Volume 1 - Iraq Watch

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ContentsA Word on the Scope of This Chapter.......................................................................................... 1Key Findings................................................................................................................................. 3Chapter Summary......................................................................................................................... 7The Regime Timeline ................................................................................................................... 9Ambition (1980-91)...................................................................................................................... 9Decline (1991-96) ........................................................................................................................ 9Recovery (1996-98)...................................................................................................................... 9Transition and Miscalculation (1999-2003) ............................................................................... 10Directing and Budgeting Iraq’s Illicit Procurement............................................................................... 11Overview ................................................................................................................................... 11President and Presidential Secretary’s Role in Illicit Procurement ........................................... 11Presidential Diwan’s Role in Illicit Procurement ...................................................................... 12Diwan’s Role in Supplemental Funding of Government Ministries .......................................... 12Extent of Knowledge of the Former President of the Diwan ..................................................... 13Budgeting Iraqi Procurement .....................................................................................................14General Government Budget............................................................................................. 14Sources of Government Revenue ...................................................................................... 14Supplemental Budgetary Process ..................................................................................... 14Supplemental Budget Submission Procedure .................................................................. 14Approval and Authorization of Supplemental Funding .................................................... 16Disbursal of Supplemental Funds ..................................................................................... 18Regime Financeand ProcurementFinancing Iraq’s Illicit Procurement ...................................................................................................... 19Overview .................................................................................................................................... 19Iraqi Economy’s Role in Illicit Procurement.............................................................................. 19Economic Ambition (1980-91).......................................................................................... 19Economic Decline (1991-96) ............................................................................................ 21Economic Recovery (1997-99).......................................................................................... 22Economic Transition and Miscalculation (1999-2003)..................................................... 22Iraq’s Revenue Sources ............................................................................................................. 22Bilateral Trade Protocols .................................................................................................. 24Phases of the UN OFF Program ....................................................................................... 28Disposition of UN OFF Funds .......................................................................................... 28Oil Voucher Process........................................................................................................... 29Secret Voucher Recipients................................................................................................. 30Iraqi Oil Vouchers Provided to International Leaders ....................................................... 31American and British Oil Voucher Recipients .................................................................. 33Benon Sevan’s Use of Iraqi Oil Vouchers ........................................................................ 33Iraqi Intelligence Service Nominations for Oil Vouchers ................................................. 33Oil Export Surcharges ....................................................................................................... 33i
How Surcharges Were Collected ....................................................................................... 35Kickbacks on Commercial Goods Import Contracts......................................................... 35Private-Sector Oil Sales .................................................................................................... 37Role of the SOMO............................................................................................................. 38SOMO’s Relationship to the MoO .................................................................................... 40Official Oil Accounts ........................................................................................................ 40Banking and the Transfer of Financial Assets for Procurement .............................................. 45CBI .................................................................................................................................... 45CBI’s Role in Licensing Money Exchangers .................................................................... 45CBI’s Role in Tracking Foreign Accounts for Iraq ........................................................... 46Iraqi Bank Holdings .......................................................................................................... 47Funding of the Ministries .................................................................................................. 47The Use of Foreign Banks................................................................................................. 48Use of Banks in Lebanon .................................................................................................. 49Use of Banks in Jordan...................................................................................................... 49Use of Banks in Syria........................................................................................................ 50Use of Banks in Turkey ................................................................................................... 50Use of Banks in Egypt ...................................................................................................... 50Use of Banks in Belarus .................................................................................................... 50Regime Attempts To Recover Funds Prior to OIF............................................................. 51The Role of Cash Transactions.......................................................................................... 51Iraq’s Gold Reserves ......................................................................................................... 51Executing Illicit Procurement in Iraq: Ministries, Commissions, and Front Companies ...................... 53Overview .................................................................................................................................... 53Ministry of Foreign Affairs......................................................................................................... 53MFA-IIS Connections ....................................................................................................... 54MFA’s UN Sanctions Counter-Strategy............................................................................. 55MFA and Iraq’s Bilateral Protocols................................................................................... 56Ministry of Trade ...................................................................................................................... 56MoT’s Role in Procurement .............................................................................................. 57Facilitating Illicit Procurement With Cover Contracts...................................................... 58Facilitating Illicit Trade Through Commercial Attaches................................................... 58Ministry of Defense ................................................................................................................... 61MoD Procurement Leadership ......................................................................................... 61MoD Procurement Directorates ........................................................................................ 61Budgeting and Financing Military Procurement............................................................... 62MoD Procurement Process ............................................................................................... 63Procurement for the Republican Guard and Special Republican Guard .................................... 64Military Industrialization Commission ...................................................................................... 65Procurement Leadership in the MIC ................................................................................. 65MIC: Beneficiary of Illicit Funds ...................................................................................... 66ii
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Comprehensive Reportof the Special
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versus another. They deserve at lea
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In Saddam’s view, Iraq was the na
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UNSCOM gave a sufficiently positive
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The Regime, drawing on the experien
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December 1998. The United States an
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The new Iraq could benefit from the
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and the Baath party. This is a volu
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have been important, though they ha
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Regime StrategicIntentRegime Strate
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ContentsKey Findings...............
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AnnexesA. The Quartet—Influence a
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Key FindingsSaddam Husayn so domina
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Former Iraqi Regime Officials Varie
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Who Made Iraq’s StrategicDecision
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• Tariq ‘Aziz described the req
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• Instead, voluminous files were
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secure Saddam’s support for odd o
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Saddam’s Use of Execution—Manag
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solely for civilian use when the re
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directly and continuously to him. H
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How Saddam Saw HisSubordinatesMinin
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Saddam’s PsychologyHow Saddam Saw
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to consist of was hazy. His drive t
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Iraq’s Use of CW in 1991 Against
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Excerpts from a Closed-Door Meeting
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maker asserted that either country
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Israel“There can never be stabili
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Saddam’s handling of Iraq’s res
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this to the international community
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Regime StrategicIntentNote: Red cel
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Iraq’s Relationship With RussiaTh
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Realizing Saddam’s VeiledWMD Inte
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Selected UN Security Council Resolu
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Husayn KamilBorn in 1955 within the
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ibility with UNSCOM. Iraqi demands
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and the International Atomic Energy
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The Saga of the “Chicken Farm”
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Page 88 and 89: Preserving and Restoring WMD Infras
Page 90 and 91: • The Regime also sought diplomat
Page 92 and 93: Renewing UN InspectionsIraq allowed
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Page 96 and 97: • Former Minister of Defense Sult
Page 98 and 99: Annex AThe Quartet—Influence and
Page 100 and 101: Perceptions of Threat and Challenge
Page 102 and 103: OverviewAnnex BIraq’s Intelligenc
Page 104 and 105: Regime StrategicIntentThe Scientifi
Page 106 and 107: M6, Directorate of Internal Securit
Page 108 and 109: Structure of M14• Special Operati
Page 110 and 111: M18, Directorate of ResidencyM18 is
Page 112 and 113: Structure of M40• M40/1 Monitors
Page 114 and 115: OverviewAnnex CIraq’s Security Se
Page 116 and 117: The Special SecurityOrganizationSad
Page 118 and 119: Regime StrategicIntentThe Special S
Page 120 and 121: Structure of the SSO Security Branc
Page 122 and 123: The Republican GuardThe Republican
Page 124 and 125: The Republican Guard Forces Command
Page 126 and 127: Annex DSaddam’s Personal Involvem
Page 128 and 129: [Translator Comment: they are in go
Page 130 and 131: Regime Financeand ProcurementRegime
Page 134 and 135: MIC Banking and Financing .........
Page 136 and 137: A Word on the Scope of This Chapter
Page 138 and 139: Key FindingsThroughout the 1990s an
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Page 142 and 143: Chapter SummaryThe Illicit Finance
Page 144 and 145: The Regime TimelineDecline (1991-96
Page 146 and 147: OverviewDirecting and Budgeting Ira
Page 148 and 149: Regime Financeand ProcurementFigure
Page 150 and 151: Iraq’s National Budget 1991-2002A
Page 154 and 155: OverviewFinancing Iraq’s IllicitP
Page 156 and 157: including abolishing universal empl
Page 158 and 159: Behind the scenes, the Iraqi govern
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Page 162 and 163: Figure 10. Iraq’s estimated earni
Page 168 and 169: stated that he believed the Russian
Page 170 and 171: documents. Ten other Iraqi embassie
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Page 174 and 175: Figure 21. Iraq’s estimated earni
Page 176 and 177: SOMO Account Balances Outside of Ir
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seas accounts in Lebanon and Jordan
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and the overseas banks forwarded ac
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assets in employee-named accounts.
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OverviewExecuting Illicit Procureme
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necessary to accommodate the large
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Regime Financeand ProcurementFigure
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offices, there was only a single em
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MoD’s Procurement Leadership at t
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Although other Iraqi ministries wer
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From 2000 onwards, the RG’s annua
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The information provided by these t
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its real activity, which was coordi
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• In May 2002, ARMOS was offered
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officer suggested Neptune would be
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• A foreign intelligence service
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MIC Research Support at Universitie
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Figure 51. Sattam HamidFarhan Al-Ga
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Supplying Iraq With ProhibitedCommo
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UNSCOM’s Operation Tea Cup (1995
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• The technology included guidanc
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Embassy to Jordan in Amman. The fir
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Regime Financeand ProcurementThis i
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Since 1991, Iraqi-Turkish trade rev
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cash through private sector trade o
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Chinese Assistance in Iraqi Telecom
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October 2001, Syrian technicians we
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• Yugoslav Federal also supplied
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jammers, night-vision devices, and
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• According to captured documents
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Transportation Routes From North Ko
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Materials, Equipment and Services P
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conflict, President Lukashenko inst
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Many transactions for prohibited go
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Importing ProhibitedCommoditiesDece
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International Commodity Deception:T
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Disguising the Commodity’s Destin
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months to reach Baghdad from Bulgar
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Figure 68. Primary oil smuggling ro
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Annex ATranslations of Iraq’s Bil
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An ISG Translation of the 2003 Iraq
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Benzene for automobiles:If there is
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Secondly: oil derivativesThe Iraqi
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Fifteenth:Based on the Jordanian re
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Figure 1. The Iraq-SyriaTrade Proto
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Figure 2. Iraq-Syria TradeProtocol
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Figure 3. The Iraq-TurkeyTrade Prot
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Annex BKnown Oil Voucher Recipients
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Oil Allocation RecipientList (conti
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Key Budgetary ActorsAnnex CIraq’s
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decision and issued a presidential
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• The NSC Auditing Division sent
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Annex DIraq Economic Data (1989-200
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Figure 8. Sectoralcomposition of Ir
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Figure 10. Iraq’s Paris Clubcredi
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Balance of Payments/Exchange RatesE
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Figure 16. Exchange rateID/USD.Regi
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Annex EIllicit Earnings Sources and
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account for half a year each, were
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Annex FIraqi Oil SmugglingCaptured
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ISG Translation of an Oil Sale Cont
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truck to the Turkish border. Althou
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Figure 22. Contractbetween the Nati
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Figure 22. Contractbetween the Nati
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Figure 24. Letter from A.J.Khazamip
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Figure 25 . Second letterfrom A.J.
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Figure 27. Contract forpetroleum pr
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Figure 27. Contract forpetroleum pr
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Figure 29. Contractbetween al Basha
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Figure 29. Contractbetween al Basha
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Figure 31. Telex from aFrench bank
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Figure 32. Unipack ofParis contract
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Figure 33. Telex from VitolGeneva t
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Figure 35. Letter dated 30December
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Annex GIraq’s Banking Systemdid n
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Figure 37. Department,department di
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anks for some transactions in the b
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Annex HUN Security Council Resoluti
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• UNSCR 1175 also noted that the
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Annex ISuspected WMD-Related Dual-U
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• An electrophoresis system inclu
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• The MIC initiated direct contac
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Annex JThe Procurement of Conventio
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Possible Breaches of UN Sanctions b
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Letters Dealing With a Planned Visi
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ack to Baghdad without repair. The
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specified that the Iraqi attendees
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• In April 1999, seven Russian en
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• The letter also indicates that
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• In another letter, SARA-M refer
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Possible Belarusian Breaches of UN
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Possible Syrian Breaches of UN Sanc
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• A recovered contract dated 20 F
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9k38 portable air defense systems (
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Annex KSuspected Intermediary andFr
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Atera ManufacturingDaei Internation
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Annex LProcurement AcronymsAcronymA
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IAFIraqi Armed ForcesIDIraqi DinarI
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TPICTTCUAEUAVUDMHUHFUNUNCCUNDPUNESC
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Regime Strategy and WMD Timeline Ev
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