Volume 1 - Iraq Watch

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Regime Financeand ProcurementFigure 41. MIC hard currency budget (million US $) in 2002.Figure 42. MIC-IIS special procurement cycle.71
MIC Front CompaniesThe MIC used front companies to accomplish thosebusiness transactions it could not conduct amidUN scrutiny. Front companies handled the tasksof smuggling oil, funneling UN OFF revenues,and importing weapons and dual-use materialssanctioned by the UN. The MIC formed many ofthese companies in 1991 to bypass UN sanctions andspread the transfer of funds through a wider variety ofcompanies to avoid international attention (for a fulllist see Annex K: Suspected Front Companies AssociatedWith Iraq).• The MIC operated three primary procurement frontcompanies that were critical to Iraq’s clandestineimport activities: Al-Basha’ir, Al-Mafakher, andARMOS.• These companies also had a close association withthe IIS and used connections that the IIS had inforeign countries to procure goods.• The IIS was also heavily involved in the operationof these companies by having IIS personnelin middle and upper management and in securityoperations.The most important of these companies was Al-Basha’ir, which was formed by Husayn Kamil andmanaged by Munir Mamduh Awad al-Qubaysi. Thecompanies ARMOS and Al-Mafakher were createdlater by the head of MIC, Abd al-Tawab MullahHuwaysh, to help facilitate competition among MICfront companies in importing banned goods and toimprove productivity. Apparently, Huwaysh deemedthese companies to be so important to MIC thataround 1998 he moved responsibilities for the companiesfrom one of his deputies to the CommercialDirectorate. This allowed him to exert greater controlover the operation of the companies, according to aformer Regime official.• There was a large network of international companiesand banks with which these front companiestraded. Some were merely banks or holding companies,primarily in Syria and Jordan that purchaseditems from the manufacturer and acted as cutoutsbefore sending the items to Iraq under false documents.The networks of these companies still exist throughtheir former employees, even as the old offices nowstand empty. The owners and employees of formerfront companies may be seeking to become a part ofthe post-Saddam Iraqi business community.Bidding Process With MIC Committees. Accordingto a former civil engineer, the MIC bidding processbegan when a MIC facility generated a requirement,called a tender. There were two kinds of tenders,regular or invitation.• Regular tenders were open and could be bid uponby any contractor or private company approved byMIC security, including foreign contractors.• Invitation tenders were issued when specialtyitems were required that could only be suppliedby specific companies. In addition to MIC securityapproval, it is most likely the IIS and/or MFAalso vetted these companies. The invitation tenderswere issued directly to company agents in Iraq andJordan, not to the foreign companies directly.• This approval process was a result of Iraqi officials’concerns over foreign companies with hidden connectionsto Israel. According to captured documents,the MIC blacklisted a Bulgarian companybecause a Russian-Israeli businessman owned it.Interested foreign and domestic supply companiesthen offered bids for the tenders through the MIClegal department. The MIC Procurement Committee,an informal seven-member panel, selected thebest bid based on the offered price and the preferencerating of the particular supply company. After a tenderwas awarded to a specific supplier, the MIC facilitythat originated the tender passed the contract to aMIC trading company such as Al-Basha’ir, ARMOS,or Al-Mafakher. These companies worked through theapproved supplier to conduct the actual procurement.The Al-Basha’ir Trading Company. The MIC establishedthe Al-Basha’ir front company in 1991. Thecompany’s names has been discovered on hundredsof contracts for weapons and dual-use materials, aswell as legitimate day-to-day goods and supplies.The company traded in items such as constructionmaterials, foodstuffs, and power generators to cover72
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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
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Annex AThe Quartet—Influence and
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Perceptions of Threat and Challenge
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OverviewAnnex BIraq’s Intelligenc
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Regime StrategicIntentThe Scientifi
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M6, Directorate of Internal Securit
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Structure of M14• Special Operati
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M18, Directorate of ResidencyM18 is
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Structure of M40• M40/1 Monitors
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OverviewAnnex CIraq’s Security Se
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The Special SecurityOrganizationSad
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Regime StrategicIntentThe Special S
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Structure of the SSO Security Branc
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The Republican GuardThe Republican
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The Republican Guard Forces Command
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Annex DSaddam’s Personal Involvem
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[Translator Comment: they are in go
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Regime Financeand ProcurementRegime
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ContentsA Word on the Scope of This
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MIC Banking and Financing .........
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A Word on the Scope of This Chapter
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Key FindingsThroughout the 1990s an
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ents. He made all modifications to
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Chapter SummaryThe Illicit Finance
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The Regime TimelineDecline (1991-96
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OverviewDirecting and Budgeting Ira
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Regime Financeand ProcurementFigure
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Iraq’s National Budget 1991-2002A
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OverviewFinancing Iraq’s IllicitP
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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 164 and 165: Regime Financeand ProcurementFigure
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
Page 174 and 175: Figure 21. Iraq’s estimated earni
Page 176 and 177: SOMO Account Balances Outside of Ir
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Page 182 and 183: seas accounts in Lebanon and Jordan
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Page 188 and 189: OverviewExecuting Illicit Procureme
Page 190 and 191: necessary to accommodate the large
Page 194 and 195: offices, there was only a single em
Page 196 and 197: MoD’s Procurement Leadership at t
Page 198 and 199: Although other Iraqi ministries wer
Page 200 and 201: From 2000 onwards, the RG’s annua
Page 204 and 205: The information provided by these t
Page 208 and 209: its real activity, which was coordi
Page 212 and 213: • In May 2002, ARMOS was offered
Page 214 and 215: officer suggested Neptune would be
Page 218 and 219: • A foreign intelligence service
Page 220 and 221: MIC Research Support at Universitie
Page 224 and 225: Figure 51. Sattam HamidFarhan Al-Ga
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Page 232 and 233: • The technology included guidanc
Page 236 and 237: Embassy to Jordan in Amman. The fir
Page 238 and 239: Regime Financeand ProcurementThis i
Page 240 and 241: Since 1991, Iraqi-Turkish trade rev
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Page 244 and 245: Chinese Assistance in Iraqi Telecom
Page 246 and 247: October 2001, Syrian technicians we
Page 248 and 249: • Yugoslav Federal also supplied
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Page 254 and 255: • 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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