Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 22, 1992 TAG: 9203220077
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Los Angeles Times
DATELINE: WASHINGTON LENGTH: Medium
Beginning in 1989, administration officials learned that Saddam Hussein's regime had demanded millions of dollars in bribes from American exporters of commodities, the documents indicate. The commodities had been sent to Iraq as part of a food aid program underwritten by the U.S. government.
Senior administration officials, including Secretary of State James Baker, were warned of such abuses in the fall of 1989, but still pushed through $1 billion in new government loan guarantees to let Iraq buy more agricultural products, classified documents show.
Two administration officials said the warnings culminated in a highly classified intelligence report in July 1990 - a month before Iraqi troops overran Kuwait. According to officials who read it, the report said a Jordanian entrepreneur heavily involved in the U.S. aid program also was assisting Iraq's covert arms-procurement network.
At the same time, Iraq threatened to stop making payments on $2 billion it owed on previous loans guaranteed by the United States unless new aid was approved, according to classified records.
Despite the intelligence findings and the Iraqi threat, documents show that the State Department and the White House National Security Council continued to seek the release of a final $500 million in aid for Baghdad.
The disclosures are the first suggestion that American food aid may have been bartered by Iraq to buy weapons, and they provide new details on the extent of the warnings about widespread irregularities in the aid program. They also illustrate the determination within the administration to continue aid to Iraq in the face of evidence of abuses.
That determination continued even after a Department of Agriculture investigation completed in April 1990 was unable to conclude that millions of dollars of commodities shipped through the Jordanian port of Aqaba were ever delivered to Iraq. The department's Commodity Credit Corp. had financed the food purchases for Baghdad.
While the intelligence report did not directly link arms deals to food aid, an administration official said the Jordanian businessman's dual role as an arms trafficker and food middleman should have been "sufficient evidence" that aid was being traded for weapons.
The administration maintains publicly and privately that it has no evidence U.S. food aid was diverted for arms by Iraq.
In an interview, however, a Jordanian businessman who was involved in the Commodity Credit Corp. program said he had firsthand knowledge that aid had been diverted by Iraq as early as 1988.
The businessman, who asked that his name be withheld, said Iraqi officials had bartered U.S. food aid to the Soviet Union in exchange for a shipment of Soviet tanks in 1988. The food was shipped to the Jordanian port of Aqaba and then shipped to the Soviet Union instead of being taken overland to Iraq, he said.
Until Iraq invaded Kuwait on Aug. 2, 1990, the Commodity Credit Corp. program remained an integral part of President Bush's policy of assisting Saddam in hopes of softening the Iraqi dictator's threats to his neighbors.
The first allegations that Iraq was demanding bribes from American exporters who wanted to do business with Baghdad under the Commodity Credit Corp. program surfaced in November 1988, according to a report detailing a Department of Agriculture investigation of the charges in 1990.
"USDA had been informed that at least one Iraqi state trading enterprise had been routinely requesting that exporters provide either cash rebates or goods, either in the form of additional commodities or non-agricultural items, as so-called `after-sales' service in the form of trucks and truck parts," the report said.
Despite an Iraqi pledge to end such practices in 1988, Iraq continued to demand kickbacks. U.S. exporters complained repeatedly to the Department of Agriculture that they were forced to give Iraq spare parts with military uses, such as armored trucks, and other bribes in order to sell goods to the gulf state under the Commodity Credit Corp. program.
For instance, in a Sept. 7, 1989, letter to the department, a lumber exporter complained of increasing pressure by Iraq to provide free trucks, trailers and tires as the price of continued business.
"The recent telex requests [from Baghdad] have exhibited extraordinarily threatening language, where the future business relations are being judged by our response to requests for free goods," the letter said.
Later court records show that Iraq also was demanding cash from U.S. exporters. Six U.S. tobacco companies pleaded guilty in 1990 to paying more than $1.5 million in kickbacks to Iraq. The funds were transferred to foreign bank accounts, some of which were in countries that had supplied Iraq with arms, such as Bulgaria, France, Germany and Italy.
by CNB