CONDOR II "critical support to Iraqi weapons programs including missiles."

U.S. HOUSE OF REPRESENTATIVES
COMMITTEE ON BANKING. FINANCE AND URBAN AFFAIRS
FOR IMMEDIATE RELEASE
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WASHINGTON, D.C., February 3, 1992 Chairman Henry B. Gonzalez said
today that the House Banking, Finance and Urban Affairs Committee has "clear
evidence" that dozens of U.S. firms provided "critical support to Iraqi
weapons programs including missiles."
Mr. Gonzalez noted that President Bush issued a report to Congress in
September, 1991, which concluded that U.S. firms did not contribute directly
to Iraq's weapons capabilities.
In a letter to the President, the Banking Committee Chairman labeled the
report "clearly inaccurate." He called on the President to submit a new
report to Congress which would "reflect the true role played by U.S.
companies and Federal agencies in permitting the transfer of technology and
know-how to Saddam Hussein's war machine."
Mr. Gonzalez sent the President documents collected by the Committee
that showed that U.S. firms were "directly involved in the development of a
ballistic missile known as Condor II." He also cited evidence that U.S.
firms were involved in two Iraqi missile programs — under the code names
Project 144 and Project 1728 — used in the production of a modified Scud
missile.
The evidence collected by the Committee is part of an ongoing
investigation of the activities of the Italian-owned Banca Nazionale del
Lavoro that loaned two billion dollars to the Iraqi procurement network.
In his letter to the President, Mr. Gonzalez said the investigation had
oeen hampered by agencies of the Executive Branch. He said Secretary of
State James Baker has refused to transmit to the Committee information on
Craqi weapons programs despite the fact that the data has been compiled by
:he United Nations and the International Atomic Agency. He said the Treasury
department failed to fully identify the procurement network as required by
Law. The letter was also critical of the Commerce Department for granting
jxport licenses to firms supplying the Iraqi Technical Corps for Special
'rojects (TECO) which Mr. Gonzalez said was actively involved in missile
>rojects. He said the Commerce Department had full knowledge of the military
ictivities of the end user of the technology.How Iraq Built Its War Machine Through U. S. Sources
Statement of The Honorable Henry B. Gonzalez
Chairman, Committee on Banking, Finance and Urban Affairs
Mr. Speaker:
For over a year, the Committee on Banking, Finance and Urbar
Affairs has been investigating the activities of Banca Nazionale
del Lavoro, or BNL, in the United States. In the course of that
investigation, we have learned that BNL provided over $4 billion in
apparently illicit loans to the Government of Iraq. While about
half these loans went to purchase food commodities, it is less veil
known that about half was used to finance Iraq's efforts to build
a self-sufficient military industry— an industry that could build
missiles, one that came close to developing nuclear arms, one that
did produce chemical weapons, one that could build a super gun
capable of unprecedented range— as well as produce conventional
weapons.
X have taken this time to report, as X have promised I would,
on the Committee's activity and findings.
Last fall, ia a report to Congress, the President reported
that no U. 8. company contributed directly to Iraq's conventional
or noneonventional weapons capability. In faot, however, Iraq
operated, as extensive, clandestine procurement network that
obtained critical financing through BNL, and that operated in this
country to procure U.S. technology and know-how for Iraqi veapons
programs. X have written the President to advise him cf this
finding, and to ask that he cooperate fully in our efforts to
6 develop all the facts. Unfortunately, the Committee has met with
many obstacles in its efforts to determine how Iraq used BNL and
other sources in this country to develop important military
technology. Despite the unfortunate obstacles, we have learned a
great deal. I hope that President Bush will now order complete
cooperation as we seek to determine the full facts. I hope also
that the President will issue a report of his own, correcting the
report sent to Congress last year.
Pending further study, I do want to describe what the
committee knows about the Iraqi procurement network, how it
operated, and how U. S. firms directly participated, wittingly or
unwittingly in the Iraqi effort to develop weapons on mass
destruction.
I hope to produce a report on all the Committee's findings,
but in the meanwhile, X will provide through this forum further
information as warranted.
Already, the Committee's work on BNL has resulted in major
legislation to require more effective regulation and oversight of
foreign banks operating here. However, it is likely that more
needs to be done. X am in fact developing a new bill that would
encourage multilateral lending institutions— the World Bank
and others— to pay close attention to the need to prevent the
further proliferation of sophisticated weaponry in countries like
Iraq, that depend on those institutions for basic economic help.
Therefore, this investigative effort has important legislative
goals.
? The government of Iraq, operating with BNL financing and using
a secret procurement network, was able to obtain assistance even
through the Export-Import Bank. This network obtained $2,155
billion in loans from BNL alone, for militarily useful products—
specialized machinery, various kinds of steel, industrial
equipment, chemicals, computers, and others. In addition, BNL
financed $2 billion worth of agricultural goods through the
Commodity Credit Corporation (CCC) program.
It was an early objective of Saddam Hussein to become an
independent producer of arms-- including nuclear weapons and the
missiles to deliver them. The world already knows that he used
chemical weapons freely against his own people. It is likely that
he would have used them in the Gulf War had he not feared
retaliation. In any case, he came close to many of his objectives-
- close to producing nuclear bombs, close to building a super gun,
and close to producing sophisticated missiles. Indeed, he did
build chemical weapons, he did build enhanced SCUD missiles, and he
did use them.
The war against Iran interrupted the indigenous Iraqi weapons
program, since the money was needed to buy finished military goods
to fight in that long and extremely bloody war. But once the war
was over/ Saddam immediately started his full scale weapons
development and production program.
The major U. 8. source of credit for food and weaponry was
BNL— a bank owned by the Italian government, which had offices in
this country, most notably in Atlanta, Georgia. A number of
persons who operated that office, and others who dealt with it,
8 have been indicted for their crimes. Some have been convicted.
But to date, the American people know little about how Iraq
operated in this country to attain its illicit goals.
Iraq could not achieve its aims without Western help. Saddam
needed more than U. 8. food. He needed technology, equipment and
supplies that were available only in the West. Despite the official
obstacles, he found little difficulty in getting what he wanted.
Structure of the Secret Network
The military procurement system of Iraq, like the rest of the
government, was tightly controlled. At the top was the Council of
Revolutionary Leadership, headed by Saddam Hussein and close family
members. This was the center of power.
Below the Council, in what we might think of as a Cabinet
department, was the Military Industrialization Board (MIB), which
planned and oversaw the effort. This Board was in all likelihood
headed by Hussain Kamil, who is Saddam's son-in-law.
Day-to-day operations of the military establishment were
carried out through the Ministry of Industry and Military
Industrialization, which X will refer to as MIMI.
MIMI in turn used a series of state-owned organizations to buy
and build the military power Saddam desired for Iraq. There were
at least a doses organizations operated by MIMI that bought Western
technology and goods for the weapons program. It was MIMI and its
affiliates that used the $2.1 billion of credit supplied by Banca
Lavoro. As a matter of fact, employees of the bank met with
Hussein Kamil on several occasions during visits to Iraq. Clearly,
this is the man who called the shots on how BNL funds were used.
9 Hussain Kamil, let it be understood, had other functions.
Besides heading the MIB and MIMI he was also head of the Secret
Service Organization (SSO). Through this organization, he set up
the clandestine technology procurement network that was essential
to Iraq's success. A key member of the Secret Service Organization
was Safa Al-Habobi, who had direct responsibility for making the
procurement scheme work. Safa Al-Habobi was the mastermind behind
MIMI's procurement efforts.
Once a year, the MIB would set goals. The MIMI would
ascertain what was needed to meet the targets, and then set out to
obtain the necessary goods.
Here is an example of how the system operated:
A military plant in Iraq known as the Martyr's Factory needed
a computer numerically controlled lathe to meet its production
goal, which required production of complex machined metal parts.
The MIB got the order from the factory and forwarded it to the
Iraqi Embassy in Germany. The Iraqi embassy in turn forwarded the
order to front companies controlled by the SSO in the United
States, United Kingdom, Germany and Italy. The front companies
obtained bids, which were communicated back to the arms plant. The
plant in turs decided which, if any, bid to accept, went back up
the ladder for approval and got the goods, the delivery of which
often depended os BNL financing.
There are thousands of examples of this type of transaction.
U. 8. Assistance to Iraq's Missile Program
The MXMX used an organization knows as the Technical Corps for
10 Special Projects, or TECO, for its sophisticated missile and
nuclear development efforts. Through TECO, Iraq was able to obtain
important U. s. help in these programs, including the Condor II,
which in Iraqi code was referred to as Project 395.
The Condor II apparently started in 1984 as part of an
effort by Iraq, Egypt and Argentina to jointly develop a missile
that had a range of between 500 and 1,000 kilometers.
Argentina was to provide the development of the production
site, Iraq was to put up the financing, and Egypt was to procure
the technology. A consortium of mostly European firms handled
various portions of the project. However, by 1987 or early 1988,
Iraq became unhappy with the slow pace of the project, and
suspicious that its partners might be siphoning off some of the
billions invested. In addition, in summer 1988, Abdel Kader Helmy
was arrested in California for illegally transferring technology
for the Condor IX to Egypt. His role is more fully described in
excerpts from trial-related documents that X will include in the
record.
By the 1988, Iraq was taking a much greater role in the Condor
II project. Through TECO, which remember was a MIMI affiliate,
agreements vere sigsed with many of the original contractors who
had worked is the consortium. At that time, TECO assigned the
designation Project 395 to the Condor IX program.
Project 395 had at least three sites in Iraq, each of which
has a different function and its own project number. In addition,
an missile R&D site was erected in northern Iraq. Despite all
efforts though, the Condor apparently was not mass produced in time
11 for the invasion of Kuwait in August, 1990. However, it is clear
that much was done, and that BNL loans were vital to the program,
and that numerous Western sources, including companies from Europe
and the United States took part.
As many Members know, a Cleveland company known as Matrix
Churchill was an Iraqi front company. TECO was the controller of
that company.
To illustrate the role played by Matrix-Churchill, I offer for
the record a telex from TECO to Matrix Churchill detailing a visit
from a Baghdad delegation. The purpose of the visit was to have
TECO employees meet with over a dozen U. 8. companies that were
expected to supplv goods to the condor IX program, known also as
Project 395, but referred to for purposes of obtaining the goods as
the Badush Dam or Badush project. The date of this telex is August
6, 1988.
There was in fact a dam being constructed in the general area,
but there was also one or more missile-related facilities in the
area of the dam. It is certain that goods supposedly bought for
the dam were actually used in the missile program. The Committee
has many shipping documents that clearly show the buyer was TECO
and Project 395 was the destination.
Sample of U.S. Suppliers Involved is Project 395
Among other companies that shipped to the project were these:
Mack Truck, Pennsylvania — tractors, trucks & trailers
12 Lincoln Electric, Ohio — welding machines and supplies
Rotec Industries, Illinois — cement handling equipment
Hewlett Packard, California — computer systems
EMCO Engineering, Massachusetts — water treatment facility
IONICS, Massachusetts — water demineralization plants and
water pumping systems
Dresser Construction, Illinois, — construction equipment
Mundratech, Ltd., Illinois, -- dump trucks
Caterpillar Tractor Co., Illinois -- tractors/earth movers
Grove Manufacturing, Pennsylvania -- truck mounted cranes
Ingersoll Rand Co., New Jersey -- cement compacting machines
Liebherr-Amejica, Virginia — Liebherr cement mixers on Mack
truck chassis
Mannesmann Demag, Illinois — heavy construction equipment
The foregoing is not a complete compilation, since there are
numerous documents yet to be reviewed. However, it is an
indication of how a foreign government can use secret methods to
obtain important help for development of military projects, taking
advantage of our opes market. Project 395 is not the only one
involved. There are two other Iraq missile programs known as
Project 144 and Project 1728 that also obtained U.S. help. These
were SCUD-related programs. It was the 8CUD that was launched
against U.S. troops and numerous other targets during the Gulf War.
The Iraqi network was also responsible for obtaining
technology related to more conventional weapons such as artillery
13 shells and artillery pieces as well as nuclear weapons-related
procurement.
Administration Response Inadequate
The government has in its hands thousands of Matrix Churchill
documents, but has yet to thoroughly review them. The hard fact
is, there are not enough personnel assigned to do the job. But
these are the documents that show clearly what the Iraqi network
was and how it operated, as well the importance of the BNL
financial support. Today, there is no higher priority than to
prevent the spread of sophisticated weapons to countries like Iraq-
- and yet, there £s not an adequate effort even to determine what
went wrong in the case of Iraq, so that the lessons can be applied.
There are hundreds of cases in which the exports to Iraq
required U.S. export licenses. Export licensing documents show
that the end user was often times an establishment engaged in
military activity. Nevertheless, it is clear that Iraq had little
trouble in getting the licenses from the Department of Commerce.
Moreover, in the case of TECO, this occurred despite the fact that
the Departments of Commerce and State had clear knowledge of what
TECO vas and what its purposes were. It is painfully clear that
the export licensing system did little or nothing to prevent Iraq
from getting the goods it needed for its weapons program— even
though the State and Commerce Departments were adequately informed
of the real nature of the buyer.
14 Misleading Report
The Iraq Sanctions Act required the President to submit a
report to the Congress on the sale, export and third party transfer
of nuclear, biological, chemical and ballistic missile technology
to or with Iraq. The report submitted to the Congress is classed
as "secret". However, there is little information in the report
that is not already published and in the public realm. But the
significant fact is that the report was at the very least
misleading in its conclusion that U. S. companies were not directly
involved supplying Iraqi conventional and nonconventional weapons
capability. Thiss^is not only my opinion; the United Nations has»
reached the same conclusion.
Pursuant to Resolution 687, the United Nations mandates the
"destruction, removal or rendering harmless" Iraqi weapons of mass
destruction. This would include any missiles with a range of more
than 150 kilometers, missile components and support facilities -
for example the enhanced SCUD and the Condor IX. This task is
assigned to the a United Nations Special Commission and the
International Atomic Energy Agency, or IAEA, which as the world
knows has encountered harassment and obstruction from Iraq.
Despite this, the UN has obtained information that confirms the
Committee's own findings about the procurement system and how U. s.
firms were used.
The Committee has asked for the relevant U.N. documents, but
these are available only through the request of the State
Department, strangely enough, the Administration has bees slow to
is ask for the information. Last November 13th, I asked Secretary
Baker to obtain the documents and provide them to the Committee.
Thus far the Secretary has not responded— has not made the request
and has not explained why there has been no action on the part of
he Administration. I include the November 13 letter in the Record.
It is unacceptable that the Administration will not obtain
information that it needs to support its own policy. Neither has
it assigned the personnel required to thoroughly evaluate its own
documents concerning Iraq's weapons program and how it worked.
we know that Saddam Hussein came close to meeting his goals.
We know that other nations are no doubt engaged in the same kind of
activity, and that they must utilize sources of technology that are
available only in this country. And yet, there is no apparent
aggressive effort underway to learn the lessons that the Iraq
episode offers, and to take the steps necessary to see that it does
not happen again.
The documents X am submitting are a fair start toward
necessary understanding. There is far more to be told. But today,
X simply want my colleagues to know how Iraq worked, and to
understand that the Administration has only a poor understanding of
the facts, and that the Administration is doing little either to
learn how to correct its mistakes or to ask the UN to provide the
knowledge, that it has developed.
In later reports, X will discuss other aspects of the Iraqi
program, what our government knew, and how it responded. But for
today, these are the essential facts:
16 1. Iraq determined early in Saddam Hussein's rule to become
independent of Russian and Western sources for sophisticated
weapons;
2. Iraq developed a carefully controlled system to develop
and build chemical and nuclear weapons, and to build missiles
capable of delivering those weapons;
3. Iraq used a clandestine procurement network in its
efforts;
4. Iraq controlled companies in this country that supplied
important support to the weapons program;
5. Iraq used U.S. companies in that effort;
6. The Commerce Department, with the acquiescence of other
agencies, readily licensed the export of militarily useful goods to
Iraq, even though it clearly knew or should have known what the
real purpose was;
7. The President submitted an inaccurate report to the
Congress concerning these matters; and
8. The State Department has thus far refused to obtain
relevant information from the UN on the Iraqi weapons program, and
moreover, like other agencies, seems to put a low priority on
learning from this episod