Volume 1 - Iraq Watch

axis turntable for testing gyroscopes. (No deliveryestablished.)• In mid-2001, Abd al-Wahab, an IIS officer stationedat the Iraqi Embassy in China, procured 10to 20 gyroscopes and 10 to 20 accelerometers froman unknown Chinese company for approximately$180,000. The gyroscopes and accelerometers wereintended for the guidance and control system of theal Samud II and Al-Fat’h missiles.Iraq also sought dual-use items with potential ballisticmissile applications from Chinese firms. Iraqsought items such as fuel for propellants and graphite,a key component in reentry vehicle nose tips,directional vanes, and engine nozzle throats. Iraq’sneed for graphite-related products was heightenedfollowing severe damage inflicted during OperationDesert Fox to the Shahiyat Missile Facility, a knowngraphite production facility. Although this site wasreconstructed, Western intelligence assessed that Iraqcould not indigenously produce the quality of graphitenecessary for ballistic missile components makingit dependent on imports. Recovered documents from2001 indicated a drive to acquire Chinese graphiterelatedproducts such as electrodes, powder, and missile-relatedfuel:• Al-Najah Company, working through an Indianintermediary, purchased supplies of Chinese missile-gradegraphite during August and September2001.• In January 2003, Al-Merbab General Trading Companyand Al-Ramig sought a supply of chemicals,both of which have applications in liquid rocketpropellants, from Chinese companies (see inset).The Chinese companies, however, refused to sellchemicals to the Middle East because of its potentialweapons application.From the Iraqi perspective, MIC and IIS attemptsto illicitly acquire goods from Chinese firms wereproblematic. MIC and Chinese suppliers conductedmany committee meetings and had other contracts,but most meetings never ended in any signed contracts.According to a high-ranking official in theMIC of unknown reliability, Chinese firms used itsmilitary and dual-use contracts with the MIC as leveragein its attempts to obtain discount-priced Iraqi oil.• Documents recovered indicate that an Iraqi delegationwas sent to China to reestablish a partnershipwith NORINCO, a Chinese arms manufacturer.NORINCO agreed to continue dealing withIraq despite a debit of $3,067,951,841.47 butNORINCO specified that Beijing would not beinformed of the deal. Iraq promised to repayNORINCO with crude oil and petroleum products,using the Iraqi front company Al-Basha’ir.• These strained negotiations sometimes resulted inthe use of alternative foreign suppliers. This wasevident in procurement attempts to acquire gyroscopesfrom Chinese firms where MIC companiessought alternative suppliers in Belarus.Although the Chinese Government promoted Chinesecompanies in commercial activity followingdefense reforms in 1998, ISG has found no evidenceto suggest Beijing’s direct involvement in illicit tradewith Iraq. Indeed, we suspect that some contractsthat were abruptly stopped may have been a resultof Beijing’s direct intervention. A delegation from aChinese firm to Iraq in December 2000, suspendedcontract talks possibly according to Beijing’s questioningof its activities with Iraq. Most transactions,however, were orchestrated through newly privatizedstate-owned companies competing in a bloatedand highly competitive, newly founded commercialsystem where they were able to participate in illegaltrade with little oversight.As with other suppliers, Iraq procured illicit goodsfrom Chinese companies behind a network of frontcompanies and trade intermediaries. Turkish, Syrian,Indian, and Jordanian intermediaries were used in theprocurement process for both seeking quotations ofgoods and in assisting delivery of prohibited goods. Inall likelihood, the various trade protocols provided alegitimate trade cover under which these illicit transactionstook place.• As in many other cases, the Syrian-based SESInternational Corporation was used as an intermediarybetween Chinese companies and Iraq. In110