Volume 1 - Iraq Watch

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Balance of Payments/Exchange RatesEmploymentThe Balance of Payments (BoP) is an account ofall transactions between one country and all othercountries—transactions that are measured in terms ofreceipts and payments. From the US perspective, areceipt represents any dollars flowing into the countryor any transaction that require the exchange of foreigncurrency into dollars. A payment represents dollarsflowing out of the country or any transaction thatrequires the conversion of dollars into some other currency.The CBI Department of Research and Statisticsprovided statistics on Iraq’s Balance of Payments,which are summarized (Figures 14 and 15).Exchange rates are important during these transactionsbecause they represent the linkage betweenone country and its partners in the global economy.Exchange rates affect the relative price of goods beingtraded (exports and imports), the valuation of assets,and the yield on those assets. The CBI pegged itsofficial rate between $3 to 3.38 per dinar in the 1970s.The last official exchange rate of $3.11 per dinarwas set in 1982. During the 1970s the official andmarket rates generally corresponded and by 1980 thecountry had $35 billion in foreign exchange reserves.Because of the war with Iran that figure had fallen to$2 billion by 1987. The currency depreciated rapidlyin the unofficial market during the Iraq-Iran warand after the first Gulf War the pace of depreciationincreased further. During 1997 to 2003, the exchangerate fluctuated between 1500 -2000ID per $1 andwas fairly steady at about 1950 ID to $1 in recentyears. Although the Regime did not alter the officialexchange rate after 1983, it acknowledged the ratedifferential in 1999 by allowing state run banks toexchange hard currency at the rate of 2000 ID to$1. According to the statistical bulletin published byCBI (Figure 16) the numbers projected by sourcesin the US are consistent, with numbers reportedinternally. It is important to note that the validityand reliability of the data provided by CBI has notyet been evaluated.Iraq’s economy suffered from under-employment,an economic affliction that was typical of oil-basedeconomies. Iraq’s oil sector historically generatedabout 60 percent of Iraq’s GDP, but only employedtwo to three percent of Iraq’s labor force. Unemploymenthas risen significantly during the periodof 1988-2003. Unemployment in Iraq during 2003was estimated to be around 28 percent of the laborforce. Some 40 percent of the employed are estimatedto work in the public sector, many in marginalizedeconomic activities, in difficult conditions, and forminimal pay. Women represent about 52 percent ofIraq’s population, but constitute only 23 percent of theformal workforce, mostly as middle level professionalsin the public and service sectors and in rural areasas seasonal agricultural workers.Over the long run, labor markets are affected bydemographics, changes in productivity and the rateof growth in potential output. In the short run, thesemarkets will reflect volatility in the level of economicactivity. The unemployment rate in Iraq representsthe ratio of those actively seeking work and the totalnumber of people in the labor force. Iraq’s economywas powered mainly by state run centrally controlledgovernment entities. Although Saddam did encourageprivatization during the 1980s, this was not successfulbecause of the continuing conflicts and lackof financing and support for private business ownersin Iraq.Social Conditions and IndicatorsFollowing the war with Iran in 1988, Iraq wasranked 50th out of 130 countries on the 1990 UNDPHuman Development Index (HDI). This indexmeasures national achievements in health, education,and per capita GDP. Iraq was close to the top of the“medium human development” category, a reflectionof the Government’s continued investment in basicsocial services. By 1995, Iraq had declined to 106thout of 174 countries and by 2000 it had plummetedto 126th, falling behind Bolivia, Egypt, Mongoliaand Gabon and close to the bottom of the “mediumhuman development” category.Regime Financeand Procurement213
Figure 14. Balance ofpayments: overall balance.Figure 15. Balance of payments.214
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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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Figure 3. The Iraq-TurkeyTrade Prot
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Figure 3. The Iraq-TurkeyTrade Prot
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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 340 and 341: • The NSC Auditing Division sent
Page 342 and 343: Annex DIraq Economic Data (1989-200
Page 344 and 345: Figure 8. Sectoralcomposition of Ir
Page 346 and 347: Figure 10. Iraq’s Paris Clubcredi
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
Page 364 and 365: Figure 22. Contractbetween the Nati
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
Page 372 and 373: Figure 27. Contract forpetroleum pr
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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Page 392 and 393: Annex HUN Security Council Resoluti
Page 394 and 395: • UNSCR 1175 also noted that the
Page 396 and 397: 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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