Bush hoped to sway Baghdad toward more moderate line

IRAQGATE BEGAN WITH PUREST OF MOTIVES

October 30, 1992|By Mark Matthews | Mark Matthews,Washington Bureau

WASHINGTON -- Bit by bit, the Bush administration's prewar effort to bring Iraq "into the family of nations" is assuming the familiar dimensions of a full-blown Washington scandal:

A policy blunder, developed largely in secret, ran afoul of publicly stated administration priorities. In carrying it out, high officials brushed aside signs of criminal fraud. And in investigating its own conduct, the government has become mired in what critics charge is a cover-up.

The affair, in some respects reminiscent of Iran-contra and previous administrations' handling of Panamanian dictator Manuel Antonio Noriega, has failed to connect with American voters despite strenuous Democratic efforts.

President Bush has denounced allegations of official wrongdoing a "phony charade" and "pure partisanship." But they almost certainly would cast a shadow over a second Bush term, as criminal and congressional probes move forward.

The controversy already has undercut the president's claims to foreign-policy competence.

The policy

From available evidence, the story began with the Reagan administration's tilt toward Iraq during its 1980-1988 war with Iran. While publicly neutral, the administration supplied sophisticated intelligence and avoided discouraging other countries from selling weapons to Baghdad.

For a while, the goal of preventing an Iranian victory clashed with the Reagan administration's arms-for-hostages trade with figures in the Iranian government.

But by 1989, when the Bush administration was sworn in, the move to improve ties with Iraq was under way again despite the end of the Iran-Iraq war.

"Our purpose, broadly understood and supported at the time, was to convince Iraq that moderate international and domestic behavior would be rewarded," President Bush's national security adviser, Brent Scowcroft, has written.

A secret national security directive signed by President Bush in October of that year solidified the policy and pushed its implementation to top levels of government, including Secretary of State James A. Baker III and Mr. Scowcroft.

Unlike the Iran initiative, the Iraq policy lacked a single driving force comparable to Ronald Reagan's determination to free American hostages.

Rather, as with many Middle East policy choices, it was seen as the best of a bad deal: Iraq had vast oil wealth and the world's fourth-largest army, was a potentially lucrative trading partner, was not aligned with Muslim extremists and was seen as potentially helpful in the Arab-Israeli peace process.

The policy, backed by America's Arab world friends, appears similar to early U.S. dealings with the dictator of another strategically placed nation, Panama.

Documents show U.S. officials had no illusions about Saddam Hussein's brutality. Indeed, the president's directive states that

renewed chemical weapons use would bring political and economic sanctions.

It also says that any breach of anti-nuclear safeguards would bring a similar response, and adds: "Human rights considerations should continue to be an important element in our policy toward Iraq."

In practice, however, the move toward friendship overrode other, publicly stated policy priorities. Despite strong evidence, the administration resisted congressional efforts to brand Iraq as a consistent human-rights violator and to list it as a state sponsor of terrorism.

A drive to export U.S. technology led to friction between Pentagon officials determined to keep items with potential military uses out of Iraqi hands and Commerce and State Department officials anxious to improve trade and the relationship as a whole.

Some of the items sold are believed to have ended up in Iraq's extensive program to develop weapons of mass destruction.

Strong misgivings about Iraq's credit-worthiness failed to prevent the administration from pushing ahead with a two-stage, billion-dollar program of agricultural credits. In fact, Iraq implicitly threatened to stall on repayment of previous loans if the U.S. didn't come through with new credits.

Italian bank connected

More significantly, the loan program moved forward despite charges that Iraq had misused previous U.S.-backed loans, provided through the Atlanta branch of Banca Nazionale del Lavoro (BNL), an Italian bank, and that senior Iraqi officials may have been criminally implicated.

A mid-level State Department official warned in a memo about a potential "four-alarm blaze" as the scandal progressed. He wrote that in addition to bank fraud, investigators were exploring the possibility that commodities were traded for military hardware and that payments may have been diverted to "sensitive nuclear technologies."

A separate memo to Mr. Baker noted that the department's legal adviser "believes the investigation is largely focused on widespread, systematic banking fraud by persons working for BNL or under consulting relationships with BNL. It may also involve several high Iraqi officials, though this is unclear."

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