Comprehensive Report of the Special Advisor to the DCI on Iraq's Weapons of Mass Destruction (2)

Comprehensive Report of the Special Advisor to the DCI on Iraq's Weapons of Mass Destruction Page Two: Regime Finance and Procurement (source: www.CIA.gov) Key Findings Throughout the 1990s and up to OIF (March 2003), Saddam focused on one set of objectives: the survival of himself, his Regime, and his legacy. To secure those objectives, Saddam needed to exploit Iraqi oil assets, to portray a strong military capability to deter internal and external threats, and to foster his image as an Arab leader. Saddam recognized that the reconstitution of Iraqi WMD enhanced both his security and image. Consequently, Saddam needed to end UN-imposed sanctions to fulfi ll his goals. Saddam severely under estimated the economic and military costs of invading Iran in 1980 and Kuwait in 1990, as well as underestimating the subsequent international condemnation of his invasion of Kuwait. He did not anticipate this condemnation, nor the subsequent imposition, comprehensiveness, severity, and longevity of UN sanctions. His initial belief that UN sanctions would not last, resulting in his country's economic decline, changed by 1998 when the UNSC did not lift sanctions after he believed resolutions were fulfi lled. Although Saddam had reluctantly accepted the UN's Oil for Food (OFF) program by 1996, he soon recognized its economic value and additional opportunities for further manipulation and infl uence of the UNSC Iraq 661 Sanctions Committee member states. Therefore, he resigned himself to the continuation of UN sanctions understanding that they would become a "paper tiger" regardless of continued US resolve to maintain them. Throughout sanctions, Saddam continually directed his advisors to formulate and implement strategies, policies, and methods to terminate the UN's sanctions regime established by UNSCR 661. The Regime devised an effective diplomatic and economic strategy of generating revenue and procuring illicit goods utilizing the Iraqi intelligence, banking, industrial, and military apparatus that eroded United Nations' member states and other international players' resolve to enforce compliance, while capitalizing politically on its humanitarian crisis. From Saddam's perspective, UN sanctions hindered his ability to rule Iraq with complete authority and autonomy. In the long run, UN sanctions also interfered with his efforts to establish a historic legacy. According to Saddam and his senior advisors, the UN, at the behest of the US, placed an economic strangle hold on Iraq. The UN controlled Saddam's main source of revenue (oil exports) and determined what Iraq could import. UN sanctions curbed Saddam's ability to import weapons, technology, and expertise into Iraq. Sanctions also limited his ability to fi nance his military, intelligence, and security forces to deal with his perceived and real external threats. In short, Saddam considered UN sanctions as a form of economic war and the UN's OFF program and Northern and Southern Watch Operations as campaigns of that larger economic war orchestrated by the US and UK. His evolving strategy centered on breaking free of UN sanctions in order to liberate his economy from the economic strangle-hold so he could continue to pursue his political and personal objectives. One aspect of Saddam's strategy of unhinging the UN's sanctions against Iraq, centered on Saddam's efforts to infl uence certain UN SC permanent members, such as Russia, France, and China and some nonpermanent (Syria, Ukraine) members to end UN sanctions. Under Saddam's orders, the Ministry of Foreign Affairs (MFA) formulated and implemented a strategy aimed at these UNSC members and international public opinion with the purpose of ending UN sanctions and undermining its subsequent OFF program by diplomatic and economic means. At a minimum, Saddam wanted to divide the fi ve permanent members and foment international public support of Iraq at the UN and throughout the world by a savvy public relations campaign and an extensive diplomatic effort. Another element of this strategy involved circumventing UN sanctions and the OFF program by means of "Protocols" or government-to-government economic trade agreements. Protocols allowed Saddam to generate a large amount of revenue outside the purview of the UN. The successful implementation of the Protocols, continued oil smuggling efforts, and the manipulation of UN OFF contracts emboldened Saddam to pursue his military reconstitution efforts starting in 1997 and peaking in 2001. These efforts covered conventional arms, dual-use goods acquisition, and some WMD-related programs. Once money began to fl ow into Iraq, the Regime's authorities, aided by foreign companies and some foreign governments, devised and implemented methods and techniques to procure illicit goods from foreign suppliers. To implement its procurement efforts, Iraq under Saddam, created a network of Iraqi front companies, some with close relationships to high-ranking foreign government offi cials. These foreign government offi cials, in turn, worked through their respective ministries, state-run companies and ministry-sponsored front companies, to procure illicit goods, services, and technologies for Iraq's WMD-related, conventional arms, and/or dual-use goods programs. The Regime fi nanced these government-sanctioned programs by several illicit revenue streams that amassed more that $11 billion from the early 1990s to OIF outside the UN-approved methods. The most profi table stream concerned Protocols or government-to-government agreements that generated over $7.5 billion for Saddam. Iraq earned an additional $2 billion from kickbacks or surcharges associated with the UN's OFF program; $990 million from oil "cash sales" or smuggling; and another $230 million from other surcharge impositions. Analysis of Iraqi Financial Data The Iraqi revenue analysis presented in this report is based on government documents and fi nancial databases, spreadsheets, and other records obtained from SOMO, the Iraqi Ministry of Oil, and the Central Bank of Iraq (CBI), and other Ministries. These sources appear to be of good quality and consistent with other pre- and post-Operation Iraqi Freedom information. All Iraqi revenue data and derived fi gures in this report have been calculated in current dollars. Saddam directed the Regime's key ministries and governmental agencies to devise and implement strategies, policies, and techniques to discredit the UN sanctions, harass UN personnel in Iraq, and discredit the US. At the same time, according to reporting, he also wanted to obfuscate Iraq's refusal to reveal the nature of its WMD and WMD-related programs, their capabilities, and his intentions. Saddam used the IIS to undertake the most sensitive procurement missions. Consequently, the IIS facilitated the import of UN sanctioned and dual-use goods into Iraq through countries like Syria, Jordan, Belarus and Turkey. The IIS had representatives in most of Iraq's embassies in these foreign countries using a variety of offi cial covers. One type of cover was the "commercial attaches" that were sent to make contacts with foreign businesses. The attaches set up front companies, facilitated the banking process and transfers of funds as determined, and approved by the senior offi cials within the Government. The MFA played a critical role in facilitating Iraq's procurement of military goods, dual-use goods pertaining to WMD, transporting cash and other valuable goods earned by illicit oil revenue, and forming and implementing a diplomatic strategy to end UN sanctions and the subsequent UN OFF program by nefarious means. Saddam used the Ministry of Higher Education and Scientifi c Research (MHESR) through its universities and research programs to maintain, develop, and acquire expertise, to advance or preserve existent research projects and developments, and to procure goods prohibited by UN SC sanctions. The Ministry of Oil (MoO) controlled the oil voucher distribution program that used oil to infl uence UN members to support Iraq's goals. Saddam personally approved and removed all names of voucher recipients. He made all modifi cations to the list, adding or deleting names at will. Other senior Iraqi leaders could nominate or recommend an individual or organization to be added or subtracted from the voucher list, and ad hoc allocation committees met to review and update the allocations. Iraq under Saddam successfully devised various methods to acquire and import items prohibited under UN sanctions. Numerous Iraqi and foreign trade intermediaries disguised illicit items, hid the identity of the end user, and/or changed the fi nal destination of the commodity to get it to the region. For a cut of the profi ts, these trade intermediaries moved, and in many cases smuggled, the prohibited items through land, sea, and air entry points along the Iraqi border. By mid-2000 the exponential growth of Iraq's illicit revenue, increased international sympathy for Iraq's humanitarian plight, and increased complicity by Iraqi's neighbors led elements within Saddam's Regime to boast that the UN sanctions were slowly eroding. In July 2000, the ruling Iraqi Ba'athist paper, Al-Thawrah, claimed victory over UN sanctions, stating that Iraq was accelerating its pace to develop its national economy despite the UN "blockade." In August 2001, Iraqi Foreign Minister Sabri stated in an Al-Jazirah TV interview that UN sanctions efforts had collapsed at the same time Baghdad had been making steady progress on its economic, military, Arab relations, and international affairs. Companies in Syria, Jordan, Lebanon, Turkey, UAE, and Yemen assisted Saddam with the acquisition of prohibited items through deceptive trade practices. In the case of Syria and Yemen, this included support from agencies or personnel within the government itself. Numerous ministries in Saddam's Regime facilitated the smuggling of illicit goods through Iraq's borders, ports, and airports. The Iraqi Intelligence Service (IIS) and the Military Industiralization Commission (MIC), however, were directly responsible for skirting UN monitoring and importing prohibited items for Saddam.