Volume 1 - Iraq Watch

In 2001, the IAEC and MIC were working to obtainCNC machines to modernize Iraq’s scientific infrastructure.By 2002, documentary evidence showsIraqi front companies soliciting bids and contractingfor CNC machines from companies in Tawian. TheCNC machines procured from Taiwan by Iraq consistedof three or more axes, suggesting potential usein weapons production.• In early May 2002, the Baghdad-based Iraqi firm,Aldarf Company, represented by Ali Albakri,sought tilting rotary tables for two machiningcenters. She Hong Industrial Company, one ofTaiwan’s largest manufacturers of machine tools,acknowledged the Iraqi company’s need for accessoriesand stated that rotary tables manufactured byTaiwan’s Golden Sun industrial Company Limited,Taichung could be added to both machines that Iraqalready possessed.• Recovered correspondence from the Al-Basha’irCompany revealed a deposit of $900,000 into theaccount of Mr. ‘Abd al Razzaq Al Falahi and Brothersto execute a contract for importing machinetools from Taiwan. This money was then transferredinto the account of She Hong Industrial Company.• In July 2002, Iraq asked a Jordanian company toseek a new quote from a company in Taiwan for agun-drilling machine, earlier quoted at a price of$146,000.• January 2003 bids for CNC wire-cutting machinesfrom Taiwan were also revealed in documentationfrom the Al Badr State Company, a subsidiary ofthe MIC.Iraq took active measures to ensure that illicit tradefor machine tools from Taiwan was concealed. Recoveredcorrespondence from Al-Basha’ir expressed thatthe wording of the contract conducted by Mr. ‘Abdal Razzaq Al Falahi should not make reference toAl-Basha’ir and that monies should be deposited ina static account for all transactions. Correspondencefrom a MIC-run company also indicated that bidsfrom companies in Taiwan were under the auspices ofthe Iraqi and Syrian agreements, implying that goodsobtained from Taiwan would be transshipped throughfront companies operating out of Syria or that Syrianfront companies would act as intermediaries andfacilitate delivery of the procured equipment.EgyptSince 1990, illicit procurement activity betweenIraq and Egypt provided Baghdad with a limitedamount of materials that the Regime found difficultto acquire outside UN sanctions. Materials that Iraqacquired through its relations with Egypt, outside UNsanctions and resolutions, included nitric acid, stainlesssteel and aluminum alloys.Egyptian and Iraqi procurement relations began in theearly 1980s when Baghdad provided Cairo with $12million in 1981 in return for assistance with productionand storage of chemical weapons agents. At thistime Baghdad also entered into a series of contractswith the Government of Egypt to procure the twostageBadr-2000 missile and to provide the technologicalinfrastructure to build the missile indigenously,before it attempted to extend the range of its Scud-B/8K-14 missiles.Following Operation Desert Storm and UN sanctions,procurement from Egypt was limited. Nevertheless,Iraq used its ties with Egypt to procure key items thatwere difficult to procure elsewhere.• The MIC, through its front company Al-Husan,had a $5 million contract with an Egyptian firm forstainless steel, forged steel, and aluminum in 2003.Trade in nitric acid, a precursor in the manufacture ofsolid propellant also flourished following the destructionof the Al Qa’Qa State Company Nitric Plant inDecember 1998, during Operation Desert Fox.• A senior official from the MIC stated that Iraq hada secret agreement with Egypt during 2001 to 2002to have nitric acid shipped from Egypt throughSyria to Iraq. It is unclear how many tons of nitricacid Iraq received from this secret agreement.130