KEY officials of the United States Agriculture, Commerce, and
State Departments ignored years of warnings from the US
Export-Import Bank (Exim) that Iraq was using credits to build its
military machine, say Treasury Department sources.
From 1987 to 1989, the officials were present at Exim's scheduled
board meetings where it documented concern over Iraq's priority
defense financing and policy of only paying back creditors who issue
fresh money first.
According to Exim documents obtained by the Monitor, Iraq's
primary goal since the early 1980s was to acquire high-tech military
superiority through international credits. Exim repeatedly warned
of Iraq's "ruthless strategy of securing strategic financial
partners, (and) employing financial secrecy, private bilateral
negotiations, and blatant unequal treatment of creditors."
June 1989 Exim documents state that "Iraqi leaders believe that
advanced military technologies - bombers, missiles, chemical and
bacteriological weapons, and nuclear capability - are the key to
Anxious to buttress US-Iraqi ties, State Department policy makers
cast Exim's warnings aside in favor of US exports and financing to
Baghdad. A general past "policy of engagement," now is broadly
acknowledged by Bush administration officials.
In its October 1989 risk assessment of Iraq, Exim issued a stern
warning about the Iraqi military threat: "Iraq is expanding
purchases of foreign military equipment and technical assistance in
order to beef up its forces for possible future combat." Iraq's
defense spending - $5 billion annually - continued unabated after
the cease-fire with Iran. Exim also pointed to mounting financial
pressures confronting Saddam Hussein's regime: rising demands of
Iraq's population, which expected more consumer goods and better
services after fighting an eight-year war with Iran.
US officials took their cue from Iraqi government ministers, who
insisted that expanded trade and financial links with Washington
were the only means of improving bilateral political relations.
Deputy Foreign Minister and former Ambassador to Washington Nizar
Hamdoon - founder of the US-Iraq Business Forum, a group composed of
leading American corporations which aggressively pursued Iraqi
contracts - delivered Iraq's offer to the US: "In order to stabilize
political ties you should start stabilizing the trade ties....
Involvement of US companies should have a substantial impact on
Iraqi planners boasted a $35 billion postwar reconstruction
opportunity for American and other Western suppliers in 1988.
According to Exim documents, Iraqi planners grossly miscalculated
the oil revenues that would be available to meet their needs.
In fact, Iraq's revenues were slashed by a series of events:
Syria's closure of two important Iraqi pipelines, the collapse in
oil prices during the mid-1980s, and Iraq's counterproductive
efforts to increase its OPEC (Organization of Petroleum Exporting
Countries) quota, which actually depressed world oil prices instead
of increasing Baghdad's export receipts. …