 after the list went into effect. . The stated end use of this item was for "calibrating, adjusting and testing of a surveillance radar," which could function as a ground support system for nuclear-capable missiles. 3. Navigational, radar, airborne communication, and mobile, communication equipment (ECCN 6598) valued at $115,000 (case D092873). Approved without external review in April 1990. 4. Communication, detection, and tracking equipment (ECCN 1502) valued at $1,825. Energy Department approved in February 1987. 5. Computers (ECCN 1565) in three cases valued at $130,000. Energy Department approved all three cases. 6. Measuring, calibration, and testing equipment (ECCN 1529) valued at $7,375 (case D066127). Endnotes 1. "BXA Facts" (press release), U.S. Department of Commerce, Bureau of Export Administration, March 11, 1991. The list covers a period from 1985 to August 2, 1990, when Iraq invaded Kuwait, and reveals that three of the approvals were for over $1 billion worth of cargo trucks, which were not shipped. Id. at p. 3. See also, Stuart Auerbach, "$1.5 Billion in U.S. Sales to Iraq," Washinaton Post, March 11, 1991, p. Al; Michael Wines, "U.S. Tells of Prewar Technology Sales to Iraq Worth $500 Million," New York Times, March 12, 1991, p. A13. 2. Mark Hibbs, "Components For Pakistan Were Intended For High-Enriched U, German Confirms," Nuclear Fuel, May 18, 1987. 3. Mark Hibbs, "Intelligence Reports Identify Two Sites as Key to Iraqi Weapons Program," Nuclear Fuel, January 21, 1991, p. 3. 4. "Involvement in Iraqi Gun Factory Reported," Der Spiegel (Hamburg), July 9, 1990, pp. 54-56, translated in JPRS/TND, July 18, 1990, pp. 35-37. 5. United States Government Accounting Office, "Arms Control: U.S. Efforts to Control the Transfer of Nuclear-Capable Missile Technology" (Report to the Honorable Dennis DeConcini, U.S. Sen- ate), GAO/NSIAD-90-176, p. 14. 6. N.B. Namody, Director of the Saad General Establishment, letter of February 27, 1985 to Gildemeister Projecta, describing the 76 laboratories at the Sa'ad 16 Research and Development Center. 7. Sa'ad General Establishment, letter of May 3, 1986 from H.A. Al-Dahan to Gildemeister Projecta. 120 8. U.S. Department of Commerce, Memorandum to John Knofala from Willard A. Workman, August 12, 1986. 9. Quartz crystals are missile technology items if "usable as launch and ground support equipment" under commodity control number (ECCN No.) 1587. See Part 779, Supplement Four, U.S. Export Administration Regulations (April, 1987). 10. See Part 779, Supplement Four, U.S. Export Administration Regulations (April, 1987). 11. U.S. Export Administration Regulations, Supplement No. 1 to Part 778, p. 1. 12. U.S. Export Administration Regulations, Sections 776.18 (missile technology) and 778.4 (nuclear technology). 13. Henry Weinstein, "Despite Warning, U.S. Okd Sale of Missile Part to Iraq," Los Angeles Times, April 9, 1991. p. A7. 14. Id. 15. Sa'ad General Establishment, letter of May 3, 1986 from H.A. Al-Dahan to Gildemeister Projecta. 16. Mark Hibbs, "Intelligence Reports Identify Two Sites As Key to Iraqi Weapons Program," Nuclear Fuel, January 21, 1991, p. 3. 17. Mark Hibbs, "Intelligence Reports Identify Two Sites As Key to Iraqi Weapons Program," Nuclear Fuel, January 21, 1991, p. 3. 18. "A Civilian Project of Mosul University," Stern (Hamburg), January 26, 1989. See also Alan George and Herbert Lansinger, "Rocket Merry-Go-Round," Profil (Vienna), March 20, 1989, pp. 36- 38, translated in JPRS/TND, May 5, 1989, pp. 31-34. 19. International Imaging Systems, press statement, January 29, 1991. STATEMENT OF HENRY B. GONZALEZ, CHAIRMAN, HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS BUSH ADMINISTRATION HAD ACUTE KNOWLEDGE OF HtAQ'S MILITARY INDUSTRIALIZATION PLANS JULY 27, 1992 Table of Contents —Bush Administration Assistance to Iraq in Billions —Goal of Iraq's Military Industrialization Effort —Foreign Firms Play a Big Role —Center Piece of Iraqi Strategy —Hard To Distinguish Between Military and Civilian —Example of Confusing Iraq Policy: Export Licence Approved for Iraqi Front Company Matrix-Churchill Last week I showed that the Bush Administration deliberately, not inadvertently, helped to arm Iraq by allowing U.S. technology to be shipped to the Iraqi military and to Iraqi weapons factories. Throughout the course of the Bush Administration U.S. and foreign firms were granted export licenses to ship U.S. technology directly to Iraqi weapons facilities despite ample evidence showing what these factories were producing weapons. I also showed how the President misled the Congress and the public about the role U.S. firms played in arming Iraq. Today I will show that the highest levels of the Bush Administra- tion, including the President nimself, had specific knowledge of 121 Iraq's military industrialization plans, and despite that knowledge, the President mandated the policy of coddling Saddam Hussein as spelled out in National Security Directive 26 (NSD-26) issued in October 1989. This policy was not changed until after the Iraqi in- vasion of Kuwait, by which time the Bush Administration had sent Saddam Hussein billions of dollars in U.S. financial assistance, technology and useful military intelligence information. I will also show how the Presidents policy of appeasing Saddam Hussein was at odds with those in the Administration who saw Iraq as a major proliferation threat. This will help set the stage for next week's report which will discuss Iraq's clandestine technology procurement network and BNL's role in funding the network. I would like to emphasize however, that the Administration knew about the procurement network, as I showed last week—and de- cided to tolerate it. Bush Administration Assistance to Iraq in Billions From the beginning of the Bush Administration Iraq received bil- lions in U.S. financial assistance and sophisticated U.S. technology. As is well known, the largest financial aid program for Iraq was the Commodity Credit Corporation (CCC) export guarantee pro- gram. Between 1983 and the invasion of Kuwait, Iraq received $5 billion in CCC guarantees that allowed them to purchase U.S. agri- cultural products on credit. Over half of that program, or $2.6 bil- lion, was authorized during the first two and a half years of the Bush Administration. The CCC program was the single largest chunk of financial as- sistance that Iraq received from the West. It helped to feed the peo- ple of Iraq and it freed up scarce resources that were first used to purchase weapons to fight the war against Iran and later, during the Bush Administration, the freed up resources were plowed into Iraq's military industrialization program. There have been many allegations, and there are still ongoing investigations, that are at- tempting to determine if Iraq was diverting CCC guaranteed com- modities to purchase weapons. When Iraq invaded Kuwait in August 1990, it defaulted on two billion dollars of the CCC credits advanced during the Bush Ad- ministration. But the CCC program was not the only financial ben- efit bestowed upon Iraq during the Bush Administration. As I have reported elsewhere, the Bush Administration also au- thorized a $200 million credit program through the Export-Import Bank (Eximbank) that allowed Iraq to import various equipment and raw materials. The Eximbank program was one of the largest of its type among the Western industrialized nations. This credit not only permitted Iraq to purchase U.S. equipment, it also freed up scarce resources for cash strapped Iraq, and was granted de- spite Iraq's shaky finances, under pressure from the highest levels of the Administration. Not to be overlooked is BNL-Atlanta's $5 billion in supposedly unauthorized loans to Iraq—well over $1 billion in commercial loans which were issued during the Bush Administration. While the intelligence community has remained silent on what it knew about BNL's activities prior to the raid on BNL-Atlanta in August 1989, it is safe to assume that it would have been highly unusual 122 for our intelligence community not to have noticed thousands of communications between Iraqs highest profile military organiza- tions and BNL in Atlanta, Georgia. The same can be said of Iraq's front company in Ohio called Matrix-Churchill. At a minimum, the Bush Administration looked the other way and allowed BNL's and Matrix-Churchill's activities to continue. Don't forget the CIA has a history of neglecting to inform law en- forcement officials about nefarious activities when those activities just happen to facilitate the Administration's policy. The recent Bank of Credit and Commerce International (BCCI) and Inter- national Signal and Control (ISC) cases provide vivid examples of that phenomenon. I will add more details to this at a later date. During the period 1985-1990, the Reagan and Bush Administra- tions approved 771 export licenses for Iraq—239 of these approvals came from the Bush Administration. Much of the equipment shipped to Iraq under these licenses ended up enhancing Iraq's military capability. For example, licenses for the Iraqi armed-forces and Iraqi weapons factories were routinely approved. As I showed last week, this was not done inadvertently; it was a written, but never publicly stated, Bush Administration policy to help arm Iraq through the export licensing process. Given the Administration's refusal to accept responsibility for fa- cilitating the arming of Iraq, it is important to understand the con- text in which the billions in U.S. financial assistance and sophisti- cated technology flowed to Iraq. Once you understand the context of the decision to provide financial assistance and technology to Iraq, you will understand that it was U.S. policy to accommodate Saddam Hussein's military ambitions. The Bush Administration was acutely aware of Iraq's intentions, and knew that the financial assistance it was providing to Iraq fa- cilitated Saddam Hussein's ambitious military industrialization ef- fort. Goal of Iraq's Military Industrialization Effort To understand the Iraqi military industrialization effort, one must understand that since the 1970's the goal of Iraq was to be- come militarily self-sufficient. Iraq wanted to have its own military industrial base so that it did not have to depend on the Soviet Union or Western arms suppliers for its national security. The Iraq-Iran War placed the better part of Iraq's military indus- trialization program on hold because resources were used to pur- chase urgently needed finished military products such as tanks, fighter jets, ammunition, artillery, and other equipment. However, during that war Iraq also continued to work on its highest priority indigenous military projects, and when the war ended Saddam Hussein began a massive military industrialization effort. Iraq had several ambitious goals as it ended its long eight year war with Iran. First, Iraq wanted to provide for its own national security. Second, Iraq wanted to remain the Arab world's strongest military power. Third, Iraq wanted to become the Arab world's strongest industrial power. The massive military industrialization program was key to making these goals possible: Evidence that the Bush Administration knew of Iraq's plans is widespread. One example is an Export-Import Bank Country Risk 123 report dated June 1989. The Eximbank report, which was based in part on intelligence information, was presented to the Eximbank board of directors along with representatives of the State Depart- ment, CIA, and Commerce Department. This report states: "In addition to higher oil production, the government is planning to develop new state controlled industries to supply the military, the civilian market and export markets. Iraq's ambitious plans, unlikely to be completed even within the next five- to-ten years, include oil refineries, petrochemical complexes, specialty steel and alu- minum plants, vehicle assembly and various manufacturing activities. These new industries will fashion products for the new arms industries, and produce goods for sale in the domestic market and perhaps export markets." A year later the CIA reported: "One of Iraq's main post-war goals is the ambitious expansion of its defense indus- tries." What could be clearer. After the cease fire in its long war with Iran, Iraq obviously did not have any plans to demilitarize. In fact, it is apparent from reading intelligence community reports that Iraq's highest post-war priority was expanding its military indus- trial base. Like the Eximbank, a 1989 intelligence community re- port similarly states: "A dramatic reduction in domestic military and civilian state'sector claims on oil revenues and non-oil production would provide resources for an earlier end to ar- rears and rescheduling. However, such a massive reduction in military and civilian absorption of resources seems very unlikely . . ." Iraq's ambitious military industrialization plan called for civilian activities to be integrated into military production and vice versa. In a public speech to the nation in 1989 Saddam Hussein urged Iraqis to: ". . . make use of civilian industry for military purposes and military industry for civilian purposes using their surplus potential." This point is further brought home in a June 1989 intelligence report which shows that: "The Ministry of Industry and Military Industrialization (MIMI) planned to inte- 5rate proposed specialty metals, vehicle assembly, and other manufacturing plants irectly into missile, tank, and armored personnel carrier industries." U.S. knowledge that Iraq gave highest priority to development of its defense industrial base is further spelled a year later in a July 1990 report which states: "In May 1989, Hussein Kamil, the head of the Ministry of Industry and Military Industrialization (MIMI), proclaimed publicly that Iraq was implementing a defense industrial program to cover all its armed force needs for weapons and equipment by 1991. He stated that Iraq's industrialization program gas intended to provide all of Iraq's basic industrial supplies from indigenous sources." For Iraq the drive to develop its own weapons production capabil- ity required, to say the least, a complex and intensive undertaking. Not surprisingly, a 1990 CIA report noted that evidence indicated Iraq was devoting a considerable amount of its financial and labor resources on military industrialization. An estimate of the magnitude of the effort is contained in a June 1989 Eximbank report which says that in 1988 Iraq devoted 42% of its oil revenues to military-related procurement. Foreign Firms Play a Big Role Iraq had several motivations is embarking on such an ambitious military industrialization effort. First, Saddam Hussein did not want his national security beholden to foreign suppliers of military 124 hardware. Foreign government policies change and Iraq had trou- ble developing secure long-term supply relationships for the supply of military hardware. The intelligence community stated in the summer of 1990: 'Iraq's desire for a large arms industry has grown during the past decade. Presi- dent Saddam Hussein apparently believes an expanded arms industry will enhance Iraqi prestige and help solve security problems identified during the war such as lack of" reliable arms suppliers." In future statements I will show how Iraq used BNL money to pay foreign firms for their critical role in his ambitious military in- dustrialization effort. Iraq clearly could not have achieved the suc- cess it did in its military industrialization program without mas- sive assistance from firms in Europe and the United States. As we all know, foreign firms played a critical role in many of Iraq's most dangerous and exotic weapons programs such as the Condor II ballistic missile and Gerald Bull's "Big Gun" project. Center Piece of Iraqi Strategy While the resources and coordination required to successfully carry out Iraq's military industrialization effort was monumental, many within the Administration believed that Iraq would take a practical approach to setting priorities. For example, in July 1990 the intelligence community stated: "Although Iraq's stated goals' almost certainly are over ambitious, we believe the regime recognizes its limitations and holds more pragmatic aspirations in private." The goals of Iraq's military industrialization program, while am- bitious, were considered substantial for several reasons. An execu- tive branch report of July 1990 noted that: "Baghdad has significant advantages in making this grandiose, but still substan- tial expansion of its defense industries a realistic goal: (1) It has cheap hydro- carbons; (2) oil income is likely to increase long-term; (3) large Iraqi military can absorb high levels of production; (4) Iraq has the most highly educated work force in the Arab world; (5) a potential supply of customers for exported arms exists." These factors are still valid today—not just for Iraq, but also for Iran, Saudi Arabia and the former Soviet Union. Hard To Distinguish Between Military and Civilian Our government knew from Saddam's own words that Iraq's mili- tary industrialization effort was designed to make it difficult to dis- tinguish between military and civilian end-uses. As a result, huge industrial complexes in Iraq, many covering thousands of acres, contained civilian as well as military components. In addition, Iraq did not allow very many foreigners to have com- plete access to these complexes. U.S. intelligence no doubt had plenty of satellite photos of Iraqi establishments, but given strict travel restrictions in Iraq, they had limited human intelligence about exactly what was going on in various facilities. Iraq's "mixed-use" complexes made it difficult for export licensing officials and those concerned about proliferation, to tell exactly where U.S. equipment was going in Iraq. That is why post-installa- tion checks—the Bush Administration did only one check—should have been a prerequisite for approving the shipment of U.S. dual- use technology to Iraq. Without checking on the technology after it was installed, there was almost no chance of determining if it was being used for civilian purposes as claimed by Iraq. The lack of any 125 checks, given that the Administration knew what Iraq wanted to do and how it was going to develop military facilities is inexplica- ble. That problem is illustrated in a July 1990 executive branch re- port which states: 'Iraq's military industrialization program presents a significant problem for con- trolling U.S. origin goods and technology and preventing its use in Iraqi military program, particularly strategic projects developing missiles and nonconventional weapons . . . dual-use equipment and technologies can be easily diverted from civil- ian to strategic military programs." Iraq's close control of production and its mixed-use facility scheme was always a problem for policy makers. A declassified No- vember 1989 State Department memo discussing how President Bush's mandate to increase trade with Iraq was at odds with ef- forts to stop Iraq's proliferation efforts put it this way: "The problem is not that we lack a policy toward Iraq; we have a policy. However the policy has proven very hard to implement when considering proposed exports of dual-use commodities to ostensibly non-nuclear end-users, particularly state en- terprises." The memo goes on to state, as I have reported before: Complicating factors in decision making include: 1. A presumption by the Intelligence Community and others that the Iraqi govern- ment is interested in acquiring a nuclear explosives capability; 2. Evidence that Iraq is acquiring nuclear-related equipment and materials with- out regard for immediate need; 3. The fact that state enterprises . . . are involved in both military and civilian projects; 4. Indications of at least some use of fronts for nuclear-related procurement. 5. The difficulty in successfully demarching other suppliers not to approve exports of dual-use equipment to state enterprises and other ostensibly non-nuclear end users." I will now provide a real world example of this dilemma using a BNL-financed glass fiber factory that went to Iraq through Ma- trix-Churchill Corporation. Example of Confusing Iraq Policy: Export License Approved for Iraqi Front Company Matrix-Churchill One of the Iraqi military's highest priorities was carbon and glass fiber technology. Western militaries use carbon and glass fi- bers extensively in nuclear, missile, aerospace programs. These very lightweight fibers, when mixed with the proper ingredients, can protect metal from temperatures up to 3000 degrees. For exam- ple, carbon and glass fibers can be used to insulate pipe in nuclear reactors. Carbon fiber technology is used to make nose cones and other temperature resistant parts for rockets. When properly fabricated these fibers can also be used to replace metal in many applications. For example, missile casings and many airplane fuselage parts are made with these fibers. These fibers are lighter and more heat resistant than metal. Carbon fibers can also be used to make parts for high temperature applications such as uranium enrichment centrifuges. Carbon and glass fiber technology also has many civilian uses such as making the hull of a boat, computer casings, and even golf clubs. Given Iraq's military intentions and the priority they placed on military production, a carbon or glass fiber plant in the hands of Iraq was known to be dangerous. But with the help a BNL loan and Iraq's front company Matrix-Churchill the Iraqis were able to 60-509 0-93-6 126 obtain from the U.S. a glass fiber factory for the Nassr State Enter- prise for Mechanical Industries—which was Iraq's prime ballistic missile maker and also an integral cog in Iraq's efforts to enrich uranium through the centrifuge method. Even though the U.S. had severe restrictions on sending carbon fiber technology abroad, Iraq was able to obtain glass fiber tech- nology through the U.S. export licensing process the glass fiber de- bacle dramatically illustrates how the President Bush s mandate to increase trade with Iraq was at odds with the policy of limiting proliferation. Iraq's military industrialization strategy of mixing military and civilian production with the same complexes, repeat- edly caused nightmares within the export licensing process. A summer 1990 government report reflecting the dangers of Iraq's strategy cautioned that: "Development of missiles and non conventional weapons was Iraq's highest prior- ity and the program most at odds with U.S. policy of limiting proliferation. Iraq's activities clearly presented tough problems for controlling U.S. dual-use technology that can easily be diverted from civilian programs because Iraq integrates civilian and military production facilities." But instead of heeding numerous warnings about Iraq's military intentions and dubious procurement activities, the Bush Adminis- tration repeatedly approved export licenses of military useful tech- nology to Iraq. The glass fiber factory and many other military use- ful technologies and equipment were shipped to Iraq in order to im- prove trade: obviously proliferation concerns often took a back seat to that goal. Shortly after the BNL raid in August 1989, the UPS. Attorney in Atlanta began investigations of several BNL-financed projects. One of the projects that drew immediate attention was the glass fiber factory being procured for Iraq by Matrix-Churchill Corpora- tion. A Federal Reserve memo indicated what the Assistant U.S. At- torney (AUSA) thought of the project. The September 22, 1989 Fed- eral Reserve memo of a conversation with the AUSA states: "McKenzie said that everything being written about the missile sales is true. Ma- trix-Churchill made missile casings." A Federal Reserve memo dated September 28, 1989 indicates that the DOD had real concerns: 'The Department of Defense is investigating allegations that BNL's funding was used at least in part to finance arms shipments to Iraq in violation of U.S. law. The AUSA Gail McKenzie has indicated orally that she believes that BNL-Atlanta made loans to Matrix-Churchill ... to finance the purchase by Iraq of missile casings ..." Two months later, on November 24, 1989, Matrix-Churchill Cor- poration, Iraq's front company in Cleveland, Ohio, applied for an export license to ship equipment for the glass fiber factory to Iraq. The Matrix-Churchill export application states: "Equipment to be used to control a glass fiber production line with a capacity of 15 tons a day." The end-user listed in the Matrix-Churchill was the Technical Corporation for Special Projects, referred to as TECO or Techcorp. The Bush Administration had information on TECO going as far back as the middle 1980's. For example, a September 1989 govern- ment report says that TECO was involved in high priority military f»rojects that included chemical weapons, anti-missile programs, ong-range missiles and nuclear weapons. 127 A later document showed that TECO served as focal point for de- fense related industrial construction and civil engineering and com- mercial contacts between Iraq establishments and foreign suppli- ers. Thus, before the November 1989 date of the application for a li- cense to ship the glass fiber technology to Iraq, the Bush Adminis- tration had clear information showing that Matrix-Churchill was part of Iraq's secret military technology procurement network, and that the network's goal was to procure technology for high-priority missile and nuclear weapons projects in Iraq. They also had information showing that the end-user of the tech- nology was an integral part of Iraq's procurement network and that TECO was responsible for Iraq's highest priority clandestine mis- sile and nuclear programs. Meanwhile, on February 12, 1990 a secret State Department cable was sent to the U.S. Embassies of our closest allies in Europe and Asia. The State Department instructed the Embassies to warn host governments about Iraq's plans to procure nuclear and missile technology, especially carbon and glass fiber technology. The cable, subtitled, "Possible Iraqi Missile and Nuclear-related Procurement" reported that the Nassr State Enterprize for Mechan- ical Industries had been seeking a glass fiber production plant and that NASSR had procured commodities for Saddam Hussein's nu- clear and missile programs in the past. As I revealed last week, as far back as 1988 the Administration had abundant information showing that NASSR was the heart of Iraq's ballistic missile programs and also a critically important player in the nuclear weapons program. A Commerce Department memo related to an export license application for NASSR dated Au- gust 1988 sheds light on how far back our government knew of NASSR's activities. The memo states of NASSR: 'The equipment will be used by the NASSR State Establishment for Mechanical Industries. After several reviews DOD recommended a denial because DOD alleges that we are dealing with a 'bad' end-user. The ultimate consignee is a subordinate to the Military Industry Commission and located in a military facility." An intelligence report on NASSR in May 1990 showed that: "In the case of the missile program—the Nassr State Establishments for Mechani- cal Industries (NASSR) was instrumental to Iraq's missile development effort." Amazingly, despite all this and in complete contradiction to the State Department's February warning, on May 30, 1990, the U.S. Commerce Department informed Matrix-Churchill that it did not even need a license to ship the equipment and the glass fiber tech- nology to Iraq. Commerce told Matrix that the technology was G- DEST—in other words all Matrix Churchill had to do was to have Techcorp verify in writing that it would not divert the technology to a third country. In June Techcorp obliged and sent the required letter to Matrix which sent it to the Commerce Department. In July 1990, the last shipment of equipment for the glass fiber factory left the U.S. Several weeks ago the Committee interviewed a Matrix-Churchill employee assigned to the glass fiber project. He told the Committee that the plant was being erected at NASSR across the street from a secret centrifuge plant. 128 The moral of this zany, but dangerous story is this. When it came to Iraq, the general policy of thwarting proliferation was at odds with the President's policy of increasing trade with Iraq as spelled out in NSD 26. The Iraq policy permitted Iraq to obtain so- phisticated U.S. military useful technology despite abundant evi- dence of Iraq's intentions and military programs and even despite our government trying to stop these purchases elsewhere. Conclusion There is no way the Administration can say that it did not know of Iraq's intentions. There is no way the Administration can claim that it was not aware that it was helping to arm Iraq. The intel- ligence information and reports on Iraq's military industrialization program that I have discussed today and last week were widely disseminated within the Administration. Individuals at the White House, State Department, DOD, Ex- port-Import Bank and the Commerce Department received all this information and much more throughout the entire Bush Adminis- tration. In fact, the President himself received a good dose of this information in a national intelligence review which was sent to him in November 1989. Last Friday the Los Angeles Times printed an article which stated: "Administration officials maintain that any military assistance to Iraq was an in- advertent consequence of the attempt to moderate Iraqi actions. They said that they were unaware of the extent of (Iraq's) network in this country and that top officials were distracted by other foreign policy concerns." This claim is patently false. The fact is that the Bush Adminis- tration had excruciating detail on Iraq's military industrialization plans and intentions and that Iraq gave highest priority to expand- ing its indigenous weapons manufacturing capability. It was in this context that President Bush issued NSD-26 even though he had evidence of Iraq's intentions and dubious practices showed growing danger. The Bush Administration did nothing to significantly alter its strategy toward Iraq. It was a written policy of the Bush Administration to help arm Iraq. The Bush Administration sent U.S. technology to the Iraqi military and to many Iraqi-weapons factories, despite overwhelm- ing evidence showing that Iraq intended to use the technology in its clandestine nuclear, chemical, biological, weapons and long- range missile programs. And yet, in 1991 President Bush stated flat out that not one U.S. firm supplied Saddam Hussein with equipment that enhanced Iraqi's military capability. Last week and this week I have shown that the Bush Administration actively participated in enhancing Iraq's military capability by watching and even encouraging the flow of billions in U.S. financial assistance and technology to Iraq. Any claim that the U.S. may have "inadvertently" helped to arm Iraq is a smokescreen to obscure the massive blunder that occurred during the coddling of Saddam Hussein. There is more to say about this. 129 ryliVTHIX-CHUHCHILL. 5903 HARPER ROAD • CLEVELAND, OHIO 44139 June 4, 1990 Mr. Taha Salman TECHCORP P.O. Box 8024 Baghdad, Iraq Subject: Glass Fiber Project - Export License After a lengthy debate with the U.S. Department of Commerce - Office of Export License, we were able to obtain their approval to export the technology for the E-Glass Continuous Fiber on the condition that we receive a "Letter of Assurance" from the Importer, Technical Corps for Special Projects, that neither the technical data nor the direct product thereof is intended to be shipped , either directly or Indirectly, to some specified countries, as per the list of countries in the attached letter text. To enable us to transfer the technology , you are kindly requested to send a "Letter of Assurance" as per the attached text. Very Truly Yours, A.T. Qadduml Project Manager Ref. File No. LT-01-023-90 Telephone (216) 246-7950 • Facsimile (216) 248-7981 • Telex 687-3219 130 KVf: Churchill Corporation JSOf/BaTper toad a^lacd, Chio 44139 Siijsct'; E-d»«» Continuous Fiber Plant-Export License Application NO.C120752 Letter of Assurance Ctantkfeeni Thi* is.to aa»ure yuo that neither the techlcal data nor the direct prodvet thereof from the nbove plant is Intended to be ahlpped, either directly or indirectly to the following countrlee: 1) tap try Croup Qs Romania 2) .> idfantry Croup Si Libya 3) . Soon try Group Wi &ingery, Poland 4) Country Croup Y: Albani a, Bulgaria, Czecho Slovakia,Estoni a German Democratic Bepubl ic.Laos ,La tvia n Lithuanian, Mongolian People Republic, U. S. S. R 5) .Cbuotry Croup Z: North Korea, Vict nam, Kampuchea, Cuba 6) ltjhsnistan ?)tWpl*'s Bapubllc of China 8) River (Kam A7) or ZIL truck Plants In the U.S.S. R Signet ur e: ®S^4^*v~-^*U Dwhtllcal Corps for Special Projects 131 UNITED BTATBS DBPABTMHNT OF OOMMERCI ■uriiu of export Administration WaahinQton, DC. B0330 Mr. A.T. Qadumml Matrix Churchhill Corporation 5903 Harper Road Cleveland, Ohio 44139 Dear Mr. Qadummii Pursuant to our recent telephone conversations I am informing you of the following. The Office of Technology and Policy Analysis informed in a that they concur with our determination regarding the 286 computer and peripherals on export licenso application C120752. This equipment is decontrolled under General License G- Deat and should be classified as 65650. The technical data for glass fiber production can be shipped under General License GTDR with a letter of assurance. The glass fiber equipment equipment qualifies for General License G-DeBt and should be classified as 6399 0. Temperature and process controllers that are serially . networked to the computer should be classified as 6599G and qualifies under General License G-Dest. The following item numbers identified in the equipment list provided by the applicant cannot be classified because of lack of technical parameters: 24, 49 ,78, 89, 90, 91, 92, 93, 99, 101, and 105. For these items a formal commodity classification should be obtained in order to determine whether they require a validated license. For further information please contact Lockett Vee in otpa-TTC at 377-1662 or Dale Jensen in OTPA-C8 at 377-0708. The statements made in this response are based on information from the otpa files for the export license application referenced above. 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Swiss authorities confiscated 30-40 blanks and eight ma- chine tools, which are used for centrifuge end cap forging, from Schaeublin plants. Of the fifteen machine tools that were or- dered, ten were reported as delivered. These centrifuge compo- nents and machines were suspected of being produced for the Tuwaitha Nuclear Complex (U.N. inspection report 11). It later was discovered that the complex was the research and develop- ment site for uranium enrichment. • According to a Tuwaitha U.N. inspection team, the Spanish firm Zayer was responsible for supplying 5 Zayer machining centers on January 9, 1989. These machines were financed by BNL-At- lanta for 303,144,945 Spanish pesetas. • The Italian firm Innocenti supplied high precision milling and turning machines. BNL-Atlanta funded 2,439,280,000 lira for 45 rolls of sectional mill. • The German firm Friedrich Deckel was responsible for supplying 5 units of universal boring machines and 4 milling machines with spare parts. BNL financed 755,745 DMZ for the 4 milling machines and spare parts and 2,407,363 DMZ for the 5 universal boring machines. • Neue Magdegurger was responsible for 6 center drive lathes and three large milling machines (U.N. inspection report 8). BNL fi- nanced 7,750,000 DMZ for the 6 lathes. • Matrix-Churchill supplied small components for the centrifuge prototype (U.N. inspection report 11). BNL-Atlanta financed 8,950,000 pound, for the lathes and $3,486,714 for 2 centrifugal water cooled water chillers. • Lurgi, a German firm, received more than 5,100,000 DMZ in loans from BNL-Atlanta for a Demineralization Plant and the training of Iraqi nuclear engineers. It was not until shortly after the invasion of Kuwait, that the German Foreign Office cancelled the permit allowing the training of these engineers. • The Swiss firm Bonaventure, supplied raw materials, machines, tools and accessories for the Iraqi nuclear program. BNL funded $2,616,000 for the raw materials and $5,188,582 for the equip- ment. 137 OFFICE MEMORANDUM date April S±_iQj_L TO Mr. Corxigan SUBJECT Lavoro from Thomas C. Baxter. Jr. , I followed up on your suggestion about a possible connection between Banca Nazlonale del Lavoro ("BNL") and the nuclear triggers that were seized in London. As you suspected, there is a connection. Apparently, Von Hedel (a former officer of BNL who is now cooperating with the government) says that one of the transactions done with Rafidain Bank at sone point referenced nuclear detonators. According to Von Wedel, this reference scared BNL away from this particular transaction, but it is possible that the lesson the Iraqis learned was to be generic in preparing the credit documentation. Thus, it is entirely possible that BNL financed some of this material. At any rate, I have been assured that those con- ducting the criminal investigation in Atlanta are looking into these connections, with a view to developing additional criminal charges. The resignation of the United States Attorney in Atlanta has led to a number of difficulties in that Investigation. These difficulties have been compounded by what is perceived as interference from the Justice Department in Washington. The press has also made a connection between BNL and the detonators. Attached you will find copies of two ancial Times articles doing just that. Finar &/SV Attachments cc: Messrs. Oltman Patrikis 138 •■■ Tuesday,Mat 19,1992 A15 Iraq Provides Names q Of 3 Firms That Aided Its A-Arms Program By Michael Z. Wise Sj«M M n» MM VIENNA, May 18—Iraq has giv- en the International Atomic Energy Agency the names of three foreign companies it described as directly involved in producing components for its nuclear weapons program, a senior agency official said today. In addition, a half-dozen more firms whose product* were used in the oncxlandeatine arms drive of President Saddam Hussein are listed in the latest report about agency ef • . forts to dismantle Iraq's nuclear ca- pability. Three are Swiss, two. Ger- 'man and one American. The U.S. firm, Hardinge Bros. Iqc ■ of Elmrra, N.Y., was named since the 'agency said a Super Precision lathe it 'manufactured was found at the al-At- 'heer complex southwest of Baghdad »and could have been intended for use : in producing weapons components, • The report said spindles and other parts of the lathe—a machine used in tool-making— were destroyed to make it unusable. [Robert E. Agan, president of Har- dinge Bros., said Monday that all lathes manufactured by Hardinge carry the trademark Super Precision but be said that his company had never had dealings with Iraq. [Agan said he had heard from U.S. officials that "an old, standard man- ual lathe* made by his company had been found at al-Atheer, but had been left there and not destroyed •because its technology was not crit- ical." He said "God only knows* how it had gotten there.] The IAEA earlier had identified a dozen other companies, most of them German, whose products were used in the Iraqi nuclear program. Last December, the Vienna-based U.N. agency published a list including the American chemical producer E.I. Dupont de Nemours & Co. Dupont said it had permission from the U.S. government to supply the material, a special lubricant that was used in centrifuge uranium-enrichment ma- chines that produce weapons-grade nuclear explosives. Iraq has now told agency inspec- tors that C. Plath of Germany, Schaubhn of Switzerland and Matrix 'Churchill of Britain manufactured small components for the centrifuge prototypes. Fifteen machine tools for centrifuge development were also procured from Schaublin, according to the U.N. list Maunao Zifferrero, the official overseeing agency operations in Iraq mandated by the U.N. Security Council, said the three companies all had direct transactions with Iraq on producing the centrifuge prototypes. Details of the equipment in Iraq have been given to the jovem- raenta where the firms are based, Apart from the three companies t&t made the centrifuge prototype components, agency officials said they could, not be certain in other cases whether the firms knowingly supplied the products to Iraq or whether they were procured through Intermediaries. L German law enforcement author* Ities have begun investigations into possible export-control violation* by several firms believed to have had dealings with Iraq. Much of the equipment found at al-Atheer was destroyed by the Iraqi army on IAEA orders during the 11th inspection by agency ex- perts April 7-15. Eight buildings at the al-Atheer complex, covering a surface area of about 35,000 square yards, were blown up or filled with concrete and 29 equipment items rendered useless. Agency inspectors have found Iraqi nuclear specialists had a wide- ranging, highly successful interna- tional procurement network, using other Iraqi establishments as buyers and often working through foreign intermediaries to prevent detection. The ease with which Iraq was able to obtain sensitive technology has spurred calls for tighter export con- trols. Last month, 27 supplier coun- tries agreed on a new set of guide- lines to restrict the transfer of ad- vanced items that can be used for peaceful purposes as well as for pro- duction of weapons. The agreement includes the United States, Britain, Germany, Prance, Switzerland and Russia. Iraq has resisted providing infor- mation about procurement of mate- rial or the sources of technical advice for its nuclear program. The IAEA continues to press for it, arguing that submission of procurement data is an essential part of compliance with U.N. Security Council resolutions setting the terms for a cease-fire in last year's Persian Gulf War. 139 PRQDEEE PROUOUCTl ELECTRICAL STEEL STRIP AMOUNTi USDOLLAR 4,207.070/-l/ , \ PLEASE INFORM BY RETURN TELX YOUR REACTION TO ENABLE'US TAKE THE NECESSARY ACTION REGARDS BANKING DEPT3 OURREF^S-B-U MARKAZI BAG COL TEST 05676 4979333 BNL UI FROM CENTRAL BANK OF IRAQ BAGHDAD DATE 10/11/1983 TO BANCA NAZIONALE DEL LAVORO ATLANTA GEORGIA TEST 03727 ATT MR CHRIST DROUGAL AND MR PAUL VON WEDEL REF TO NTL NO 2 DD 6/10/88 STOP WE LIST HEREUNFDER THE PATEEE PARTICULERS OF CONTRACT WHICH WE INTEND TO OPEN ITS LC THROUGH YOUR GOOD BANK CONTRACT NO ABA CONTRACT DATRED 6/9/83 S SUPPLIER: MATRIX CHURCHILL LIMITED P 0 BOX 39 FLETCHAMS TEAD HIGHWAY COVENTRY CV4 9DA UK BUYER* STATE ESTABLISHMENT FOR HEAVY ENGINEERING EQUIPMENTS BAGHDAD PROUOUCT: VERIONS CNC MACHINING CENTER AND CNC LATHES AMOUNT STERLING 8950O00 POUND STERLING STOP PLEASE INFORM BYRETURN TELEX YOUR REACTION TO RENABLE US TAKE THE NECESSARY ACTION REGARS BANKING DEPT 3 OURREF 5-B-13 MARKAZI BAG COL TEST 03727 4979333 BNL UI FROM CENTRAL BANK OF IRAQ BAGHDAD . DATE 10/11/1988 TO BANCA NAZIONALE DEL LAVORO ATLANTA GEORGIA TEST04562 140 FROM CENTRAL BANK OF IRAQ BAGHDAD 13.11.1938 TO . BANCA NAZIONALE DEL LAVORO ATLANTA TEST 16305 NOAMOUNT ATT MR CHRIST DROUGAL AND MT PAUL VON WEDEL REF TO THE MTL < NO 2) D D 6.10.83 STOP WE LIST HEREUNDER THE PARTICULERS OF CONTRACT WHICH WE INTENED TO OPEN ITS LC THROUGH YOUR GOOD BANK CONTRACT NO 1939 CONTRACT D D 17TH AUG 1988 SUPPLIERS METRIX CHURCHILL LIMITED PO BOX 39 FIETCHMSTEAD HIGHWAY COVENTRY CV 4 9 DA UK BUYERS MINISTRY OF INDUSTRY STATE ESTABLISHMENT FOR HEAVY ENGINERUNG EQUIPMENT BAGHDAD * f Ct$ -_7S, PRODUCT MARHINES KITS SUPPL'YPER__15»89--^' AMOUNT STERLING 31.00«,00;^r~POUND STERLING STOP PLS INFORM BY RETUR N TELEX YOUR RECTION TO ENABLE US TAKE THE NECESSARY ACTION REGARDS BANKING DEPT 3 OUREF 5.B MARKAZIBAGHDAD COL TEST 16805 NOAMOUNT 4979333 BNL UI RESTRICT 141 RX-BD2\o503 EST 01/27/39 4979333 BNL UI JAN 27 1939 0526 497?333 BNL UI =212296B CNBK IK FROM CENTRAL BANK OF II DATE 27/1/1939 DATE 27/1/1939 TO BANCA NAZIONALE DEL ATT MR CHRIST DROUOAL i TEST K0X730 NBOAMOUINT REF TO MTL NO 3 DATED 3 DFEC 1983 WE LIST HEREUNDER THE PARTICULARS OF CONTRACT WHICH WE INRTEND TO OPEN ITS CONFIRMED LC THROUGH YOUR GO OD BANK SUPPLIER BONAVENTURE EUROPE INC P 0 BOX 314.1211 GENEVA 12 SWITZERLAND BUYER STATE RESTABLISHMENT FOR HEAVY ENGINEERING EQUIPMENT BAGHDAD IRAQ PROUDUCT MACHINES AND ACCESSOR IRS AND TOOLS AMOUNT USD 5,133,532/- CONTRACT NO 939/59/1 PLEASSE INFORM US YOUR AGREEMENT TO FINANCE UNCDER MTL 3 DIRECTLY OR ACCORDING TO OPTION B TO COVER THE LCS THROUGH OTHER BANKS IN ORDER TO ENABLE US TAKE THRE NECESSSRY ACTION REGARS BANKING DEPT 3 OUR REF 5-B MARKAZI BAG 4979333 BNL UI 49793x3 BNL UI F-RGM CENTRAL BANK OF IRAQ BAGHDAD DATE 27/1/1939 DATE 27/1/1939 xc TO BANCA NAZIONALE DEL LAVORO ATLANTA GEORGIA ATT MR CHRIST DROUGAL AND MR PAULzVON WEDEL TEST 06796N0AM0UNT 142 RJC-DD2 0002 EST 03/14/89 R7771 4979333 BNL UI MAR 14 1989 0003 4979333 BNL UI FROM CENTRAL BANK OF IRAQ BAGHDAD 13/3 TO BANCA NAZIONAL DE LVORO ATLANTA GEORGIA TEST 04683 ON 13/3 ATT MR CHRIST DROUGAL AND MR PAUL VAN WEDEL REF TO MIL NO (3) DATED 3 DEC 1988 WE LIST HEREUNDER THE PARTEEE PARTICULATS OF CONTRACT WHICH WE INTEND TO OPEN CONFIRMED L/C THROUGH YOUR__gOOD BANK MTL (3) DIRECTLY OR ACCORDING TO OPTION B TO COVER THE LCS THROUGH OTHER BANKS IN ORDER TO ENABLE US TTAKE THE NECESSARY ACTION REGARDS BANKING DEPT 3 OUR REF 5-8 COLTEST 04685 ON13/3 4979333 BNL UI 4979333 BNL UI -212296B CNBK IK TO BANCA NAZIONALE DEL LAVORO ATLANTA GEOOIA ATT MR CHRIST DROUGAL AND MR PAUL VAN WEDEL REF TO MTL NO <3> DATED 3 DEC 1988 WE LISEEE LIST HEREUNDER THE PARTICULARS OF CONTRTEEE CONTRACT WHICH WE FROM CENTRAL BANK OF IRAQ BAGHDAD 13/3 143 «X-DD2 0002 EST 12/03/83 4979333 BNL UI DEC 08 1988 0516 4979333 BNL UI 4979333 BNL UI 4979333 BNL UI =212558 CN BK IK FROM CENTRAL BANK OF IRAQ BAGHDAD DATE: 8-12-1983 TO: BAMCA NAZIONALE DEL LAVORO ATLAMTA GEORGIA USA TEST: 07772 ON 3-12 FOR NO AMOUNT ATT MR V CHRIST DROUGAL AND MR POUL VON WEDEL REF TO MTL NO (2) DATED 6,OCT 1933 WE LIST HERUNDER THE PARTICULARS OF V X XX CONTRACT WHICH WE INTEND TO OPEN CONFIRMED L/C THROUGH YOUR GOOD BANK UNDER ABOVE MENTIONED AGREEMENT -SUPPLIER SCHAU BLlhvfABRIQ UE DEMACHINE3 SCH AU BLIN S.A BEVILARD SS^TYERLAND^ BUYER STATE ESTABTrWflMENT FOR HEAVYENGINEERING EQUIPMENTS BAGHDAD PROUDUCT CNC MACHINES AND SPARTS AND READY PARTS AMOUNYT S FR 7793,533/- CONTRUCT NO 16/11/88 PLS INFORM US YOUR AGREEMENT TO FIANANCE UNDER MTL 2 DIRECTLY OR ACCORDING TO OPTION B TO COVER THE L/CS THROUGH OTHER BANKS IN ORDER TO ENABLE US TAKE THE NECESSARY ACTION REGARDS BANKING DEPT 3 OUR REF 5-B-73 MARKAZI BAGHDAD TEST:07772 ON 8/12 FOR NO AMOUNT 4979333 BNL UI 4979333 BNL UI =212558 CN BK IK =212558 CN BK IK THEY DISCONNECT restr: 144 R5366 RX-DD2 0022 EST 11/14/88 4979333 BNL UI NOV 14 1938 0030 4979333 BNL UI =212558 CN BK IK FROM CENTRAL BANK OF IRAQ BAGHDAD 14.11.1988 TO . BANCA NAZIONALE DEL LAVORO ATLANTA GEORGIA TEST 17794 ATT MR REF TOQlTL NO OF CONTF luijAL AND MR PAUL VON UIEDEL (2) J7 D 6 OCT 1933 WE LIST HEREUNDER THE PARTICULERS WE INTENED TO OPEN ITS LC THROUGH YOUR GOOD BANK ERIEDRICH DECKEL AKTIENGESELLSCHAFT POST FACH 700423- bL_z3> BUYERS: MINISTRY OF INDUSTRIES STATE EST FOR HEAVY ENGINEERING EQUIPMENT BAGHDAD PRODUCT: 5 UNITS UNfgEBCAL ANlP&pRING MACHINES AMOUNT DEUTSCHE HeggLaAajsAa/^s C0NTRACT--ttt}-86vUs§/62 DD loTSt.88 PLS^INFORM US Y0URNW3REEMENJ TO FINANCE UNDER MTL 2 DIRECTLY OR ACORDING TO OPTION BJC8^C0VER THE L/CS THROUGH OTHER BANKS IN OROERTO ENABL^JJS_-TA1CETHE NECESSARY ACTION REGARDS BANKING DEPT3 UUHkh 57Tj MARKAZI BAGHDAD COL TEST 17794 NOAMOUNT ON 13.11 4979333 BNL UI X RESTR? 111/ INTEND TO OPEN ITS L/C THROUOH YOUR GOOD BANK SUPPLIER FRIDRICH DECKEL AKTIENOESELL SOFT PAST FACH 700428 PLINOANSERSTRABE 150 D 8000 N X HUNCHEN 701 W 0^/ BUYER MINISTRY TJFMNDUSTRY ISTATE ESTABLISHMENT FOR HEAVY ENGINEERING EQUIfttENJS PROUDUCT 4^4?u!InOM&CHINES WITH SPARE PARTS AMOUNT D(ff 755^745/01 CONTRACT NO 10 /37/, PLS INFORM OS-¥0UR^A0REEMENT TO FINACE UNDER(MTL (3) DIRECTLY OR ACCORDING TO OPTION B TO THE L CS THROUGH OTHER BANKS IN ORDER TO ENABLE US TAKE THE NECESSARY ACTION REGARDS BANKING DEPT 3 OUR REF 5-B COLTEST 05723 ON 13/3 4979333 BNL UI 4979333 BNL UI -212296B CNBK IK THEY DISCONNECT Elapsed tint* OOi lit 18 PRINTED AT 0013 EST 03/14/89 9H 88/zi/u isa siio xv aaiNiad OZ:SO:00 »<"T* P»Sd«l3 X33NN03Sia A3H1 woocnaoM via Aid3a XI X8N0 V 96ZZJ2 in "1N3 CCC6.L6.i7 ID 1N8 IT'OT NO 1S31 "lOO izvxavw zi'8'c daano c idaa onixnvb saavosa aois noiiov Aavs333N 3H1 3XVJL Sn 318VN3 01 NOI13W3H anOA X3H31 Nani3a A8 UiaOdNI 3SV31d -/ooo'ooi's xavw 3Hosin3a inoowv ova i asivn V3ianavi3 aod SNivai omi iNvnd Nouvznvasniuav nonaoad avaHOwa iN3Wdine3 ONia33NioN3 aawsh aod 3siada3iN3 3iv±s :a3Ana < o a d > ANwuiaso do onanaaa nya303d ivw /iadnxNvad 0009 s 33-nv 10am Hawo ioann :a3iiddns »N«a aooo anoA HonoaHi 01 Sll N3d0 01 aN31NI 3M H3IHM lOVaiNOO dO Sa3"lD0Iiayd 3H1 asaNn3a3H isn 3m aois B86t'0i*9 a a cz> on iN3W33aov nw 01 d3a "I303M noa inwd aw qnv iwonoaa lsiaino aw nv ida 1 II *0I NO Z9SfrO 1S31 vioaoso vinwhv oaoAvn isa sinwoizvn vonvb 01 8861'IImZ\ avai-iova ovai do xNva "waiN33 woad XI X3N0 V 96Z2I2 10 1N3 C8G6Z6V £110 8861 ZX AON in 1N3 C8C6Z.6V 88/21/11 isa 6010 zaa-xa 147 R8304 RX-DD2.0445 EST 04/09/1 4979333 BNL UI FROM CENTRAL BANK OF IRAQ BAGHDAD APR 09 1989 0453 4979333 BNL UI ■212296B CNBK IK * 7. Vu1,lW4.s~2 '■ APRIL 9 1989 TO . BANCAN NAZIONALE DEL LAVORO ATLANTA TEST 20935 FOR 2467644 ON 9.4 ATT MR. C. DROUGUL NEW AA) PLEASE NOTE THAT UNDER OPTION (B) OF THE FACILITY WE HAVE TODAY EXECUTED THE FOLLOWING VLUE 11.4.89 LC NQ==8AC3/4'*9 VALID FOR 6v«Ot4WS^STOP BB> PLS CREDIT OUR A/C WITH MANTRUST NY VLUE 11.4.89 WITH USD 2,467,644/52 BEING THE EQUIVALENT OF PESETA 2S6000000/- AT THE RATE OF 15 115.90 AND CONFIRM EXECUTION TO INVEST DEPT ATT SA AZIZ STOP REGARDS MARKZIBAGHDAD COL TEST 20935 FOR 2467644 0N9.4 16,000.000/- AEA^WQO 163 4979333 BNL UI 4979333 BNL UI 'THEY DISCONNECT Elapsed tint* 00104:45 K&232020/- FAVOUR M/S MESSRS TECHNO 28.2.1989 STOP PLS AMEND THE NAME OF i. T. S. AEEE I.S.T.S.P.A RESTRITED 148 4979333 BNL UI 212203B CN BK IK FROM CENBTRAL BANK OF IRAQ BGAHADDA 9.1.89 TO:BANCA NAZIONALE DEL LAVORO ATLANTA. TEST: 26975 ■MR>\ CHIRST DROUCAL AND MR. PAUL VON WEDEL . REF TO MTL (3)^DATED 3. DEC. 1988 WE LIST HEREUNDER THE PARTICULARS TRACT WHICH WE INTEND TO OPEN ITS L/C THROUGH YOUR GOOD BANK. SUPPLIER: BUYR: G ZAYER.S.A APORTi vi iuma- 163-P.DE. VERGARA . 7.O10S0 ESPATI MINISTRY OF INDUSTRIES / STATE EST. FOR HEAVY ENGINEERIN X PRODUCT: AMOUNT: G EQUIPMENT. 5 ZAYEft MACHINING CENTERS. SPANISH PESETA 303,144,945/- CONTRACT NO.: 88/65/76 PLS INFORM US YOUR AGREEMENT TO FINANCE UNDER MTL (3) DIRECTLY OR ACCORDING TO OPTION -B- TO COVER THE L/CS THROUGH OTHER BANKS IN ORDER TO ENABLE US TAKE THE NECESSARY ACTION . REGARDS BANKING DEPT 3. OUR REF 5-B-116. MARKAZIBAGHDAD 4979333 BNL UI 212203B CN BK IK RESTRiOTEO 149 reST 14766 ON 16/3 ATT MR CHRIST DROUGAL AND MR PAUL VON WEDEL ✓ REF TO MTL NO O) DATED 3 DEC 1988 WE LIST HERUNDER THE PARTICULARS OF CONTRACT WHICH WE INTEND TO OPEN CONFIRMED LC THROUGH YOUR GOOD BANK SUPPLIER INNNEEE INNSE/ INNOCENTI SANTEUSTA - CCHIO P 0 BOX 368- 20-25127 BERSCIA I TALY BUYER STATE ESTABLISHMENT FOR HEAVY ENOINERRING EQUIPMENT PROUDUCT 1 43 ROLLS FOR SECTION MILL '* AMOUNT I T L 2.439,280.000/- CONTRACT NO OFFER NO 87809 DT 9/11/1988 PLS INFORM US YOUR AGREEMENT TO FINANCE UNDER MTL (3) DIRECTLY OR ACCORDING TO OPTION B TO COVER THE L/CS THROUGH OTHER BANKS IN ORDER TO ENABLE US TAKE THE NECESSARY ACTION REGARDS BANKING DEPT 3 OUR REF 3-B COLTEST 14766 ON 16/3 4979333 BNL UI n RESTRICTED 150 R3232 4979333 BNL UI RX-DD2 0623 EST 11/09/88 ^-^A-^^1—-^* 212296 A CNBK IK FROM CENTRAL BANK OF IRAQI BAGHDAD DATEI3-U-1988 TO BANCA NAZIONALE DEL LAVORO ATLANTA TESTi 26793 ON 3-11-1988 NO AMOUNT ATT .MR CHRIST DROUGAL AND MR. PAUL VON WEOEL REF TO MTL N0(2) D.D 6-10-1988 STOP WE LIST HAVE UNDER THE PARTIEULERS OF CONTRACT WHICH WE INTEND TO OPEN ITS L/C THROUGH YOUR GOOD BANK SUPPLIER:- NEUE MAGDEBURGER WERK ZEUMASCHINENFABRIK GMBH 6920 SINSHEIM FED REG OF GERMANY BUYER «- MINISTRY OF INDUSTRY /STATE ESTABLISHMENT FOR HEAVY ENGINEERING EQUIPMENT PROUDUET « SIX CENTER DRIVE LATHES CNC 60 H M XXXXXXXX 604M. AMOUNT :D.M. 7,750.000 DEUTSCHE MARK STOP PLEASE CONFIRM BY RETURN TELEX YOUR REACTION TO ENABLE US TAKE THE NECESSARY ACTION REGARDS BANKING DEPT 3 SEC 3 .B MARAKZI BAGHDAD TEST«26795 ON 5 -11-1988 NO AMOUNT. 4979333 BNL UI 212296 A CNBK IK 0638 11/03 THEY DISCONNECT Elips«d tim« 00107129 PRINTED AT 0630 EST 11/05/88 151 IRAQI WEAPONS COMPLEXES AND GOVERNMENT PROCUREMENT FRONTS The Reagan and Bush Administrations approved export licenses for numerous Iraqi end users that were engaged in weapons manu- facturing. While it may have made sense to help Iraq militarily during its war with Iran, inexplicably, many of the licenses were approved after the cease fire in August 1988. It is impossible to know exactly which weapons program(s) bene- fitted from U.S. equipment purchased by a weapons complex such as the Nassr State Enterprize for Mechanical Industries (NASSR) which produced weapons ranging from ballistic missiles to aerial bombs to prototype centrifuges tor the nuclear weapons program. Huge weapons complexes, sometimes containing as many as 100 buildings and covering a hundred square miles, often produced or were involved in producing components for several weapons sys- tems at a time. An intelligence report dated July 1990 entitled, "Beating Plow- shares into Swords: Iraq's Defense Industrial Program" states: "Some state establishments—sometimes called enterprises, organizations or gen- eral establishments—are responsible for the production of several types of weapons systems or components and control facilities at several locations." In addition, some civilian production could have taken place at any particular complex. For example, many of the buildings at the Badr General Establishment were producing parts for the secret centrifuge program. At the same time, some of the buildings at the complex were involved in producing civilian consumer goods. This point is brought home by a June 1989 intelligence report which states: 'The Ministry of Industry and Military Industrialization (MIMI) planned to inte- grate proposed specialty metals, vehicle assembly, and other manufacturing plants directly into missile, tank, and armored personnel carrier industries." Combining military and civilian production in the same complex made for ideal cover for Iraq's many covert weapons programs. It was also rare for the Iraqis to allow government officials to visit factories. When visits were approved they were well orchestrated in order to avoid providing government officials with a complete picture of the activities at the complex. In fact, the only way to know for sure if U.S. equipment was uti- lized for civilian purposes as promised by Iraq was to visit the fac- tory and check the equipment in person. This is called a post-in- stallation check. Out of 771 licenses approved between 1985 and 1990 U.S. offi- cials did ONE post-installation check and Iraq was notified well in advance of the visit. This scheme made it especially hard for export licensing officials in the U.S. and Europe to determine the exact nature of the business being conducted by the end user in Iraq. A late 1989 U.S. intelligence report states: ". . . many entities are false end users, passing the materials acquired from for- eign suppliers directly to enterprises involved in military projects, including chemi- cal and triological warfare." A November 21, 1989 State Department memorandum discussing the difficulty on licensing exports for Iraq states: ". . . we are still left with no clear indication of how to proceed on the majority of cases . . . The problem is not that we lack a policy toward Iraq; we have a policy. However the policy has proven very hard to implement . . ." 152 The memo goes on to state: "Complicating factors in decision making include: (1) A presumption by the Intel- ligence Community and others that the Iraqi government is interested in acquiring a nuclear explosives capability; (2) Evidence that Iraq is acquiring nuclear-related equipment and materials without regard for immediate need; (3) The fact that state enterprises . . . are involved in both military and civilian projects; (4) Indications of at least some use of fronts for nuclear-related procurement; (5) The difficulty in successfully demarching other suppliers not to approve exports of dual-use equip- ment to state enterprises and other ostensibly non-nuclear end users." The confusion did not abate. A May 1990 State Department memo discussing the inherent conflicts in the export licensing pol- icy toward Iraq states: "Formulating such a policy will be complicated because end-users which engage in legitimate non-nuclear and non-missile related end uses also procure commodities on behalf of Iraq's nuclear and missile programs. Because the Iraqi procurement network serves both nuclear and missile programs, one cannot distinguish between purchasers of nuclear concern and those of missile concern." The dangers of not knowing how U.S. equipment was to be used is highlighted by a 1990 State Department memo which states: "An initial review of 73 cases in which licenses were granted by Department of Commerce (DOC) or DOC/DOD from 1986-1989 shows that licenses were granted for equipment with dual or not clearly stated uses for export to probably prolifera- tion-related end-users in Iraq." In other words the Reagan and Bush Administrations approved export licenses for Iraq knowing that the equipment could easily be diverted for Iraq's missile program or its nuclear, chemical and bio- logical weapons program. To illustrate this point, I have listed below Iraqi end users that were engaged in weapons production as identified by the U.S. intel- ligence, the United Nations Special Commission on Iraq or from other sources such as books on Iraq. Many of these complexes and procurement fronts received U.S. export licenses and had numerous U.S. suppliers. In addition, many received BNL-Atlanta money. The U.S. intelligence community had a pretty good idea of which Iraqi complexes were major weapons producers, although they had an incomplete picture as to what weapons were produced at these complexes. The U.N. Commission work in Iraq proved that Iraq dedicated a much large portion of its industrial capacity to weapons production than had been previously thought. For example, the se- cret nuclear weapons program employed about 13,000 people and work on the project took place at over a dozen Iraqi complexes. The following is a list of MAJOR weapons facilities as identified by U.S. intelligence, the United Nations and public sources. While there may be civilian production at these facilities, weapons produc- tion is main activity. Nassr State Establishment for Mechanical Industries (NA55R) Major player in nuclear weapons program (uranium enrichment), production of modified Scud missiles and components, other ballis- tic missiles, surface to air missile called Ababel, conventional bombs, cannon barrels and components for other weapons pro- grams. Received U.S. export licenses. Many U.S. suppliers. Known recipient of hundreds of millions in BNL-Atlanta loans to Iraq. 153 Badr General Establishment (BADR) Nuclear weapons program—development and testing of cen- trifuges. Received U.S. export licenses. U.S. suppliers. Known re- cipient of over $15 million in BNL-Atlanta money. Saddam State Establishment (SADDAM) Work on Condor II ballistic missile, nuclear weapons program, long-range howitzers, assembly of tanks and other weapons related activities. Received U.S. export licenses. U.S. suppliers. Known re- cipient of several million in BNL-Atlanta loans to Iraq. Received Export-Import Bank guarantees. Al Kindi Research Complex (formerly SAAD 16) Main missile research center in Iraq, also work on nuclear weap- ons program. Received at least 16 U.S. export licenses. Known re- cipient of BNL money. Salah Al Din State Establishment Iraq's major electronics complex, produces military communica- tions and guidance systems, produces radar, also work for missile programs and other weapons programs. Received U.S. export li- censes. Many U.S. suppliers. Known recipient of BNL-Atlanta money. Al Qaqaa State Establishment (AL QAQAA) Iraq's major explosives and rocker fuel factory. Filling station for ballistic missiles, work on Condor II ballistic missile, nuclear weap- ons program and explosives for conventional bombs. Received U.S. export licenses. U.S. suppliers. Known recipient of several million in BNL-Atlanta loans to Iraq. In 1989 3 employees of AL QAQAA allowed to attend U.S. government sponsored symposium on nu- clear detonation. Hutteen State Establishment (HUTTEEN) Test site for Condor II ballistic missile, nuclear weapons pro- gram, conventional weapons production. Received U.S. export li- censes. Many other U.S. suppliers. Known recipient of several mil- lion in BNL-Atlanta money. Al Qadisiyah State Enterprise for Electrical Industries Nuclear program involvement, Super Gun. Received U.S. export licenses. Export-Import Bank guarantees. Many U.S. suppliers known recipient of BNL-Atlanta money. Al Yarmuk State Establishment Conventional weapons production including mortals and small arms. Known recipient of BNL-Atlanta money. Auqba Bin Nafi State Establishment Nuclear weapons program—machining of components for cen- trifuges; repair and production of tank parts. Al Atheer, Tarmiyah, Al Tuwaitha Nuclear Research Center Main complexes involved in secret nuclear weapons program. Prime development and testing site for various parts of nuclear weapons program. Known recipient of millions in BNL-Atlanta money for purchase of presses used to shape nuclear explosive 155 chemical weapons precursor. Received U.S. export licenses. Recipi- ent of over $60 million in BNL money. Petrochemical Complex III (PC-3) Code name for nuclear weapons program. Scientific Research Center Support for various weapons programs. Received U.S. export li- censes. Space Research Center Support for various weapons programs. Received U.S. export li- censes. State Establishment for Oil and Gas Refining I State Company for Oil Projects Procurement of chemical weapons related components and pro- duction equipment. Received U.S. export licenses. Received Export- Import Bank guarantees. Technical and Scientific Materials Division (TSMID) Biological warfare support and numerous other military related activities. Received 10 U.S. export licenses. Iraqi Airways Heavily involved in procuring and transportation of equipment and technology weapons programs. Received U.S. export licenses. State Establishment for Automobiles Industry (SEAI) Used to procure parts for Super Gun project, and self propelled howitzers. Works closely with Saddam State Establishment. Re- ceived U.S. export licenses and recipient of BNL money. Oil Equipment Company Sometime front for procurement of equipment for nuclear, chemi- cal weapons program and ballistic missile program. Received U.S. export licenses. State Organization for Chemical Industries I State Establishment for Pesticide Production Primarily responsible for chemical weapons program. Received U.S. export licenses. U.S. suppliers. New Tires Project I State Machinery Trading Company I Iraqi Trad- ing Company I Al Hilal Industrial Company I State Enterprize for Rubber Industries I Special Projects Company Sometime procurement fronts for weapons programs including ballistic missile program. Received U.S. export licenses. Recipients of BNL money. Received Export-Import Bank guarantees. 156 S/23215 English Page 22 0) E E 1_ O) o i_ Q. C/) LU '5- z AGE z DC >- CT ERG (/) LU < F LU UL OMIC ZD _i IAN o < 2! < 157 S/23215 English Page 23 E U) o c £ sz o iZ c LU o O) 3 C o o "5- Z Q d O O CC < a. a. O) SSAR WORKS ■ Machining Al parta (Typa 2) • Test frames ■CMI Contractl Al Furat ProJ« ODAM WORK •Machining Al parta (Typa 1 . ifi OR & DAURA - Partners In engineering Al Furat proj < 2? i - f E 2> J If — 2 3 *2' 0 < CD 2 la I i •if! 60-509 0 - 93-5 158 Iraqi Weapons Plants 159 SPACE RESEARCH CORPORATION'S U.S. ACTPVTTIES This report will focus on the U.S. role in facilitating the activities of ballistics genius Gerald Bull and his firm Space Research Cor- poration (SRC). I will show that the Commerce Department granted SRC export licenses to obtain a powerful computer and missile engineering software that was used to design a space launch rocket and the projectile fired from the Super Gun. I will also provide information on several other U.S. firms were involved in SRC military projects in Iraq. In previous reports I detailed how Iraq embarked on a massive military industrialization program designed to make it self-suffi- cient in the production of weapons. The Ministry of Industry and Military Industrialization (MIMI), under the direction of Saddam Hussein's son-in-law Hussein Kamil, was given the responsibility for achieving Iraq's ambitious military industrialization program. MIMI was responsible for all phases of weapons production ranging from research and development to erecting plants, and producing guns, bombs, cannons and missiles. In order to produce the most modern and sophisticated weapons, Iraq needed Western technology. But that task was made difficulty because the technology needed to produce the most advanced weap- ons, including nuclear, chemical and biological weapons, and long- range ballistic missiles, was prohibited for export by most Western nations. Iraq overcame this barrier by establishing a clandestine network of front companies to procure Western technology. Iraq established front companies in the U.K., Spain, Italy, France, Belgium, Germany, Switzerland and the United States to mention a few. Under the control of MIMI, these firms sought out Western technology that could be used to produce weapons ranging from pistols, to howitzers to ballistic missiles. Financing for Iraq's procurement network came from Iraqi oil sales, government guaranteed export promotion programs, and to a lesser extent, from commercial banks. The largest source of com- mercial bank funds for Iraq's military technology procurement net- work was the Banca Nazionale del Lavoro. The Atlanta branch of BNL loaned over $2 billion to MIMI, much of it funneled into Iraqi front companies. In fact, at least five Iraqi front companies received direct loans from BNL totalling nearly $100 million. On top of those loans, the U.S. Attorney's Office in Atlanta estimates that firms in the procurement network utilized about $700 million in BNL funds to purchase equipment and tech- nology in Europe. MIMI or entities under its control used the remainder of the BNL loans to purchase a petrochemical complex, a semiconductor factory, computers, scientific instruments, chemicals, steel, alu- minum, iron ore, machine tools and other goods from hundreds of firms in Europe and the U.S. While Iraq was quite successful in obtaining Western technology, it still faced a serious barrier to achieving its military industrial- ization goals. Although Iraq has the best educated population in the Middle East, it had little expertise in building weapons. Given Iraq's ambitious plans, a lack of expertise in building weapons sys- tems was a formidable obstacle. Iraq not only had little experience 160 in producing conventional weapons such as cannons, and tanks, it had little idea how to build more advanced weapons such as ballis- tic missiles and nuclear weapons. This obstacle did not deter Saddam Hussein. MIMI contracted with hundreds of foreign firms to provide the technology and know how to produce weapons. One of the most important foreign firms contracted by MIMI was Gerald Bull's Space Research corporation. Ironically, it was Bull's relationship with the brutal dictator Sad- dam Hussein that earned him the most notoriety. In March 1990 Gerald Bull, the famous ballistics expert, was as- sassinated outside his apartment in Brussels, Belgium. His death marked the end of a brilliant and often controversial career. Bull, who held dual Canadian and U.S. citizenship, helped to develop one of the world's most technologically advance long-range howitzer and helped to develop advanced shells to fire from the deadly gun. He also spent several months in a U.S. jail for supposedly illegally exporting munitions technology to South Africa. In the 1960's Bull became famous for developing the world's larg- est cannon in a joint U.S.-Canadian government project called the High Altitude Research Project or HARP. This gun was capable of firing a projectile hundreds of miles into the air and it was Bull's dream to launch satellites into space with the gun. The HARP project was eventually moth balled after the U.S. military decided to cut funding for the program. While Bull went on to develop ad- vanced long-range howitzers, production of the super gun remained a dream of his. Gerald Bull's first U.S. operation went into bankruptcy in the early 1980's after he was put in jail for illegally exporting 155 mil- limeter howitzer technology to South Africa. Bull was very bitter over his imprisonment because he believed that he was a partici- pant in a secret U.S. government policy to transfer 155mm tech- nology to South Africa. After leaving jail, Bull moved his weapons engineering firm, which had been located along the U.S.-Canadian border, to Brussels, Belgium. He also established a firm in Geneva. SRC employed nearly a hundred persons made up mainly of engi- neers, mathematicians, and ballistics experts. Several Americans, long-time associates of Bull's from the HARP project, worked for SRC in Belgium. Even though he had been jailed in the U.S., Bull still wanted to export U.S. military technology. In order to obtain State Depart- ment munitions control licenses, Bull established a firm in the Bal- timore, Maryland called the Space Research Corporation of Mary- land. The owner of the firm is listed as Michel Bull, one of two sons connected with Space Research Corporation. The articles of incor- poration for the firm state: 'The purpose for which the corporation is formed are to manufacture, buy, mar- ket, sell, distribute, export or otherwise deal and trade in defense products . . ." In the middle 1980's Space Research received State Department munitions control licenses for a complete 155 millimeter towed- howitzer system for the Government of China. Space Research's China venture, which lasted several years, fit well into the Reagan/ Bush Administration policy of enhancing China's military capabil- ity. Apparently all was forgiven. 161 After the China venture, Space Research entered into a joint ven- ture in Spain where they also work on the 155 millimeter howitzer. In January 1988, Hussein Kamil, the head of Iraq's military indus- trialization program, invited Gerald Bull to visit Iraq to discuss po- tential contracts for weapons projects. In the coming months Space Research signed over a dozen contracts to work on various weapons projects including: —a factory to produce 155 millimeter shells and the fuzes to deto- nate the shells; —a project to develop and eventually produce 155 & 210 millimeter self-propelled howitzers; —Project Bird, a rocket comprised of five SCUD missile bundled to- gether, which was supposedly slated to launch satellites; —the development of a small anti-aircraft rocket. In all, Space Research was involved in dozens of weapons related projects in Iraq. Space Research also established a branch office in Baghdad. In fact, a December 1989 intelligence report on Iraq's military technology procurement network identifies Space Research Corporation's Baghdad office as a part of Iraq's procurement net- work. Earlier reports identify SRC as part of Iraq's procurement network. As I stated earlier, Michel Bull is listed as the owner of the Space Research Corporation of Maryland. Steven was a director of Space Research Corporation of Belgium. Both worked with their fa- ther at Space Research in Belgium. Gerald Bull's brush with U.S. legal system not only bankrupted his firm and made him bitter to- ward trie U.S. government, it had a profound influence on his sons, Steven and Michel. Since Space Research planned to continue to apply for U.S. mu- nitions control licenses, both brothers, as well as several other former Space Research employees told the Committee recently that they thought it was in their best interest to keep the U.S. govern- ment informed of their activities. When opportunities in Iraq began to blossom in early 1988, Michel Bull, Christopher Ohly, the U.S. attorney for Space Research, and another American that worked for Dr. Bull, approached the State Department to inquire as to the U.S. policy toward Iraq. The meeting was held in March/April 1988 at the State Depart- ment's Office of Munitions Control (OMC). The three Space Re- search employees informed the State Department that they wanted to work on several conventional weapons projects in Iraq, namely the howitzer project and shell factory. They specifically asked if the State Department had any objections to such activities. The State Department official, who recently verified the content of the meeting, informed the SRC officials tnat the State Depart- ment would not grant munitions control licenses while the Iran- Iraq war was still ongoing, but that the Department could make no determination about post war policy toward Iraq. The State De- partment official stated that he would inform his superiors about the meeting. There were additional meetings between SRC employees and the State Department in 1988 and 1989 related to munitions licenses for other countries. During these meetings Space Research was never informed that the State Department objected to its activities 162 in Iraq. The five Space Research employees interviewed by the Committee all believed that they were following U.S. policy in Iraq. That is, until SRC got involved in Super Gun and the space launch rocket. Both Steven and Michel Bull, as well as other Space Research employees have told the Committee that they objected to the Super Gun project. It was Gerald Bull's dream, but many of the Space Re- search employees, including his sons, considered the project a threat to the legitimacy of the firm. Since his sons Michel and Stephen objected to the production of the Super Gun, Gerald Bull took several Space Research employees and established a separate firm in Greece to manage the contract, called Project Babylon. The first project manager of Project Bab- ylon was a brilliant metallurgist called Chris Cowley. The project called for the development and production of two 350 millimeter guns called Baby Guns and a 1000 millimeter gun called the Big Gun. One of the 350mm guns was found 180 kilometers north of Baghdad. It had been test fired. The other 350mm gun as well as the Super Gun were found at Iraq's main vehicle facility, the State Enterprise for Automotive Industries, located about 50 kilometers south of Baghdad in an area called Iskandariyah. U.N. inspectors also found 14 tons of explosives for the Super Gun at Iraq's main explosives factory called Al Qaqaa. After the Gulf War Iraq originally denied that it possessed a "Super Gun," but discoveries by the U.N. Special Commission soon dispelled that notion. The U.N. originally did not believe that the Gun would be accurate enough to fire conventional weapons. U.N. inspections of the nuclear program did uncover some preliminary plans that indicate Iraq was considering the possibility of using the gun to fire nuclear tipped shells. But that effort appears to have been abandoned. While the Super Gun project receives the most attention, the Space Research project that posed the greatest threat to peace in the Middle East was Project Bird, called the Al Abid rocket in Iraq. If successful, this project, which involved strapping 5 SCUD mis- siles together, would eventually enable Iraq to deliver a nuclear tipped warhead. Either wittingly or unwittingly, the U.S. govern- ment assisted both the Super Gun and Project Bird ventures. In the spring of 1989, the Commerce Department had approved a Space Research Corporation application for the export of engi- neering software, called ANSYS. The Pennsylvania firm that re- ceived the license, called Swanson Analysis Systems, produces soft- ware packages used in civilian and military engineering analysis. Swanson's distributor in the U.K., a firm called STRUCOM, sold one of the software packages to Space Research Corporation of Bel- gium with the understanding that the software was to stay in Bel- gium. Literature explaining the transaction that was submitted to the Commerce Department states: "The ANSYS program will be used in the design and analysis process at SRC. SRC is a member of NATO and is involved in defense work. The ANSYS program would be used to analyze designs of military and heavy construction vehicles, lor- ries, satellites and missiles (projectiles)." 163 In applying for the license, Swanson clearly informed the Com- merce Department that SRC planned to install the software on a Silicon Graphics IRIS Super 380 Computer. On September 22, 1989 the Commerce Department approved an Space Research Corporation of Maryland application to re-export an IRIS SUPER 380 Computer to Iraq. The sophisticated computer was manufactured by a California firm called Silicon Graphics. SRC Belgium purchased four of these computers from Silicon Graphics distributor in the Netherlands, a firm called Structural Dynamics Research Corp. Two of the computers were shipped to Iraq and two stayed at SRC's Belgium office. The license application submitted by SRC states that the com- puter would be sent to the State Enterprise for Automotive Indus- tries (SEAI) to supposedly be used as follows: 'The design, design verification, and design modification of truck and bus engines, transmissions and axles will be the key tasks." Because the computer would be useful to Iraq's nuclear program, the application was reviewed by the SNEC, the interagency group Chaired by the State Department and comprised, on the Depart- ment of Defense, Department of Energy, and the Department of Commerce. After review, each of these agencies approved the appli- cation. SRC's U.S. lawyer recently told the Committee that he was shocked that the licenses were approved. Mr. Christopher Cowley, the SRC metallurgist who was the project director for the Babylon Project for six months recently told the Committee that the Silicon Graphics IRIS computer and Swan- son Analysis Systems software were used to help design the missile that was to be fired out of the Super Gun. A director of Space Research recently told the Committee that the computer and software combination were also used to help de- sign the space launch vehicle, called Project Bird, which shocked the world when it was successfully launched in December 1989. He also stated that the software was used to design the armored vehi- cle, called the VSP for Vehicle Self-Propelled, that carries the SRC designed 155 and 210 millimeter howitzers. The Commerce Department's investigation of the software license concluded: "Investigation disclosed that the software was properly exported from the U.S. to Belgium . . . Iraq was considered by the Administration to be a free world destina- tion as long as the war between Iran-Iraq was ongoing. In this regard 90 to 95 per- cent of all license applications for Iraq were approved.' In keeping with the lie that the U.S. did not help to arm Iraq, the Bush Administration publicly denied having aided Gerald Bull and Space Research Corporation activities in Iraq. State Depart- ment press guidance issued on February 11, 1991 says: 'The Department of State has not approved any exports of equipment or tech- nology by Bull or companies associated with Bull to Iraq." In a State Department cable dated April 26, 1990, the State De- partment informed over a half a dozen U.S. embassies that: 'The U.S. has learned through various sources that the Space Research Corpora- tion, an international consortium with subsidiaries in several cities, may be involved in supporting Iraq's missile or space programs." The cable, which is signed by then Secretary of State James Baker, goes on: 164 "As you are aware, we are very concerned about the progress which Iraq has made in developing ballistic missile technology in the very unstable region of the world. We hope that host government shares our concern and will ensure that no firms in host country provide assistance to Iraqi missile programs by licensing the export of important technology . . . We request that you take appropriate action to discourage and terminate any plans of these or other firms to provide support for Iraqi missile program." Ties to BML SRC had ties to Banca Nazionale del Lavoro. The Committee has evidence showing that BNL funds paid for some prototype 210 mil- limeter shells being develop by SRC for Iraq. The firm supplying the prototype shells is a Spanish firm called Trebelen. Trebelen re- ceived at least $400 thousand in BNL funds. Working on the same project was a French firm Creusot Loire. Over 20 million French francs in BNL money went to Creusot Loire. An Italian firm called AIAX, which has been linked to the Super Gun project, also re- ceived BNL money. Mr. Christopher Cowley, the former project director for Project Babylon, told the Committee that when Gerald Bull asked the Iraqis how they were going to pay for the SRC projects in Iraq, they told him that some of the money was going to come from the United States. Given all the revelations about BNL, Mr. Cowley now believes that many of the SRC projects in Iraq, including the Super Gun, were paid for with BNL money. Mr. Cowley believes that BNL was involved in financing procure- ment of Super Gun parts from ILVA, the Italian government owned firm that is the fifth largest steel maker in the world. On May 11, 1992 Italian police seized more than 75 tons of forged steel parts in the port of Naples. The shipment was supposedly headed for Iraq's Petrochemical Complex No. 2. Although the seized parts didn't have a military export license, it was suspected that the parts had the potential to be used in the big gun. Inspectors quickly determined that the parts were actually "com- ponents" made for the back end of the Iraqi "super gun." Soon thereafter, Italian police seized another 15 tons of forged steel com- ponents and confiscated documents from the premises of the pro- ducer of the parts, the subsidiary of ILVA called the Society Delle Fucine Steel works in Terni, Italy. MIMI ordered the $3.8 million in parts in October of 1989. Mr. Christopher Cowley, the SRC manager for the big gun project told the Committee that the components produced at the Italian govern- ment-owned steel mill were for the back end of the big gun. He states that SRC went to the Italian firm because they had the metal presses large enough to form the huge parts. The Italian press has speculated that BNL financed the trans- action. While he has no documents, Mr. Cowley states most defi- nitely that BNL financed the transaction. He also states that SRC received the approval of Italian government officials to purchase the parts from ILVA. The Committed has documents showing that BNL-financed firms, including several U.S. firms, were involved in SRC-related projects in Iraq. SRC had a contract to build a factory for the pro- duction of 155 and 210 millimeter howitzers in Iraq. A U.S. firm, RD&D International, Vienna, Virginia, was involved in this project. Documents obtained by the Committee show that 165 RD&D International was working on a Space Research Corporation project to make parts for the 155 and 210 millimeter howitzers being built in Iraq. BNL loaned RD&D International $360,000 for working capital purposes. In addition, BNL financed the RD&D International sale of machine tool inserts as well as the sale of ma- chine tools to Iraq's Saddam General Establishment. Payment for the machine tools was guaranteed by the Export-Import Bank. Sad- dam General Establishment is the prime location where Space Re- search was working on the 155 and 210 millimeter self-propelled howitzer. RD&D International also received an export license to ship $55,000 worth of surveillance cameras to the Iraqi Ministry of Oil. In addition, in October 1987 RD&D International submitted a pro- posal to supply machine tools to make the 155 millimeter cannon barrels at the Saddam General Establishment. An RD&D Inter- national export license application related to exports of sophisti- cated machine tools to the Saddam General Establishment was em- bargoed and is currently under investigation by law enforcement officials. RD&D International, which is now out of business, was run by a mysterious man named Dale Toler. While working for RD&D International, documents reveal that Mr. Toler worked simulta- neously for another Northern Virginia firm called Applied Systems International. In addition, during the sentencing hearing of BNL's Christopher Drogoul in Atlanta, Drogoul and former BNL vice-president, Paul Von Wedel, testified that Toler told both of them that he was con- nected to the U.S. intelligence community. The Committee recently contacted Mr. Toler but at this time he refuses to talk. Rest as- sured, the Banking Committee will continue to investigation Mr. Toler, RD&D International and Applied Systems and their relation- ship to BNL and the U.S. intelligence community. U.S. Steel's Baytown Works While Iraq did not have the necessary facilities to build a big gun indiginously, they were working to obtain that capability. Iraq at- tempted to obtain equipment capable of making big gun compo- nents from several U.S. firms. Matrix-Churchill, the Iraqi front company in Cleveland, Ohio, was instrumental in negotiations to purchase the U.S. Steel's Texas Baytown works. The Houston steel mill had been shut down for two years before the Iraqis tried to buy it in 1988. Iraq sent a dele- gation to Texas to review the plant and they liked what they saw. They wanted to disassemble the plant and ship to the Southern Iraqi city of Sasra. The Texas Baytown Works had a capacity to produce up to 1.3 million tons of large diameter oil and natural gas pipe a year. While Iraq still wanted the plant to produce oil pipe, according to the former Space Research Corporation director of the Super Gun project, Mr. Chris Cowley, the plant would have also provided Iraq with the ability to produce tubes for the barrel of a big gun. The price tag for the plant was to be $150,000,000 payable at the time of closing. A maximum of $50,000,000 could be paid in Iraqi oil. Several Texas lawmakers were opposed to the sale of the Texas 166 Baytown Works because they believed that the plant could be re- opened to save U.S. jobs. A U.S. Senate "Steel Caucus" letter sent to the Commerce Department stated: "We view such a sale as a serious threat to the long-term health of the American steel industry." A news report stated that "groups of lawmakers are trying to get the administration to block the sale. They have argued that it could augment Iraq's military capabilities . . . At the same time, an Associated Press story quotes an unnamed Commerce Department official as saying that the sale "appeared to raise no nations security questions." According to the official, "the technology is very old, very outmoded." The sale eventually was dropped even though Matrix-Churchill had already entered nego- tiations with the Texas oil company Coastal Petroleum to sell $50 million in Iraqi oil that was to be used to purchase the plant. The Committee also has evidence showing that Matrix-Churchill tried to buy other steel mills. For example, the Commerce Depart- ment even got into the act when it tried to sell the Monessen Works of Wheeling Pittsburgh Corporation to Matrix-Churchill under a special U.S. government program. Whemco Press Besides steel, another key component for making parts for the Super Gun was a press large enough to shape huge steel pieces. According to Chris Cowley, there are very few of these huge press- es available in the world, but the Iraqis were able to find a 10,000 ton forging press through the efforts of Matrix-Churchill Corpora- tion. A firm called West Homestead Engineering and Machine Com- pany (WHEMCO), near Pittsburgh, Pennsylvania, had a 10,000 ton press for sale. They began discussions with Matrix-Churchill in July 1988. WHEMCO wanted $15,900,000 for the press. Discus- sions continued for more than a year. WHEMCO agreed to pay Ma- trix-Churchill a commission of $610,000 if it sold the press to Iraq. At one point Mr. Cowley evaluated the press to make sure it would be adequate. WHEMCO bought the press from a munitions factory where it was used to make 16" cannons for the U.S. mili- tary. To be safe, WHEMCO applied for a Commerce Departments license to ship the 10,000 ton press to Iraq. During the application review, the Department of Defense expressed concern that the press could be used to produce bomb casings (either conventional or chemical) or other weapons. According to licensing documents, the DOD inquired: ". . . is there any way we (DOD) could be assured that this equipment would be used solely for producing steel containers for the petrochemical industry, as stated by the applicant." When the Commerce Department told the DOD that it did not have the authority to stop the sale, the DOD recommended that the Department of Energy review this case for possible nuclear-re- lated end uses. There was concern that if certain attachments were added to the press it could compress nuclear fuels. In August 1989 the export license was finally approved under the condition that Iraq not use the press for nuclear end uses. The sale never went through because of financial difficulties encountered by Iraq after the BNL scandal. 168 the case defected to the law firm representing some of the Rexon Technologies employees. The U.S. Customs Service thought that this coulcf jeopardize the case. A draft of a Customs letter to Robert Mueller, the head of the Criminal Division of the Justice Depart- ment states: "As you can understand, the Customs Service is gravely concerned with this de- velopment and the potential impact on the prosecution." This is another in a growing list of disturbing incidents involving law enforcement cases related to Iraq. The U.S. Attorney in At- lanta, the office conducting the BNL investigation, worked for the Iraqi front company Matrix-Churchill prior to his appointment. Ma- trix-Churchill still has not been indicted and the Committee has documented the obstructions occurring in the BNL case. In another mysterious case, the U.S. Attorney in Miami was the lawyer for Carlos Cardoen prior to recent appointment to that post. There are still no criminal indictments in the Cardoen investiga- tion. Now we learn that the Justice Department lawyer working on the Rexon case defects to the law firm representing Rexon employ- ees. There are still no indictments in the Rexon case even though the U.S. employees involved in the case were convicted over six months ago. Conclusion One intelligence source interviewed by the Committee claims that the U.S. was unaware of Bull's big gun activities until the British Customs seized a shipment of big gun parts in March 1990. That is hard to accept. A miniature scale model of the big gun was shown at the Baghdad arms fair in 1989. Did no U.S. personnel at- tend the fair and see the model of the big gun? CIA reports as early as November 1989 list SRC as a member of Iraq's technology procurement network. State Department and Defense Department employees were well aware of the Space Re- search Corporation and its activities. It is bad enough that the Bush Administration approved an export licenses for SRC for Iraq, but allowing SRC to buy missile design software from a U.S. firm? The export licenses granted to Gerald Bull's Space Research Cor- poration symbolizes the Bush Administration's policy of helping to arm Iraq. Unfortunately, the Space Research Corporation example is just the tip of the iceberg. 169 FILE COPY 2 Bajnca. Nationals del Lavoro Issuing Baak'B Credit No. 88/3/1812 Cur Advltx No. 11504 Beneficiary ATLANTA. JjBS 7. 1988 r L r L RD and D /nt«rnat(«na(. /nc. OSA 712 Dondnte* At. Vienna. Va. 37180 Instruction* Recti vnd from Central Bank Of Iraq New Bank Stmt Iran J ~i t For Account Of \ Saddam General Kstcbltstemnt \ Pal tufa Ammriya J L J W* are plcaaed to advtaa you that Ul* above Mt(«Md correepondertt ftaa faeued their Irrevocable Let tar of Credit In your- favor for account as sheen above for a sum not exceeding Three Million Sight Hundred Five Thousand Nine Hundred TMrtysaven and 50/100 Dollars United Slates Currency ($9,805,937.50 VSC). Aval table by your draft(s) dram at 380 days data on us (so* below). The amount of this letter of credit covers 95% *L the Invoice value oft Goods according to contract no. 88-08-03 dated April 25, 1988 C t F Felufla Amerlya, Iraq. Your draft(t) mist be led try the following its: 1. Your signed caamerclal Invoice tn orlgtnal end 4 copies In the name of the above mentioned account** stating the merchandise description, quantity, price value, gross and net weight, freight charges, shipping narks, country of origin, country of manufactures, trade dlsctxmt (If any) and certifying tt$ correctness and that the goods are of O. S. A. origin. Original mat bo attested by Iraqi Consulate Chamber of Commerce (see * below for attestation and legalization). 2. Certificate of origin in original and 3 copies (see * below for attestation and legalization). 3. Full set shipping company's Through clean on board bills of lading Issued to the nrder^fCeniral Bank of Iraq-marked notify So&lan^Gcneail St tab ll shuent, Palujlo Anerfya anH Freight "Prepaid. Bills of^tadlng trust show 'in transit to Iraq*.'' Plat 1 manually atoned copy of-fifJI of lading. Continued on page 2. 170 Banc a Naziqnale del Lavqr© ATLANTA AGENCT PEACHTREE CENTER GAS LIGHT TOWER SUITE 2000 235 PEACHTREE STREET NE A T L A N T A G E O R G I A 3 0 3 0 3 PHONE |404]5«10143 TELEX 5«2I94 TELETAX '4041 522 09 '8 Our advice no. 11504 page 2 of 3 Atlanta June 7 t^fP 4. Seaway bill issued to the. order of The Central Bank of Irca notify the cccaunl perty phowr. a!x>vc. 5. your signed s M ttmen t that trensportc.t ion .frorr Aquba to Folufic Anprfyn will heiriitie through Ircjji-^tale Cr;tan i\zm ion for Lunc TrcnsporT. 6*. Your signed stetcrrant that r.ll packages are nvrked with the buyers airr« end address end L/C no. St>/"/1612. This statement trust clso certify thr.t you have requested the carrier to include the rJiov<* on the shipping manifest. 7. Shipment to he made on vessels of Irani State Enterprise for larittrrs Transport or United Arab Shipping Company through their agents: Arabian Hetioncl Shipping Corp. P. O. Vox H Jamaica, Nev Yorl: 11430 Tel. (Hew Yorl: 718-528-2200) end (Houston 713-723-2264). In the event thnt the above lines are not available, your rust also present: n. Signed stJtercnt issued by Artjbian Notional Shipping Corp. stating that the vesst'f is of lines recognized rhy the lrnqi Authorities end approve by then. b. Certificate issued by Lloyd's l'.egist*r of Shipping London stating Vnt vpss^J if not ov?r 15 y,?«rs of age. 8. Completed Exporter's Certificate and Atrrccncnt (us per attached). Evidencing one or more shipments of the merchandise from U.S.A. port to Aoabc by see then to h'alujia Areriyc by inland tronsportet ion not Icter than June 5, IPS?. Tronshiprrient not perml I ted. Insurance covered in Iraq. All Uanlzing ctw.recs outside Iraq for beneficiary's account. * Original earner ice. I ircoice or Original certificate of origin r.iist be le.gclizrd and attested to mntme of producer or rrenufac lures and the producing ecrrpeny {suppl ier)" of the goods. The legalization rust be by Owr+iprs of Unions of Corrreerce or Industry or similar bodies or organizct ion acting for the* or Joint Arab Foreign Chcr.i->-~rs of Cnmnrce according to the local Greet ice in the supplying country. 7p" ?l tcsit.t ion by the Irrni Ccrt-.rrcicl Attache or r.'is representative in the Irani Oiploer-tic or Consume ri^rasentation in the supplying country. Continued on page 171 Banc a. Naziqnale del Lavqr© PEACHTREE CENTER GAS UlGMT TOWER SUITE 2000 235 PEACMTREE STREET NE ATLANTA. GEORGIA 30301 HEAD OFFICE ROME. ITALY Our novice mo. Hj94 p«CT 3 of 3 ati anta June 7, 19SS Pleose note: The Centrcl i?on>: of Irac inforr.ie us thai the rerrtining 5? of the invoice voliu? to .V pnychie loeclly. This is givpn without r^sponsibi(ity on our pert. LtocLrrrri t s rust be presentee ct our office (235 Peachtrce Street, Suite 2000 Gas Light To\xr, Atlcntc. Ga. ?>0ZQ") not later that Awjust 5, 19H9. We hereby confine, this tetter of credit end engage with you that all doaments cram under tmC in corpliancr with tht» Lerrs of the rOyove mentioned credft will be duly honored hy us. PlcMse note, F.C.I.A. - EViV Bank reserves the right to cancel their insurance covercrje. any ting prior to negotiation of the documents. Therefore, our above Tnzntioneti confirmation will only rmvin in force concurrent ly vi th the F.C.l.A. - fXlK Biw.lT coverage. It is n rendition of thif crecit thct tlic F.C.l.A. fees of ?!* I flat will he oemcteC frorr thr proceeds of r.ech negotiation. LtWi-ss otherwise taeprenly stated, this letter of cr*>cit is subject lo th<- Uniforrr Custc^s znd Practice for Documentary Credits (1Q83 Pc\ision), International ChTrtocr of Cormeroe Publication No. 400. Very truly yours, Author tree Signcturc 172 o RDD _/55 xiMU.GALtj_A5_&uu-&AM-T. .BAGHDAD T&AQ. _ INTERNATIONAL, INC. Sy 1 I JLATUG CA'C - 4 Axis Sti C/c{£ , S.tS^//DI/VS SP/a/0L£S S.oiA «. <2 / "{or/G ST I/L7 ATTACH M£HT °f Sis* TVsss £A'THE ft 10 1t* 4 SoAli/JG UrHE JOL'O &OiZ"VG 'S-/3o"' ■ rie£PAA/H/fja . /so £ot/*r£/i ■ 3o>e///S(A't/s#) 'rtuiri-Curree. -(PuLLB) ssvo cat. onBoeifjc tools T00////G Ae* /SS stfcr/eof/'ic aeP/7/ c<"vr^oc vaez/.vc ME THCOS \G0VAriNG WOZlCPtECE {STAT/OMRr TOOL r^alatins tool —: [OTAZfOA/AAfY wog/cP/£C£ SOTAT/f/STaoL '0TATWL7 ivaexAiecs ~7~o&L AGE C3*r&oL tool roa /s~s umius o HONE . W0*XWG METHODS rkoTAT/ZYS TOOL .. [STA TiOMAG'/ WOGKP/ECE VffUTATlNG TOOL I /30TATIMG WO/e/TA'/SCE MOMSffS 0/A —SSQfrf ID. MAX. U#GTH —9" MAX 0.D- 400"" nr 212 Dominion Road. N.E.. Vienna. VA 22180 U.S.A. [33= Telephone [703] 281-9760 Telex 493-1052 • - ■jso/o cat o /o ro* -mate cap O 10 vs/er/cAL &o8/ng mill Ho ■ So n« TAgie CAP. 7S, > r*^J i 5 Heuvo w&r£ sp£cs 212 Dominion Road. N.E.. Vienna. \A 22180 USA Telephone (703) 281-9760 Telex 493-1052 • 1 176 o INTERNATIONAL, INC. IS -ruse: \///A^ZZZZ2ZlZZ^/////////7 15 O _7-£-£ nt 38774-37 8877 4 33 i - '-.&0.&OX fSSC3) &4GUDAD - CJ&E - H/A/Jfi&,TLX (J/ZIZ/ SADDAM IoSscr-&/G.* '///MUOD D T^S^'M . *'> J~? k' Hewso w£ir£ SP£CS 212 Dominion Road, N.E.. Vienna. \A 22180 U.S.A. Telephone (703) 281-9760 Telex 493-1052 177 :ct Court Sanca Naziorale Del v. RD?1D Internat'l Ir.- Assigned to: ../_dge Charles h. Move, Jr. Jury demand; De 0~^*pd: $360,00 J Nature of :eid Docks!:: None Jurisdiction: i D* tz in 3tate,*FLiiton-6 is :90-vs-2153S fend-ar t 1 L> -etiticn for Removal- Negotiable Instrument 3ANCA NAZICNALE DEL LAVORO plaintiff Ua1ter Dri/er, Ir. CCOR LD J L. Joseph Loveland, Jr. CCOR ldj Laura Anne Lewis Gwens CCOR LD NTC] King S Spalding 25 Park Place, N.E. 2500 Trust Company Tower Atlanta, GA 30303-2501 40H-5r2-L+600 RD-iD INTERNA"rI0NAL, INC. de fendant Robert Allen Evers, phv CCOR LD NTC] Richard L. Cys, phv CCOR LD NTC] Davis Wright Tremaine 1752 N Street, N.W. suite eoo Washington, DC 20036 202-823-23S8 RDAD INTERNATIONAL, INC. ccun ter-claimant Robert Allen Evers, phv CCOR LD NTC] Richard L. Cys, phv CCOR LD NTC] Davis Wright Tremaine 1. 52 N Street, N.W. Suite 800 Washington, DC 20036 202-828-2388 Docket as of November 7, 1990 9: 1M- am Page 1 178 PEACHTREE CENTER GAS LIGHT TOWER • SUITE 2000 235 PEACHTREE STREET. NE ATLANTA. GEORGIA 30303 1*0*1581-0143 Telex 54-2194 July 18, 1990 BY REGISTERED MAIL Mr. Dale Toler RDAD International,Inc. 8133 Leesburg Pike Suite 310 Vienna,Virginia 22180 Dear Mr. Toler: We advised you by letter dated January 12,1990 that the following loans by BNL to RDSD International ,Inc. matured on the following dates: $100,000 maturing on January 22, 1990; $100,000 maturing on February 5, 1990; 5100,000 maturing on April 9, 1990 and $60,000 maturing on June 11, 1990. By letter dated March 14, 1990, we restated our position that we would not renew these loans, demanded payment in full of the loans which matured on January 22 and February 5, 1990 and informed you that the remaining two loans were due upon maturity. All four loans are now past due. We hereby demand payment in full of the $360,000 principal amount due and owing under all four loans, together with accrued interest thereon and reasonable costs and attorney's fees incurred in enforcing the obliga- tions of RD4D International,Inc. We have previously notified you that, as provided in the Note, RD4D International, Inc. would be responsible for reasonable attorneys' fees in connection with the loans maturing January 22 and February 5, 1990 unless it paid the $200,000 then due within ten days of receipt of the demand letter. ROAD International, Inc. received that demand letter on March 20,1990 but failed to.pay the amounts due. Under applicable Georgia law, reasonable attorneys' fees are deemed to be 15% of the first $500 of indebtedness and 10% of all amounts over $500. Consequently, RD4D International,Inc. is liable for attorneys' fees incurred in connection with the enforcement of the first $200,000. Similarly, you are now in default with respect to the $160,000 principal amount plus interest that became due on April 9 and June 11. Unless you pay the $160,000 currently due and owing within ten (10) days of receipt of this letter, you will be responsible for reasonable costs and attorneys' fees incurred in connection with the enforcement of the Note. Head Office ROME-ITALY 179 Bamca Naztomalb ubl Laycro Mr. Dale Toler July 13, 1990 Page -2- If we do not receive payment within ten days of receipt of this letter, we shall be forced to institute legal proceedings. We look forward to hearing from you. Yours sincerely, 180 °EACHTB££ CENTER GAS LIGHT TOWES SUITE 2000 235 PEACmTREE STREET NE ATLANTA GEORGIA 30203 »0Ai 581 0113 Teie, 5« 2'94 RD & 9 INTERNATIONAL, INCORPORATED Vienna, Virginia July 25, 1988 $360,000.00 Line of credit for pre-export finance. MATURITY: July 31, 1989. APPROVED: Chff s tophej^rogou 1 First Vice President and Manager 181 STATEMENT OF INCOME AND RETAINED EARNINGS REVENUES YEAR ENDED 31 MAY Gross sales $ 525,838 Commissions fees 15.000 Total revenues 540 .838 DIRECT COSTS Cost of goods 284,624 Commissions 50 .000 Total direct costs 334.624 GROSS PROFIT 206,214 INDIRECT COSTS 140.512 INCOME BEFORE TAXES 65,70 2 INCOME TAXES-DEFFERED NET INCOME 65 .702 RETAINED EARNINGS £ 65.702 182 BALANCE SHEET ASSETS Cash $ 93,000 Inventory 36,000 Commissions due 15,000 Fixed assets 8,540 $_ 152 .540 LIABILITIES AND SHAREHOLDERS EQUITY LIABILITIES Accounts payable $ 10,838 Note payable 15.000 Total liabilities 25.838 SHAREHOLDERS EQUITY Common stock, $1 par value, 10,000 share authorized, 1000 share issued and outstanding 1,000 Paid in Capitol 60,000 Retained earnings 65.702 Total shareholders equity 126.702 £ 152.540 183 NOTES TO FINANCIAL STATEMENT 31 MAY 1988 NOTE 1. NATURE OF BUSINESS The Company's principal activities are to provide technological help to third world and emerging nations. The majority of contracts call for the procurement of equipment and the technical skill for operating and or installing that equipment- The primary use is for the industrialization of the emerging country. NOTE 2. CURRENT CONTRACTS The nature of the business dictates a significant lead time between the receipt of an order and when it is allowed to be book by accounting practices. At this time there are contracts that are currently signed and being worked on, however, they will not deliver until some time in the next operating year. The value of these contracts is $ 5,846,388. NOTE 3. DEBT FINANCING The Board of Directors has approved for the 1988- 1989 fiscal year borrowing against the current contracts in order to maintain operating capitol. The allowable limit is one-half of the gross profit of signed contracts or currently $1,000,000. 184 WriEJ/iZO December 8, 1988 Ministry of Industries Al-Fao Establishment, Ninth Floor P.O. Box 5847 Bagdad, Iraq Attn: General Nazar Al-Kasseer RE: WHEMCO Project W-9096 10,000 Ton Open Die Forge Press and Accessories Revised Contract - 8 Dec. 88 Dear General Nazar: Thank you for your telex reference TX-2792 which we received today. As mentioned to you in our telex of December 2, 1988, we have agreed to certain changes to our Contract and are air expressing to you today three (3) copies of our subject revision for your review. We are very excited about this project and are very aware of its benefit to Iraq and WHEMCO. Nothing would please us more than to come to an agreement with you for its sale. With this in mind we have given you a further concession in the guarantee of major press castings which we hope you will regard as acceptable. Unfortunately, not everything can be honestly compromised; therefore, you will find some of the open items of discussion remain unchanged. We will be happy to discuss our position in detail during our next meeting. Regarding our schedule for returning to Bagdad, we suggest that we mutually agree to a time following your review of the latest contract revision. West Homestead Engineering and Midline Company P.O. Box438 West Seventh toenue Homestead. Pennsylvania 15120 Phone: 412J4&L4400 Telex: 847069 docu 0399 cks 12/08/88 185 - 2 - In view of both of our heavy schedules, we respectfully suggest that we arrange our next meeting in a major city in Europe such as Frankfurt, Paris or Zurich, that we can both easily reach. Please consider this and advise us by telex when and where you would like to meet. Looking forward to your reply and our next meeting, I remain Sincerely, T C^/f William G. Cook, Jr. President WGC/cks J. Thomas L. Smith West Homestead Engineering and Machine Company P.O. Box438 West Seventh Avenue Homestead. Pennsylvania 15120 Phone: 412/464-4400 Telex: 847069 docu 0399 cks 12/08/88 186 WnSIASSI WnS/ACO Wn&ItZO f//HSfACa A DIVISION Of PARK CORPORATION 160 INCH PLATE MILL H0KE8TEAD WORKS B0MK8TKJU>, PA U. 8. X. WEST HOMESTEAD ENGINEERING AND MACHINE COMPANY - 187 INTRODUCTION The 160" mill is a two-stand plate mill built by Meats Machine Company. Originally commissioned in 1944, the mill has undergone extensive modifications and upgrades since its initial start-up as a Defense Plant Corporation facility. The basic configuration consists of a two-high scale breaker stand and a four-high revers- ing stand. (See Appendix A) The four-high reversing stand has a back-up to work diameter ratio in excess of 1.5 to 1. Therefore, this will produce less roll deflection than other mill designs with smaller roll diameter ratios. This configuration provides the capability to produce wide, heavy gauge plate products with the same high quality characteristics of narrow light gauge plate products. The mill is rated at an annual capacity of 720,000 tons. The average rolling rate with a diverse product mix is 650 tons in eight rolling hours. The maximum rolling rate is 1640 tons in eight rolling hours. Products rolled in this mill include a varied mix of carbon, alloy, high strength, stainless, and armor steel grades. This report examines each major mill component in detail, beginning with the reheat furnace facilities and ending with the final plate treating facilities. Finally, mill applications are discussed, suggesting possible production schemes and uses for the mill equipment. 189 US $300,000.00 (approx. 49%) US $60,000.00 (approx. 10%) US $100,000.00 (approx. 16%) Within two (2) weeks of the time when WHEMCO draws down its payment from SEEI on overseas shipment (Esti- mated to be during February of 1990.) Within two (2) weeks of the time when WHEMCO draws down its payment from SEEI on the basis of presentation of Take-over Certificate. (Estimated to be during August of 1990.) Within two (2) weeks of the time when SEEI releases WHEMCO'■ final bank guarantee. (Estimated to be during July of 1992.) We reiterate it is only after machining - the time of your second scheduled payment - that WHEMCO can be assured all castings are intact and that neither party can cancel the Contract. WHEMCO is, therefore, financially risking its initial payment to you and, in the event of Contract cancellation, we will expect its prompt return. WHEMCO also agrees to accelerate 10% of its final payment to Matrix-churchill as evidenced by the above schedule. We trust that this revised schedule meets with your approval and, if so, we ask that you signify your acceptance by signing and returning the attached copy of this letter to us. Sincerely, William G. Cook, Jr. President Schedule of commission payment accepted by: Signed Title _______ astw-r-0 Mi MicUm Date P0 Box 438 flWMSfM-. Pvmsylwm 15120 60-509 0-93-7 190 March 30, 1989 TDG 2 Stratford Place London, England WIN 9AE Attention: Dr. Safa Al-Habobi Subject: 10,000 Press for Iraq Dear Dr. Safa, Supplementing our conversation of Tuesday, March 28, 1989, I have included for your reference a signed copy of the contact for the 10,000 Ton Press along with copies of the forms for the export licence and end user certificate. As I explained to you, we are having difficulty in obtaining the end user cer- tificate and the export licensing. In addition, it was our understanding that the financial personnel of Iraq would visit our office to help and expedite the letters of credit, to initi- ate the contract and start the work of retrofitting the press. At this point in time we are at ar. impasse to proceed with work until these details are worked out. It was a pleasure speaking with you again, and we appre- ciate any assistance you can give us to hasten the finalization of the above items. Thanking you for your assistance, we remain, JJT/pac Enclosures We si Homestead engineering and Machine Company P.O. Box438 West Seventh Avenue Homestead, Pennsylvania 15120 Phone:4121464-4400 Telex: 847069 Very truly yours, Joseph J. Thomas Vice President - Sales 192 MATRIX-CHURCHILL CORPORATION MEMO TO FROM DATE SUBJECT Mr. Sam Naman Mr. Michael Terry July 14, 1988 Monessen Rail Mill Sam: I spoke with the Dept. of Commerce and have enclosed all the information available on the facility. The full Engineering Evaluation - Project Report is the document I originally obtained; the other information is that sent to me by the Dept. of Commerce. There is not a fixed asking price as the facility is available to the highest bidder; the U.S. government is the seller of this facility. Bids must be sub- mitted by August 18, 1988. A tour of the facility can be arranged by contacting Mr. John McClure or Michael Oberlitner 9 202-377-4965; they would like at least three (3) days advance notice to set a tour up. I have been told the Rail'Mlll Facility cost $110 million, when built in 1981, and the Dept. of Commerce stated that they expect the bidding to exceed $50 million. Additionally, Bethlehem Steel is evidently very interested in purchasing the facility and operating it at the existing site. They reportedly bid $60 million for the facility and the bid was declined. I don't know whether the bid was rejected due to the price or because the bidding was re-opened due to the fact the initial bid time frame was very rushed. Let me know if you require me to arrange for a plant visit. Regards, Michael Terry MT/ds 193 UNITED STATES DEPARTMENT OF COMMERCE Economic Development Administration Washington. O C 2Q23Q July 20, 1988 Michael Terry Matrix Churchill Corp. 5903 Harper Road Solon, Ohio 44139 Re: Wheeling Pittsburgh Steel Corporation Monessen Rail Mill Dear Mr. Mr. Terry: The purpose of this letter is to provide you with an update on the status of the Monessen rail mill. As you know, the Economic Development Administration (EDA) has conducted an extensive marketing campaign during recent months in an effort to reach all parties interested in purchasing the facility. Pursuant to an order of the Federal Bankruptcy Court, all proposals to purchase the rail mill must be submitted to EDA on or about August 8, 1988. EDA will choose the best offer for recommendation to the Bankruptcy Court. Since the marketing of the rail mill began, the Sharon Steel Corporation has purchased substantially all the other assets in Monessen. Since this acquisition affects the configuration of the "B" parcel, which EDA is marketing along with the rail mill, we are enclosing an updated description of the property offered for sale. This revised property description should be utilized when preparing a proposal to purchase Monessen assets. If you have any questions, please contact this office at 202-377-4965. Sincerely, Michael Oberlitner Director Liquidation Division Enclosures 75 Years Stimulating America's Progress * 1913-1988 194 ivnunvniiiL) Wn nto«i Nd»bk*« e»> men « Please deliver the following , pages. rr0B; P-A fcWj*fcSga« L, _ , , If you do not reoeive any ot.i^e. /o^loj^i£.:j)ageait*l«Me -oootaot our ooapany at 0203 75521. ■*»••..-•*rj.wti r.;.-7. t','.=- Thank you. 195 VISIT REPORT Industrlas Cardoen Llda Person seen: Los Conqulstadores 1700 Piso 28 Dr Carlos Cardoen Cornejo Fono 2313420 P Henderson MCL 0 Harrison MCL Purpose of visit: To discuss Iraqi Project for manufacture of fuses CODE NAME 03. Or Cardoen Indicated that the requirement was for 93 CNC lathes of Three Series size and 22 Machining Centres possibly V2E. Approximate value - £20M. He proposed two alternative methods of payment: 1. The machines will be purchased by Swiss Company 1n the USA and the machines will be shipped to USA. On this basis they want us to set up a credit facility possibly ECGD backed over a five year period. 2. Cardoen are being paid 1n oil. We were asked to consider payment in oil. Their preferred method 1s (1). . • Payment terms Irrespective of payment method will be: 20X Down payment against Bank Guarantee 50% against Shipping documents l against receipt of goods in Iraq 7i against Commission1ng receipt Certificate 7X against Take over Certificate 6X against Final acceptance Certificate We stated that our preferred terms would be our standard terms and conditions, but Item 1 above can be considered but they will need to make an approach to ECGD themselves and 1t will require Cardoen to give guarantees and references before ECGO would consider the credit facility. Payment terms against Item 2 would be unacceptable to MCL as we could not 1n any way handle payment through this method. 196 - 2 - Or Cardoen expressed their wish to purchase from MCI because of our special relationships with Iraq. However, he claims we are too expensive. Attached 1s a copy of their summary of prices between Holri SeUi, Clndnnatti and MCI. We explained that It was difficult to compare prices on Standard Quotations, this could only be done once the machines had been fully engineered. Wa highlighted our special expertise over the competition such as: a. Knowledge of munition production b. Expertise 1n installing large quantities of machines c. Training Expertise d. Quality of machines e. Special relationship With Iraq f. Transfer of Technology g. Trained engineers based 1n Iraq etc., • Mr Schurmann will be visiting Coventry next week and I have left strict instructions that we are not to deviate from anything other than our Standard terms and conditions on prices, payments etc. PAUL HENDERSON 9/6/1988 197 Sut(e2tO M.*mlLik8J Fkvidj 33014 (USA) (305) 2100 • Telei 201261 S~-ji I* FAX NO: 305-825-7975 THIS IS FROM: SWISSCO MANAGEMENT GROUP. INC. ADDRESS AS ABOYE.. ORIGINATOR: DATE fBvWl 1? FACSMILE SENT: WE HAVE PA6E(S). TO SEND, INCLUDING THIS PAGE. IF YOU NEED A RE-SEND ON ANY OF THE PAGE(S), PLEASE CALL OUR OPERATOR AS SOON AS POSSIBLE. IF YOU DO NOT CALL, WE WILL ASSUME THE PA6E(S) WERE RECEIVED CORRECTLY. ~?i3- Stf- L^g-i PLEASE DELIVER TRANSMISSION TO: hA < , , 198 7/13/88 3:45pm. DR. CARDOEN: PLEASE BE AWARE THAT "03" REPRESENTATIVES from LONDON HAVE MADE AN Extensive Evaluaron of ONE hou Ar LTV-ALIQUIPPA (THE "ERW" - WELDED RIRE mill). A RECERTY-RESIGNED V.P. from CASEY EQT. Co-Pittsburgh SPISIOT 3 WEEKS IN "6" WorrinG ON THIS PROJECT ANO PROVIDING Formal proposals & QUOTES FOR THE "Erwh MILL, WHICH INCWRES EXTENSIVE REBUILDING AND REFITTING OF THE me to LATEST TECGNOLOGY STANDARDS WHICH would AND SEVERAL Million $ To The Price of the mill. CASEY Co. IS HANDOLING THE SALE OF THE SA Mills for LTV STEEL. THEY ARE CAPARLE OF PROVIDING Complete TURN-KEY ENGINEERING SEfvices and REBUILDING, IF NECESSARY our CONTACT WITH THEIR company is Mr. Ron Towns (PHONG 2:6-750-1005 a 412-378-9723). HE HAS 304 URS EXPEnisice In Pipe miL OPERATION - LASTY AS GENERAL mar of ALL LTVP.PE OPERATIONS IN THE USA. "03"-LONDON REA'S ARE QUE TO VISIT LIV-AIQUIPPA For MILL INSPECTION ON FILLBAY 71,5 or EARLY NEXT WEER. REGARDS, BOB Sipp 199 STHUCTVKtJ ANO CVMKUItx* LTD Fax Message Tel: 01-679 5511 Telex: 9471S3 Fax: 01-679 5588 Elliot N01 ATTEN: SUSAN 6ARTUSIAK - SASI RE: SPACE RESEARCH CORP SRC HAS AOVISCD US THAT ALTHOUGH THEY ARE INVOLVED IN DEFENCE WORK AND ARE A MEMBER OF NATO, THEIR USE OF ANSYS WOULD NOT 3£ SOLELY CONCERNED WITH VEHICLES AND AIRCRAFT OF A MILITARY NATURE. VEHICLES = MILITARY, HEAVY CONSTRUCTION, LORRIES AIRCRAFT = SATELLITES MISSILES • PROJECTILES THEIR WORK DOES NOT INVOLVE ANY CNE PARTICULAR STRUCTURE OR DESIGN ASPECT BUT COVERS THE WHOLE DESIGN PROCESS. I HOPE THIS IS SUFFICIENT INFORMATION FOR THE EXPORT LICENCE. SRC HAS INDICATED THAT IF IT WAS A CASE OF DEALING THROUGH A.S I I, THEIR DECISION TO USE ANSYS MAY HAVE.TO BE RECONSIDERED. REGARDS JUDITH LECLERE STRUCOM 13 MARCH 39 200 Latter of Explanation 1. Identities of Partles to the transaction: Swanson Analysis Systems, Inc. (SASI), a Ponneylvania corporation, cooks to send our computer progrun, ANSYS®, plus error corrections and updates, 10 vplloable to Space Resourch Corporation (SRC) in Brustolo, Belgium. 2. Exact Project Location: Tho referenced program will be used at the facilitlue of Spaco Rosearch Corporation in Brussels, Belgium. 3. Use of Apolloution Proaren: Product Dasоrlotion Capabilities ASE Software for the engineering analysis of structuros, using tho finito olament method Can analyze designs to give strosses and defloctions, and to optimize material weight The ANSYS program will be used in the design and analysis process at SRC. SRC is a member of NATO and lo involved in defense work. The ANSYS program would be usnd to analyze designs of nilitary and heavy construction vehicles, Torria, utollltoo, and missiles (projectilu). 4. Orinin and Model of computer to be Ung: a. Computer type: b. Sorial number: 8111 con Graphics 40/20 Porsonal Irla 65586 1; IPB c. Origin of CPU: Obtained from: silicon Graphics, Inc. 2011 stlorilo Rord Mountain View, CA 94043 - d. Processing data rate: Less than 20 million bits par second .. Export license: Assume the computor wes exported under a validated licenso. 5. Conveyence of Software: Product Form Lennung AS 1 copy object Fortren Program is conveyod via magnotio tape on i cartridge, including vor iflostion oxano lor and installation procedures. Also Inoludod loe copy of the ANSYS voor'. Manual. Gabriel J. DeSalvo and Robert W. Gorman, • 1997, 2 volumos, 1168 pagos. Explanation for Export of software in other than Object Form: Software is being provided in object form only. 102 _ I 0 laAimM] u»i»H ~*i 7' *"* SiSaIVNv NOSNVMS uait I' nm M ► Ui »« °t*M<* Lax N* MM Hmdmi «yn n ■ yganfUH Hi MM» l».a WW hWM Hi iimil" 1'ai m ■»»•»•< M r.i * ivO>l"*w t» aupf lMl»ft m Mf>o Ml ie rajau a*j v ftaaWwd PJM—tj *«• l>*wwej i« tMuMAQ I n aw PI Applied >•* I *, VHMNki «UPm«liW47V CI] Ml X t\ IMC\ «« •» MMV aw n~ M I——1 aw « fcjxanaaJ vm, Wl IN | M VuvtOl ««Hl ■ »H H*»»* » »tv»»i« WWVI a) aHPtplfia wa* «uaa»e MM IJPaMP Mil MAM put HU» iwillli I J* '/1 w plWlin M ou» AIM sa M MJP4 *p* fcli P*«aPaPa t HI PUDtartBaaj tappr) am t»*aM PM tw«*»t«aBaa *jmmr*m* aw M ama^iaai MpajaaaPPI aap taj aaiaajauaM waataa a*i *• Hav am t» Pum* fcp wr aaapa* waam paa Aip->, Oa»«» •» mlJi«»J P>1 a> > i II i ui nm.a|»i ii.iiii Aup (at » a aat* t«j t*p pwaaat m aarpamnoa aw ,i .1 wa> aw *—"■» a ai^aaMjP**u<**1 202 July 22. 1991 «INTO> V2CZC1NA3890 PACE 01 ACTION 10-19 INFO IOC-00 DOEE-00 NEA-01 P-01 COMFIOCKTIAl Usui II 02(70 192313Z ACOA-13 ADS-00 AF-01 AAA-01 CIAE-00 EAP-01 EUS-01 H-01 IHRE-00 IMS - 01 KRC-02 NSAE-00 NSCE-00 OES-09 O1C-02 SMP-01 SP-01 SSO-00 SS-01 /060U 7FCE02 1923162 /66 0 2000122 JUL 91 TO SECSTATE UASNOC INK£DIATED&406 INFO GULFWAR COLLECTIVE PHI0*ITT UN SECURITY COUNCII. COLLECTIVE PRIORITY ON GENEVA PII OR ITT 5874 UASNOC PRIORITY ✓ OODE-00 L-03 PH-01 :;cor is Only: USUN NEW YORK 02470 E.i TAGS: UNSC, IAEA, HOPS, 12 SUBJECT: AMBASSADOR EKEUS' JULT 19 MIEFING OF TNE PERMFIVE PERNREPS: IRAQI ENTIRE TEXT. NG TNE COURSE OF MIEFING TNE PERMFIVE PERMREPS PLANS OF TNE SPECIAL COMMISSION, EKEUS REPORTED THAT YESTERDAY JULY 18 THE 001 NAD PROVIDED THE SPECIAL COMMISSION DETAILS ABOUT ITS SO-CALLED SUPER GUN. THE COMMISSION HAD ASKED FOR PAGE 02 USUK N 02470 1923132 INFORMATION ABOUT THE SUPERGUN ON APRIL H AND ON APRIL 19 THE IRAQIS HAD REPLIED THAT THEY HAD NO SUCH WEAPON. EKEUS SAID THAT THE COMMISSION'S FIRST ESTIMATE IS THAT THIS GUN WOULD NOT IE ACCURATE ENOUGH TO DELIVER CONVENTIONAL WEAPONS AND THAT IT NAY HAVE A RELATIONSHIP TO IRAQ'S CHEMICAL, 1IOLOGICAL AND NUCLEAR WEAPONS PROGRAMS. OTHER DETAILS OF SOUS' MIEFING FOLLOW IT SEPTEL. 3. BEGIN TEXT Of IRAQI DOCUMENT: NO. ITEM SITE QUANTITY CONDITION 1 3S0HM-CALIME GUN, JABAL KAHRAYN WITH S2.5M-LONG BARREL STEEL TUBE FOR BARREL OF 1.000MH- CALIIRE GUN STEEL TUBE FOR BARREL OF 350MN- CALIME GUN (180 KM NORTH OF BAGHDAD) ISKANOARIYAH (VEHICLE FACILITY SO KM SOUTH OF ISKANOARIYAM (VEHICLE FACILITY) INRISS INR INFORMATION SUPPORT SYSTEM 203 \ . . v f July 22, 1991 STEEL MSE FOR 1.000-CALIBRE GUM WITH 15 SUPPORTS PACE 03 USUN M 5 HYDRAULIC SHOCK- ABSORBER CYLINDERS FOR 1.00OMM- CALIBRE CUM 6 STEEL BREECH FOR 350MM-CALIBRE GUN 7 GUNPOUOER FOR 350MM-CALIBRE GUN ENO TEXT. PICKERING CONFIDENTIAL 02470 192313Z ISKAMJARIYAH (VEHICLE FACILITY) ISKANOARIYAH (VEHICLE FACILITY) QA'OA'FACILITY (45 KM SOUTH OF IAGH04P) 12 TONS NEW NEU •i S INRISS INR INFORMATION SUPPORT SYSTEM 204 uss Heavy Products 600 Grant Street Pittsburgh, PA 15230 Thomas J Usher Executive Vice President June 24, 1988 Dr. Safa Al-Habobi Matrix-Churchill Corporation 5903 Harper Road Cleveland, OH 44139 Dear Dr. Al-Habobi: It vas an honor to meet with you to discuaa this significant business transaction. Based on your intent to purchase all the equipment and buildings at our Texas Works steel plant for shipment to Iraq, it is our intent to enter into negotiations with you for the sale of this equipment and buildings. We would like to enter Into a non-binding letter of intent within 15 days of the date of this letter and complete all contracts and close the transaction within 60 days of the date of this letter. The following includes some of the significant conditions that should be included in this transaction: 1. Facilities - The sale will be on ah "as is, where is" basis and will include all equipment and movable buildings at our Texas Works steel plant but does not include any land. 2. Lease - We will enter into a short-term lease of the land associated with the-steel plant. The base term of the lease will be for a period of two years, which should be sufficient to permit temporary operation of the plant, as well as dismantling, packing and loading of all equipment and movable buildings for shipment to Iraq. Consideration could be given to an extension of the lease for a limited period while you are continuing in good faith to complete the shipment to Iraq. A division of USX Corporation 205 USS Heavy Products 600 Grant Street Pittsburgh. PA 15230 Thomas J Usnei Elective Vice President Dr. Safa Al-Habobi Page Two June 24, 1988 3. Operation - If you desire, we would be willing to attempt to make arrangements for the operation of the plant and for training of your employees in the operation of the plant. All costs of operation and training and all risks of operation would be for your account. The actual operation and training would be performed by third parties and not by USS. We understand that you desire to operate the plant not only for training but also to ship product to customers in Iraq. 4. Price - The price would be $150,000,000 payable at time of closing with a maximum of $50,000,000 payable in oil or the price would be $144,000,000 payable in cash at time of closing. These prices include the lease payments for the base term of the lease. Any extension of the lease would be extra. If you are willing to enter into negotiations on.this basis, please initial a copy of this letter and retunr'it to me. We will not enter into a binding contract for .the' sale of our Texas Works steel plant to any other party as long as we are negotiating in good faith to execute a non-binding letter of intent within 15 days of the date of this letter, and we complete all contracts and close the transaction within 60 days of the date of this letter. Except for the preceding sentence, nothing contained in this letter creates a binding obligation on either party. I am enclosing the information you requested at our meeting. We can make arrangements for your personnel to visit our Texas Works whenever you are ready. Sincerely, T. ./.XJsher A division of USX Corporation 206 PM Press Guidance 1 '!3! February 11, 1991 ''°fLETE Nan-*i*ci fe^^~f ■ •:' 'r~":": - -ij-lil^ PA E~on" 1* i&m&nJ »••« jew)? GERALD BULL AND ARMS EXPORTS 'C 0K*t Q: Did the Department of State allow Gerald Bull to ship artillery shells to South Africa, Iraq and China? BULL EXPORTED 155 MILLIMETER ARTILLERY SHELLS TO SOUTH AFRICA WITHOUT U.S. PERMISSION. HE WAS PROSECUTED, CONVICTED AND JAILED FOR THIS VIOLATION OF MUNITIONS EXPORT REGULATIONS. BULL, AND COMPANIES ASSOCIATED WITH BULL, WERE ALSO INFORMED AT THE BEGINNING OF THE IRAN-IRAQ WAS THAT THE EXPORT OF MUNITIONS TO IRAQ OR IRAN WOULD NOT BE PERMITTED. THE DEPARTMENT OF STATE HAS NOT APPROVED ANY EXPORTS OF EQUIPMENT OR TECHNOLOGY BY BULL OR COMPANIES ASSOCIATED WITH BULL TO IRAQ. -- THE EXPORT OF SOME TECHNICAL DATA ON THE MANUFACTURE OF ARTILLERY TO CHINA WAS APPROVED BY THE DEPARTMENT AS PART OF OUR LARGER POLICY OF MILITARY COOPERATION WITH CHINA WHICH WAS IN EFFECT THROUGHOUT THE 1980 -s. THIS POLICY REMAINED IN EFFECT UNTIL THE TIANANMEN SQUARE INCIDENT WHEN THE PRESIDENT SUSPENDED ALL MUNITIONS EXPORTS TO THE PRC. 207 - 3 - Q: Has the Department responded to Congressman Wolpe's letter on shipments to Iraq by Bull? A. -- WE HAVE SENT CONGRESSMAN WOLPE AN INTERIM RESPONSE PENDING A MORE DETAILED ANSWER TO HIS LETTER. Q: What was the Department's role in the Vermont Grand Jury investigation of the illegal transfer of artillery technology to China by companies associated with Bull. A. — THE DEPARTMENT OF STATE COOPERATED FULLY WITH THE CUSTOMS SERVICE, GRAND JURY, AND THE OFFICE OF THE U.S. ATTORNEY IN THEIR INVESTIGATION. ON TWO SEPERATE OCCASIONS OFFICIALS FROM THE OFFICE OF MUNITIONS CONTROL TESTIFIED BEFORE A GRAND JURY IN VERMONT THAT THE EXPORTS WERE IN VIOLATION OF THE ARMS EXPORT CONTROL ACT. 208 13 IS ENGINEERING S.A. 9 A. rue dc Vermont 1202 Geneva Swilicrland Tel. (0221 34 83 55 Tclo«412 908 SRCCH Tclclax (0221 338059 PRELIMINARY PROPOSAL FOR SATELLITE LAUNCHER USING CLUSTERED SADAM ROCKETS 1. INTRODUCTION During the recent hostilities, Iraqi Military Industries reverse engineered the SCUD-B rocket while at the same time developing improved versions. Thus there are available in Iraq three types of single stage, liquid rocket motors whose characteristics are summarized in Table 1. The liquid Euel consists o£ the hypergolic combination of hydrazine N2H4 and nitric oxide, HNO^ in a mixture ratio to give the specific impulse as listed in Table 1. Each rocket carries its own stabilizing, guidance and control package. Launched vertically, the rocket is tilted over to an ap- proximate 45 degree path angle as it rises through the lower atmosphere. The problem has been studied of the feasibility of clustering and staging these rockets in such a manner as to achieve worthwhile orbital payloads. The results of the study with discussion are presented in this report. 2. THERMO-CHEMISTRY OF COMBUSTION At the time of conduct of this study, the exact nature of the fuel and mixture ratios was unknown. Using normal thermo- chemical combustion calculations, assuming an average between the equilibrium and frozen case, the thrust and specific ! 209 PAGE impulse characteristics of this and similarly fueled systems was studied. Particularly a comparison was made with the 1966 HARP Aero]et General system, (Ref. 1) which used as fuel a mixture of 86?» monomethyl hydrazine (CH^.NH.NH2) and 14% hydrazine ^2H^ and as an oxidizer a mixture of 71\ HN03 (nitric acid) with 29* N02 (red fuming nitric acid). Aerojet General designed the HARP system about their standard service rockets. Using a 5:1 nozzle area ratio, and a chamber pres- sure of 500 psi, the specific impulse for this system was 250 seconds (sea level) and 292 seconds (in vacuum). The low specific impulse achieved on the motors listed in Table 1 is difficult to understand. While normal losses may reduce the efficiency, the maximum reduction should lie between 5* and 10%. Various factors influence the efficiency. Besides the mechanical losses must be included: i) Deviations from the optimum mixing ratio. ii) Uneven and/or incomplete combustion in the chamber (combustion chamber design plus fuel-oxidizer mixing) iii) Nozzle losses These aspects are discussed in more detail in Appendix 1. Since it is felt that improvement in the specific impulse can be achieved, the studies of clustered rocket performance were conducted using the specific impulses given in Table 1 and repeated using a value of vacuum specific impulse for all motors of 292 seconds, corresponding to that achieved during the HARP project. 210 PAGE TADLE 1 ASSUMED MISSILE CHAOACTZRISTICS 1. All-up, leas warhead mass, Kg SCUD B SADAM 80 SADAM 100 4860 5694 7052 2. Fuel mass, kg 3786 4769 5925 3. Guidance & Control Module, kg 198 198 198 4 . Fins & attachment, kg 1 20 120 1 20 S. Case Weight, kg 756 835 929 6 . Gross Mass Fraction 0.779 0.838 0.840 7 . Mass Fraction less 3 ♦ 4 0.833 0.887 0.880 a. Nominal Burn Time (sees) 63 80 1 00 9. Missile Outside Diameter, m 0.88 0.88 0 .88 10. Nozzle exit diameter, m 0.3988 0.3988 0.3988 11. Nozzle Throat Diameter, m 0. 1 26 0.126 0.126 12. Mass Clow, —, kg/sec 57 .83 57.83 57.83 13. . Fuel consumed in nominal burn time, kg 3642 4626 5783 1 4 . Sea Level Thrust, kg F 1 3380. 1 3380 1 3380 15 . I_ in vacuum, sec 253.7- 253.7 253.7 1 6 . Length of missile body excluding g & c module,m 7.154 8 . 654 10.419 211 3. CLUSTERED ROCKET COMBINATIONS Within the time available for those studies, optimized system studies were not possible. Rather the combinations evaluated through orbital trajectory studies were selected to bracket the optimum. The first stage systems studied consisted of 4, 5 and 6 Sadam 80 rockets with the second stage being one and two Sadam 100 rockets respectively. The use of two Sadam 100 rockets for the second stage was studied to show that it was deviating away from the optimum and had less performance (payload in orbit) than the single second stage rocket case. The layout of the various clustered rocket configurations is shown in Figure I. Studies were conducted using the specific impulse values of Table 1 for the first and second stages, as well as the higher value discussed previously. The third stage system was considered always to have the higher (292 second) specific impulse and a mass fraction of 0.85. The size of the third stage was gauged for optimum by determining the effective payload in orbit as this stage size was varied. As shown in Figure I, the cluster configurations considered may be considered in the following categories: Configuration A This consists of four Sadam 80 rockets as a first stage, clustered about a Sadam 100 rockets as the second stage. The third stage is a specially designed system to approach the near optimum orbital capability and with the higher specific impulse. 212 214 10.4 Issues. This site had undergone a significant amount of clearing and salvage. Some of the salvaged machinery was present;-other items were not. ,"At issue_is the.relationship between this facility and the test site. ''The plant manager was very quick to repeatedly state that there was no produat relationship between the plant itself and the test area. .When asked where the receiving area was for the engines to be tested he stated that they were delivered to the test stands directly. When asked where the fuel was stored for the teat, he stated that this also was brought to the site. It is hard-to appreciate the role this plant exercised in testing' liquid engines and the declared non-relationship of -the plant to Huch tasting, other than personnel. In conclusion, a lot of questions were not fully answered and the relationship of this site to" testing"is still not clear. •• Again there was an absence of the normal debris associated with missile . systems in the test area and plant proper. • 11.'. Inspection of Project 328 (Shahiyat Unidentified Facility' Under Construction) j. 11.1 Discussion of the site. Upon arrival at the site, team was greeted by . a Mr. Mohammed, . who -identified • himself as the resident engineer responsible for construction at the site. "He identified the project as 328, the Centre for Space' Research which was oonceived in 1988 with construction beginning in late 89/90 and ongoing. 11.2 Purpose of the. site. The purpose of the site was .to test rocket engines for space launch vehicles and the vulga and HY2 systems. 11.3 Inspection results. This site was under construction with no activities observed ongoing in any of the structures. It appeared that no activities have occupied any of the buildings. Team observed bomb damage in two structures vicinity of the test stand. Team was informed that the engineers had encountered technical problems with the subsoil which would effect the test stand area. The subsoil was of gypsum and because .of this the project was practically cancelled. The team observed problems in the area of. the partially completed concrete platform for the test stand. This area suffered from .a high water table and a small lake had formed at the base of the concrete test stand. Attempts had been made to pump this out, but a significant spring was supplying water. The site has the appearance of a university research centre, with construction of" several buildings with design of a decorative rather than functional nature.. 11.4 Issues. This site will probably merit further inspection at .a later date. A significant amount of non-testing research could occur here. -It was most evident that the site had not engaged in any productive function for its intended purpose. 12. Inspection at JabalHami-ayn ( Supergun ) - 1 - * • EO Citation* 12 < i CLASSIFY m '" , , I* I DOWNGRADE TO to ( ) i, . m *J*d0* oa pu« aue«dTm>B Buxmsnu atta ShSIStS IPSJ™* jo tRuoa im.a». ^oa qoaaa.aS onuTVo?o, A UTBfi, ar ."WW: ».-T .»m JT 'axq^ado aS! JSA^lJTS .TTuST^ Nn Aq uot^»blzojot J»tRO :»b& A"»qa TTiun psoonoaun *nra 009 ;o B-iq-jiso v M^Trt urv6 B 6ujABii 30 Bqa Apnas oa bbpt ub bbw saaqa AXTBU07aTPPY ., , . 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B joj va«p 5u7a^e£> jo; pus aUB«doxBABa 9 HOjBassH joj annq bb« un6 BTMi .:ZaTTT»BJ B^ J° eeodirvi c*gx •a C'6T ilS CVO H t'Z6 £S »c taB__pB^BQQT B7 £u7PX7nq ©A7a«Jas7U7nrpo eqx ao'Tr is zto~h Vtt 9s vc po^bdox »7 ea79 uAbobbh xBqBr »yx •Bqquom aoj suop bb« JfJOft BouBueau7BW ou aBin B039S aT 'Bds^B poo6 a4ba « UT ^7 JTBsaT u"6 *IM */bwb B3( c •xoaddB ouTPXTnq BATaBJasTUT^P" UB PUB - TBUUOBJBd aoj euo pub uoTiBiUBBiraaBUT aoj.eqo - bsbx^^, ow; 'imfuadns Bqa atuo eapnTOUT 31 'BBjlB "aJBBBp » «t' PBp6BH JO W^OU BD( OB^noqB" pe^Boox 37 »a7s uXBjmrey jsqB^BjjlX 'aaTO eqa jo uojBcnDBTa T'tT 216 12.4 issues: The-site inspected in Jabal Hamrayn matched with the ■ site described in the official declaration, made by the Iraqi government. It was declared by the. chief inspector, that tha site in Jabal Hamrayn and in Jabal Singar will be visited by a special team to inspect the locations. It was requested, to leave both sites untouched until they get other information by UN. The gun is at the moment not operable, if there is a intention to use it again or to continue research work, several month of- work for reinstalling the measuring equipment and to repair the gun will be necessary. 13. Inspection at Al Dujayl ( Sumaykah SSM support facility ) 13.1 Discussion the site. The Sumaykah SSM support facility at Al Dujayl is divided "in"three areas at 60 km south of Saiaarra, along the road Samarra-Bagdad. Two of them are located on the east side of the road Samarra-Bagdad, the third one on the west side. The first one called Sumaykah SSM support facility • southeast located in 33 49*11 "H - 44 16 02,8 E is abandoned, barracks guarded by one dozen of soldiers. The second one, located in 33-48 43,9 N - 44 15 52,7 E is an open area guarded by few soldiers living in a tent. There are no fenoes. The third facility, sumaykah southwest, Lb located in 33 48 43,9 N- 044 15 52.2 E. 13.2 Purpose of the facility. The first site was former barracks for troops. Several one storey buildings in poor status. The second one consists of storage of Scud and Al Hussein warhead canisters. This site has been dealared by the Iraqis as Dujayl chemical warhead storage, but with a mistake in the geographic coordinates, according to the Iraqis officials. The third one is an open storage for oxidizer and fuel tanks as well as empty SCUD RV canisters 13.3 Inspection results. Sumaykah southeast : about 50 storage rooks for 9 M 21 TG missiles ( FROG ). Five and a half canisters ( 8 P 44 export version ) used as water tanks. ■ Second site : 30 canisters 8 F 44 export version and thirty ^—- boxes of barometric units for the scud and Al Hussein missiles. 3 canisters were opened, containing modified ahemical-warhead for Scud and Al Hussein missiles. Also on sits was the chemical additive for the binary SARIN warheads which are filled with alcohol. This material is leaking and bubbling from the containers. - Numbers from Warhead Containers, 8P44EH: 875526 851767 875849 853149 876048 864463 875384 852391 064763 876013 851693 863406 076063 875885 875368 852741 875606 875823 852725 853282 864931 87351S 875465 852164 865089 863594 875481 875906 873222 875911 14 217 the one to the south east. At least two mixers had been removed "from"the' buildings and stored* In on open 'field.- "They- were inspected and photographed by the team, location 32 59 09/9 N, 044 13 30,1 E . Al Qa'Qa did not fill Al Abbas warheads with HE, They had inert warheads filled elsewhere. Supargun propellant: During the 6uper gun inspection on 11 August 1991, Iraq revealed that of the 12 .tons . of TNT propellant declared for the super gun, only one ton remained and that was stored at Al Qa'Qa. During the inspection at ~A1 Qa'Qa the team was taken to building #7 on - Enlargement "E" and was shown 13 wooden boxes containing small extruded black cylinders 50mm x 190 mm. Total weight of propellant per box was approx. 1 ton. The team was then driven". through the open area just south-west of facility and Bhown a concrete pad where the n tons of TNT propiallant was - exploded on 30 JUne 1991 and 9 July 1991. The Iraqis 6aid it was destroyed because they didn't want to have'so much. ......... "15.3 Inspection results: - The one ton of supargun propellant remains in building §7 - The launcher conversion/R&D building #9 is destroyed and the cement pod to the south/west of building #9 has not been used recently. - The mixer buildings where the Al Hussein warheads were refilled is being rebuilt and could soon be operational. The mixers are intact and could be easily reinstalled 15.4 Issues: Supergun propellant The Iraqi explanation for the missing 11 tons does not make sense. A full accounting of why the 11 tons were destroyed is needed. Launcher Activity No longer an issue at this facility, however the large four bay building /3 on Enlargement "B" is actively being rebuilt and was not inspected. Warhead filling The warhead filling buildings rapidly being rebuilt and could be operational soon. The building to the north east of the mixer building is used to make KDX, Tetryl etc. They look operational but were uninspected and could be used do support warhead/bomb/mine filling operations. 16. Survey at Iskandariyah ( Supergun ). 16.1 Discussion of the site. The components of the 1000 mm supergun are located in a civilian facility at Iskandariyah, 50 km south of Bagdad. The coordinates of the site are : 32 54 21,7 N 044 20 58,5 E. Altitude is 135 ft + or - 10%. 16.2 Purpose of the facility. The facility in which the tunes for the supergun are stored is a civil plant for manufacturing automotive parts. 16.3 Inspection results. The team surveyed: - 44 steel tubes for the barrel c* the 1000 mm gun- 20 218 [pfrq<;.;:n- ■ - 6 steel tubes rJ^ttiMja^t&Maf the 350 mm gun - l ateel base for the 1000 mm gun with 15 supports 4 hydraulia shock absorber cylinders-for 1000 mm-gun '• - 1 steel breech for 350 ma gun. The chief inspector received a complete list of countries and firms being involved in this projeat ( 9 pages ) and approx.' 90 technical drawings of the supergun. These documents will be handed over separately to the Chairman of.UNSCOM. 16.4 Issues. The number of surveyed itens matched the number of the items in the official declaration of the Iraqi government. The Iraqis were told to leave the parts of the guns untouched until they get other information by UKSCOM. It is recommended that a special group of gun-experts should inspect this parts. 17. Inspection of Balat al-Shuhada' plant, Al Yawn Al-Azim factory .(Al-Musayyib rocket motor .test facility). 17.1 Discussion of the site. Al Yawra Al-Azim factory, one of the ithrea facilities declared by Iraq as belonging to the Balat al Shuhada' plant is located at 32 48 25 N - 44 11 33 -E (GPS) near Musayyib, 70 km south of Bagdad. The plant adjoins a separately secured probable military-industrial facility immediately to the north. The facility sustained severe damage , with'in excess of 50% of principal structures being damaged/destroyed. • --• - 17.2 Purpose of the facility. The site was purpose-built for the final assembly and statio testing of BADR 2000 solid-propellant first stage motors. Plant offioials also maintained that future static testing and final assembly of the 120 km .range SAKR 200 ballistic missile and future testing of unguided ASTROS and 122 mm rockets would take place at the site. 17.3 Inspection Results. Buildings at the site were in many cases severely damaged and some had been totally destroyed. In general, very little equipment appeared to have been installed in the structures when they sustained damage. In. the south-western corner of the facility were six storage bunkers. Buildings 29, 30 and 31 ( 513,514,515 ) were completely destroyed, the roof of each having • collapsed. Iraqi plant officials maintained, however, that all three were empty when damage occurred. Building 34 (512) was also badly damaged, but contained a variety of support equipment ~ and maraging steel sheets evacuated from the Dhu al-Fiqar factory. The Iraqis were asked to remove the maraging steel sheets from the rubble. Upon re-inspection on. 15 August. the sheets have' been removed: Eighteen maraging steel sheets ( 2.65 m * 1.05 m * .26 m ) had been cut into two sections and an approximate 100 mm deep section was out out of each of tha five motor-case end-dome sheets ( 8 2 mm diameter ). Factory markings on the sheets suggested that more had been delivered than were presented by the Iraqis for inspection and destruction. . .. Building 35 (511) was essentially intact and contained 168 21 612 831*1 HOI13IOS!Mir sii Hour. S3II1S001I OH SUIIi JO 1I3U113M9 1S0I IMA UOIJ S33IM3S 3II1S31 90 ll*dlM3 133$ S1I33* 9IIS*K3IHd mil 01MIS IMddOS 11311 1S3M3I 0«V 313IW30 WW in 30 BDinissns On 3X11*1 311 30 S1UHII3A03 ISO! MA MCJll AW MA ■rtnxa on vwoia 'kossoh -suimd m mi a J '3W3 311 30 C IWd II 03IK1W3 S3SS3I0IN 1VNI3IW W3 aONVOinS 9IIMN0J '031IS30 31 X! 311 01 MOO » 30IMld AW nOA 'ltd 933 SI SI3Ilffd 131k 01 030m>0i m ma mum » a 11 dm m *V. '• >' / concernin6 FAILED EFFORTS TO CURTAIL IRAQ'S NUCLEAR WEAPONS ^PROGRAM v . y APRIL 24, 1991 ,\ r Serial No. 102-95 Printed for the use of the Committee on Energy and Commerce 223 367 PORTinnD %%z 1989 ') Final Announcement The Ninth fsSBlli Symposium (Snternational) on Detonation August 28 - September 1,1989 Sponsored Jointly By: ■"' Office of Naval Research Air Force Armament Laboratory - Army Armament Research, Developments Engineering Center Army Ballistics Research Laboratory Lawrence Livermore National Laboratory Los Alamos National Laboratory Naval Sea Systems Command Naval Surface Warfare Center Office of Naval Technology Sandia National Laboratories Red Lion Inn, Columbia River Portland, Oregon 224 9TH DETONATION SYMPOSIUM REGISTRANTS Slephen F. Agncw Los Alamos National Laboratory P.O. Box 1663. MS C346 I.OS Alamos. NM 87545 M. Ahadd AL QAQAA Stale Establishment P.O. Box 5134 Baghdad, Iraq Irving Aksl Los Alamos National Laboratory P.O. Box 1663. M I. MS I960 Los Alamos. NM 87545 Fernando Alcalde Union Espanola De Explosivos Claudio Coello. 124 Madrid, 28006 Espana David F. Aldis Lawrence Livermore National Laboratory P.O. Box 808. L-364 Livermore, CA 94550 Richard M. Alire Lawrence Livermore National P.O. Box 808. L-282 Livermore, CA 94550 Allan B. Anderson Los Alamos National Laboratory P.O. Box 1663. P952 Los Alamos. NM 87545 C. J. Anderson 1S5S Sydenham RcU RR 8 Kingston. Ontario Canada K7L 4V4 James Aplm US AF Armament Laboratory AFATL/MNE Eglin AFB, FL 32542-6009 Mary E-Arce U.S. Air Force Astronautics Lab AL(AFSORKPL Edwards AFB. CA 93523-5000 Werner A. Arnold MBB Schrobenhausen Hagenauer Font Schrobenhausen. D-8898 FRG Blame W. As ay Los Alamos National Laboratory P.O. Box 1663. MS. MS I960 Los Alamos. NM 87545 Alice I. Atwood Naval Weapons Center Code 3891 China Lake. CA 94555-6001 Jean Aveille Commissariat a I'Encrgie Atomique CEVMBPNo.7 Courtry. 77181 France Joseph E. Backofcn Brigs Co. 2668 Peterborough St. Hcmdon,VA 22071 Mcl R. Baer Sandia National Laboratories P.O. Box 5800. Div. 1512 Albuquerque. NM 87185 Kerry L. Bahl Laboratory P.O. Box 808. L-281 Livermore, CA 94550 Richard Bardo Naval Surface Warfare Center 10901 New Hampshire Ave. Silver Spring. MD 20903-5000 Peter Barnes Ministry of Defence . Navy CTNO 64B Ensleigh Bath. Avon UK Edward J. Barr Vanderbilt University Box 6019, Station B Nashville, TN 37235 Jude Barry Aerojet Solid Propulsion P.O. Box 15699C Sacramento, CA 95608 Pascal A. Bauer ENSMA. Lab Detonique. RueGuulaume VTi Poitiers, 86036 I John B. Bdzil Los Alamos N P.O. Box 1663. M-9. P952 Los Alamos. NM 87545 Bruce Beard Naval Surface Warfare Center 10901 New Hampshire Ave. Silver Spring, MD 20903-5000 Raymond L. Beauregard Applied Ordnance Tech, Inc. 2001 Jefferson Davis Hwy Arlington. VA 22202 Anthony J. Bedford timba-ssy of Australia 1 presentation to • smaller group of experts, please expres? your preference for a specialist session when submitting you* SMiUMnary. Papers for the Poster Sessions and Specialist Sessions will be selected by the Review Committee. Mail paper summaries no later than August 15, I9U to: William E. Deal. MS P9I5 Ninth Symposium (International) on Detonation Los Alamos National Laboratory Los Alamos. NM 87S45 The mail-in card below will be used to update our mailing list for future correspondence. Please complete, detach, and mail. If you are interested in ordering Proceedings of past Detonation Symposia, complete Item 5 on the attached card and return it with your check or money order. The Red Lion Inn/Columbia River, in addition to its excellent conference facilities, has a swimming pool, plenty of free parking, live entertainment nightly, a restaurant, and a coffee shop. It is close to Portland International Airport and within walking distance to the Jantzen Beach Center, a shopping and entertainment center. For your convenience, shuttle service runs from the Inn to the Airport. Portland and its surrounding nvers offer cultural and recreational activities for everyone. Museums and galleries display paintings and sculptures from around the world, and you can enjoy learning about the history of (he Pacific Northwest at Oregon's Historical Center. Two colorful gardens in the area are the International Rose Test Garden, where thousands of varieties of roses are grown and tested, and the Crystal Springs Rhododendron Garden with more than 2,000 rrockxlcndrons. New Market Village, located in Portland's historic district, offers fine international food, 32 gift shops to browse in. and a relaxing courtyard. ML Saint Helens National Park, located in Washington, is a little over an hour away by car. Once off Interstate 5. the road runs trough verdant vaiteys oetore starting up into the Cascade Mountains. The new road, built to accommodate this 'cu. tst ?rzc'\on. winds through i^ c ugreen forests on the west side of the mountains, through the hillsides devastated by the 1980 eruption, culminating in a vista point offering a breathtaking panoramic view overlooking Spirit Lake and the Ml Saint Helens Volcano. The U.S. Park Service offers guided tours continually throughout the day. SPONSORS The Ninth Symposium will be sponsored by Office of Naval Research (ONR); Office of Naval Technology (ONT): Naval Sea Systems Command (NAVSEA): Naval Surface Warfare Center (NS WQ; Los Alamos National Laboratory (LANL): Lawrence Livcrmore National Laboratory (LLNL); Sandia National Laboratory (SNL): Ballistic Research Laboratory (BRL); Army Armament Research. I>welopment. and Engineering Center (ARDEQ: and Air Force Armament Laboratory (AFATL). Dr. James M. Short. NSWC. and Dr. Edward I- Lee. LLNL, are ccchairman of the Symposium. (TEAR AT PERFORATION) PLACE STAMP HERE NAVAL SURFACE WARFARE CENTER Attn: Wanda J. Ohm, E221, 1-370 10901 New Hampshire Avenue Stiver Spring. MD 20903-5000 229 405 PROCEEDINGS Ninth Symposium (International) on Detonation VOLUME I Sponsored by: Office of Naval Research Air Force Armament Laboratory Army Armament Research, Development and Engineering Center Army Ballistic Research Laboratory Lawrence Livermore National Laboratory Los Alamos National Laboratory Naval Sea Systems Command Naval Surface Warfare Center Office of Naval Technology Sandia National Laboratories August 28 - September 1, 1989 Red Lion Inn, Columbia River Portland, Oregon Approved for public release; distribution is unlimited. 230 406 FOREWORD The Ninth Symposium (International) on Detonation was held at the Red Lion Inn. Columbia River, Portland, Oregon, from August 28 through September I, 1989 The Symposium was one of a scries started in 195 1 as an Office of Naval Research sponsored "Conference on Detonation." Sponsorship has expanded over the years to include Army, Air Force, and Department of Energy Laboratories, as well as the Navy. The Symposia have been international since the fourth in 1965. The Symposium provided a forum for scientists from throughout the world to discuss special problems in the field of energetic materials, particularly detonation phenomena in solids and liquids There were 445 attendees at the Symposium; 122 were from countries outside of the United States. Fifteen countries submitted papers and sent authors to the Symposium, and a total of 20 countries participated in the meeting. Papers by scientists who were unable to attend were presented by other scientists. There were 17 exhibit booths by vendors specializing in equipment for the detonation research community. Many conference participants and their families attended the Symposium banquet. Professor Claude Fauquignon of the Institut Franco-Allemand de Recherches de Saint-Louis served as the Master of Ceremonies. The guest speaker. Dr. Anthony Irving of the University of Washington's Geology Department, gave an interesting and educational presentation on the 1980 eruption of Mount St. Helen's. To allow more papers to be presented at the Symposium, one and one half days were set aside for 16 Specialist Sessions, where as many as three papers were given simultaneously. Seventy-four papers were presented in the Specialist Sessions, forty nine in General Sessions, and thirty seven papers exhibiting research results were displayed in the Poster Session. Of the 160 presentations given at the Symposium, 156 papers are published in this book. Of the four that are not published, one was published in a journal that was distributed before this book was completed and three were not submitted to the editor in sufficient time to be included. Volumes I and II of this book contain papers from the General, Specialist, and Poster Sessions, and also copies of poster displays if they were furnished by authors. With the exception of papers in the Poster Session, papers are grouped by subject and appear in the order in which they were presented at the Symposium. Poster Session papers appear in the order in which they were listed in the Technical Program, except the paper by S. Crane, et an index of the first through the eight symposia, which was placed at the end of Volume II. Copies of the poster displays that were provided by authors appear following the written version of the paper. This book was composed on the Xerox 6085 word processing system which, in general, the editor feels is a good system for the presentation of technical work. However, readers should know that the gamma symbol (y) on this system looks very similar to the capital letter Y. The Detonation Symposium Organizing Committee for the Ninth Symposium is gratified with the outstanding exchange of scientific information in the field of detonation phenomena in solids and liquids which took place at this meeting. The following are acknowledged for contributing to the success of the Symposium: 231 407 SPONSORS: Office of Naval Research Air Force Armament Laboratory Army Armament Research, Development and Engineering Center Army Ballistic Research Laboratory Lawrence Livermore National Laboratory Los Alamos National Laboratory Naval Sea Systems Command Naval Surface Warfare Center Office of Naval Technology Sandia National Laboratories THE ORGANIZING COMMITTEE: Edward L. Lee, Coc hair man Lawrence Livermore National Laboratory James M. Short, Cochairman Naval Surface Warfare Center Allan B. Anderson Los Alamos National Laboratory William E. Deal Los Alamos National Laboratory Joseph C. Foster Air Force Armament Laboratory Robert B. Frey Army Ballistic Research Laboratory Leona H. Hicks Lawrence Livermore National Laboratory PaiLu US Army Research, Development and Engineering Center Dennis E. Mitchell Sandia National Laboratories Wanda J. Morat Naval Surface Warfare Center Alita M. Roach Alamos National Laboratory Karen A. Spurlin Lawrence Livermore National Laboratory Philip L. Stanton Sandia National Laboratories PORTLAND ARRANGEMENTS Leona H. Hicks Lawrence Livermore National Laboratory Edward L. Lee Lawrence Livermore National Laboratory Karen A. Spur lin Lawrence Livermore National Laboratory REGISTRATION: Patricia C. Crawford Lawrence Livermore National Laboratory Leona H. Hicks Lawrence Livermore National Laboratory Mary Ann Lucero Los Alamos National Laboratory Gay Maestas Lawrence Livermore National Laboratory Beverly McCollough Lawrence Livermore National Laboratory Wanda J. Morat Naval Surface Warfare Center Alita M. Roach Los Alamos National Laboratory Karen A. Spurlin Lawrence Livermore National Laboratory AUDIOVISUAL SERVICES: Matthew T. Dimercurio Lawrence Livermore National Laboratory PREPARATION OF PROCEEDINGS: Wanda J. Morat Naval Surface Warfare Center Global Associates, Ltd. ii 232 408 Sandia National Laboratories is acknowledged for printing Volumes I and II of the preprints; Volume III was printed at the Naval Surface Warfare Center (NAVSWC) with funds provided by the Army Ballistic Research Laboratory. This book was edited and produced by Wanda Morat of N AVSWC with the dedicated assistance of employees of Global Associates, Ltd., Alexandria, Virginia. Original plans were for the book to be assigned a NAVSWC publication number and reviewed for release by NAVSWC. However, publishing authority was subsequently requested and granted by the Office of the Chief of Naval Research (OCNR), therefore, it was necessary to assign the book an OCNR publication number. The Organizing Committee of the Symposium greatly appreciates the understanding of Richard Miller of OCNR concerning the importance of publishing this book, and the assistance of Judah Goldwasser and others from OCNR in the final publishing process. Robert Frey, chairman of the Poster Session, is acknowledged for planning, organizing, and managing the Poster Session, and Alita Roach is acknowledged for planning and coordinating the displays by vendors. The session chairmen, listed in the table of contents and on the section title pages, and others who assisted in the review process are acknowledged for assuring that the papers in this book were thoroughly reviewed. The Organizing Committee would also like to thank Carol Lee, wife of Edward L. Lee, for organizing activities for companions of the attendees, and the staff of the Red Lion Inn, Columbia River, for their assistance before and during the Symposium. Plans for the Tenth Symposium (International) on Detonation are under way. It will be held the week of July 11-16,1993, at the Boston Park Plaza Hotel and Towers in Boston, Massachusetts. Edward L. Lee, Coch airman Lawrence Livermore National Laboratory James M. Short, Cochairman Naval Surface Warfare Center iii 233 S/23215 English Page 17 234 BNL MONEY FUNDS CANNON PROJECT AT TAJI STEEL COMPLEX The Nassr State Enterprise for Mechanical Industries (NASSR) was probably the most important weapons complex in Iraq. NASSR was Iraq's main ballistic missile producer and was involved in the chemical weapons program and the secret nuclear weapons pro- gram. NASSR also produced aerial bombs and other conventional weapons. One of the main complexes under NASSR control was called At Taji or Taji. Iraq decided to produce heavy artillery pieces for the Iraqi military forces at a new steel facility. The Taji steel facility had three primary components: a casting foundry, a forging line and a rolling mill. The casting foundry, designed to manufacture extremely high caliber steels, was contracted to the Klockner syndicate in April of 1987. Klockner, with BNL loans totaling over 33,000,000 DM, sub- contracted to several German firms for various specialty jobs. A German firm, Thyssen Rheinstaal, was brought on board for the in- stallation of 63,500,000 DM worth of conveyance structures and $17,000,000 worth of spare parts. Asea Braun Boveri (ABB) of Mannheim, Germany installed 3,273,565 DM in furnaces and ower substations and Mannesmann Demag supplied huge over- ead cranes. Siemens, the German electronics giant, provided elec- trical products. All of these companies were funded out of the At- lanta branch of BNL. The forging plant at Taji was awarded to the German firm Ferrostaal in consortium with another German firm SMS Hasenclever. The latter supplied the hydraulically operated open die forging press which was capable of handling huge items. Both these firms received money from the Atlanta branch of BNL. The rolling mill was awarded to the Italian company Danielli in January of 1989. Danielli then hired specialty firms to manufacture the heat treatment furnaces necessary to reach the 350,000 ton an- nual capacity. The Danielli contract was funded by a 126,000,000 DM loan from BNL-Atlanta. 235 II 3 | i i? - g • 0 !"D • c if 1 I j : & • II !i - 11 It! Q ■ O k ! 5 e a « r * 9 - J g = i r; h3i I *! - f i i 81 i 111 III! I I ^ III* 5 f!M! 5 I * * a u S i] is . - c 5 S £ ; S — • n • JO 5 iff 236 23-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter Amount |Description of Goods/Services Additional Suppliers Iraqi Beneficiary/ IIraqi Names 1 5624,510 Same Modern Paints for Industries, Co. Itelwer International, Inc. Amercin Center 13100 West End Avenue Nashville, Tenn 38203 Chemical raw materials 1410 NT three types of 1sol vents as follows: 11. 190 NT thinner PA lll. 1093) | Baghdad, Iraq |Fatime Telmar, Pres. 12. 100 MT thimer N.B. lll. 1073) 13. 120 MT thinner EGL l(l. 1081) | Chemical Raw Materials solvents 1 $181,913 Same | Modern Paints for lindustries Co. ITelmar International, Inc. I Amercian Center 13100 West End Avenue Nashville, Term 38203 1220,500 MT solvent Inaphtha (RL.813) hedtav. Baghdad, Iraq I |Fatime Telwar, Pres. 126 tube presses | $1,796,448 Sune McNeil Akron, Inc. 1 % East Crossier Street Akron, Ohio 44311 I I New Tyre Project Committee Ministry of Industry and Minerals (2) 1P.O.Box 5914 Baghdad, Iraq 237 ill I i 11 I 2 I3 till it o 0 u m 0 l! « Ii 1:? s ■ !! il 1 1 j | J * $ I!! i i 11 11 Z m J 1 ! 1 J 9 £ s « ! i S s 8 5 s i 5 •* s ■ o I I .5 - 1 N. — ■1 W • r 5 2 ill SI s 1 8" 3 S | ° S S N Hi! ■ o • i 11| «i; ii i t !S 3* Ii o N S 8i 1 S 8 f il -J N fl I 1 a n S J = X o « - I' m • ? ° 5 i d 1 t a 5 238 23-Oct-92 BNL's Letters of Credit to Iraq · Option A Exporter Amount IDescription of | Goods/Services Additional Suppliers Iraqi Beneficiary/ Iraqi Names |Xerox Copiers | $372,316 Same Al Faraby Computer Center (2) | Automation Engineering 1206-C Mill St. NE lvienna, Va. 122180 Microfiche system I $82,630 Same (Rayon State Establishment I Marnerwood Ltd. 16 Islet Park Drive Maidenhead Berks SL6 IJS |England Spare parts for cooling Iplant type Carrier 1907 al no. 6526-9883 | Baghdad, Iraq 1 $247,005 Same | Agricultural Supplies Co. I I Lobel Chemical Corp. 115.000 ltr. Glyphosate | Manufactures Exports-Imports Herbicide (Round Up) 1100 Church Street New York, New York | 10007 Baghdad, Iraq Same $239,705 | State Establishment for | Cotton Industries 1 lDraper Corp. | Spare parts as per 1951-5 Pine Street Extension I buyer's orders F/7418 | Spartansburg, South Carol ina l 115 Harness Com 11 LM Regular Top 180 LN Cloth Roll Rack 180 RH Cloth Roll Rack 1 Baghdad, Iraq I $147,120 | Same Tiragi Trading Co. (1) | Copeland International Inc. 11,050 pieces Copel and 11675 West Campbell Road compressors for I Sydney, Ohio lair-conditioner. 145635 Baghdad, Iraq 239 rading Co. ( . Iraq ! a a s 3 ii S I ? - s y • i - • « - * f j | Iraqi T | Baghdad | Iraqi T | Baghdad Si is J J f J I [ i! 2 t s I 1 II 1.1 _*-_ *- • * •J J Nil m 3 OS I iij ill ii > y > i I 2 I s! si "8 > I s IIJ • j i III! ! « * i $ in 8 if I § 1 | ! -. ■& E 3 =: ? i * 240 ! ii a ■ a 8; u h Ii c! if HI 1 il 1 Additional | 1 • i 1 i m o § i I s s 3 j |Description of | III .1 1 I I lit III b — 5 i 2 3! i ■ s Is: ll i! ! || j ■ "So E | Exporter | i I i i ii If !j 11 •Hi III5. 1 1 f i $ i s s 1 * If 5 i 11 i 4 c *- • • lillL iilili il!li.L liiiii! | SMMN ID»J|| 1 Mil 1 il «°8 0d| 1' 1 1 3/V *M« )aiJJiripu|| | 03 MlJlsnpui )M6|-|| 1 1 | 1)1)1 »A!S«ip»B-)V| | |«3lJl»i3 joj 3sijdj>ju3| | MiJimpuij 1 C»| 1 b»J| '»crb»8| ! | | ams juaajea ib»j|| | *t\jdj»iuj\ 1 1 1 P*PM**H| 1 | | joi )uaas| Bum»Mua jo» »iq»lint| lio:> JO) dun jiddoDl papunoj Mil" joionpuool -saBpal p*ai jo) dun jaddool V|poH pinog joa »j«ds| )a|j»»npu| «d|uoji»,3 Pim>9| -j»lloj»uo3 «iqaa*MjBoxl| ujbA ja)s»X)od «uoi oSZl u»P 1/OSll ujsX jais»A|od iA CD -? * E 3 ■ « e • 3 1 | 111 1 s IL I I J I j J § o a 3 3 § 1 s 5 s s i 1 s s 3 u a l„ S s • Description of Goods/Services !t 100.000 Itr. Iw (Ourtbm 40.8 EC 96 tons polyuret adhesive 47 tone white gl Sterile disposal surgical blades 100,000 Itr. Due 2 e il i 5 J •— • lis 1 | 8 < < M « — Is ? • i 11 c • if! I $ • • 1 1 1 ft] S |Nitco Ltd. |5008 Melvey |Suite 3004 |Fort Worth, T |67107 1 jih |Upjohn Uorldu |7000 Portage iKalamazoo, Mi HI «" u * o* — M • M It Is |49001 1 ; « s 5 I 2 la s s i a 243 s ■a jl \ 11 i i Co. for Drugs it Appliances :ing if « ii * ■ ii if | i! 3 "S fib -o 5 k 1 | Iraqi | Iraqi HI! a 1 | II! a 5 | ii ! i Additional | | Suppliers 1 1 1!! i 1 1 J i s o s § S 2 1 e fc" s ! i a j iDescr lpt ion of Goods/Services J 1 1 i 3 (M if I! £ i I R I i! i i- h §i ! I -« in 1 - 5 ii I i . h< i 1 * \ s I O" M |s \ u 1 * ft *- ! ii y ■ O a S i y • 0 Hill |iriito | Croup |2400 P lEvansv C ** — ~ • " s — y» • i i. | i ■ at II 1 s 5 « o' 1 • H !i i: - i 11 ^5 1 ~ S; i m HI il £ a S i « i - * s = * s B 3 2 |ENU Inc |«5 Sta |Buffalo i t - s E i I — m m in — M « (M — M a ~ |H202 1 §$12 ssii 245 5 ■ j i: 1: « j * a - S ; «l as 1 .!, , 1 j 1 i « « 1 Iraqi 1 Iraqi il l • I 1 c 'S V U « "3 • 3 • v 1 3 2 111 1 III! : |j i I s ! .! 1 1 1 « 1 S If - 3 h r 5 * 2 a i J 1 i 1 i I f i § & 8 § i I i f i j « « 1 1 1 2 9 o • « o • ! i h I s 0 £ | \ ) J • .: c 1 — 1 c i 1 | | j | Descriptio | Goods/Serv 1 >» C_ 1 O i 1 « B a i J J j I 1!! 1 | i X i 1 ! 1 a a m u i • s :E , . J «: *2 - 1 O i ill 3 r 8 . 1 I, „ \ ; i • 9 o « o c > tf> b m • : in 5 * S — < m — M- c ! 1 2 ill. iiili.il o i ial. : 248 11 i g x -1 ion tnois er Construct Sunny Siete A tyville. Ml f] 1 I J I* 1! li n il ! l! 5 3 § g o g a I a" S S «* 3 S I I . si ! ; 1 s !: ì 111 5 ! J ili ill ■ si t- i — £- — — a • a* ills u <- 2 -o o c - 2 fill fill! 249 'J t i i i | Additional |Suppliers e ° 1 si ii 1 s § i i I s s a o tl s - * bs. | Uets F.O.B. | Uets F.O.B. | | Description |Coods/Servi | Centrifugal Exhaust hoo | Spare parts !: i "* 2 & 2 1 1 ! 1 1 - a -o a I k ,1 . J sli | > 1 (J -w 1— U Ik l» « t. k » i. i. a a :»3 g Hill :*5 g i o a «« o 11 a 11 £ £ e 3 X 251 23-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter Amount Description of | Goods/Services Additional Suppliers Iraqi Beneficiary/ Iraqi Names I $195,000 Same I Computer system hardware I and software. Hewlett Packard Intercontinental 13495 Deer Creek Road IPalo Alto, Calif 194303 IIraqi State Trading Co. |(2) 1 Baghdad, Iraq Sleeve bearings |A125 Flinger . $220,000 Same State Electrical Industries Enterprise 1A. 0. Smith Electrical Products Inc. 1531 North Street Tipp City, Ohio 145371 Waziriah 1 Baghdad --- $1,600,000 Same Electronic Industries Co. I American EX-IM LTD 128250 N.W. Highway Suite 202 | Southfield, Michigan 148076 1Parts materials for manufacturing of 10 million of cassettes tape. | I Baghdad | Carbide tools I | Associated Instruments IP. O. Box 49591 Atlanta, Georgia 130329 |$12,161,502 |Hertel AG | Wehl aver Strabe 73 Postfach/P.O.Box 1751 10-8510 Furth Bay Germany State Machinery Trading Co. |(2) Baghdad Nash V. Rehmann - Pres. I Cutting tools I | Associated Instruments IP. O. Box 49591 Atlanta, Georgia 130329 Nash V. Rehmann - Pres. | $8,547,644 Hertel AG | Wehl aver Strabe 73 Postfach/P.O.Box 1751 D-8510 furth Bay Germany Istate Machinery Trading Co. 1(2) Baghdad 252 11 I i 11 I! I u- - S | b. 1 8 flfi 11 1 1 8 w | CO .c a x i 1 ■ : . 1 I 1 s i 1 i ^ V -38 J if S Ma* ^ lilfl Jllll lull. > 5 II i 5 a § 8 _ I 8| Q n u 1 j S s s ■ 2 * g . 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Inc. 1010 Northern Boulevard Suite 232 I Great Neck, New York 111021 | Baghdad Iarnesman Handel Dusseldorf, Germany | Hydraulic Materials 1519,941,312 | Same 14.000 tons Hot Rolled Coils | Istate Establishment for Heavy Engineering Equipment |(2) I State Enterprise for Steel & Iron Basrah Fork 1 577,325 Same Draper Corporation Fork Grate 19515 Pine Street | Spartansburg, South Carolina |Check Strap/Endless State Establishment for Cotton Industries - | Baghdad |Textile Machinery Spare Part $313,760 Same Wash International Co. 1310 wilson Avenue Norwalk, Connecticut | Vacuum pump of standard castl liron State Establishment for lPulp & Paper Industries | Baghdad IMatrix Churchill Limited IFletchansted Nighway | Coventry, cv 4 9 DA U.K. 12 centrifugal water cooled water chiller trane type ICVGA 034 | $3,486,714 | Trane S.A. OG Vente I Des Equipment Trane ITedesco Avenue 71160 Brussels, Belgium Nassr Enterprise |Machanical Industries |(2) Baghdad . 270 27-Oct-92 BNL's Letters of Credit to Iraq - Option A lExporter Amount Additional suppliers Description of | Goods/Services Iraqi Beneficiary/ Iraqi Names . | $1,459,088 Same Ilonics 165 Grove St. I Water town, Mass. 102172 Water demineralization Iplant Establishment for Mechanical Industries I State Enterprise for Heavy Engineering (2) Techcorp (3) Project 395 Matrix Churchill Limited Fletchame ted Highway | Coventry, CV 4 9 DA U.K. Mach 111 FNV55 3 axis vertical machining centres I 11 FMV65 3 axis vertical machining centres 1 4,439,808 Flexible Manufacturing Technology LTD. 1 British Carden Avenue, Hollingbury Pounds Brighton BN1, SAU England Nassr Enterprise |Machanical Industries (2) Baghdad 11 tool and cutter grinding machine 12 tool setting machine I $67,143 | Same 1 IAL Maddad Enterprises Inc. 13212 West End Avenue Nashville, Tennesse 37203 12 pieces clupak rubber Iblankets State Enterprise for Pulp I & Paper Industries Baghdad I $67,494 | Same Al Haddad Enterprises Inc. 13212 West End Avenue Nashville, Tennesse 37203 1200 pieces reed cutter Ifly knives State Enterprise for Pulp 14 Paper Industries I Baghdad 271 23-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter Amount Additional suppliers |Description of | Goods/Services Iraqi Beneficiary/ Iraqi Names Machine parts kits | $3,430,480 Same I Matrix Churchill Limited IFletchansted Highway | Coventry CV 4 90A U.K. Nassr Enterprise Mechanical Industries |(2) lone kit Churchill Three | Series with spindle direct | Idrive lone kit Churchill Three | Series with gear box drive | | Ivety-Pharmaceuticals | $320,278 Same |Agriculture Supplies Co. I lupjohn Worldwide 17000 Portage Road I Kalamazoo, MI 149001 Baghdad 1 Waste and water treatment equipment | EMCO Engineering Inc. 125 North Street Cention, Mass 02021 $700,000 Aqua Techniek 8.v. IP.o. Box 1058 13350 CB Paperchecht I The Netherlands Istate Establishment for Heavy Engineering Equip. |(2) Project 395 | Bassan E. Shalboub - Pres. I Galglass Ltd. 1321 Hough Lane Wonowell Bainsley South Yorkshire UK Nadin Kassir · EMCO 1110 valves 1 $10,404 | Same State Establishment for 1Steel and Iron Henry Vogt Machine Co. 11000 West Ormsby Ave. I Louisville, Ky 140210 water demineralization Iplants | $1,780,000 Same I 11onics 165 Grove st. Watertown, Mass. 102172 Pres. - Arthur Galdater State Establishment for | Heavy Engineering Equip. |(2) 1Project 395 Pumping station i 272 i Iraqi Beneficiary/ | Iraqi Names | State Enterprise for Heavy | Engineerins E qui pawn t | (2) | Project 395 | 1 1 | Baghdad | 1 1 1 1 1 1 State Enterprise for Rubber | Industries | Oiuaniya | 1 1 1 1 State Enterprise for | Mechanical Industries | State Machinery Trading | Coapany (2) | At Fao State Establishment (2)| Project 395 | Additional Suppliers 1 s 1 § 1 \ i i i i i s Description of Goods/Services 5 Units Volvo NIO 6x4 I with 18 nj tank for | diesel fuel PTO puap | 13 units Volvo NIO 6x4 | with 15 K3 tank for | industrial water PTO puap 2 units Volvo NIO 6x4 | with 15 N3 tank | 450 tons carbon black 100 tons carbon black 4 furnaces with ton capacity| type 1 TMK5 | 1 2 electrical power supplies 4250 ICU | |Mcdiui frequency induction | |furnace Melting systea. | i I Two coaplete MD600 cranes, | two coaplete MD900 cranes, | one coaplete MD500 crane | and spare parts. Volvo International | |Developaent Corporation | |5-40508 | Hoteborg, Sweden | | ICO Industrial Supply t | Consulting Organization | |12 Route 17 North | |Suite 201 | |Paraaus, NJ | |07652 | 1 1 |Asea Brown Bovierf | |lndustrlal Plants Division | |P. 0. Box 829 | IDortaund | | Germany | 1 1 1 1 1 1 1 1 1 1 |18 Rue de Charbonnieres > |B. P. 173-f 69132 |Ccully Cedex, France I I |Potain | 273 i i CD X i g si! | 01 41 O ^ i! * g s si 1? it I < U ■ 2 I 111 iiii s 5 I J n a | \ j= ■ S Q PI < O J ? £ la 1 fc S § 3 iis ■ 19 M * I -5 1 I' S:8 N1 u IJI e o 1 6 i J U O > t .!! O O — I S ± 3 274 I 1 j it! 1 Benef ic Names 1! 11 o ii j ii j HI 1 5 < Iraqi Iraqi si 1 is' ii 1 VI 01 Q «• ■ o - Additional Suppliers | 1 Uniroyal Goodrich Tire Co. | 600 South Main St. | Akron, Ohio | 44397 | 1 h 1 uniroyal Goodrich | |409 Weber St West | |Kitchener, Ontario | N2 G-4S5 | | Canada j 1 1 ii 1 i - a - I K s ii *ii § 3 i 5 s 1 i K -# 5 i 1 8 s a* s i a k t 11 ? u! "3 1,000 ton BAR C 1,000 ton BOG C 1 Ml i \ |Description of | Goods/Services 1 I Tyre balancing machine. h N I I f •ii s f 1 o si a s: ii 1: i|l - s 5 t 6*1 ill! - 3 O •a ■ > ■I • > > • X i 0. a £ i K jc 1 > — jtt « '• | ? s - | 11 5 » i 5 t 5 ? S ^ (AO 3 ■ o * z ^ ?- ■ | III 3 — ■ ° J | S - ■ ■; ?- s |Exporter ill I — - 41 s a 1 a illii. 1 1 sis:'. s £aii 275 23-Oct-92 BNL's Letters of Credit to Trag - Option A lExporter Amount u Description of | Goods/Services Additional suppliers Tiraqi Beneficiary/ Tiraqi Names I Mobil Polymers International 11,251,250 MT (HOPE injection $1,069,168 | Same Ilimited lgrade HMA 035 (UV)) I 11 Mimnervatrast 1930 Zaventom I High dens ity polyethylene Brussels, Belgium I HOPE Injection Grade hon 0351 Industrial Bank IN/C National Chemical and Plastic Industries Co. I Baghdad Same $684,686 | I Mobil Polymers International 1500,500 MT (HOPE blowing Ilimited I grade HYA010) 11 Mimervestraat 11930 Zaventem Migh density polyethylene Brussels, Belgium HDPE Blowing Grade HYA010 Industrial Bank 1A/C National Chemical and Plastic Industries Co. I | i I Baghdad Technoexport Vaclavske Nam. 1 (Praha 1 1Parts of air cooling system | $1,654,531 | Janka Radot in - Praha State Establishment for I and steel sheets Heavy Engineering |Kovosvit Holoubkov Equipments (2) I Machinery Skoda - Plzen Sehee |Isolating Material | Baghdad Sclick Roto - Meteler i Project No. 74 |Rosicke Uhelne Doly · Zhysov | · Teplotechna Praha 1 S96,212 | Same Spare Parts | Shuttle Feeler Draper Corporation 1951,5 Pine Street Extension IP.O. Box 5498 | Spartansburg, s.c. State Establishment for Cotton Industries Crank Shaft Gear Baghdad Power Block Trap 276 i I £5 2 o —* 1! ill Z m m n u ■ m «i II! X u — i i ! J !! !! 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MO'SV* | jaidVw j«M oil 'P>1 i«uoi)«uj9>U| »p»Jju3| I II I I SMRN ib»J|| I I s»3iAj»s/spoog| I /aj« 131 jM»g |t>«j|| sj>n!ppy| junowy| jo uondijDSJal j»jjodxa| V uoijdo - b»j| oj jip»J3 »o sjajjsi s.iira Z6-J30-K 278 23-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter Amount Additional suppliers Description of Goods/Services Iraqi Beneficiary/ Iraqi Names I $6,500,000 Same State Establishment for Petrochemical Industries I Lummus Crest, Inc. Design, engineering and Thyssen Rheinstahl Technik Iprocurement service for an | GMBH Ethylene Plant. 11515 Broad Street Bloomfield, New Jersey 07003 | Basrah, Iraq 1200,000 Ltr. Propanil 3601 1G/L Herbicide $714,000 Same |Agricultural Supplies Co. I Lobel Chanical Corporation 1100 Church Street New York, NY 10007 I | Baghdad Pitressin Tannate in oil 11 ml 750 1 $21,300 Same IP. Davis Co. 1G.B.o. 118 Post Box (Detroit, MI 148232 I The State Co. for Drugs 1 & Medical Appliances Marketing Baghdad Test tape qty 250,000 1 $330,625 Same Eli Lilly S.A. IP.o. Box 395 ICH-1211 Geneva 26 Switzerland The State Co. for Drugs 14 Medical Appliances Market ing Baghdad 1100 NT (BBP) | $266,000 Bayer A.G. West Germany Entrade International Ltd. 1630 Fifth Avenue | Suite 1755 I New York, NY 110111 Industrial Bank A/C The National Chemical and Plastic Industries Co. Baghdad 279 J | o ■ £ I a s 3 j I f i ■ 1 o ^ ^ « V 2 1 s His I £ w a — 3 * S flu* u >■ I 3 8 5 Nobil Polymer) International Saudi Vanbu Pi P.O. lox 3013< Madinat Vanbu I H § i s si 1,072,500 NT HOPE (HMA 035 with UV) | High Density Polyethylene | HOPE (HMA 035 with UV) | 1 1 1 1 Precious antala | 3150 troy ounces (99.95 j Purity) of platinua sponge. | 350 troy ounces (99.9) of | rhodium powder. | II L . S t III s i i Hi a- . i: = t> o o a> n o — t 2 ii I ! s 2 ! gj I :t S11 . Hill 3 j °, § 1 | * »*. 5 £ s s o »- > I m a. m l. 6 — i11 llii f - * III III 280 i s : I Kit Hi • j • si 111 i i S * t s I III 5 | a 35 <0 S 8 5 2 S 2 S . g S ° 2 3 ^23 i 1 « — S 5 Is 8 i t 5 O L : § [1 II s : s Vi i i | O 09 "t i s « ^ is I :1 * • ■ i z i * ?- < B 3 1 1 • ? I s I e 1 £ «: fi i 2 j hi & o I ? 5 1 e 1 281 23-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter Amount |Description of Goods/Services | Additional Suppliers Tiragi Beneficiary/ Iraqi Names 110 MT Tertiary Amine | Catalyst (Dabco 33 LV) | $138,4001 Industrial Bank 11/C National Chemical and IPlastic Industries Co. Entrade International Ltd. 1630 Fifth Avenue Suite 1755 New York, NY 110111 Yavuz Tezeller - CEO Baghdad | Copper material Inet weigh 24,000 kgs | $551,514 lozer Metal San: A.S. linstanbul, Turkey Entrade International Ltd. 1630 Fifth Avenue Suite 1755 New York, NY 110111 Al Qadissiya Enterprise Itor Electrical Ind. 1(2) Baquba 1500.5 MT HDPE (HMA 014) I I Mobil Polymers International Ltd. 11 Minervastraat 1930 Zaventeem 1 Brussels, Belgium $712,211 | Saudi Yanbu Petrochemical Co. Industrial Bank IP.. Box 30139 11/C National Chemical and Yanbu Al-Sinaiyah Plastic Industries Co. Madinat | Saudi Arabia Baghdad IL ab equipment $126,534 | Same Agricultural Supplies Co. 1 TV Scientific 1P.O. Box 7900 San Francisco, Ca. 194120 Tubercul in syringe (Baghdad Cryo-Gloves 15154,000,000 Same General Motors Overseas Distribution Corporation 13044 W. Grand Blvd. Detroit, Michigan 48202 Ten thousand 1990 model lOldsmobile Ciera four door sedan model 3AJ69 General Automobile and Machinery Corp. Baghdad Spare parts 282 o 1 c »> J m « ° 1 - * s i SI II !"r \s \ li Enterpri icat Ind Establis Engineer t No. 74 Establis Engineer t No. 74 ii • 5? | Iraqi 1 | Iraqi 1 | Nassr 1 | Mechan |Baghda State 1 | Heavy 1 l<2) |Projec |State 1 | Heavy 1 1(2) |Projec State 1 | Heavy 1 { State 1 | Heavy 1 1(2) |Projec 1 i<2> i: 1: s 1 J i I Additlonal | Suppliers |Esab Goete | Finland i |Esab Goete | Finland i * 1 11 i i S § i: ! 81.000 {Marcs o 8 I 3 s 5 M a! V o 1 t ■ 1 1 I .? si? s J 1! i 1 1 ? 1 \ 1 * 5 * |! i 7 g 1 f ? i 1 « 1 1 • c I 1 | * Oescrij Goods/! 2 »s!2 1 |Thyrst( it; O 5! 4 £ $ 1 i — « 3 K 8 I: = |s ■ • -J X Export Fore TD. avshe Nam 1 Czechoslova 1 o o I |Matrix Church | F letchomsted |Coventry CV 4 1 1 1 . Export TO. 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II I r i S 8 I 1 § I i § § § I e s 8 i i s I 8 s ! .? 1 i i *t \ 1 ? i o 2 a I t \ 9 S J 11 j* 1! | I il_ o 1 < i_ 3 i i 1 \ f i § z s i i i 8 • z S z ! o o 0 O o 1 . 1 . I. i. |. | S. IL_ UJ O 111 o IL. IL. !L. IL IL ii. 289 J 4 1 : li | jl li c | ii! li iff • J I iL-i ■ e u 2 r -1 i « ■ * o |State | Rayon Bugs F |Tlkrit *- • eg i_ V> X w o. li! £ m 11 1 | 1 ]1 |j si! ft ii i i 1 tii o — at < 1 j i 5 >. I I j • • 1 *: ^? !! jt. | M I 0 i. 1||I ! s 11 * I i w a Vi j 1 u xi S jj! sit* 290 27-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter Amount Description of | Goods/Services Additional Suppliers Iraqi Beneficiary/ Iraqi Names 1 1 I Trading and Investment Corp. Airconditioning equipment 1P.o. Box 9503 IHS/77/88/2049 (Spare Parts) Charlotte, N.C. 28299 11) Compressor 2Tons 50H7, 122 VO (70 units) $25,580 IC.C. Dickson Co. 1927 East Blvd. Charlotte, N.C. 128236 State Company for Drugs and Medical Appliances Marketing I Baghdad 12) Compressor 1 1/2 Tons |(30 units) 1 1 Daniel i and Company Officine Engineering documents and Meccaniche S. P. A. drawings concerning the Via Nazionali 33042 steel buildings and the Buttrio (Udine) Italy Icivil works for the |first phase of rolling mill plant construction. l 29,500,000 Same I (Deutsche I Marcs State Organization for Iron and Steel I Basrah $1,445,000 Same 1100 tons high bulk yarn, I dyed on cones for knitting. count MM/2 State Establishment for Cotton Industries | Scheuer International Trading Inc. 110, Westport Road Wilton, CT 06897 I Baghdad Attn: David Marker 1100 tons high bulk yarn, I dyed on cones for knitting Icount MW 52/2 I Raw water treatment Iproject llonics Italbe SpA Ivio Mauro Macchi, 26 120124 Milano italy | $9,550,000 Ionics Incorporated 165 Grove Street Watertown, Massachusets 102172 Technical Corps for | Special Projects (TECHCORP) (3)|| (Water processing plant for (Petrochemical 11 1 Baghdad Project 202 Petrochemical Complex 2 (2) 291 23-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter Amount Description of (Goods/Services Additional | Suppliers IIraqi Beneficiary/ Iraqi Names 1300 km 435/55 Acer According to Din 48206 Twith Grease | $1,434,000 1 Rabak Elektrolitik Bakir ve Mamulleri A.S. Major Electric Projects Ilmplementation Commission Entrade International Ltd. 1630 Fifth Averwe | Suite 1755 I New York, N.Y. 110111 1 | Turkey Baghdad Specification: Aluminum Wires 54 X 3.2 mm. Mominol Area I IAL 434.34 2 st 56.34 2 1 | Complete Conductor; 4901m. 2 I | $2,120.000 State Establishment for | Cotton Industries Entrade International Ltd. 1630 Fifth Avenue | Suite 1755 I New York, N.Y. 110111 1 $146,700 10.MT (Tertiary amine | Catalyst) (Dabco 33 LV) Entrade International Ltd. 1630 fifth Avenue Suite 1755 I New York, N.Y. 110111 Industrial Bank 11/C National Chemical and Plastic Industries Co. Baghdad 150.MT (silicon Oil) $535,250 | | Entrade International Ltd. 1630 Fifth Avenue Suite 1755 New York, N.Y. 110111 Industrial Bank IN/C National Chemical and Plastic Industries Co. I 1 Baghdad Jua»M8nq»l«3 »»»»s o*i |y| UOJI JOJ JSIjdjiluJ sibjsI l»rojd tajAi h»n| •oj s»nddns l«jna)n3|j»y| «>l 1 i 1 1 ! 1WS pu«| 1 b.J|| i i ! uoiasiHuosI (Z)| pvpM0«g| | ! «"S| uoit|Aio pJ»pu»JS uojj)y| •»|j>«npu| J»>P!d - »1»»3| «9l - 6981 *oa o -d| snusAy poof»)Bu3| 011(0 "uoj)(y| 60£»*l MMS| msj ooo'owt 1 0M)'66St I OU'ltZt 1 090'/9Vl« 1 i i i i i i ! 1 1 1 1 1 ! I j 1 j taumsM Buipian Mil IWt-SVZl-JI •"I** «UMJ»d| jo sjiia ajonbs 000'009l si3| »i«|B ajodsl Jt»H! »J»dsl dojn JMU|| dojh j9)no| ■suej )tnt>i|» pu»| 1 1 1 1 1 1 1 1 1 1 1 1 1 1 •JS »q»no mnos 9l»l •pn Bunnen Uj«ii| •ton »Bjo»9 Bu,) £| >t»n anuMy ujois] | dd / I Ma "pjo»«>»| 31JJM13 U)03U|1| oiMO 'puoitAOial Buil*V*M JWWdl -03 'poofW)Bu3| 0818011 •»-S Bu|p»Ji hoqI »*» n»)3 ->S| It Minsl mosl 81 xoi 0 dl mimj pmijwiimj sjai)ddns isuomppy S93IAJ9S/SPO09I *o uoi)dij»3ol y uoildo - boj | oj >!P»J3 to sujiai S,1M 294 23-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter I Amount Description of Goods/Services Additional Suppliers Iraqi Beneficiary/ Iraqi Names 110 Mack trucks (chassis model 20690 I Liebherr Truck Mixers ICH-5415 Nussbaumen AG I General Guisanstrasse 14 IP. 0. Box 54 $631,574 Mack Trucks 12100 Mack Blvd, Box M Allentown, Penn. (18105 I Air clemer: Donaldson EBA 1152 Tropical cooling Al fao State Establishment 1(2) Istate Establishment for Heavy Engineering Equipment 1(2) (Project 395 Switzerland Donaldson JUSA I $355,000 Same ! Liebherr Truck Mixers CH-5415 Nussbaumen AG General Guisanstrasse 14 1P. 0. Box 54 110 units Liebherr truck Imixers NTM 604-S mounted Ion Mack trucks chassises. IAL fao State Establishment |(2) State Establishment for Heavy Engineering Equipment 1(2) Project 395 | Switzerland Raw materials ferrostaat A.G. |Dept. AE/NE Postfach 10 12 65 14300 Essen 1 West Germany 1 2,652,246 Sane |Deustche I Marks Saddam State Establishment |(2) Baghdad Spare parts for Sharp | model SF-820 7 SF-825 1 494,456 (Sharp Corp. 1 Japan (State Company for Shopping Centers Industries Entrade International Ltd. 1630 Fifth Avenue Suite 1755 New York, N.Y. 110111 1 Baghdad $467,864 1Operating materials for IPPC-820 825 Sharp Corp. Japan State Establishment for | Central Shopping Entrade International Ltd. 1630 Fifth Avenue Suite 1755 New York, N.Y. 110111 · Baghdad 296 23-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter Amount Description of | Goods/Services Additional Suppliers Iraqi Beneficiary/ Iraqi Names 1 $183,400 Same Technical Communications 1100 Domino Drive | Concord, Ma. 101742 CSD-3324 Communication Security Device with TCC securephone Technical and Scientific Materials Importation Division · 12 KFD-800 key fill device Baghdad 11 Service Kit Markasi - 12 CSO-909 Community Security Device Heavy ElEE engineering l equipments product I equipment ICIEEE Digital Systems Two week training at TCC Engineering & supply for Jutility facilities. $9,706,509 Chyoda Corp | Chyoda Corp 131-19 Shiba 2 Chome Minato - Ku | Tokyo, Japan Technical Corps for Special Projects |(3) |echCorp (stean borders, cooling towers, air compressors I IN2 generators & substitutes lof 140,00 BPS grassroot Trefinery Mitsubishi Corporation Manager of Central Refinery Project - Araba Holdings 1 54,455,000 Same I Grain Board of Iraq | Covering storage terminal | services in Aqaba for wheat shipments. Panama Bagdad 297 27-Oct-92 BNL's Letters of Credit to Iraq - Option A Exporter Amount Description of | Goods/Services Additional | Suppliers Iraqi Beneficiary/ Iraqi Names Araba Holdings | $3,575,000 Same Grain Board of Iraq | Freight charges of transportation of Canadian wheat to Tiraq. | Panama Bagdad | $3,297,000 Same School Exercise Book |Factory Amercian Pulp and Paper Corp. 12.000 ADHT bleached kraft 1155 NE 100th Street soft wood pulp Suite 40 | Seattle, Washington 11,000 ADMT bleached kraft 198125 Thardwood pulp i Taji Baghdad i 12,000 ADMT unbleached kraft softwood pulp 1 |XYZ Options Inc. Arcadia Drive | Tuscaloosa, Alabama 133404 12 Dewax-Sinter furnaces |(one with hydrogen sinter Icapabilities) . - 5880,428 vacun Industries Inc. 134 Linden Street Somerville, Mass. 102143 State Machinery Trading Company |(2) - 11 laboratory furnace (Part 1 - - - |XYZ Options Inc. I 11 NL 20 honer with |accesories $71,849 Dynetics Com at fowle Street Woburn, Mass 01801 State Machinery Trading Company |(2) | Spare parts 298 1 1 i i i! Trading ! Trading ! Trading State Machinery I State Machinery |State Machinery i jState Machinery ! ■ (2) 1(2) s 3 (2) il 3 il 1 il u > * |Sweco Inc. |8029 US Highway P.O. Box 1S09 |Florence, Kentu |41022 < M |Uit-0-Matic 22605 Heatip Or |Novi, Michigan 148050 I 5 fill i h!i lit !1« 8 3 s i E * i ■ 3 i Hi |Description of : | I: 1 nil t . e I — a ai •* t s i - /A»|»|1M»| lb«J|| Au«»ll03 ftuipsii AjMlip«N »)«)S| Xueduoo Buip«Jl AjMlipSM »1«1S| Xu«du»3 6uip»Ji AjouiiptM »1»JS| 1 I Xuaduoo Buipaji AjwiiptM »J»1S| |Xu«*uo3 6uip»Ji Ajwimmn »i9li\ (Z>l (2)1 I (Z>l poos auj»H SSol | UOItlA|0 11IAMN "*»s| | •djo3 li»~»dl 5lZ'6l« 1 1 1 £l£Wl 1 ojmo 'uoj«| | P"°9 •insuiuad uojiiv SZ6l| j •3U1 »s»doJ<( uoiunl S6£'iil* | 1 1 1 1 509Z0 P«J»I«I apoqu 'uioounl | Z0»# Id X»h»a auoii)(j»n o| | djoj 3¥M| £60'»Z>t 1 910091 I || '3«U!»H »»al | ■»Ay pj£ Liuofl ftosl | uwwnoH 1 Aoaok 0/31 | Hi pwdsl Zl/'»9» 1 '6609»l 1 uoBiipiM 'Ao_u| | 612 »ob Od| | A»mjBiH wosuoijttejs OOZZl I inwd 'j»)tui«j»n| | niiMiwH rail ws'szt 1 l«uoilippv| >un<»v| »j»nd*sl | 1 1 1 1 1 1 1 1 1 1 V48ll | 1 1 1 1 •)j«d vjadt ioi i| MM" JOWinu«j8 o-£># ll suid sjeds sjoi ;| J01|J»« 3S-0S ll JOjum 3S-0£ ll sum) jjsds »0) ll jopuij* dn-DUD Zl-S» ll «u»d «j«d« jo) i| •UIM3M Bu|dd*i roiKU ll j»j»«!3jao3 DOW ll to uoiidijoaaal «»IAJ»S/»POOO| jauodx} | •3U| WD||dO ZAXl •ou| woiido ZAXI 3U| suoudo ZAX| •DU| wo|>do IAX| 3U| WO lido ZJkX| V uoiido - b»ji oi »!P»J3 *° »J»>»»1 ».1Hf Z6-"0-£Z 300 rading Coapany| 1 1 1 rading Coopany| 1 u f i 1 ■ >. >* >. ! 1 ! ! ii i i I ii • « • « M •** |Engineered Procet* Equipment | P.O. Box 11022 | |giraingh*a, A( 35202 | 1 1 a Li in i »i5 • | o 3 r 1 *~ 2 s | 2 a y 2 ~ m hi ~ W) X 1 S * -5 h 1 i 3 1 ii S - S : o" i 8 m C S = C o «* *| M Q 1 | fi a * S at ■ • 1 coating ball grinder with Sharp accesoriea J 1 Hod. CIP23630 cold iaostatic press 1 aodel #200 coating furnace Description of Goods/Services i 5 1 lot spare parts 1 lot *par* parts r 1 1 i • « £ \ | Exporter | 1 1 1 1 ?!? |xtz Option* Inc. | |xrz Options Inc. | a a i * i s M B 301 23-Oct-92 BNL's letters of Credit to Iraq - Option A Exporter Amount Description of Goods/Services Additional | Suppliers Iraqi Beneficiary/ Iraqi Names |XYZ Options Inc. 11 MC 12.5 Press | S939,547 (Hydranet American, Inc. 14605 Del emere Blvd. |Royal Oak, MI 148068 State Machinery Trading Company 1(2) 11 MC 12.5 Press 11 HC 30 press 11 MC-EC slugging press 11 HC 75 Press 11 lot spare parts 11 lot adapters / Ifactory training |XYZ Options Inc. 11 Moore G-18 8600 CP 5 Axis Tuig Grinder Istate Machinery Trading Company | |(2) $558,111 | Moore Special Tool, inc. 1800 Union Avenue | Bridgeport, CT 106607 11 lot accessories linstallation & training 11 export crating |XYZ Options Inc. 11 Berney B-72 Honer State Machinery Trading Company|| 1(2) 11 lot spare parts $130,556 Grinding Technology Inc. 1128 Long Hill Crossroads 12.0. 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uej6ojd sawBN ibej] /Aj«|3)|*U*| ibeji SJaiiddns l»uo|jippv sa^iAjas/spooo |0 uoudijosao MlJOdx] •stuBJBojd jeapnu puB »]|M|« 3|)|ip)iq || jopuoo joj sjjodxa "STI paausmj -|NS U-l'O-ll 364 SIGNIFICANT CASE: SAC rac r NATIONALI 1 CASE IMPACT | x | NUMBER CASE NAME [pexcn Technology Corp., et al PROGRAM: FINANCIAL | | SMUGGLING CURRENTl 1 _A_ M CASE I X | DATE OPENED a2sE □ PATE a0SED 073190 1 x 1 FRAUD EXOOUS OTHER □ 2. EFFECT ON: ECONOMY/TRADE A PARTICULAR INDUSTRY ADMINISTRATION LEGISLATION f CUSTOMS ORGANIZATION CUSTOMS | RESOURCES I NEWS/ I PUBLIC AFFAIRS I BRIEF DESCRIPTION OF IMPACT*: This case involves the illegal exports of mun^ions to Iraq. MM ^HHHMH^Hi IHHHI^HBHHHI^HI^HHHIi^^Hr This ^^^^^^ investigation sets forth the accarplishments ot^resaurcesdedicaTi^To networking in Strategic Interests with foreign Customs counterparts via 0.S. Customs Attaches' Offices. This case identifies specific support areas unique to Strategic Investigations: carmodity Identification; international letters of credit; investigative strategy, etc. This case has a dramatic impact on public awareness in the area of U.S. Customs investi- gative efforts to stop the illegal transfer of U.S. military munitions and technology. 3. • RESOURCES UTILIZED: • NUMBER OF AGENTS: FULL-TIME • AMOUNT OF FUNDS UTLIZED: | q CD PART-TIME TOTAL -F HOURS • OTHER COSTS': S 15,312.51 (OPERATION AEGIS) 4. CUSTOMS IMPACT/RESULTS: pending ARRESTS I^^^H SEIZURES INDICTMENTS CURRENCY LAUNDERED CONVICTIONS •See attached definitions CURRENCY SEIZED RECOVERIES PENALTIES ASSISTS IZZ1 nz3 365 DRAFT Robert Mueller Assistant Attorney General Criminal Division Washington, D.C. Dear Mr. Mueller: This is to inform you of a serious situation which has recently developed in a Customs case being prosecuted in the District of New Jersey at Newark. Specifically, the Assistant U.S. Attorney assigned to the case has given notice that he is leaving the U.S. Attorney's office in July to join a law firm that represents principal investors in the firm under investigation. The case involves Rexon Technology Corporation, a New Jersey based ordnance fuse manufacturer and major U.S. Government defense contractor. I » Paul Shapiro, the Assistant U.S. Attorney leaving Government service, has been assigned to this case since its inception, and is privy to all matters occurring before the grand jury, witness interviews, and documentary evidence. It is our understanding that Mr. Shapiro is joining a law firm that currently represents two individuals with direct financial interests to Rexon. As you can understand, the Customs Service is gravely concerned#with this development and its potential impact on the prosecution. We are further concerned that this situation involves a conflict of interests, or at the very least the appearance thereof. We have advised the Internal Security Section of our concerns with this situation, but we also believe this matter merits your attention. Accordingly, we ask that you make inquiry into this matter and take appropriate action. Please let me know if you have any questions on this subject. John Hensley Assistant Commissioner Office of Enforcement 366 Dear Mr. s This is to inform you of a serious situation in a Customs case being prosecuted in the District of New Jersey at Newark. Specifically, the Assistant U.S. Attorney prosecuting the case has given notice that he is leaving the U.S. Attorney's office to join a law firm that represents principal investors in the firm under investigation, we believe that the circumstances of the prosecutor's departure raise conflict of interests issues, and we are concerned with attendant delays in proceeding with the prosecution. As you know, the case involves Rexon Technology Corporation, a New Jersey based ordnance fuse manufacturer and major U.S. Government defense contractor, been under intense investigati The Assistant U.S. Attorney leaving Government service has been assigned to this case since its inception and is privy to all matters occurring before the grand jury, witness interviews, and documentary evidence. It is our understanding that he is joining a law firm that currently represents two individuals with direct financial interests to Rexon. ~~ As you can understand, the customs Service is gravely concerned that this situation may involve a conflict of interest or an appearance thereof. We have advised the Internal Security Section of our concerns with this situation, but also believe this matter merits your attention. Accordingly, we ask that you make inquiry into this matter. Further, we are concerned with the delay in proceeding with the Rexon prosecution. For some time now we have felt strongly that sufficient evidence exists to obtain an indictment against the targets. I 368 MEMORANDUM TO: T- OES/N- FROM; OES/NEC- St/BJECT: &NECC*Je»<>f Interest . The November ljl meeting of the SNEC end the November 20, briefing on Iraq'a nueltu program and the activities of atatc enterprises rrorided » thorough presentation of available information end ntelligence Community views on theie millers. However, we are still left with no clew Indication of how to proceed en the majority of cases currently before the SNEC The problem Ii not that we lack a policy on Lraqj we have a policy.. However the policy hsj proven very hard to Implement when conjidtring proposed exports of dual-use commodities to ostensibly non-nuclear end! users, particularly •talc enterprises. SNEC policy for some years has been not to approve exports for Iraq's nuclear program except for very Insignificant Itcmj for clearly benign purposes lucr/nudear medicine. However. •( (he same time, U.S. poucy, aj confirmed In NSD 26, has been lo Improve relations with Iraq, Including trade, which means that exports of non-aensitive commodities to "clean" end users In Iraq should be encouraged. According to NEA/NCA, although VS. policy precludes approval of Munitions Control license*, for Iraq, exports or dual cue commodities for conventional military use may be approved. ComplkiUrm firlon In dcdalon rnddng include: L A presumption by the Intelligence Community and others that the Iraqi Government is Interested in acquiring a nuclear explosive capability; 2- Evidence that Iraq Ls acquiring nuclear related equipment and materials without regard for Immediate need; 3. The fact the state enterprises which arc ordering rubsUntial quantities of dual use equipment needed for post war reconstruction, such as, computers and machine tools, art involved In both military and civil projects; 4. Indications of at least some use of fronts for nuclear-relaled procurement. 369 -2. 5. The difficulty In successfully d em arching other supplier* not to approve exports of dual uie equipment to •Talc enterpoje* and other ostensibly non-nuclear end Ultra. RECOMMENDATIONS '' Notwithstanding the foregoing, we are prepared to re oo mm end the following actions on the below-listed currently pending dual use exports to lie]. Porposed conditions arc tailored to significance of export Other agencies, particular 7 DOD, may'not concur in the recommendations for approval, which would result in split dedsons being reported to Commerce for resolution at a higher level l for one 1 GHZ ot dUoieope for Technical University Xesearch Center, Iraq. Pending reply to Stale cable requesting end u*«r info and DOC in/o on end use. pEFER FOR REPLY TQ STATE TELEGRAM TO BAGHDAP, for three HP 9000 workstations to Nasser State Enterprise, Iraq. Deferred for CIA code word level briefing on Iraqi State enterprises and their connections with Iraqi ™de«/ program. PEW ON FOREIGN POLICY (NOT NUCLEAR) GROUNDS BASED ON SPECIFIC INFORMATION LINKING THIS PROPOSED EXPORT TO A MISSILE DEVELOPMENT PROJECT, for one HP model 360 computer to Ministry of Industry and Military Industrialization, Iraq. End user is identified as of concern for missile and other military activities. End user directs all state enterprises. However, computer proposed & tft^fefSr J fCy APPROVE WITH UCEMSE CONDITIONS Of NO NUCLEAR USE AND NO RETRANSFER WITHOtfT PRIOR CONSENT k END USER CERTIFICATE ON 5>AMT rowis 370 machine tool lo trader General establishment, Iraq. ArPROyE SUB1ECTTO LICENSE CONDITIONS OF NO NUCLEAR USE AND NO RETRANSFER WITHOUT PRIOR CONSENT.- END y USER CERTIFICATE ON SAME POINTS AND PERIODIC REPORTING Of STATUS OF EQUIPMENT BY EXPORTER OR £XFPRTER Bfigg application D015535 forte-export of one VAX *310 and one MICRO VAX II computer* lo Scientific Re>««x(v Council* Iraq. Concerns htre been raised because of poiilble nuclear-related procurement of Heme such as glove boxes. However thla end aser la responsible for universities and scientific Institutions In Iraq, inducting auch benign activities aa estronomv. MorroTtrthe computers prcpoied for export, though highly desirable VAX rodcls, have rather low FDR ratinga (300 for Unseat end 39 for the emaller evslem end workstations). APPROVE WfTH LICENSE CONDITIONS OF NO NUCLEAR END USE ANT) NO RETRANSFER WITHOUT PRJOR CONSENTT A NO END USER CERTIFICATE ON SAME POINTS. - Y for one CYBER f 10B-400 aericti workstation to the Hutteen General Establishment, Iraq, for engineering applications. This Is the low end of the CYBER miWmellne with a PDR of 318. APPROVE WITH LICENSE CONDITIONS OF NO NUCLEAR USE AND NQ RETRANSFER WITHOUT PRIOR CONSENT i* END USER CERTIFirATE ON SAMEPQ1NTTS. for two optical heads for cameras and turun* lights (o AJvf. Daoud Research Center, Iraq, for work on projectile beharior end terminal ballistic*. DOE review ahowi that speed of this equipment la appropriate for conventional artillery rounds but far too alow for nuclear applications. APPROVE WITH LICENSE CONPmONS 6f NO Nl ENP USE AND NO RETRANSFER WITHOUT FRIO! AND END USER CERTIFICATE on. SAME POINTS. ex. OES/NEC- 371 US Nuclear Export Policy Towards Iraq H7 During the Iran-Iraq war, the US imposed a de facto embargo on the export of nuclear-related commodities to nuclear end-users in those countries. Kith the exception of China and Argentina, other nuclear suppliers had similar policies. The cease-fire prompted the US to demarche a number of nuclear i suppliers urging that they not resume their pre-war practice of- permitting export of nuclear commodities to Iraq and Iran. It^/N also prompted the US export community to consider the need for a review of US export policy towards those countries. Because such a review has not been formally conducted, the Commerce Department has held without action for the last several months virtually all nuclear-related dual-use license applications fcr^- Iraq. t si £ O o The recent attempt to export to Iraq capacitors with military specifications has made the need for export-related policy guidance even more apparent. This development, however^l Identifies only one, now publicly known, Iraqi clandestine procurement effort. Prior to the arrest, ample evidence ^f§CI~5< existed that Iraq operated an extensive, worldwide clandestine network which attempted to procure a wide range of military items, including nuclear-related dual-use commodities. Such 6 I '£ z < i r? V 3 SECRE 372 procurement efiorts and Iraq's apparent lack of COIMfitment to its international treaty obligations, evidenced by its disregard of the Geneva Convention on chemical weapons, must be considered in formulating US export policy toward that country. Formulating such a policy will be complicated because end-users which engage in legitimate non-nuclear and non-missile-related end-u6es also procure commodities on behalf of Iraq's nuclear and missile programs. Because the Iraqi procurement network serves both nuclear and missile programs, one cannot distinguish between purchasers of nuclear concern and those of missile concern. Thus, US export policy should apply equally to Iraqi nuclear end-users and purchasers for Iraq's nuclear and missile programs. Current Licensing Practice Current US policy is to deny all license applications for the export of NRC-licensed items to Iraq, notwithstanding Iraq's NPT status and acceptance of IAEA safeguards. This position results from doubts about Iraq's commitment to and support for nuclear nonproliferation. The Subgroup on Nuclear Export Coordination (SNEC) presently recommends denial of all cases involving SECRET 373 Commerce-licensed commodities for the Iraqi Atomic Energy Commission and performs case-by-case review of less significant commodities going to non-nuclear end-users. The snec has al6o recommended denial^ of certain cases involving proposed exports to entities believed to procure or produce commodities on behalf of Iraq's nuclear program. However, a large number of other cases involving proposed exports to Iraq are pending. At present, no foreign policy controls exist which permit the OS to control nuclear-related dual-use commodities across-the-board to Iraq. Proposed Export Policy Computers Given the difficulties involved in controlling the export of computers, their wide foreign availability and the pace of development of computer technology, it is proposed that export of computers with a PDR of 250 or less to non-nuclear Iraqi end-users be reviewed with a presumption of approval. Thi6 policy would also apply to end-users which have procured commodities on behalf of Iraq's nuclear and missile programs but which also engage in legitimate non-nuclear and non-mi66ile related activities. An exception to this policy would be made, however, if there is information linking a nuclear or missile end-use to a specific export request under review. 374 Foreign Availability While foreign availability should be taken into account in determining whether to approve a license, it should not be the overriding factor. In the case of other proliferant countries, the US has denied licenses for the export of commodities available in other countries because it considered the risk of diversion to proscribed end-uses too high. The operation of Iraq's procurement network inevitably raises concerns about the potential for unauthorized diversion of commodities in Iraq^ar.d doubts about the veracity of the information provided on Iraqi license applications. Thus, US export policy towards Iraq should generally be guided not by foreign availibility of corr.rrodi t i es Dut by DS nuclear and missile nonprol i f era t ion considerations. Other Suppliers Despite the lack of US policy guidance governing exports to Iraq, the US has urged other suppliers to exercise extreme caution in permitting nuclear-related and dual-use exports to that country. In addition to demarching DS suppliers after the close of the Iran-Iraq war, the US has also approached SECRET 375 suppliers on specific Iraqi procurement efforts, urging them to take steps to ensure that certain exports to Iraq not occur. In considering US export policy toward Iraq, we should also consider the need to establish procedures which would ensure regular communication with other nuclear suppliers about US export control actions involving Iraq. Such communication would involve informing suppliers of general principles governing US exports towards Iraq. It would also involve notifying them of actions taken by the US on individual cases and urging those suppliers to adopt similar notification procedures. This is particularly important as much of the focus of Iraqi procurement efforts is in Europe. Thus attempts to impede development of Iraq's nuclear program by technology denial will succeed only with the cooperation of other nuclear suppliers. US Conditions of Supply All nuclear-related dual-use exports to Iraq should be conditioned on no nuclear use and no retransfer within Iraq without prior DSG authorization. The US should also explore the feasibility of conducting post-installation checks in Iraq, similar to those conducted in 376 Pakistan. This method could be used to allay concerns that items are being illegally retransferred to nuclear or missile end-users. This method could deter unauthorized diversion of US commodities. Such checks should generally be used only in instances where US export policy does not preclude export of a commodity to a particular end-user. They should not, however, be used as a substitute for denial of commodities required under the above guidelines. Similarly, if such checks are not possible, a more restrictive approach to exports would be appropriate. ■, Proposed Guidelines The following guidelines are proposed for use by SNEC agencies when considering dual-use license applications, excluding computers, for Iraq (See attached chart): — No export of Nuclear Referral List items will be permitted to Iraqi nuclear end-users, or end-users which are known or suspected to procure commodities on behalf of Iraq's nuclear and missile programs, regardless of the stated end-use. End-users in the latter category include state enterprises and ministries. A complete list of grey end-users is attached. (The list is currently being completed by Livermore) Given the rapidity of change in the Iraqi SECRET 377 procurement network, this list will need to be updated regularly by the intelligence community. Export applications for items not on the Nuclear Referral List to Iraqi nuclear end-users will be reviewed on an ad hoc basis with a presumption of denial. Export applications for items not on the Nuclear Referral List to Iraqi end-users which have been involved in procurement of commodities for Iraq's nuclear and missile programs will be reviewed on an ad hoc basis and may be approved if the commodity is considered by technical experts to be appropriate for the stated end-use. Standard no-nuclear-use conditions would apply. If possible, conditions of supply .should be verified, e.g. post-installation checks. Export applications for items on the Nuclear Referral List and items not on that List to non-nuclear end-users with no known procurement connection to Iraq's nuclear and missile programs will be reviewed on an ad hoc basis with a presumption of approval if the commodity is considered appropriate for the stated end-use. Standard no-nuclear-u6e conditions would apply. 379 - 2 - o■ .. ^received a license to export '"navigation/dTrection finding/radar/mobi le communications" equipment to Salah-al-Din, which is associated with an Iraqi missile project. o DoD approved a license for the export of possible telemetry equipment to the Saddam General Establishment. Implementation of various aspects of EPCI would provide a basis to deny licenses (and require additional licenses so transactions could be reviewed) in cases similar to those reviewed because of the end user (country or entity), the knowing contribution to or risk of diversion to a proliferation activity. 8301L £££££1 380 PM Press Guidance February 11, 1991 I i } DOWNGRADE 3/4/1 GERALD BULL AND ARMS EXPORTS Q: Did the Department of State allow Gerald Bull to ship artillery shells to South Africa, Iraq and China? A: -- BULL EXPORTED 155 MILLIMETER ARTILLERY SHELLS TO SOUTH AFRICA WITHOUT U.S. PERMISSION. HE WAS PROSECUTED, CONVICTED AND JAILED FOR THIS VIOLATION OF MUNITIONS EXPORT REGULATIONS. BULL, AND COMPANIES ASSOCIATED WITH BULL, WERE ALSO INFORMED AT THE BEGINNING OF THE I RAN-IRAQ WAS THAT THE ^ EXPORT OF MUNITIONS TO IRAQ OR IRAN WOULD NOT BE PERMITTED. THE DEPARTMENT OF STATE HAS NOT APPROVED ANY EXPORTS OF EQUIPMENT OR TECHNOLOGY BY BULL OR COMPANIES ASSOCIATED WITH BULL TO IRAQ. -- THE EXPORT OF SOME TECHNICAL DATA ON THE MANUFACTURE OF ARTILLERY TO CHINA WAS APPROVED BY THE DEPARTMENT AS PART OF OUR LARGER POLICY OF MILITARY COOPERATION WITH CHINA WHICH WAS IN EFFECT THROUGHOUT THE 1980-s. THIS POLICY REMAINED IN EFFECT UNTIL THE TIANANMEN SQUARE INCIDENT WHEN THE PRESIDENT SUSPENDED ALL MUNITIONS EXPORTS TO THE PRC. 381 - 3 - Q: Has the Department responded to Congressman Wolpe's letter on shipments to Iraq by Bull? A. — WE HAVE SENT CONGRESSMAN WOLPE AN INTERIM RESPONSE PENDING A MORE DETAILED ANSWER TO HIS LETTER. Q: What was the Department's role in the Vermont Grand Jury investigation of the illegal transfer of artillery technology to China by companies associated with Bull. A. THE DEPARTMENT OF STATE COOPERATED FULLY WITH THE CUSTOMS SERVICE, GRAND JURY, AND THE OFFICE OF THE U.S. ATTORNEY IN THEIR INVESTIGATION. ON TWO SEPERATE OCCASIONS OFFICIALS FROM THE OFFICE OF MUNITIONS CONTROL TESTIFIED BEFORE A GRAND JURY IN VERMONT THAT THE EXPORTS WERE IN VIOLATION OF THE ARMS EXFORT CONTROL ACT. 60-509 0-93-13 382 THE SECRETARY OF STATE WASHINGTON JULY 25, 1990 Dear Bob: I have just had a memorandum forwarded to your Executive Secretary requesting that additional controls be placed on items that could contribute to Iraq's chemical and biological weapons and missile programs. Iraq's extraordinarily aggressive weapons proliferation efforts make this situation urgent. I therefore ask that these controls be instituted as quickly as possible. With best personal regards, Sincerely yours, James A. Baker, III The Honorable Robert A. Mosbacher Secretary of Commerce Declassfied by: Frank Machak Director, Office of FOI, Privacy, and Classification Review July 27, 1992 383 HOLASSIFIED 90% ofteppe state 'suis 15, 1910 i nove sort 8.ad prorondat 161*HD 18 mal fueroline Herriary MOI150 ius stilius: RIDIO be fint on luon IMI would tribulo 10 114'e merreal an toimitu: Warsas ou pinuto mogineligg' nientilor113 oniissive vopost puoliluroni. 1110118 IN 18.1111BMIn ujomi' 111.0101010 Banca Toll, Bogoh a. Hien, 118 Writing Careerne. Declassified by: haak Machak Director, Office of ror, Privacy, and Classification Review July 27, 1992 GILSSTE 384 THE WHITE HOUSE WASHI NGTON RECEIVED JUL 7 1992 Commrtae on Banking, Finance i Urban Affairs July 7, 1992 Dear Mr. Chairman: This letter responds to your letter to. the President dated May 27, 1992, concerning the conflict-of-interest waiver granted by the President under 18 U.S.C. 208(b)(1) to eleven senior Administration officials in August 1990 in connection with the Iraqi invasion of Kuwait. A copy of the August 8, 1990 waiver is enclosed. I wish to emphasize at the outset that it would be incorrect to infer that the issuance of the August 1990 waiver in any way implies that one or more of the eleven officials violated conflict-of-interest restrictions before the waiver was issued. As explained below, the President issued the waiver "in the interest of caution and prudence," not as a matter of legal necessity. Under Section 208(a), an Executive Branch employee may not participate personally and substantially in any particular matter in which, to his knowledge, he has a financial interest, if the particular matter will have a direct and predictable effect on that interest. Under Section 208(b)(1), a waiver from the restrictions of Section 208(a) may be granted to an employee by the official responsible for the employee's appointment upon a determination that financial interest in the matter is "not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect" from the employee. As the waiver document states, the President asked the Counsel to the President to review the financial interests of each official and brief the President on those interests. The President was briefed by the Counsel to the President based on information contained in the financial disclosure report each official was required to file for calendar year 1989 and other information provided to the White House Counsel's Office by ethics officials in the various Departments. In order to provide the Committee with a complete picture of each official's financial interests at the time the waiver was issued, we are providing with this response a copy of each official's calendar year 1989 financial disclosure report. We are also providing a copy of each official's calendar year 1990 report obtained from the Office of Government Ethics. (The calendar year 1990 report, although not required to be filed until after the waiver was granted in August 1990, discloses any assets acquired after the close of the reporting period for the calendar year 1989 report but before the President granted the waiver.) 385 Your letter asks "what is the nature of the conflicts of interest (i.e. oil investment, stock ownership, etc.) that precluded the individuals from engaging in the policy in the first place?" In general, the types of financial interests for which a waiver under Section 208(b)(1) was considered desirable included interests in oil- and gas-producing properties and oil and gas companies, foreign and domestic, and interests in other companies with plants or employees located in the Middle East arena of conflict. However, it is wrong to assume that such financial interests created "conflicts of interest," or that these interests "precluded" these individuals from "engaging in the policy in the first place." It is the official's financial interest in a particular matter, not any financial interest per se, that is addressed by Section 208. Financial interests are considered to pose a conflict or potential conflict under the statute only in relation to one or more "particular" matters. The term "particular matter" means only matters that involve deliberation, decision, or action that is focused upon the interests o[f] specific persons, or a discrete and identifiable class of persons. . . . The term particular matter . . . does not extend to the consideration or adoption of broad policy options that are directed to the interests of a large and diverse group of persons.1 Even if a specific policy were deemed to be a "particular matter," one must also analyze whether any of the officials had a financial interest in that particular matter and whether the resolution of the particular matter would have a "direct and predictable effect" on that interest.2 1This definition is taken from Section 2635.402 (a)(3) of the proposed comprehensive standards of conduct issued by the Office of Government Ethics. 56 Fed. Reg. 33778, 33800-01 (July 23, 1991). Although contained in a proposed rule, this definition reflects the current construction of Section 208 by the Department of Justice and Office of Government Ethics. 'section 2635.403(a)(1) of the OGE proposed rule also defines "direct and predictable effect." A particular matter will have a direct effect on a financial interest ... if there is a close causal link between any decision or action to be taken in the matter and any expected effect on the financial 386 Significantly, the waiver document states: It is not clear which, if any, of the decisions ahead would constitute "particular matters" that would have a "direct and predictable effect" on the financial interests of advisors on whom I will need to rely. Based on the consultations between our staffs over the past week, I have been advised that most of the high- level decisions and actions ahead will be at a level of generality so broad as not to implicate Federal conflict-of-interest law. Although it is unclear to what "policy" your question alludes, if your question refers to United States Government policy toward Iraq, such policy — without further definition — is not a particular matter which could give rise to a conflict of interest within the meaning of Section 208. As noted above, the waiver was intended as a precaution and not as a response to one or more identified conflicts of interest. The President believed that "Cabinet members and other key foreign policy advisors should not be needlessly restricted in assisting me in shaping the United States response to the Iraqi offensive or be left in doubt about when they can and cannot assist me." (Emphasis added.) Assuming out of an abundance of caution that some decisions might involve a particular matter that would have a direct and predictable effect on the financial interests of one or more officials, the waiver was granted by the President based on his determination that "the financial interests held by [the eleven senior officials] are not so substantial as to be deemed likely to affect the integrity of the services that the Government may expect from them in the course of current United States policy- making, discussion, decisions, and actions, in response to the Iraqi invasion of Kuwait." Therefore, no conclusion fairly may be drawn from the issuance of the waiver in August 1990 that any of the eleven officials was precluded before the waiver from participating in any deliberations concerning United States policy toward Iraq. interest. ... A matter will have a predictable effect ... if there is a real, as opposed to a slight or speculative, possibility that the matter will affect the financial interest. 56 Fed. Reg. at 33800. (Emphasis in original.) 387 4 Your letter also asks for the names of the eleven Cabinet officers and Cabinet level officials that received the Presidential waiver. The waiver document itself lists the officials by their position. Their names are: Gen. Brent Scowcroft, Assistant to the President for National Security Affairs Robert M. Gates, Assistant to the President and Deputy for National Security Richard L. Thornburgh, Attorney General John H. Sununu, Chief of Staff William H. Webster, Director of Central Intelligence Robert A. Mosbacher, Secretary of Commerce Dick Cheney, Secretary of Defense James D. Watkins, Secretary of Energy James A. Baker, III, Secretary of State Nicholas F. Brady, Secretary of the Treasury C. Boyden Gray, Counsel to the President Your letter asks whether these individuals are still covered by the waiver. By the terms of the waiver document, it "remains in effect until further notice." The waiver is still effective. Since the issuance of the waiver in August 1990, Richard L. Thornburgh, Robert A. Mosbacher, John H. Sununu, and William H. Webster have left the Federal Government. Robert M. Gates remains covered by the waiver in his new position as Director of Central Intelligence. Also, on March 2, 1992, the President granted a similar waiver to the new Secretary of Commerce, Barbara H. Franklin. A copy of that waiver is enclosed. Your letter also requests "all documents related to the waivers." In addition to the calendar year 1989 financial disclosure reports we are enclosing with this response, we have located additional responsive documents originated by Departments and agencies outside the White House or reflecting discussions with those Departments and agencies, and are consulting them regarding your request. Finally, your letter asks why the waiver was not released to the public or to Congress until this January.3 There is no requirement to publicly release or announce a waiver at the time of its issuance or to notify Congress. Section 208(d)(1) requires that a copy of any waiver granted under Section 208(b)(1) be made available to the public upon request. To the We assume your letter's reference to January 1991 was in error. 388 5 best of our knowledge, a copy of the August 1990 waiver was first provided to a requester in January 1992. However, at least two news articles published very soon after the waiver was issued noted the waiver with respect to Commerce Secretary Mosbacher.4 We trust this letter responds to your request. Sincerely, Enclosures Honorable Henry B. Gonzalez Chairman Committee on Banking, Finance and Urban Affairs U.S. House of Representatives Washington, D.C. 20515 *"Mosbacher is Taking Part in Gulf Crisis Discussions, The Wall Street Journal, page A4 (August 13, 1990); "White House Unfetters Mosbacher," The Washington Post, page A13 (September 10, 1990) . A copy of each article is enclosed. 389 United States Department of State Washington, D.C. 20520 August 8, 1990 P - Mr. Kimmitt ^ L - Jim Thessi Bob, Amy Schwartz of Boyden's office informed me that the President signed a waiver this afternoon for eleven Cabinet officers and cabinet level officials, including Secretary Baker, that authorized them to participate in "current United States policymaking, discussions, decisions, and actions in response to the Iraqi invasion of Kuwait." Schwartz indicates that this will allow the Secretary Baker to participate in all foreign policy questions related to the Kuwait crisis, even those directly involving oil production and prices. In addition, OLC is expected to issue an opinion in the next day or so narrowing from previous interpretations the definition of "particular matter", the touchstone for potential conflict analysis. Because of the breadth and sensitivity of the waiver, the White House is currently unwilling to distribute copies to affected individuals. We are working to reverse this position so that we can provide a copy to the Secretary. 390 COMMUTES ON BANKINO. FINANCE AND URBAN Af FAIRS ONE HUNDRED SECOND CONGRESS 2 119 RAYBURN HOUSE OFFICE BUILDINO WASHINGTON. DC 205 16 U.S. HOUSE OF REPRESENTATIVES May 2, 1991 TO** CAtfWU. aHJOMM The Honorable George Bush President of the United States Washington, D.C. 20500 Dear Mr. President: The House Banking Committee is conducting an investigation into over $4 billion in unreported loans the former employees of the Atlanta branch of Banca Nazionale del Lavoro (BNL) provided to the government of Iraq between 1985 and 1990. The Committee's investigation has uncovered the fact that Henry Kissinger was on the International Advisory Board of BNL during that same time period and that BNL was a client of Kissinger Associates. As you are aware, Mr. Brent Scowcroft and Mr. Lawrence Eagleburger were high ranking officials of Kissinger Associates — Mr. Scowcroft as Vice Chairman and Mr. Eagleburger as President. Kissinger Associates represents many large multinational companies Involved in various aspects of international trade, Including the arms business. Since these firms sell their wares worldwide, they often are the beneficiaries of U.S. policy towards foreign countries. I am deeply concerned over the potential influence Hr. Kissinger may exert over the decisions and actions of Mr. Scowcroft and Mr. Eagleburger, and am especially troubled by a potential conflict of interest involving Mr. Scowcroft. The National Security Advisor is in a position to strongly influence our national security and foreign policies, including the U.S. export licensing process. These policies often have a direct influence on individual corporations doing business abroad. Until October 4, 1990, Mr. Scowcroft owned stock in approximately 40 U.S. corporations, many of which were doing business in Iraq. Those companies received more than one out of every eight U.S. export licenses for exports to Iraq. Several of the companies were also clients of Kissinger Associates while Mr. Scowcroft was Vice Chairman of that firm. 393 Thank you for your prompt attention to this matter. I look forward to your reply. With best wishes. Sinc/rely, A Henry B. Conzalez Chairman HBGrdk 2 394 fMITIHOUtt tsHINOTON'' . ; Auguat Ii 19)0 M£MORWmi« FOR THE AWORNKY OEKKRXLN ^fi FAOMl - THE PRESIDENT fafij SUBJECTi Confllct-of-Intereat Waiver I am writing to notify you of 4 conflict-of-interest determination 1 have reached under 18 U.8.C. 208(b)(1) in conneotion with the current Middle East crisis. As you fcnov. vital United Statu and world interests Are At stafce in the Middle East as a result of the Iraqi Invasion of Kuwait. A« commander in chief and the nation's chief Executive, X en confronting deoislons of immense Import with lasting consequence* for the nation and the world* The United States/ along with other world powers* has strongly condemned the Iraqi invasion, and we have instituted a range of measures, inoluding a freete on Iraqi and Kuwaiti assets in this country among other economic sanotionsi We now face a series of deoislons, large and small, about Solicies and military measures required to defend United states ntcrests and counter this act of blatant aggression. I expect that these decisions will be among the most difficult that X ever face as President. As X confront the demanding choices ahead, it is essential that X be able to call freely upon my advisors for counsel and assistance. I am awaro chat undsr federal confllot-of-interest law (18 u.s.c. 208), an Executive branch employee cannot participate personally and substantially in a particular matter, in which, to the employee's knowledge, he has or is deemed to have s financial interest. 1 understand that the Department of Justice has historically interpreted this statute to mean that an individual cannot personally and substantially participate in a particular matter if the resolution of the matter would have a direct and predictable effeot on such financial Interests. An Individual's appointing official is authorised to Waive this prohibition baaed upon a determination that the individual's financial interests are "not no substantial as to be deemed likely to affect the integrity Of the services which Wis Government may expect" from the omployeo. It i* not cr.ear which, if any, of the decisions ahead would constitute "particular matters" that would have a "direct and 395 predictable effect" on the finanolal interests of advisors on whore 1 will need to rely. Bated on tht consultations between our ataffi over the wit week/ z have been advised that most of the high-level deolaloni and aotioni ahead will be at t level of generality so brood aa not to Implicate Federal conflict-of- interest lav, Nonethele*e, in the interest of caution and prudence, I believe that under current circumstance*, Cabinet members and other Key foreign policy advisors should not be needlesily restricted in assisting me in shaping the United States response to the Iraqi offensive or be loft In doubt about when they can and cannot assist me. X have therefore directed my Counsel/ C. Boyden Gray, to review the financial interests of those of my foreign poll ay advisors for whom I have not delegated the waiver authority vested in me under 16 V.fi.C. 208(b). In particular/ x have had him conduot a special review of the financial interests held by Thu Assistant to the President for National Security) The Assistant to the President and Deputy for National Security} The Attorney Oeneral; The Chief of Staff to the President) Th<) Director of Central Intelligence; The Secretary of Commerce; The (Jecretary of Defense; The Secretary of Energy; The Secretary of State; and Tha Secretary of Treasury. X have nluo had the Department of Justice review the financial interests of the Counsel to the President. I have now been briefed on the financial Interests of these Individuals. Some of the individuals in question hold only interests Such as mutual funds that under no foreseeable circumstances could be construed to implicate any prohibition under conCliot'-of-interest law. In other .instances, individuals have quito substantial financial Interests in industries that may ho affectod (though not necessarily in a "direct" or ''predictable" way] by the resolution.of situations that may arise. In light of current world evente and the significance of our response to the nation's security/ it is my judgment that none of t'neae individuals' financial interests are "so substantial as to hi deemed liXely to affect the integrity of the services; which the Govcirruiwnt may expect" from him in all aspects of the current iffovt to develop and Implement a United States and International L'dcponse to Iraq's occupation of Kuwait. I have been counseled 396 that tho Department of Justice; In interpreting oonflict-of- intereat wi-iver authority, has said that the appointing official should conuider the list of the financial interett(i) and the nature of the services the individual is called upon to provldi, In toy judgment; the nature of the current crisis and the gravity of the mo&iiurea under consideration by the United State* are iuch that even vast financial interest* could not he deemed likely to of foot the integrity of the service* the Oovernment may expect from it* chief foreign policy officers. Maintaining the highest standard!! of integrity In the Government ha* been a paramount priority for me throughout the Administration. In ray view, national socurity consideration* at etake in the current situation are SO great as to diminish to insignificance the likelihood that individual employe** could be swayed by their private interests. On this hauls, I horeby determine that th* finanoial intereate - held by thji individuals indicated above are not bo substantial *a to be deiamud likely to affect tha integrity of the services that chi Government may expect from them In the course of current United S':a:e9 policy-making; discussion, decision*, and actions, in response to the Iraqi invasion of Kuwait. This waiver shall remain in 'iffact until further notice. 397 ACTION COPY UNCLASSIFIED DEPARTMENT OF COMMERCE INC0M1NC TELEGRAf. page II 11)1)1 OCOIH !l/ma! usto K Fdlllllfl p«oeuc!io«- upoh mvt 10 n*o. i ccwooiit iivmc ficvii- cr;'oii ^408'«:' ^00ioi> i:j'in v?: 'oi• in Mi' saum iiMon i)ii rn ami-sassi t-MD to maot.tts::: i-:-dc inpo «u(KC/sic:i-'t u.;hoc 3>%j iu(hro-«n[n(.;w «c-l lot) IT uncus BACNOiO UNI FOR SH/tti/t.uuCiuS ISll/ltr/taCSi cr.(/;s;ns )|]l/USFCS/OI0 In. iiESA/iwfArtR stilt roil ti'nc.cu •one fc» ciistcti ji:-c«! CO. I1IS(: «/• TIGS: me.;: SUIJtCT: tiff '.C lEOUESl, II -OAOA SIAIt Esiah i sunt HI Itf: ai usoo: IIOII. I> USJOC os«»s i. mis acticn c-llE. 1. IEF A :KC it SUIJCC! ISTMl I2<-!«iT. ttr I itou'.s": :mit:M Of 'tc x*r ano im:<»:'M post that i'H eant'tli post •: :o Writ! us:oc -'-O *=ci-dj i-ir IVMMIM ft" « c» imcnm, ;::ivi- :S. --io suitieuiTT of no»:ns COMISCCC. J. M. til < €"•! tSt«Rit!t!!is*: mil sc: -ii ••" officios" nitn«o S" fOS! OU'».:i WILL SitlSt i E . -.■■n oiveni 0' S'.ijtt: ••: ■< otfMtrcit iHfos'-t: >3s; . :.: the. pism «o« win •.;»! «t pijpcsed ms'f;; i .; is maitiM cus s>J'.tl. £*••' SUCK AN CfF-PiANt "iSTISt i. vt win :•«•! it etug »o wut :;p:it ASAP, in T': ::UOWINO PHA PI0VI0-; ill iHtoittAiici ••: K s.UtCI cstutisiirKiiT :% iesfckse to itf I.. s. ai-oaoa istiMiSMit is i factoit ccwin iocateo infill |i (i*l c t.i«;»5 »o opeiaiihs uioti thc i»i Rinim cf nausiir aho muim INDUSTRIAL II^TIOM —•nil. IN MOOITIOH TO CIVILl-K production Of inmiiim csais and onus, it is a fiajoi haoi RMIliM punt .narihg siuuians -id ARtlLURT unualllCI. iT L £ AST 0«t FOIflCH COfUl IAS 1 CONtllCT IHN. -t-OAOl WIS TIE SITE Of 1 OKASTATIKG EWOSICI I AtT AUGUST, lilt IDC IUI0IEDS OF VOUEIS. II IS KM THE SITE WHICH tit Hum I0*« JOUINAIISI |A!0fl VISITED ItlKMtl IIIOI 10 IIS tfrtHlliltl A«0 MCVflM AS A SIT Mil PASI MACS. ACC0IOIKG tO lafOIRITlOU OcVttOPES, ll-OAQA IAS A ■ I1IIC ACID MIT WHICH WAS lAOtr OiniGEO II HE turns ICH, KtVtltatltSS, Al-OAOA IS COIIIIUIIG 10 riOOUCE EXCESS IIIIIC ACIO, WE AIE 1010, WHIM HAT IE I. Itfltl lEOl'CTS trfA-.ST COnrtNl on SuiTaiuiit Of ai-qaoa tc icciitl IICI1SC. vt iSSwnE INAI use ioiict »c«nowuociiiG tn no»t cf .ojtiiintKis to riOOUCE CS'IVCNT I OKI HifOHS llltl 1910S. WE HAVt 10 iHfonnAticii to susGist WM UCta!! .atwitl ion-court»tIS«M -E-PC'.". If CCC W SUCH iiroinAtiOii, nilll tt" JS mow, it .in noviOE Out IHOUGAfS. ). AC1I0H ItCHJESTEO: .aFOHfl P0:t If Off-Hint KCIIW will U-OIOA KflCIMS CSUIO It SUFfICICHT 1C nttl USOOC NEEDS. FILE COPY V V 399 oculornst to moved or 11 order condities of the issorl liceos, are volt 3 o vi Givos ido rocoot NSC decioson • ser• divorably reviar port dicon. pod •Priscilla to trul, plens. Personally rorles ll1emislielos datos sro se or du vill oooll 10 000 maior010, leo jualled and video i luluto ed io r. la lao lollor Issuti Orou) molla. Ve ; beronsiedo -111. 11 40 rossRSS II Perosnel vieulo 10 days of tbe dico ol uito leilor, commerer vill orocose dio isplicotloa. 400 UNITED 3TATE3 DEPARTMENT OF COMMERCE Bureau of Export Administration Wosrungcon. O C. 20S30 MEMORANDUM FOR DENNIS KLOSKE FROM: SUBJECT: /I IAIN S. BATRD/Qlfi- The NSC and Iraq To the best of my recollection, there have been four NSC meetings relating to export licensing and Iraq. In late summer 1987, the was an NSC meeting at which Steve Bryen presented some satellite photographs of the SA'AD 16 facility. As a result of this meeting, Paul Freedenberg directed that we suspend the Gildemeister case (the Hybrid analog computer), and we did so on September 22, 1987, based on the new controls available under the MTCR. In the spring of 1988, a number of Iraqi export licenses had backed up pending a decision by the Administration with respect to trading with Iraq; At an NSC meeting at that time, these cases were reviewed and cleared and the instruction was issued (conveyed by Paul Freedenberg) to treat Iraqi applications favorably. On April 16 and May 29, 1990, there were Deputies Meetings chaired by the NSC at which you argued for expanded foreign policy controls on Iraq. You also sent a proposal to Robert Gates on June 8, 1990, outlining you proposal for the expansion of the MTCR, including controls on Iraq. In June and July 1990, the proposal is discussed at several PCC meetings. 401 Washington. U. C. JO.jJO l'nitcr.1 Slal<-s Department of Male To: Subject: From: NEA - John H. KeWy^fy, — The, ..Banca del Lavoro Scandal and Trade with Iraq You will have seen reports in the press linking the Atlanta branch of Italy's Banca Nazionale del Lavoro to Iraqi nuclear and missile programs. The money does appear to have been used to finance a wide range of imports and projects, probably including the acquisition of sensitive technology, but the technology transfer aspects are separate from the scandal surrounding the credits. Investigators are not talking, but it is clear the BNL branch manager in Atlanta gave Iraq over $4 billion in export credits in over 2500 separate transactions, at below market rates, that he kept on a secret set of books. Despite protests that BNL's Rome headquarters knew nothing of the unauthorized loans, the bank's two top officials have resigned and the former Italian defense attache in Baghdad has committed suicide. At least $900 million of BNL's letter of credit have not yet been paid out to the Iraqis, who are demanding that the bank make good on them. The F.in^iicJajL_limea and Wall Street, Journal appear to be mixing up the credit scam, Iraqi conventional weapons production, and Iraqi nuclear and missile proliferation programs. The tone of the press stories tars all Iraqi industry -- and technology transfer -- with the proliferation brush. The September 14 WS_J_, for example, claims U.S. officials have concerns about the nuclear weapons capabilities of a $500,000 machine tool designer an Alabama company wants to export to Iraq with BNL credits. The net result could be a perception that all technology transfer to Iraq is illegitimate. In attempting to counter Iraq's nuclear, missile and CW programs we have concentrated on denying key technologies. To be credible, we need to keep the focus on these key technologies '— while recognizing that the Iraqis will, if they can, use basic civilian industrial technology for military production as well. • SE£££I DEC'L: OADR 404 : UNCLASSIHED ... . 2 - The imposition of the foreign policy controls described herein will affect u.s.trade with iroq as well as U.S.-Iraqi political relations. These are burdens that we are prepared to bear, give our serious concern about Iraqi proliferation activities. The Nonproliferation PCC is preparing a package of additional export control proposals that will include other countries besides Iraq. However, there is a need to move now on Irag because of its very active 50mm onennt practTMT10 5 . Recent events also indicate there is danger that unsegnaccomID 11.)5011 Utuose efforts and thereby undermine our landership cole in non- Proling. These unilateral controls will not prevent irag from acquicing the equipment they seek from other countries but will make clear USG concern and policy on nonproliferation. We will need multilateral cooperation to have an ofloctivo regime that will strengthen the controls already in place. Multilateral controls will also deflect any Congressional and business criticism that these controls will offects.S. companies moru than Iraq. we will provide you with talking points to discuss this issue with General Scowcrofano Seccotu58 Mosbacher We will also develop approprio pross guldance and briefing materials for US with Congress. BECOMMENDATION That you authorize transmission of the Roy-Cospol memorandum at Tab A and sign the note to Secretary of Cumine Ice Mosbacher at Tob 6. (PM. NEA, L, EB approve) Jin 74 bij APPROVE DISAPPROVE tap4/10 Attachment: As stated. UNCLASSIHL 405 IRAQI EXPORT CASES: WHY THEY iv»XE THE CASE FOR EXPANDING LICENSE REQUIREMENTS AND REVIFrf An initial review of 73 case* in «j£&Ugflglg cranted wer- -«'—™n. uu.4 v. . uses for Iraq. »■■»»»..■■ ----- •—«— - ;daT?icr.tl review cf licenses c«".«Jd reduce U.S. contributions to proliferation activities. These cases concerned only exports for which a license .':ad to be obtained; they indicate nothing about equipment that cay have been exported freely because no license was required. Esaanles During the period is question, at least 17 licenses were issued for the export of bacteria or fungus cultures either to the Iraqi Atomic Energy Commission (ZA£C) or the University of Baghdad. 4 A known procurement agent for Iraqi missile programs, 'was issued licenses to export computers to a missile activity and computers and electronic instruments to the IAEC. ^ A license was issued to export a computer for a "fertilizer plant" to the Iraqi Ministry of Minerals, which is known to be associated with the Iraqi CW program. ^ received a license to export equipment to the Nassr Establishment for "general military applications such as jet engine repair, rocket cases, . etc." ^ Licenses were issued for the export to Iraq of . computer-assisted design and manufacturing (CAD/CAM) ~" and chemical process control equipment. had a license approved by DoD for a computer system for use with a furnace for "medical prostheses." "J als? had a license- approved byDoD/DOC to export numerically controlled equipment related to crucibles. Declaasified By: Frank Kachak Director. Office of FOI. Privacy end Clarification Review July 27, 1992 406 - 2 - -6 • received a license to export "navigation/direction finding/radar/mobile communications" equipment to Salah-al-Din, which is associated with an Iraqi missile project. j OoD -'.pprcved a license for the export of possible i elui.i-try equipment to the Saddam General Establishment-. Implementation of rericus aspects of EFCI would Frcvide s basis to deny licenses (and require additional licenses so transactions could be reviewed) in cases similar to these reviewed because of the end user (country or entity), the knowing contribution to or risk of diversion to a proliferation activity. 8301L 407 • (KFORISATION FURKISHED TEKEUTTH IS SUBJECT TO THE PROVISION OF SECTION 12(C) OF THE EXPORT AGINISTRATION ACT Of 1970, so U.S.C. M . *HQNO ITS MULTIORITE DISCLOSURE IS momIH TED BY LA CASE NUNGEN RECEIVED ONTE FIRAL DATE VALUE APPLICANT CONSICTEE . . . . . FIRST COMMERCE LIST PAGE 43 0035121 91012 NEWLETT-PACKARD COMPANY SALAN AL DIN ESTAALI SIENT IS1101 $19,935 ECCH - 1331 . MRER. STUTHE SIDERS & EQUIP. CONTAINING (SPECIF.) EHOUSE: ACCORDING TO OUR INFORMATION THE END. USER IS INVOLVED IN MILITARY MATTERS. ERDUSE INFOROMTION: THE ORDERED MODUCTS WILL BE USED IN CALIBRATING, AQJOSTING AND TESTING ON A SURVEILLANCE MOM SUPPLIED BY THONSON. SECOND COMERCE LIST PAGE 60 0765621 97012 NEWLETT-than 0.PUNY SALAN AL DIU ESTABLISMENT 891101 $199.555 ECCU - 1531 - FREQ, STITRERIERS & EQUIP. CONTAINING (SPECIF.) ENOUSE: TE ORDERED MODUCTS MILL BE USED IN CALIORATING, NOASTING HO TESTING ON A SURVEJUHIDE KOH SUPPLIE BY THOMSON, *** NOT RESTRICTED FOR KID, QERIOUSIIOLOGICAL, OR KEEN HOU-PROLIFERATION - 410 - 2 - k the(second anniversary)of the Iraqi attack K. At the time, Iraq's President accepted o May 17 will mar oil fche'uss £ie_rji. responsibility and promised compensation. Mike Armacost presented the first set of claims, for wrongful **>\* nf U liHOF*! on tJuiJLJ HUft (totalling about|$34■million). The Iraqi MFA's Legal Adviser went over the claims in detail here in July, 1986, but has made no substantive response since them Judge Sofaer Is In Baghdad, at Iraq's invitation, to Oibcu'es the' clfriMS'lurtner. lie met with Hemdun before leaving and said we will aoon present personal iaimy claims (about $1.5 million) and USp claims of $9^ million (n>o~Btiy damage to the SSSSKTt but emphasired we have no room for negotiation on the death claims. Sofaer called from Baghdad to report that an_initial session March 27 went v>rv wyll. «nd he hopes lie can resolve the issue during this trip. with this information in hand, Bob Kimmitt saw Hamdun March 22, and stressed it is important to settle these, sensitive claims to remove a stumbling block from the relationship. o Following CW use in the war with Iran, Iraq used Qj pj of a campaign to suppress a Kurdish rebellion last August. We condemned unlawful CW use, and Congress began considering sanctions legislation. Responding to our diplomatic approach and the threat of sanctions, Iraq stated adherence to international law on CW, participated constructively in the Paris CL. Conference, and began to participate in the Conference on Disarmament talks in Geneva. Sanctions., legislation fell by.the wgyslfle last, term in Hie tush tc idiourn. deapi te overwr>elm>na mjpfort. Bills introduced thlS B&Bil'bn" would apply tough trade, aanctions for future unlawful CW use and punish companies contributing to certain CW programs, Iraq'i among them. Iraq has eaked us to push Congress to delete, all references to Iraq in the oiifi. 'We nave explained that it is uHTCTTYaTjTC EO UApect Congress to do so. 411 SF.CWX - 3 - o The ceasefire begun with Iran last August 20 la still holding, but UN-sponsored peace talks have produced few fJL5J4ts. Workiny-leveJ talks continue in New York, and there will probably be a ministerial meeting in mid-April. Iraq.wants to claim full sovereignty over the Sh,att al-Arab. waterway; Iran refuses to allow reooenino tlif Shatt until lr«q gives up its claims, and is holding. •■ 70,000 Iraqi POWs until Iraq withdraws to its borders. o Commercial relations are good, but further growth is constrained tw If"'* gjflncji l^n ig now our njjntfiej two trading partner in the Arab world, but ,a .commercial agreement we BigllUU 1H femains unimplementcd. Iraq imports over $1 billion per year in U.S. aqr|pnHir»] .m-nfl^fff. Hn»n4(l wl th VSDA rt'C credit insurance. But industrial trade lags. Irao wou}.d like Exim to grant medium-term coverage in addition to its sliiell snbrt-fcefm la'cimy. Iraq would also like freer export licensing procedure: for high-tech. ^Applications are often held up in "* Commerce or DoD, usually on grounds that dual-use technology could add to Iraq's military capabilities.^ The powerful M,ln^ster of Inrfuatrv (Saddam's son-in- law) wanted to.buv a r'"""' "s* ftLaflt in Bpytown^TX. USX froze the deal when Congress took up unTon objections. As part Of Its approach to the U.S., Jrag has in the last year given favorable deals to U.S, oil companies: oil exports to the U.S. have soared to around 500*000 barrels per day. III. PARTICIPANTS 1L£L IRAQ The Secretary Undor Secretary Nizar Hamdun Policy Planning Staff Ambassador Abdul-Amir Al-Anbari Director Dennis Ross Khalid Mohammad, First Secretary NEA DAS A. Peter Burleigh (Notetaker) S/P Staffer Aaron Miller NEA Notetsker' IV. PRESS COVERAGE: Photo Op S£XB£I 412 &E£B£I V. we aro fllsfcurbfcd hY Utt mnHmifffl Presence in. Iraq of SlSgl iTSZ SnaeiiMiid rni„n? t^ar^-- head »taH s Special Operations section — bHTI travels tQ_Baghdad. /© — we ™k aoain that rr» ^nv AH» Ahhns and CfllQCg] Hgttari accetfs to i^Jmatry. The fact that Abu Abbes as « member q tEePLO ExecuUveConanlttee damages the Jljje&fcin.ian cause. vi. Trade (If raised) — We are committed to expansion of trade and U.S. exports around tiie world. — We believe reconstruction and development -projects in Iraq will present significant opportunities for U.S. exporters. SECRET 414 I. elstions - we ar>-sTeasec1 that wr have broadened bi lateral .r.elatlous -,1th Iraq s^nrpe ye reamed, ^hem in Ls-8'1' e,1<3 "A t0 /continue to develoe. ties. As-the President said in his message to President Saddam Husaein^we ^tUchgreaL i mpo «£• P5«. ™?.J "i? - * °"S- r *9 O ^Tit M.rrUKr1 fnr nur Dilatera* rations to set (;/ ^STTTTrino eroni Iraq" attack on the USS 5^5 as Xift-the soon as possible. nvfrrnmina tMfl "hutaele will oive our relationship^* (^XBt^rongth in the postwar period. I hope wo will be able to .settle the first get of claims, JT for the deaths of our 37 sailors, during JWgT^|g^O£ij& t0 Irao. -" . III. Chemical We^r/janl A — wV>e»go,fte"lraq,s participation in the Conference on Disarmament Ttl GUUUVfl. As a country that has used chemical weapons in the recent in tnr "nr,|d wm h* 8erv^ b* (JS/ Constructive participate ion in efforts to ban these weapons l_ as you know, Iraq's past use of chemical weapons is -a-verv e_n8ltlve topic in the U.S. Administration and_Congress. IV. Peace Talks AlthougrT"Wr"do not get involved in details of the peace negotiations, we are interested in a comprehensive, lasting settlement that will promote stability and reduce tensions in the region. • fi\ — what Ik vour assessment; of ornnrp.is made to date,., ond US prospects for the next round ot ministerial talks? SJECflSI 415 UNITED STATES DEPARTMENT OF COMMERCE Th« Under Secrstiry for Export AdrniniBtration Wesl-iington QC 20230 March 11, 1991 Honorable Doug Barnard Chairman, Subcommittee on Commerce, Consumer Protection and Monetary Affairs Committee on Government Operations House of Representatives Washington, D.C 20515 Dear Mr. Chairman: In response to your request for Iraq licensing information that can be made available to the public, I am enclosing a printout summarizing applications for licenses to export to Iraq processed by the Department in the 1985-1990 period. Also enclosed is a fact sneet that includes a description of the print- out and a one-page summary or iraq licensing statistics for that time period. The printout is based on the one provided to you on December 12,1990, except that it does not include information that could identify exporters or suppliers. Specifically, all the names of license applicants have been removec and, where the end-use information included references identifying suppliers, those references have been deleted. Under the authority delegated to me by the Secretary of Commerce, I have made the national interest determination required under section 12 (c) of the Export Administration Act to release to the public the data contained in the enclosed printout The information previously provided to you identifying exporters and suppliers is not covered by the this determination, and therefore, remains subject to the confidentiality provisions of section 12 (c). Should you or your staff have any questions, please contact Mark Neuman, Director of Congressional Affairs for Export Administration, at (202) 377-0097. Sincerely, Dennis Kloske Enclosure cc. Honorable Dennis Hastert Ranking Minority Member 416 STATISTICS ON U.S. LICENSING FOR IRAQ 1985-1990 Each of these licenses was processed in accordance with the prevailing export policies and interagency procedures described in the BXA Facts - Iraq Export Licensing Farf b ACTION MEMORANDUM S3 SECRET TO: THROUGH: FROM: SUBJECT: The Secretary United States Departntent of State Washington, D. C. 20520 9016243 T-»g h^s frp»n attempting to obtain items to «:npnnrf fh<»^ nrMifpr.n-nn »ffMvltl" fTnm "S- "PQr^r^" MM <=..rreSsf ul Iy> Existing foreign policy controls do not allow us to stop the sale of all items which might contribute to Iraq's weapons development activities. The Arms Export Control Act can control only those items which are inherently military in nature. The imposition of new nonproliferation controls would require potential exporters to apply for a license to sell items relevant to Iraq's needs. Commerce would refer these license applications to the State Department for review. It is likely that Congress will move to pass more sweeping sanctions against Iraq in the near future. Institution of these controls would allow us to argue on the Hill that we have obviated the need for such legislation. SICEEX DECL: OADR 422 wsra -1 - The imposition of the foreign policy controls described herein will affect U.S.trade with Iraq as well as U.S.-Iraqi political relations. These are burdens that we are prepared to bear, given our serious concern about Iraqi proliferation activities. The Nonproliferation PCC is prepirinq a package of additional export control proposals that will include other countries besides Iraq. However, there is a need to move now on Iraq because of its very active proliteration-related ** ptSauSSSEl ED5ZFT! Recent events also indicate there Is a dqnopr t-hat U.S. «»Tr,nrt-»r< ronlrt Mrnen IffflMcaUH In rnr»i» efforts and thereby undermine our leadership role In ngu. These unilateral controls will not prevent Iraq from acquiring the equipment they seek from other countries but will make clear use concern and policy on nonproliferation. We will need multilateral cooperation to have an affective reqime thai will strengthen the controls already In place. Multilateral controls will also deflect any Congressional and business criticism that these controls will affeet*J.S.companies rootv than Iraq. we will provide you with talking pointa to discuss this issue withfCeneral Scowcrof & and Secretary HoabacheS h« wll irTaTe press guidance and briefing material !lf . also develop approp.. for use with Congress BECOMMENDATIO" That you authorize transmission of the Roy-Casper memorandum at Tab A and sign the note to Secretary of Commerce Mosbacher at Tab B. */» Attachment: As stated. Z66X 'lz *rnr •saxqtanjs 03 pa^ixar saatrdtnba paxxojjuco £n*o$smam 3*odxa .-sasaqssojd xtojpsa. ia; asruih; i mjn asn jo; u«3sXs jaindujoa i jc; aoa .(q pa*S3ddi asuastx i piq ^ 'aaasdtnba roi^ucd ssasojd [tantsqd pot .-, (WYO/OYO) oa;jn33t;nuif put ofitsap. p»3St*Si-j»3ndu»3 "'•*• 10 but oa ;jodxa aq3 jo; pansst ajan sasuasfi ^ ,*33» 'casta 3a*ssj 'jttdaj suxfiua 3aC si qsns suoxitoyxddr Xjt3TXta i«jsu35. io; 3oaoiqs»xq»?S3 J*s«K »W3 03 ;uauidtnba 3Jodxa 03 asuastx 1 paAtaoaj f •utlSojd jo T&"I 3lH q3T« pa3it30ssi aq 03 unOUTf s\ q?fq* 'SliiaatH ?o £x3Stutw tbui aq3 03 .3V>X' aa2tx»;jai.' i9» '>3nduo3 1 ;jodxa 03 pansst si* asuaayx y f *D3YI >q3 °3 IJWBU3IBI 3taoi33aTa pui sja3ndmo3 pat X3tAj33t ai;sspu t 03 sia3ndai03 3J0dx» 03 sasoaotx pants; sin , 'smi26ojd aitsstu jbiJi joj 3uafit ^uauainooid u«Out< y p •pipqbig jo ZixsjSATun aq3 JO (D3YI) uotsstuaoo Xfijau? 3JB03Y tbrji aq; 03 J»q?T» saan3xn3 sniunj jo ijjassiq ;o 3Jodza aq3 joJ pansst ajan sasuaoyi £x 3*»»X *• 'oot3sanb ex potjad aq3 ouxjna •pajjnbaj sin asaasjx oa asnsoaq .idjn&» 3noqi Sujq^ou a3t3fp'Dl JC»q3 :paata3qo aq 03 pi:: asuastx » q^TW" 20; ssjodza ■ .» ntamtr 13 M3t A3 J T»-0t3tpp: 0HiailYdJC3 HOi 3SVD 2n- 3»■•! a3H- aHM -535^ iaua* 424 - 2 - ~6 . received « license to export "navigation/direction finding/radar/mobile communications* equipment to Salah-al-Din, which is associated with an Iraqi missile project. 4 OoD .'pprcved a license for the export of possible IcluJetry equ\?:aer.s to the Saddam General Establishment. Implementation of varicus aspects of EFCI would F?"'*ide a basis to den/ licenses (and require additional licenses so transactions could be reviewed) in cases siailar to these reviewed because of the end user (country or entity), the knowing contribution to or risk of diversion to a proliferation activity. 6301L 427 JNCLASSIFIED I rag Normal relations between the United States and Iraq would serve our longer-term interests and promote stability in both the Gulf and the Middle East. The United States Government should propose economic and political incentives for Iraq to moderate its behavior and to increase our influence with Iraq. At the same time, the Iraqi leadership must understand that any illegal use of chemical and/or biological weapons will lead to economic and political sanctions, for which we would seek the broadest possible support from our allies and friends. Any breach by Iraq of IAEA safeguards in its nuclear program will result in a similar response. Human rights considerations should continue to be an important element in our policy toward Iraq. In addition, Iraq should be urged to cease its meddling in external affairs, such as in Lebanon, and be encouraged to play a constructive role in negotiating a settlement with Iran and cooperating in the Middle East peace process. We should pursue, and seek to facilitate, opportunities for U.S. firms to participate in the reconstruction of the Iraqi economy, particularly in the energy area, where they do not conflict with our non-prolifetat ion and other significant objectives. Also, as a means of developing access to and influence with the Iraqi defense establishment, the United States should consider sales of non-lethal forms of military assistance, e.g., training courses and medical exchanges, on a case by case basis. JNCLASSIFIED A 431 - 3 - Because of the sensitivity of the documents requested, I trust that I can count on the Committee to protect the confidentiality of all the materials we are providing. Our ability to carry out diplomatic and intelligence activities and to receive candid advice would be irreparably harmed if these materials were to be discussed publicly. Mr. Chairman, we have made, and will continue to make, every effort to provide Members with the information they need to fulfill their responsibilities. Because of the unique circumstances involved, we have provided the Committee with an unprecedented amount of information of unparalleled sensitivity. I appreciate your cooperation and understanding. Si James A. Baker, III 433 plan. We are providing a copy of this report to the acting Under Secretary and to the General Counsel. Introduction Beginning in September 1990, Congressman Doug Barnard, Jr., Chairman of the Subcommittee on Commerce, Consumer, and Monetary Affairs, House Committee on Government Operations, sent several requests to the former Under Secretary for the Bureau of Export Administration for lists of export license information on Iraq from 1985 through 1990. The former Under Secretary responded with computer printouts on October 10, October 24, and December 12, 1990. The October 10 printouts did hot show whether the licenses were referred to other departments under applicable licensing regulations. The regulations require BXA officials to submit certain license applications to the Departments of Statu, Energy, and Defense. The October 24 printout showed information on the referral to other agencies, but it did not show the other departments' responses or recommendations. The December 12 printouts showed all referral information, including the other departments' recommendations. On February 8, 1991, the Department's General Counsel asked the former Under Secretary to provide & report addressing whether (1) the printouts were misleading, (2) certain end users of the licensed commodities were deleted or changed, and (3) the characterizations of the licensing information had been materially changed from those originally in the system database. This information was requested because of media-reported allegations that export license information and records were deleted from the Bureau's files. The former Under Secretary provided the report on February 26, 1991, acknowledging that changes were made to the information given to the Chairman. On March 11, following continued media reports that Iraqi export license information was deleted from the Bureau's files, the General Counsel asked the Office of Inspector General to review this matter. Purpose and Scope of Review The purpose of our review was to determine (1) if any changes were made to the information prior to submission to the Chairman, (2) if any changes were made to the export control automated system database records, and (3) the accuracy and completeness of notations indicating the positions of other departments involved in reviewing licenses for exports to Iraq. We interviewed Commerce officials involved in preparing the responses to the Chairman, including the former Under Secretary, 2 58^ 'paddjqs uaaq babij sxoru; pecuaoji ou ;aq; sn penuoju? -[auuosa&d nwejng 'paAOJdda bjba B88U807T aq; qfinoq^xY *B»suaojx X»nj; ay; 09 saSuaqo Aq joj pa;unoooB 87 sasuaoxx pafiUBtp Bin JO BltTBA 7»;o; 8q; JO ;UBOjad L6 uaq; a job ';oaj ui *ms?a9J JBpim pofJBd bid bufjnp dbji Joj BBsuBojx Vodxa paAOJdda sin JO snxvA i>)03 Bin jo z/z AX»3VBpcoaddB ao 'uotxITQ T$ Joao SBA SXOOXi pBBUBOJX JO BDXBA 7B;0; »Ui *pUnOJ 8A ;wq; OA; aq; fiuTpnxou? 's^on-i; aoj sasuaoxx oajj pabuaqo xeuuosjsd nvsjng *6uxpBax&xa ptre pajj-p^snfun bjba seSuaqo Bin ^sq; apnxouoo »h -nnajna aq; Aq pasua07x aq uvo pua ;sxx suox;xuna aq; uo ;ou ojb sxpna; aq; ;aq; js;jodxa aq; pauoju? Axaaan ;i •safiuaqo uoj^djjosap a in Joj uo7;807Jx;snf ou sapxAOjd Ja;;ax aq; ;aq; *n paoaojux Aain' 870707jjo ;u8nnjadaa o;b;s TOT" ja;;ax C86T a in jo s;ua;uoo a in passnosxp ba uaqA 'AxX8Uox;xppY •sasodand Ajv;7XT* ;aq«oouou joj pa 1167sap 88X374** ojodsircx} At 1x0517 ad bjb ssxoxqaA qons "^sji suo7;7unx *S *0 Bin uo ;ou eav }Bin sxpnj; Aae^7X7B jo axas a in Joj sasuaoxx BAOjdde o; noajng aq; aoxx9 suo7;axn5aj uoT^ea^sjujorpB ;jodxa aqj, -BuoT^dposap A;7ponniioo aq; 6uT6uaqo jo; suosvaj q;oq ini« aaofiasxp bm ,-(E)piu; oSjbo A^jTi^n x^xoaeoaooa se paxj7ssaxo bjba 'dbji o; axas joj papua;ux bjba qoxqA 'sspnj; s,j3^jodxa a in ^ain pa;BOTpux jb;;bx aqx *C86I U7 ae^zodxa ua o; ja;;ax ^uan^zadaa b;b;s a Aq pax;x;snf aaaA saouaqo uot^djaosap ein PTBS osxa 70707jjo aqx *sj(OTva; Ajb^ttth 20 axas aq; esuaoj 1 ;ou saop naaang aq; ;aq? Ajx-xaxo 03 pafiuaqo aaaA suoj^dfaosap A^yponuoD aq; sn pxo; xBT°TJJ° naajng V •suox^Bxnbaa eq; qajA ;ua;sxsuoou7 o3ir apan ;aq; sax;xponnnoo pasuao7x jaq;o 30 suox;dxJOsap xajteuab 03 686uaqo ou punoj bm •spnxt ain jo uox^djaosap xojaueb Bin 88 supx^axnBea uox^vx^sjuTnps ^aodxa a in U7 pasn busj Bin q^7A ^ua^sjsuoo 87 ua; aanjoz aqx H*S7I0IHaAM *° mSXDAHJ. OOHYO xiiiLLn TYionaKHoou o; „asn ahyxiiih hoj aaNoisaa saaoiH3A» aoaj E5(orLn . Commerce also approved a companion license (A897642) over a DoD denied position in August 1965, to the sace end-user. This latter case involves the aale of an Electronic Associates, Inc. EA1-2000 hybrid computer to an Iraqi National Research and Development (R&D) Center. The documentation submitted with these cases (Attachment 2) indicates that the R&D Center ic still under development, but will involve approximately 82 different laboratories, covering a broad gambit of scientific research including fuels, electro-optic, navigation and control, atmospheric, and microwave development. In light of U.S. policy tovards Iran and Iraq regarding military end-use, 1 am very concerned that Commerce has taken such a casual attitude towards providing such sophisticated equipment for an end-use as anbigious as this and with such military significance. The EA1-2000 is extrenely useful in a number of sensitive military applications and has been the subject of close export super- vision by Defense. 1 believe these two cases ere yet another exatrple where review by the Technology Transfer Steering Group (TTSG) is required. Since the EA1-2000 has yet to be exported, 1 recommend the license be suspended, and both cases be referred to the TTSG as soon as possible. Sincerely Dr. Stephen D. Br yen Deputy Under Secretary 453 « I 2 BBC MEMORANDUM TO: FROM: John lonfali Director Strategic Trade Controls Department of Defi 'e n s e \ aillard A. Morknai Acting Director Office of Technology and Policy Analysis SUBJECT: XA1 Case B042381 The issue in this case is visitation/inspection requested by DOD to verify physical installation and end-use. The consignee, SA'AD, ir. the application is a general contractor that is building a Research and Development Center for the Government of Iraq. The R&D Center is the ultimate consignee in Iraq and SA'AD will have no control over the goods being exported. Ir. a letter SA'AD has reported that any future visits to the R6D Center will have to be arranged through the Iraq government by SA'AD. The national security concerns with an export of this type to Iraq are limited to risk of diversion to proscribed destinations. Therefore, OTPA will issue the suiject license with a condition that EAI visit and report to OEL, with.n one year of installation at the R&D Center, that the computer has been installed and is being used for the research specified in the *>A'AD letter of 3 May 1 986. Ctate could not get the requested £ssurances. Therefore, the DOD conditions have been placed on the applicant. 457 Kftea^Cj I Dr»f 1 oyft. Cf '.'t TECHNICS'. MC HECWftKlCAl EjWBJM^jTAl AN? TRAJJONG WQRr.SHQPS, CONS ? ST ] S3 0f: 0101 Mechanical workshop 0102 Heat tre*iment shop 0103 Surface treatment shop 0104 Pattern shop 010b Material test laboratory for testing mechanical materials 010£ Mechanical measuring laboratory 0107 Grease analysis laboratory 01DE Cherr.ical analysis laboratory for the analysis of materials 0109 Material testing cabinet for saline vapour corrosion tests "Salt Fog Chamber' 0110 Laboratory for testing the properties of plastics and rubbers 0111 Laboratory for the rapid determination of carbon and sulphur content in metals 0112 Laboratory for fissure detection in metals 0113 Laboratory for he-dness testing of metals Oil* Laboratory for the preparation o* metaTlojraphic samples - Oils Metallographic laboratory •0116 Da-kroor with photocrasr.i: oevel coner.t e:»"icaer.t — 0117 SDe:-.al analysis labo-eto~v for tht ice'tification of mete's * 03C1 Labo_ato"y for p-er-aratior. o' mtcnanical expe'iments ^CiZZ~- Labo^to-.y for &u"i nc tnt ocpericar,;€ o' *: eel t re', i or. or, o-ivt 458 HBPstTOPr FQ- SjlSggGUgHlC SO!l TESTS C?01 Laboratory for seumoc'aphu toil tes'.i PHYSICS LMORATOgT TO? NQK-WgULUC MtTEP.Iit.LS AND PROCESS1"S gpgsTgig on '— O<01 Physics laboratory for non-metallic iwterials and processes 0*02 Laboratory for the preparation of test materials CHEK1STRY LABORATORY FOP METALLIC AN: NON-METALLIC MATERIALS. CONSISTING 6T 0501 Laboratory for testing the tiechanical properties, e. g. plastics 0502 ) Laboratory for calometric testino of fuels ) 05C3 ) Laboratory for calometric testing of fuels 05D4 Laboratory for testing storage properties in raised temperatures 0505 Leboratory for testing the behaviour of titerials during trar.spo" (vibration and friction) 0505 Laborato-y for determining the speed »-ith wr.icn fire spreacs, the development of ois and building-up o* pressure 050" Laboratory for testing tne chemical stability of compunss and mechar.itil r.ixtu'es DIDE. L2boratory for tne general cnemicil analysis o' ra» mate-iels and cne-icel compounds p-osuce: m syntnetics lars 460 012: PntjmatlCS and h^JriJitJ I»b0'tt0*y i/06D£ Automat tc control vyste- naulition laboratory 0609 Mechanical worunop for experiment preparation OS10 ) Control system and navigation laboratory ) _--0£lZ ) Control system and navigation laboratory 0£13 Laboratory for measuring thrust and performance of turbo machines 0E1* Laboratory for measurements ir, consideration of climatic conditions 0£15 Laboratory for testing of environmental conditions ^ D£l£ Photochemistry laboratory for production and processing of pictures for the recording and documentation of physical motion LABORATORIES FOP OPTICS, ELECTRICS AND ELECTRONICS CONSISTING OF: "' 0701 D702 D?C3 Laboratory for examination of electro-optical aids, e. g. the production of lenses, critical filters, glass laboratory equipment Laboratory Tor examination o: electro-optical aids, e. g, the production of lenses, ootical filters, class laboratory equipment Laborato-y for examination cf electro-optical aids, e. g. the production of lenses, octical filters, class laborato*y ecuipmj: 461 *'! 0704 Laboratory for examination of ele:tro-opt it»1 lids, e. g. the production of lenses, optical filters, glass laboratory equipment 0705 Laboratory for examination of electro-optical aids, e. g. the production of lenses, optical filters, class laborttory equipment D70t Laboratory for examination of electro-optical aids, e. g. the production of lenses, optical filters, glass laboratory equipment 0707 Laboratory for examination of electro-optical aids, e. g. the production of lenses, optical filters, glass laboratory equipment 0708 Laboratory for examination of electro-optical aids, e. g. the production of lenses, ODtical filters, glass laboratory equipment 070? Laboratory for examination of elertro-optical aios, e. §. the production of lenses, optical filters, glass laborato-y equipment 0710 Laboratory for examination of electro-optical aids, e. g. the p-oduction o' lenses, optical filters, class laboratc-y eCwip^ev. 0711 Leboratory for examination o* electro-optical aids, e. c. the production of lenses, optical filters, class laborato-y equipment 462 07J2 LabPratory of microwave enginee-in; 0713 Laboratory Tor lo« and Mjh frequency engineering, e. 5. in the rafii0 and television frequency bind C7ji ) Laboratory and wo-kshcp for electronic measuring instruments ) 071B ) Laboratory and workshop for electronic measuring instruments 0716 ) Laboratory for antennae and antennae parts, and assembly and testing ,0717 ) Laboratory for antennae and antennae parts, and assembly and testing 0716 lest laborato'y for printed circuit board engineering 0719 Electronic components assembly laboratory 0720 IKZ laboratory 0721 Calibration laboratory LABDRATOJULS FOR HIASllfLUS S*I£L AKD -PRUSUII, CONSISTING OF: ~ ~ 091? Laborato-y for itvessu-inc the oepenisnce of acceleration or. C"lve 093- Workshop for preparation of mechanical expe-iments C3C3 Laboratory for testing movement seqjences unde- atmospheric conditions 463 United States Department of State Washington, D.C. 20520 FEB 2 6 1992 FEB 271992 UMCLASSIEIBILJHitll CONFIDENTIAL attachment Dear Mr. Chairman: In response to the Committee's earlier request for a list of U.S. company names compiled by the UN Special Commission on Iraq (UNSCOM) and the International Atomic Energy Agency (IAEA), and in order to assist the Committee in fulfilling its legislative responsibilties, I am transmitting under cover of this letter a preliminary list of U.S. company names released by UNSCOM. These materials contain classified information, and we ask therefore that these materials be handled as classified documents, there be no duplication of these materials and that access to them be restricted to members of the Committee and such staff members who possess the requisite security clearances and are designated by yourself or ranking Republican Congressman Wylie as having a need to review these materials for the Committee's legislative work. We also request that the Committee return these materials to the Department after its legislative work on this matter has been completed. It should be understood that a company's inclusion on the enclosed or any subsequent list provided by UNSCOM or IAEA does not imply that it conducted illegal trade in support of Iraq. Such judgments cannot be made without investigations conducted by appropriate agencies. Upon receipt of a more comprehensive list, we will forward it to the Committee. You may be assured of our continuing concern in this matter. The Honorable Henry B. Gonzalez, Chairman, Committee on Banking, Finance, and Urban Affairs, House of Representatives. Assistant Secretary Legislative Affairs Enclsures: As stated. 464 ^United States Department of State Washington, D.C. 20520 RECEIVED MAR 20 1992 MAR 2 3 1992 Committee on Banking, Finance & Urban Affairs Dear Mr. Chairman: This letter is in response to your letter to the President of January 31, 1992 outlining the Banking Committee's investigation of the activities of the Atlanta branch of Banco Nazionale del Lavoro with respect to Iraq. The Department of State has been very concerned that goods and services of Western companies may have been used in Iraqi production of weapons of mass destruction (WMD). Following an interim reply on December 11, 1991 to your letter of November 13, 1991, the State Department notified you on February 5 that it had requested from the UN Special Commission on Iraq (UNSCOM) and the International Atomic Energy Agency (IAEA) the lists of U.S. company names they compiled from their inspection activities in Iraq. On February 26, 1992, the Department of State transmitted to you a confidential preliminary list of U.S. company names released by UNSCOM. We assured you then that as more comprehensive lists are received they would be forwarded to the Committee. As we informed you earlier, the IAEA has no list of U.S. company names beyond the one name they released (along with 12 foreign company names) in December. I want to emphasize that a company's inclusion on the list provided by UNSCOM does not imply that it conducted illegal trade in support of Iraq. Such judgments can only be reached following thorough investigations conducted by appropriate agencies. The Honorable Henry B. Gonzalez, Chairman Committee on Banking, Finance, and Urban Affairs, House of Representatives. 465 - 2 - The State Department has also shared the UNSCOM list of names with the Departments of Justice and Commerce and the U.S. Customs Service, who may conduct such investigations as they deem appropriate into the possibilities of U.S. companies conducting illegal trade in support of Iraq. The U.S. government would, of course, seek, if warranted, to prosecute any such companies or individuals. Janet/ G. Muslins Assistant Secre>«ry Legislative Affairs 468 pnwpncMjfRj UNITED NAT IONS NATIONS UN I ES (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical TYPE: thiodiethylene glycol (thiodiglycol) PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Fallujah 3 DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 9 REMARKS: COMPANY: Alcolac, Baltimore, SERIAL /: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Alcolac, Baltimore TYPE: Krumfax solvent, Thiodiethylene glycol, CAS 111-48-8 PURPOSE: SERIAL/: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Honeywell? TYPE: Honeywell process flow controller SERIAL /: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: Equipment, material and supplies listed herein have been noted and recorded by UNSCOM teams in Iraq at sites subject to inspection under Security Council resolution 687 (1991) . The listing carries no implications whatsoever by UNSCOM as to how or from whom the equipment, material and supplies were procured and shipped to Iraq and as to whether any violations of national export regulations have been involved. 469 CONFIDENTIAL UNITED NATIONS NAT 10 N S UN IES 4 (COUNTRY NAME) D8A WEAPON ASSOCIATION: Chemical Charlotte,NC COMPANY: Sullaire Corp, SERIAL*: TYPE: Power supply PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Sullaire Corp, Charlotte,NC TYPE: Air filter for drying SERIAL #: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna LATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) U8A WEAPON ASSOCIATION: Chemical COMPANY: Sullaire Corp, Charlotte,NC TYPE: Buffer vessel SERIAL #: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: Equipment, material and supplies listed herein have been noted and recorded by UNSCOM teams in Iraq at sites subject to inspection under Security Council resolution 687 (1991). The listing carries no implications whatsoever by UNSCOM as to how or from whom the equipment, material and supplies were procured and shipped to Iraq and as to whether any violations of national export regulations have been involved. 60-509 0-93-16 470 UNITED NATIONS NATIONS UNIES 5 (COUNTRY NAME) D8A WEAPON ASSOCIATION: Chemical COMPANY: Sullaire Corp, Charlotte,NC TYPE: Air compressor SERIAL /: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) D8A WEAPON ASSOCIATION: Chemical COMPANY: Sullaire Corp, Charlotte,NC TYPE: Pressure and temperature regulator SERIAL f: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Sullaire Corp, Charlotte,NC TYPE: Refrigerator-air drying, Pure-Aire SERIAL /: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: Equipment, material and supplies listed herein have been noted and recorded by UNSCOM teams in Iraq at sites subject to inspection under Security Council resolution 687 (1991). The listing carries no implications whatsoever by UNSCOM as to how or from whom the equipment, material and supplies were procured and shipped to Iraq and as to whether any violations of national export regulations have been involved. CONFIDENTIAL 475 COUNTRIES OF ORIGIN (COUNTRY NAME) United Arab Emirates/OSA WEAPON ASSOCIATION: Chemical COMPANY: Union Carbide TYPE: Xylene Jevel Ali Terminal PURPOSE: •; Dubai, UAE DATE OF ARRIVAL: SERIAL*: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) USA/ITALY WEAPON ASSOCIATION: Chemical COMPANY: Evapco TYPE: Ion Exchange SERIAL /: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Fallujah DATE* FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 9 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Gorman-Rupp TYPE: Motors SERIAL /: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Fallujah DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 9 REMARKS: Equipment, material and supplies listed herein have been noted and recorded by UNSCOM teams in Iraq at sites subject to inspection under Security Council resolution 687 (1991). The listing carries no implications whatsoever by UNSCOM as to how or from whom the equipment, material and supplies were procured and shipped to Iraq and as to whether any violations of national export regulations have been involved. 477 (COUNTRY NAME) DSA WEAPON ASSOCIATION: Chemical Charlotte,NC TYPE: Power supply PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSI'xo.^., SOURCE OF INFORMATION: UNSCOM 17 REMARKS: COMPANY: Sullaire Corp, SERIAL/: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Sull.ire Corp. charlotte.NC TYPE: Air filter for drying SERIAL /. Charlotte,NC PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Sullaire Corp, Charlotte,NC TYPE: Buffer vessel SERIAL /: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: 479 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Not known COMPANY: Raving Mayer TYPE: X-ray machine SERIAL #: PURPOSE; DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Al Amer plant DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 8 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Ballistic Missile COMPANY: Varian Linatron TYPE: X-ray machine SERIAL #: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Balat al-Shuhada' Plant, Taj al-Ma'arik Factory DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 8 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Pure Aire, Charlotte, NC TYPE:? SERIAL #: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Posi Seal Inc., N. Stonington TYPE: Filling system for projectiles SERIAL #: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: 481 DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 9 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Alcolac, Baltimore TYPE: Krumfax solvent, Thiodiethylene glycol, CAS 111-48-8 SERIAL #: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Honeywell? TYPE: Honeywell process flow controller SERIAL #: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Sullaire Corp, Charlotte, NC TYPE: Power supply SERIAL #: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: (COUNTRY NAME) USA WEAPON ASSOCIATION: Chemical COMPANY: Sullaire Corp, Charlotte, NC TYPE: Air filter for drying SERIAL #: PURPOSE: DATE OF ARRIVAL: SHIPMENT DETAILS: LOCATION FOUND: Muthanna DATE FOUND: DISPOSITION: SOURCE OF INFORMATION: UNSCOM 17 REMARKS: 485 trying to find them. Other similarly favored nations could easily follow Saddam's example, given existing export laws. Iran and Libya are now maneuvering into this position. Iraqi scientists know, for exam- ple, how to cast uranium metal into bomb parts in a vacuum furnace. The vacuum prevents molten ura- nium from burning in air. At Al Atheer, U.N. inspectors found vac- uum furnaces made by a German firm, Arthur Pfeiffer Vakuum Tech- nik. The inspectors rejected Iraq's claim that the furnaces were for scientific research. The inspectors also found a large "isostatic" press, made by a Swed- ish-Swiss firm, Asea Brown Boveri. This, too, the Iraqis claimed was for research. But the U.N. team thinks the machine was for shaping the high-explosive charges that set off a nuclear chain reaction. These spe- cially shaped charges are wrapped around the bomb core and set off simultaneously, creating a shock wave that travels inward, "implod- ing" and compressing the core. When the core is compressed to suf- ficient density, the nuclear chain re- action begins. How did the Iraqis learn to use such specialized equipment? In large part from the United States Government. In August 1989, the Pentagon and the Department of Energy invited three Iraqis to at- tend a "detonation conference" in Portland, Ore. Financed by Ameri- can taxpayers, the meeting brought together experts from around the world to explain to the Iraqis and others how to produce shock waves in any desired configuration. There were even lectures on HMX, the high explosive of choice for nuclear detonation, and on flyer plates, de- vices that help produce the precise shock waves needed to ignite A- bombs. Both HMX and flyer plates have turned up at Al Atheer, which should surprise no one. The three Iraqis who attended the conference came from the laboratory that even- tually provided Al Atheer with its first shaped charges. To design a successful bomb, the Iraqis also needed computing power to solve the hydrodynamic equa- tions that predict the behavior of shock waves. The inspectors discov- ered that Iraq was running the equa- tions on a mainframe computer from the Japanese company NEC. Another Japanese firm, Hamama- tsu, sold Iraq two "streak cameras," sensitive instruments that can pho- tograph a high-speed shock wave as it implodes. The inspectors confis- cated both cameras after determin- ing that they were rapid enough for nuclear weapon work. Altogether, the Iraqis earned out 20 detonation tests before May 31, 1990 — the date of the last Iraqi progress report on Al Atheer found by the United Nations. The Iraqis had worked their way through five ersions of the bomb design, cutting the weapon's total weight from one ton in the first version to about half a ton in the last — light enough to go on a missile. After May 1990 the Iraqis worked unimpeded at Al Atheer for eight more months No one knows how much more they achieved. The Iraqis started relocating vital equip- ment before allied bombing began in January 1991, and as late as last summer tore out concrete floors to prevent inspectors, from determin- ing which machines were used there. They even ripped out electri- cal hookups to hide power usage. Now that Al Atheer is "sanitized," inspectors fear the bomb work has moved elsewhere. Wherever the work is going on, the Iraqis still have plenty of equip- ment. During the late 1980's, Bagh- dad bought jnachines by the factory load, few of which have been found. The purchases included additional vacuum furnaces, from the German firm Leybold; plasma-coating ma- chines, which could be modified to coat the surfaces of the molds into which molten uranium is poured, from the American company TI Coating; high-speed oscilloscopes, needed to develop tiring circuits for nuclear weapons and for nuclear tests, from the American company Tektronix; and two X-ray diffraction systems, capable of analyzing weap- on-grade uranium during produc- tion, from the German firm Sie- mens. TI Coating sold directly to an Iraqi factory charged with making A-bomb fuel; Tektronix sold to an Iraqi procurement agent for a string of nuclear and missile sites; Siemens sold to the Iraqi Ministry of Industry and Military Industrializa- tion, which set up Al Atheer These purchases followed Iraq's policy of "parallel sourcing." The Iraqis never buy just one machine or build a single plant. If the item is important, they buy or build two! So if one vital machine or plant is bombed or surrendered to inspectors, they al- most always have another. The inspectors found out one other thing about the Iraqi bomb — it is highly unstable. The design calls for cramming so much weapon-grade uranium into the core, they say, that the bomb would inevitably be on the verge of going off — even while sitting on the workbench. "It could go off if a rifle bullet hit it," one inspector says, adding: "I wouldn't want to be around if it fell off the edge of this desk." Even a "fizzle," when the bomb explodes too soon to get a full chain reaction, would be serious. The minimum blast effect would be equal to filling 20 semitrailers full of TNT, parking them side by side and setting them off simultaneously. The full yield would he like setting off 1,000 semitrailers' of TNT WITH A WORKABLE AND MOST- ly tested bomb design, Iraq faces only one more barrier: weapon- grade uranium fuel. Iraq started producing this precious substance before the war, but never got close to making enough for a bomb. Whether it finally succeeds will de- pend on its foreign suppliers. The key will be the centrifuge. By spinning uranium gas at high speeds, centrifuges separate light, unstable uranium isotope that ex- plodes in an atom bomb from the heavy, stable one that doesn't. A spinning tube called a rotor propels the heavy isotope to the outside wall and leaves the light one at the cen- ter. As the gas is run through a series of centrifuges called a cascade, the concentra- tion of the light isotope is gradually raised from less than 1 percent in natural uranium to over 90 percent in uranium of nuclear weapon-grade. This techni- cally demanding process is called enrichment. Iraq's centrifuges are based on German designs and were built with Ger- man help. Iraq somehow got German blueprints in the 1980's. By 1988 it was. already running experi- mental models. When one model developed a hitch in late 1988, Iraq summoned Bruno Stemmler, an ex-em- ployee of M.A.N.. the Ger- man company that makes centrifuges for the German national enrichment effort. After studying Iraq's illicit blueprints, Stemmler re- moved the hitch. Iraq's next goal was mass production. It takes from 1,000 to 2,000 German- style centrifuges to produce a bomb's worth of enriched uranium each year. German firms again obliged. From H & H Metal- form — a company subsidized by the German Government — came "flow forming" machines that are specially adapted to produce rotor tubes, the most difficult part of the centrifuge to make From Leybold's American subsidiary came a giant electron beam welder, equipped with custom-made fixtures for weld- ing the rotors to their necessary end caps. From Dr. Reutlinger & Sohne came machines to balance the ro- tors vertically and horizontally. From Neue Magdeburger came oth- er specially adapted machine tools. And from Degussa came an oxida- tion furnace to treat the surfaces of parts so they could withstand corro- After surveying this glittering array, the U.N. inspectors conclud- ed that Iraq would be able to produce more than 2,000 centri- fuges a year, enough for a full- fledged bomb program. From a re- cent inspection, we know that Iraq ordered parts for 10,000 ce"' fuges, although it is not kn' 486 many parts were actually deliv- ered, or how many centrifuges Iraq may have made The U.N. teams have now de- stroyed all the centrifuge parts it could find. But the inspectors don't know how many more centrifuge parts there are, because they don't know how many were sold to Iraq by Western companies. They are espe- cially worried about a "missing cas- cade." They assume that Iraq would not have built a plant^to mass- produce centrifuges without first be- ing able to connect them in an ex- perimental cascade. No cascade has Saddam permanently there must be "strict maintenance of export con- trols by the industrial nations." But nothing in recent history suggests that the industrial nations will exer- cise such restraint. In the five years before the Per- sian Gulf war, for example, the Commerce Department licensed more than $1.5 billion of strategical- ly sensitive American exports to Iraq. Many were for direct delivery to nuclear weapon, chemical weap- on and missile sites. Companies like Hewlett-Packard, Honeywell, Inter- national Computer Systems, Rock- THE IRAQI BOMB And Where It Came From Firing set: Energy source, timer, switches MADE WITH HELP FQOM: United States: Departments of Energy and Defense Core: IS to 18 kg or high-enriched uranium MADE WITH HELP FBOtt: Belgium: Sebatra Brazil: Atomic Energy Commission Germany: Arthur Pfeiffer Vakuum Technik. Degussa, Finnigan-MAT, HaH Metalform, Inwako. Leybold, Neue nagdeburger. Dr. Reutlinger & Sonne Niger Oranem Poland: Chemadex Switzerland: Acomel, Balzer. Schmtedemeccanica. VAT United States: Finnigan-flAT, Ley bold Vacuum Systems Sources: Wisconsin Protect on Nuclear Arms Control and L This is the actual Iraqi bomb design de Saddam was within IS to 24 months been found. As the inspectors warn in their report, Iraq "may still have an undisclosed program." The inspectors are also worried about a possible cache of weapon- grade uranium. Last July, they found four traces of this material in samples taken from Tuwaitha, Iraq's primary nuclear site. Be- cause of the possibility that the sam- ples were contaminated after they left Iraq, however, the evidence was not considered conclusive. New samples were taken in October, but the lest results are still not inf. Thus, the U.N. inspectors cannot pursue the lead. There is also the matter of a hid- den reactor. Western intelligence sources believe that the Iraqis have at least started to build one, but the inspectors have not been able to find it. Even a small, 20-to-40-megawatt reactor would be large enough to fuel a few nuclear weapons a year. And, finally, the inspectors are worried about outside suppliers They have concluded that to stop .bed in secret documents seized in Baghdad cing this bomb before the gulf war well and Tektronix sold high-per- formance electronics either to Saad 16, Iraq's major missile research center; to the Ministry of Industry and Military Industrialization, which set up Al Atheer; to the Iraqi Atomic Energy Commission, re- sponsible for atomic-bomb re- search; or to Nasr State Enterprise, in charge of Iraq's missile and nu- clear procurement. Honeywell even did a feasibility study for a powerful gasoline bomb warhead, intended for an Iraqi-Egyptian missile. The computer giant Sperry and its successor, Unisys, also benefited. They got licenses to sell multimillion- dollar computers designed to handle a "personnel data base." The powerful machines — ordered by Iraq's Minis- try of the Interior, which houses the secret police — are ideally suited to trucking and suppressing civilians. The Commerce Department ap- proved all these exports despite strong warnings from the Pentagon, the first coming in November 1!)H6 concerning Saad 16. Commerce nev- ertheless permitted the sale of hun- dreds of thousands of dollars' worth of sensitive computers and electron- ics to Saad 16. all after the warning. And there was the strange case of the Badr General Establishment, a factory outside Baghdad. In the sum- mer uf 1989 it wanted to buy a com- puter-controlled lathe from Cincin- nati Milacron and a high-accuracy measuring system from Brown-1 & Sharpe. Badr said the equipment would make "crankshafts, camshafts, and gears" for automobiles. But the Pentagon was skeptical. Commerce therefore agreed to a "pre-license _ check," in which an Ameri- can official would actually visit the site. After a 30-kilometer trip out from the capital, two em- bassy officials toured Badr witn its production man- ager, Salam Fadl Hussain. The verdict was unanimous. The American Ambassador, April Glaspie, cabled the good news to Commerce on Sept. 13. "We believe that Badr General Establish- ment is a reliable recipient of sensitive United Slates or- igin technology and techni- cal data." We now know that Badr and another organiza- tion were jointly in charge of all the centrifuge production in Iraq. As bad as the American record is, Germany's is worse. Germany supplied- more of Iraq's mass-de- struction machinery than all other countries combined. Germany not only sold Iraq most of its centrifuge equip- ment, it also furnished an entire chemical weapon in- dustry and was Iraq's great- est supplier of missile tech- nology, including a flood of parts that enabled Iraq to extend the range of its Scud missiles. During the Persian Gulf war, en- hanced Scuds hit Tel Aviv and a Unit- ed States Army barracks in Saudi Arabia, killing 28 sleeping soldiers. To develop an even longer-range missile, Iraq turned to the German armament giant Messerschmitt, now doing business as MBB (Mes- serschmitt-Bolkow-Blohm). MBB supplied the know-how for a 600- mile nuclear-capable missile called the Condor II that Iraq tried to de- velop jointly with Egypt and Argen- tina before the war. The missile's range and configuration are similar to that of the American Pershing, which MBB worked on at the Penta- gon. The same MBB employee who worked on the Pershing at the Pen- tagon also represented MBB in Iraq for the Condor, and thus was in a position to transfer American mis- sile technology to Baghdad. SINCE THE INSPECTIONS BE- gan. critics have questioned whoth- 489 490 Selected Iraqi Weapons Plants using U.S. equipment from the Mednews Archive Copyright © 1991-1992 Establishment Production U.S. Suppliers Al Atheer (PC3) Nuclear; tungsten carbide Al Qaddisiya Artillery rockets; nuclear April 7 (Narwan fuze factory) Ouster bombs; 155mm munitions Badr General Establishment Aerial bombs; centrifuge, calutron Fao State Establishment (Saad 38) Proximity fuzes Huteen General Establishment Explosives, tungsten carbide; nuclear Kennametal, Matrix Churchill Corp, XYZ Options Kennametal, Transatlantic Matrix Churchill Corp, International Signals Corp, Kennametal Centrifugal Casting Machines, XYZ Options, Pratt & Whitney, Moore Special Tool, International Computer Systems/DEC, TI Coating Inc Matrix Churchill Corp, International Signals Corp. GTE Valenite, Kennametal, XYZ Options, Pratt & Whitney, General Industrial Diamond Co, Modern Machinery Associates, Moore Special Tool, Matrix Churchill Corp, Shalco, Sandvik International, International Computer Systems, American Export Import Mansour Electronics; nuclear detonators Semetex Ministry of Industry (and Military Industrialization) Nuclear -related Veeco, Gerber Systems Technology, Hewlett Packard, Finnigan Corp, Eagle Picher Industries Inc Nassr State Establishment for Mechanical Industries (Taji) Artillery, centrifuge, calutron Bull Oak Tool & Gauge, Gerber Systems Technology, Hewlett Packard, International Computer Systems, Leybold Heraeus Vacuum Systems, Matrix Churchill Corp, Kennametal, West Homestead Engineering, Allen Bradley Saad 16 Ballistic missiles Electronic Associates Inc., Gould Inc., Hewlett Packard, Tektronix Inc., Scientific Atlanta, Wiltron Saddam Engineering Complex (Saad 5) 122mm howizters; supergun; centrifuge Unisys, Dale Toler, RD&D International, Applied Systems, West Homestead Engineering, Kennametal, Matrix Churchill Corp Scientific Research Council Procurement front; nuclear weapons Data General, Hewlett Packard, Watkins Johnson, EG&G, General Scanning Inc, International Computer Systems, Teledyne Geotech Middle East Defense Neivs Paris - France Tel: (331) 39 62 68 30 Fax: (331)39 62 59 05 491 Iraqi Weapons Plants 494 10. rue de lXInion - 78600 Maisons-Laffiac - France. Tel: (331) 39 62 68 30. Fax: (331)39 62 59 05. Dec 9. 1991 - Page 3 Med ■BE • Harshaw-Filtrol: supplied Hclium-3 for well logging operations; • Hewlett Packard: a major player in Iraq, and one of the first U.S. companies to bet on the Iraqi market in a big way, setting up a Baghdad office in 1985. HP applied for, and received, more than 56 export licenses for computers and software shipped to a wide variety of Iraqi state organizations, from 1985 through 1990. • Kennametal: This subcontractor to XYZ Options worked in tandem with Kmpp-Widia for the supply of tungsten-carbide machine tool bits which Iraq diverted for use in machining uranium. • International Computer Systems: This company was a high volume trader with Iraq, sup- plying process control computers, mainframes, and CAD/CAM systems for a wide variety of Iraqi state establishments, including $14 million worth of equipment to known nuclear facilities such as Huteen, Taji, and Badr. • Leybold Heraeus Vacuum Systems. Now defunct, this U.S. subsidiary of the West German Leybold exported high-temperature casting fur- naces to Taji in 1987, and an electron beam welding system in 1988. Both were said by Iraqis interviewed by the IAEA to have been used in centrifuge manu- facturing. • Teledyne Wah Chang: An ongoing rela- tionship with Industrias Cardoen of Chile also in- volved triangular shipments to Iraq of zirconium. SeveraJ hundred thousand tons of zirconium sponge pellets was shipped to Cardoen for use as an incen- ■ agent for Cardoen cluster bombs. • TI Coating Inc: This company i special coating technology for tungsten-carbide machine tool bits, as part of a large contract involv- ing dozens of U.S. and European machine-tool manufacturers, including XYZ Options, Matrix Churchill Ltd, and Krupp Widia of Germany. • Western Atlas International: supply of specialized capacitors in 1987, for oil well logging services. • West Homestead Engineering: In August 1989, the Department of Commerce approved this company's sale of a numerical controller to the Taji weapons and centrifuge manufacturing complex, to be used "to forge steel casting to make steel contain- ers for use in the petrochemicals industry." • York International Corp: Chillers, refrig- eration equipment, cooling tower, and air handling units, possibly diverted to uranium enrichment. 495 UK-licensed Machine Tool Exports to Iraq, 1987-1989 Source: Middle East Defense News, Department of Trade & Industry Company Item Quantity End-User Year BSA 3000 lathes long bed 12 Nassr 1987 BSA 3000 lathes short bed 38 Nassr 1987 Fletcher Stewart 900 ton "P radial press 3 Hutteen 1987 Matrix Churchill XChurchill HC 4/15 (ELB) ( 0.5 meter 3 Hutteen 1987 Matrix Churchill XSeries Four CNC lathe (1.0 meter 8 Hutteen 1987 Matrix Churchill Churchill Series 3 (1x1 meter) 26 Nassr 1987 Matrix Churchill Churchill Series 4 (1 large bore) 3 Nassr 1987 Matrix Churchill Churchill HC6/30 (1.5 meter) 1 Nassr 1987 Matrix Churchill XChurchill centering machines 3 Hutteen 1987 Matrix Churchill XHC7/50 Churchill Series lour 15 Hutteen 1987 Matrix Churchill Churchill Series 4 4 Hutteen 1987 Matrix Churchill Churchill Series 3 3 Hutteen 1987 Matrix Churchill HC745 CNC lathe (1.5 meter) 1 Nassr 1987 Matrix Churchill HC745 CNC lathe (3.0 meter) 1 Nassr 1987 Matrix Churchill Churchill Series 3 (1x0.5meter) 13 Nassr 1987 Matrix Churchill? CNC lathe 8 Hutteen 1987 Matrix Churchill Series 4 CNC lathe 6 Hutteen 1987 Matrix Churchill Series 4 CNC lathe (4 axis) 11 Hutteen 1987 Matrix Churchill? CNC lathes 11 Hutteen 1987 Matrix Churchill? Large bore CNC lathe 29 Hutteen 1987 Matrix Churchill 3 Series CNC laryhe (0.5 meter) 3 Hutteen 1987 Matrix Churchill 2 Series CNC lathes NA Hutteen 1987 N/A CNC lathe 29 Hutteen 1987 Bridge Part Interact MK 1 Series 2 vertical milling machine 1 Iraq Railway 1988 Matrix Churchill Matrix Takisawa V2E Machining Center 1 Electrical Industries 1988 Matrix Churchill Matrix No 3 (thread grinding) 1 Electrical Establishment 1989 Matrix Churchill Matrix No 9 (thread grinding) 1 Electrical Establishment 1989 Matrix Churchill V2K Vertical machining Center 1 Dijila Plastics 1989 Matrix Churchill Series 4 (2 axis) CNC lathes 13 Nassr 1989 Matrix Churchill? 4 axis CNC lathes 10 Nassr 1989 N/A Disc and Bar cutting machines 2 MIMI 1989 N/A Vertical Milling Machine Model 720 1 N/A 1989 Total machines licensed: 262 496 WALL STREET JOURNAL EUROPE FRIDAY - SATURDAY, SEPTEMBER 18 ■ 19, 1992 How Washington Armed Saddam By Kenneth R. Timmerman PARIS-When the Atlanta banker who orchestrated $5 billion of loans to Iraq, walked into court on Monday, his mind was made up. Christopher Drogoul, the former manager of the Atlanta branch of the Ranra Nazionale del Lavoro. had decided to talk instead of copping a plea. The way the Justice Department had tried to intimidate him into silence was, in the words of his lawyer, "the mother of all cover-ups." New documents obtained by investiga- tors working for the Chairman of the House Banking Committee, Representative Henry Gonzales (Democrat, Texas), lend credence to Mr. Drogoul's view that he was the instrument of a secret policy in the late 1980s to aid Iraq. The documents show that the U.S. administration ordered direct U.S. aid to Iraqi military factories, and approved the sale of U.S. technology that went into Iraq's nuclear weapons program. Rep. Gonzales and his team of investiga- tors at the House Banking Committee have established that $2 billion of the $5.5 billion in soft loans provided by the BNL's Atlanta branch to Iraq in the late 1980s, under Mr. Drogoul's supervision, dJrpcjiy Eufl- neJled-irito Iraqi military programs. Re- cently unclassified documents obtained by Rep. Gonzales show that this was no accident. In fact, as inconceivable as this might appear, supporting the Iraqi military build-up after the Iran-Iraq war was U.S. government policy- A November 21, 1989 State Department memo discussing export control cases under review shows that senior officials felt the policy was confusing even then. "The problem is not that we lack a policy on Iraq; we have a policy. However, the policy has proven very hard to implement when considering proposed exports of dual-use commodities to ostensibly non-nuclear end users, particularly state enterprises." At issue were a series of sensitive exports to Iraqi end-users identified by the intelligence community as directly involved in the development and production of unconventional weapons. The memo fol- lowed a top secret intelligence briefing given by the CIA on Nov. 20, and a Nov. 12 meeting of the Subgroup on Nuclear Export Coordination (SNEC), an interagency group including the Departments of Energy, De- fense (DoDi, Commerce, State, and the National Security Council (NSCI, as well as representatives of the intelligence commu- nity. The memo states that "although U.S. policy precludes approval ot Munitions Control licenses BT Iraq, exports ot duaUse commodities for conventional miliary nsa m a£~_b_e_ a ppTovecP The CIA had reported that Iraq "is interested in acquiring a nuclear explosive capability," and presented evidence to the State Department that Iraqi state enter- prises were "ordering substantial quantities of dual use equipment" which was being diverted to the manufacturing of weapons of mass destruction. Nevertheless, the memo states, "U.S. policy, as confirmed in NSD 26, has been to improve relations with Iraq, including trade, which means that exports of non-sensitive commodities to clean' end-users in Iraq should be encouraged." In fact, there were virtually no "clean" end-users in Iraq, and the administration knew it. By June 1989-several months before the secret Iraq policy was codified in National Security Directive 26-the CIA had already reported to the government on the activities of Iraqi front companies operating in the United States and in Western Europe to purchase dual-use equip- ment for the Iraqi nuclear weapons com- plex. The intelligence community had devel- oped a long list of "bad end-users" known to be working on nuclear, ballistic missile, and biological weapons projects. Despite this knowledge, the administration went ahead with its policy to expand trade with Iraq, and approved the sale of advanced com- puters and other equipment to these same bad end-users. Not surprisingly, some of this equipment has since been discovered by U.N. inspectors in Iraqi nuclear weapons plants. In application of the president's secret policy toward Iraq, the State Department recommended the approval of the following licenses in November 1989: A000021153716