Volume 1 - Iraq Watch

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Regime Financeand ProcurementFigure 1. Organization of the presidential Diwan,March 1991.Extent of Knowledge of the Former President ofthe DiwanThe Chief of the Diwan, Ahmad Husayn Khudayiral-Samarra’i, maintains that he authorized paymentsto bodies such as the MIC only on the orders of thePresident through the Presidential Secretary withoutknowing the details of the projects being financed.However, the head of the MIC and Minister ofFinance identified him as having been involved in theprocessing of requests for extra-budgetary paymentsto the military and security services. Moreover, theMinister of Finance stated that documents containingdetails of the request, such as project information orjustification, were kept at the Chief of the Diwan’soffice, or with the Presidential Secretary, dependingon where the request had been submitted. In addition,captured documents suggest the Chief of the Diwanhad at least some knowledge of military and securitymatters.• In April 1996, al-Samarra’i provided a cover notefor paperwork covering Protocols with a Georgianentity for a military aircraft industrialization complex.• In April 2002, al-Samarra’i provided a cover notefor paperwork concerning problems with a contractbetween the MIC and the Moldavian company Balcombefor an assault rifle (7.62 x 39mm) ordinanceproduction line.13
Budgeting Iraqi ProcurementOff-budget and secret budget planning bypassedlarge government forum and was processed directlybetween the Ministry of Finance (MoF) and thePresidency, between the requesting organization andthe Presidency, or between the requesting organizationand Saddam. The former Regime relied heavilyon liquidating assets (forcing the Central Bank ofIraq to print more money) to meet its yearly budgetshortfalls.General Government BudgetThe general government budget, made up of currentand capital spending, however, does not representthe total Iraqi budget because sensitive issues, suchas defense, intelligence, and security were excluded.As a result, government expenditures and debt probablywere higher than what was listed in the budget.• In 2001, according to statistics from the CBI, theformer Regime spent over $1.1 billion (constant2001 dollars). This represents an increase of 49.5percent over 2000.• Complete data about Iraqi government budgetspending after 2001 are unavailable. A commonrefrain among government officials and detainees isthat many of these records perished during lootingand fires after the US invaded Baghdad.Because of the economic constraints following thewar with Iran (see Economics Section), it became difficultfor the Regime to draft and adhere to an accuratebudget. Figures estimated in January divergedconsiderably by the end of the fiscal year. Also,because of Saddam’s patronage policies, the Presidentialaccounts were reportedly routinely overdrawn by15 percent, and about 50 percent of the infrastructureexpenditure was spent by Saddam.Sources of Government RevenueOn-budget revenue—revenue included in the generalgovernment budget—came from sources such as:• Income and property taxes.• Customs duties and tariffs.• A percentage of the profits from government-ownedinstitutions and businesses such as banks and insurancecompanies.• The revenues of leased state properties.• The municipalities.Not all-Iraqi government revenue was accountedfor in the general government budget. Some of theseoff-budget funds included income earned through:• The Syrian, Turkish, and Jordanian trade Protocols.• Kickbacks on UN OFF Program import contracts.Supplemental Budgetary ProcessThe procurement programs supporting Iraq’s WMDprograms and prohibited conventional military equipmentpurchases were financed via a supplementalbudget process that occurred outside of the publicizednational and defense budgets (for details on thedevelopment, approval, and execution of the commonnational budgets, see Annex C: Iraq’s BudgetaryProcess). The approval process and disbursement offunds from the supplemental budget illustrate whowas distributing the money into the illicit procurementprograms and reflect, in quantitative terms, theintent of the Regime.Supplemental Budget Submission ProcedureThere were two methods for ministries and organizationsto obtain fundraising for specific projects orprocurement activities that were over and above thescope of their annual budgets:• One method was through the (EAC).• The other was to go directly to the PresidentialDiwan or the Presidential Secretariat.14
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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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Security Services (continued)The Sp
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VX Warhead Samples & The Iraqi Air
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success—reduced or suspended oil
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Preserving and Restoring WMD Infras
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• The Regime also sought diplomat
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Renewing UN InspectionsIraq allowed
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never part of the military plan cra
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• 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
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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 132 and 133: ContentsA Word on the Scope of This
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 150 and 151: Iraq’s National Budget 1991-2002A
Page 152 and 153: Regime Financeand ProcurementFigure
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
Page 172 and 173: were made to at least two Iraqi fro
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Page 188 and 189: OverviewExecuting Illicit Procureme
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Although other Iraqi ministries wer
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From 2000 onwards, the RG’s annua
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Regime Financeand ProcurementFigure
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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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