Volume 1 - Iraq Watch

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Figure 8. Sectoralcomposition of Iraq’s GDP,1989.Regime Financeand ProcurementFigure 9. Iraq oil production,1988-2003.209
Industrial Diversification and ManufacturingIndustrial development, diversification and manufacturinghave gone through numerous phases in Iraq.In the mid-1970s a strong emphasis was placed onimport substitution and the government establishedfood-processing industries in smaller towns throughoutthe country. However, the main focus of developmentwas on the petroleum sector, and refining,natural gas processing and some part of supplies forthe industry developed in Basra and Kirkuk. Thecement and building supplies industry also expandedrapidly. By the late 1970s the emphasis in developmentplanning shifted toward heavy industry anddiversification away from oil. Iron and steel productionwas set up with French assistance at Khoral-Zubair and the defense industrial sector received ahigh priority. However, objectives were ill defined andthe economy’s concentration on oil was never challenged.Inevitably, as with all other segments of theeconomy, manufacturing and industrial diversificationwas scaled down when the Iran-Iraq war began andnever recovered.Foreign DebtIraq’s indebtedness has been the result primarily ofthe war with Iran. Iraq traditionally had been free offoreign debt and had accumulated foreign reservesthat reached $35 billion by 1980. These reserves wereexhausted in the early stages of the war with Iran. It isestimated that from 1980 to 1989 Iraq’s arms purchasesalone totaled $54.7 billion. Following the war,Iraq was faced with the dilemma of paying off shorttermdebts to western creditors estimated between$35 to 45 billion at high interest rates. However,the Regime resisted western attempts through theInternational Monetary Fund (IMF) and World Bankto reschedule the debt primarily because Baghdadbelieved it could negotiate more favorable terms dealingwith countries bilaterally.Iraq’s foreign debt was comprised of western creditprovided for military assistance, development financeand export guarantees. This assistance has beenestimated at $35 billion in principal. The formerSoviet Union and Russia also provided loans to Iraqvia the Paris Club during the 1980s and 1990s for thedevelopment and production of military programs(Figure 10). Gulf States such as Saudi Arabia, Kuwaitand the United Arab Emirates provided an additional$30 to 40 billion in financing to fight Iran (Figure11). Although the Gulf States considered the financialsupport provided to Iraq to be a loan, Iraq believedthat the Gulf States were required to provide help toIraq in its fight to prevent the spread of radical Iranianfundamentalism.In addition to the money borrowed by Iraq during the1980s, Iraq has had compensation claims made forreparations of damage inflicted during the invasionand occupation of Kuwait during 1990 and 1991.The United Nations Compensation Commission(UNCC) was responsible for processing and collectingsuch claims as authorized by UNSCR 692. TheOFF program provided that 30 percent of Iraq’s oilsales would be used to settle compensation claimsauthorized by the UNCC. This figure was reduced to25 percent in December 2000 and was set at 5 percentwhen oil exports resumed after OIF. As of 7 May2004, claims totaling $266 billion have been adjudicatedand claims worth $48 billion have been awardedby the UNCC. Additional claims worth $83 billionneed to be resolved.Another source of potential financial obligationsaccrued by Iraq since 1990 were contracts signed withcountries such as Russia, UAE, Egypt, China, France,and the Netherlands mainly in the energy and telecommunicationssectors. Because of UN Sanctionsduring the period, the contracts were not executed. Itis uncertain if these contracts will be honored in thefuture.Iraq’s total foreign debt compared to GDP from1989 until 2003 was not sustainable (Figure 12).Iraq was borrowing much faster than it was producingfor over a decade (see Figure 13).210
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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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including abolishing universal empl
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Behind the scenes, the Iraqi govern
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for what they imported in 1992, pro
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Figure 10. Iraq’s estimated earni
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stated that he believed the Russian
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documents. Ten other Iraqi embassie
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were made to at least two Iraqi fro
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Figure 21. Iraq’s estimated earni
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SOMO Account Balances Outside of Ir
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with an *) shows the total proceeds
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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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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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Page 302 and 303: Annex BKnown Oil Voucher Recipients
Page 304 and 305: Oil Allocation RecipientList (conti
Page 336 and 337: Key Budgetary ActorsAnnex CIraq’s
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Page 342 and 343: Annex DIraq Economic Data (1989-200
Page 346 and 347: Figure 10. Iraq’s Paris Clubcredi
Page 348 and 349: Balance of Payments/Exchange RatesE
Page 350 and 351: Figure 16. Exchange rateID/USD.Regi
Page 352 and 353: Annex EIllicit Earnings Sources and
Page 354 and 355: account for half a year each, were
Page 356 and 357: Annex FIraqi Oil SmugglingCaptured
Page 358 and 359: ISG Translation of an Oil Sale Cont
Page 360 and 361: truck to the Turkish border. Althou
Page 362 and 363: Figure 22. Contractbetween the Nati
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Page 366 and 367: Figure 24. Letter from A.J.Khazamip
Page 368 and 369: Figure 25 . Second letterfrom A.J.
Page 370 and 371: Figure 27. Contract forpetroleum pr
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Page 374 and 375: Figure 29. Contractbetween al Basha
Page 376 and 377: Figure 29. Contractbetween al Basha
Page 378 and 379: Figure 31. Telex from aFrench bank
Page 380 and 381: Figure 32. Unipack ofParis contract
Page 382 and 383: Figure 33. Telex from VitolGeneva t
Page 384 and 385: Figure 35. Letter dated 30December
Page 386 and 387: Annex GIraq’s Banking Systemdid n
Page 388 and 389: Figure 37. Department,department di
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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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