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Weapons of Mass Destruction (WMD)

Iraq Survey Group Final Report

 

Executing Illicit Procurement in Iraq: Ministries, Commissions, and Front Companies

Overview

Saddam used his complete control over the Iraqi Government to facilitate his illicit procurement programs. Almost every Ministry in the Regime assisted with procurement in some way. Directed by Saddam, the Ministries of Foreign Affairs, Oil, and Trade helped the former Regime orchestrate its primary foreign objective of ending UN sanctions (see Annex H: UN Security Council Resolutions Applicable to Iraq).

  • The MFA curried favors at the UN. Among other techniques and tactics used by the MFA, it bestowed oil allocations to nationals of the UNSC permanent members to influence and divide the council in order to erode sanctions. For additional details on the MFA role in influencing the UNSC, see the RSI chapter.
  • The MoT established bilateral trade Protocols that were used to hide prohibited trade. The ministry used commercial attaches to pay for illicit procurement.
  • The MoD developed requirements, hosted and conducted foreign visits, and procured conventional military goods, the export of which breached UN sanctions.
  • The banking system established foreign accounts to hold illicit hard currency until it could be used for procurement or smuggled into Baghdad.
  • The Ministry of Higher Education an Scientific Research (MHESR) conducted dual-use research; procured and developed technical expertise in WMD-related fields and procured key technologies through university systems.

Saddam, however, relied on three organizations in particular for the procurement of prohibited materials to include potentially-WMD related or dual-use items (see Annex I: Suspected Iraqi Dual-Use Procurement Transactions):

  • The MIC, headed by Huwaysh since 1997, and its associated front companies led Iraqi efforts to obtain prohibited military hardware and dual-use goods.
  • The IIS was directed by Saddam to assist the MIC with procurement in 1998.
  • The Iraqi Atomic Energy Commission (IEAC) pursued its own illicit procurement goals, occasionally with MIC assistance.

Ministry of Foreign Affairs

Directed by Saddam, the Ministries of Foreign Affairs, Oil, and Trade helped the former Regime orchestrate its primary foreign objective of ending UN sanctions. To pursue those objectives, the MFA implemented a foreign economic strategy first aimed at ending UN sanctions (established since 1990) and subsequently eliminating the UN’s OFF program. Another important MFA mission focused on supporting the Regime’s illicit procurement mechanism. In particular, the MFA played a critical supporting role in facilitating Iraq’s procurement of military goods, prohibited dual-use items, 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. The MFA facilitated, established, and maintained foreign government and business contacts and provided Iraqi officials involved in illegal international trade with financial and political sanctuaries.

The MFA also assisted the implementation of financial transactions and provided physical sanctuaries and political/diplomatic/commercial covers for other Iraqi intelligence officials involved in procurement activities across Iraq’s borders. According to a former Charge d’affaires at the Iraqi interests section in Syria, it was common practice for embassies to forward foreign cash from the CBI overseas accounts in Lebanon, to its vault in Baghdad via diplomatic pouch and courier system.

  • He specifically mentions the Iraqi embassy in Beirut, Lebanon and the Iraqi interests section at the Algerian embassy in Damascus, Syria, undertaking such activity.
  • The Iraqi embassy in Beirut would transfer cash to Damascus by diplomatic-plated vehicles.
  • The Iraqi Embassy in Moscow assisted, among other deals, a Russian company called Alfa Echo in signing contracts for importing oil from Iraq.

Moreover, the MFA possessed an indigenous intelligence capability, its Research and News Analyzing Office (RNA) that kept senior Iraqi leadership, such as the President, Deputy Prime Minister and Foreign Minister informed about global events. The MFA managed this office and had branches in many of its key embassies. It is not certain whether personnel in the MFA’s Research and News Analyzing Office were IIS agents or actual MFA officials. Nonetheless, the RNA focused primarily on collecting information of economic and political consequence to Iraq by means of open sources and other news reporting. MFA’s RNA paid special attention to political, military and economic developments in the Middle East (special attention to Israel), global oil production and market developments, Eastern Europe, and the United States.

Acting as Iraq’s plenipotentiary, Tariq Aziz (see Figure 34) often facilitated business meetings between foreigners and Iraqi officials. Foreign business representatives and government officials would contact him in order to gain access to key Iraqi officials that were in charge of approving oil and arms contracts.

  • On 27 December 2002, the president of the Russian company Russneft, Michail Gutserviev, informed Aziz and the former Oil Minister Amir Rashid that he planned to travel with a five-man delegation to Iraq via private plane to negotiate with the Iraqi Oil Minister for oil and gas contracts. The Russian business delegation was supposed to fly into Iraq in a Tupolev 134 (flight number AKT 135/136) and expected to stay in Iraq on January 13-15, 2003.
  • In 2002, Baghdad sent a scientific delegation to Belarus and China in order to stay current on all aspects of nuclear physics and to procure a Chinese fiber optics communication system.

MFA-IIS Connections

The MFA also supported IIS operations by offering its agents political and economic cover to conduct economic and political espionage. Besides providing traditional covers for IIS agents, the MFA cooperated closely with the IIS on other functions. A former IIS officer also stated that all MFA diplomatic couriers were IIS officers and were controlled by the IIS’s Internal Security (M6) Directorate. Moreover, at Iraqi consulates and embassies where IIS officer presence was absent, MFA personnel filled in as their representatives. While we do not know the full extent of MFA’s role in assisting the IIS in conducting illicit activity, we have found other indicators of the breadth and nature of the IIS’ activities from captured documents.

  • According to one document on MFA letterhead, the MFA transferred two known IIS agents to its embassy in Belarus under pseudonyms in June 2002. Another document in the same file, an IIS “Ministerial” Order, acknowledged the transfer, the agents’ job descriptions, their salaries, as well as sent copies of IIS order to other directorates.
  • One month prior to OIF, at least seven IIS officers were reassigned to the MFA to cover up their true positions in the government. They were given new identities and positions. This activity was similar to giving agents cover stories operating outside of Iraq, according to one former IIS agent.
  • Outside of Iraq, Iraqi embassies provided the IIS with the only means of secure communications outside of the diplomatic courier services. Iraqi embassies transmitted ciphered faxes to foreign posts. However, the majority of posts had manual codebooks while major posts like Washington, Paris, Moscow and South African were given machines necessary to accommodate the large amount of incoming faxes. The IIS personnel deciphered all faxes, according to a former IIS officer.

MFA’s UN Sanctions Counter-Strategy

The MFA formulated and implemented a strategy aimed at ending the UN sanctions and breaching its subsequent UN OFF program by diplomatic and economic means. Iraq pursued its related goals of ending UN sanctions and the UN OFF program by enlisting the help of three permanent UNSC members: Russia, France and China. Iraq believed it managed to varying degrees of success to influence these permanent UNSC members from strictly enforcing previously agreed UN resolutions and from initiating additional resolutions that further debilitated the Iraqi economy. By offering permanent and non-permanent Security Council members economic “carrots and sticks,” Iraq belived it managed to partially influence voting at the UNSC. Iraq’s economic “carrots” included offering companies from those countries lucrative oil, reconstruction, agricultural and commercial goods, and weapon systems contracts. In contrast, the Iraqi “sticks” included not only redirecting those contracts to other more “pro-Iraqi” companies, but held the threat of forfeiture of foreign debts – totaling between approximately $116-250 billion. Saddam expressed confidence that France and Russia would support Iraq’s efforts to further erode the UN sanctions Regime.

  • According to one source, using “semi-diplomatic cover,” the IIS attempted to recruit agents from the UN headquarters in New York to provide information or influence public opinion and their national policy toward Iraq.
  • Besides attempting to co-opt certain permanent UNSC members, under cover of MFA sponsored international conferences, Iraq tried to recruit sympathetic eastern European politicians by publicly lauding their pro-Iraqi sentiments and support in the UN.

Iraqi-Russian Relations. Saddam’s Regime needed both Moscow’s political clout in the UN and its economic expertise and resources to sustain his Regime from the 1990s until OIF Numerous trips taken by then Iraqi Deputy Prime Minister Tariq Aziz to Moscow served as a good indicator of the Russians’ opinion of Iraq’s dependence on Russia.

  • According to news reports, in July 2001, Tariq Aziz expressed gratitude to Russia for its efforts to pass UNSCR 1360 which continued the UN’s OFF program for a tenth phase. Moreover, Iraq promised to economically reward Russia’s support by placing it at the head of the list for receiving UN contracts under the UN OFF program.

Iraqi-Chinese Relations. ISG judges throughout the 1990s, the PRC consistently advocated lifting Iraqi sanctions while privately advising Baghdad to strengthen cooperation with the UN. In October 2000, Baghdad continued to seek Chinese support for the removal of UN imposed economic sanctions. By November 2000, Chinese Vice Premiere Qian Qichen stated that China would support Iraq’s efforts to end the sanctions, and work for an early resolution to the Iraqi issue according to press reporting.

  • According to diplomatic reporting, Chinese Premier Zhu Rongji and Vice Premier Qian Qichen met with Iraqi Deputy Prime Minister Tariq Aziz on 27-28 January 2002. Softening Beijing’s earlier stance for ending sanctions, Premier Zhu Rongji reportedly told Aziz that China was willing to continue its efforts toward an early solution to the Iraqi issue and that it had been advocating that the sanctions issue be settled at an early date. China also hoped that Iraq would strengthen its cooperation with the UN and improve relations with its neighbors.

Smart Sanctions

In early July 2001, the US and the UK withdrew their joint-proposal to revamp the UN existing sanctions Regime, called “Smart Sanctions,” because of Russian, Chinese, and French opposition. The US/UK proposal attempted to restructure two key elements of the existing sanctions Regime: illicit procurement of weapons and dual-use goods and illicit generation of revenue from Iraqi oil sales outside the UN’s OFF program. In contrast, the Russian draft resolution proposed to reduce the current percentage to the Compensation fund another 5 percent to 20 percent of total value of Iraqi oil exports – and increase the total amount in Iraq’s escrow account to $600 million to pay other expenses in accordance with UNSCR 1175(1998) and 1284 (1999) (see Annex H: UNSCR Applicable to Iraq). The UN estimated that each 5 percent reduction in payments to the United Nations Compensation Commission (UNCC) added about $275 million in Iraq’s coffers per each UN OFF six-month phase.

  • Iraq indirectly threatened to end trade relations with China if Beijing agreed to the goods review list (see Annex H: UN Security Council Resolutions Applicable to Iraq).

Iraqi-France Relations. Unlike the relatively predictable relationships with China and Russia, the Iraqi-French relationship was more tumultuous. Saddam recognized the important role that France played on the international stage, and in particular in the UNSC. Consequently, Saddam ordered the MFA and other ministries to improve relations with France, according to recovered documents. The documents revealed that the IIS developed a strategy to improve Iraqi-Franco relations that encompassed inviting French delegations to Baghdad; giving economic favors to key French diplomats or individuals that have access to key French leaders; increasing Iraqi embassy staff in Paris; and assessing possibilities for financially supporting one of the candidates in an upcoming French presidential election.

Moreover, the IIS paper targeted a number of French individuals that the Iraqi’s thought had close relations to French President Chirac, including, according to the Iraqi assessment, the official spokesperson of President Chirac’s re-election campaign, two reported “counselors” of President Chirac, and two well-known French businessmen. In May 2002, IIS correspondence addressed to Saddam stated that a MFA (quite possibly an IIS officer under diplomatic cover) met with French parliamentarian to discuss Iraq-Franco relations. The French politician assured the Iraqi that France would use its veto in the UNSC against any American decision to attack Iraq, according to the IIS memo.

From Baghdad’s perspective, the MFA concluded that the primary motive for French continued support and cooperation with Iraq in the UN was economic. According to Tariq Aziz, French oil companies wanted to secure two large oil contracts; Russian companies not only wanted to secure (or lock in) oil contracts, but also sought other commercial contracts covering agricultural, electricity, machinery, food, and automobiles and trucks products.

  • France competed with Russian agricultural products for Iraqi contracts.
  • In May 2002, a representative from a French water purification company requested projects for his company in Iraq.

MFA and Iraq’s Bilateral Protocols

Concurrent with Iraq’s overarching strategy to break UN sanctions, the MFA, with the approval of Saddam, attempted to mitigate the economic effects of UN sanctions and at the same time to by-pass the scrutiny of the UN’s OFF program by arranging various types of economic bilateral agreements. These countries, in particular, Syria, Turkey, and Jordan (see Figure 35), were willing to enter into such agreements.

Geographic proximity, cultural affinity, and a historical and interdependent economic relationship with Iraq explain why Turkey, Jordan, and Syria reached formal Protocols with Iraq outside the UN OFF program and in contravention of UN resolutions. Iraq would sell oil and oil products to these countries in exchange for cash and goods. Kuwait, Saudi Arabia, and Iran did not enter into any economic arrangements with Iraq, but Iran had reportedly assisted Iraq’s oil smuggling operations in the Arabian Gulf region throughout the 1990s and up to OIF.

Ministry of Trade

The MoT coordinated economic activities between other Iraqi government ministries as well as foreign companies and foreign ministries. The MoT accomplished these tasks by consolidating the import requirements from all ministries, obtaining approval expenditures by the MoF, and negotiating overseas trade agreements. The MoT generally accomplished trade for Iraq through:

  • Legitimate channels under the auspices of the UN sanctions Regime and the UN OFF.
  • Cooperative preferential trade protocol agreements with Syria, Jordan, Turkey, and Egypt.
  • Common trade agreements, albeit in contravention of UN sanctions, with other partners.

In addition to these traditional procurement roles, the MoT provided a limited role in the procurement of illicit goods such as military weaponry or WMD technologies for the Regime. To supplement this procurement activity, the MIC and MoD used their own methods to procure communications systems, ammunition, security equipment, and computers. Abd al-Tawab Mullah Huwaysh, Director of the MIC, however, stated that the MIC was able to import the raw materials it needed and did not need to use any other ministry’s funds to purchase goods and services abroad.

Nevertheless, the importance of the MoT in illicit procurement should not be dismissed. The MoT’s trade deals with willing countries and foreign companies provided Iraqi military and security entities, such as the MoD, SRG, IIS, and the Diwan, with the access and connections needed to ultimately procure dual-use and sanctioned goods and services. In contravention of UN sanctions and resolutions, the MoT provided “cover” contracts for ammunition, communication systems, and other military materiel for the MoD, SRG, IIS, and the Diwan.

MoT’s Role in Procurement

For the most part, the MoT procured legitimate civilian goods both legally under UN OFF, as well as illicitly through bilateral trade protocols and other unregulated trade agreements. The MoT played one of its most important roles in the execution of the UN OFF Program, including:

  • Coordinating other ministries’ import requirements into a “Distribution Plan.” After UN approval, this consolidated plan served as the basic import schedule for goods and services imported under each six month UN OFF phase.
  • A few non-ministerial organizations, including the MIC and Iraqi Atomic Energy Commission (IAEC), were not permitted to purchase items under UN OFF. These Ministries or departments relied on the MoT to procure common goods for them via UN OFF.

Muhammad Mahdi Al Salih, the former Minister of Trade, claimed the MoT supported the Iraqi military through the OFF program only with legitimate civilian items. Typical goods procured by the MoT for the MIC and MoD via OFF included: stationery, office computers, generators, civilian trucks, water tankers, fuel tankers, and building materials. For example, Al Salih recalled that the MoT had purchased 100,000 uniforms for the Iraqi police and vehicles for the SSO. Al Salih, however, later admitted to importing ammunition, communication systems, and other military items for MoD, IIS, SRG, and the Diwan outside the UN framework.

The MoT also played an important role in executing the Jordanian trade protocol. Under this agreement, the MoT gathered and forwarded all Iraqi contracts to Jordan for approval. These records were, however, inadvertently destroyed with the rest of the MoT building in the opening hours of OIF. Both the MoT and MoO shared responsibility for negotiating the bilateral Protocol agreements with Syria, Turkey, and Jordan. The MoO, however, was the prime negotiator in the case of Syria and Turkey, and controlled the trade under these Protocols.

  • The MoT purchased goods under the Syria and Turkey trade Protocols, particularly for military and security services that did not have their own allocation of funds under the agreement.
  • Captured documents reveal the MoT paid for “goods and services” through these protocols for the Directorate of General Security, General Police Directorate, Military Intelligence Division, MoD and SSO.
  • There are no indications of the nature of the items procured by the MoT for these organizations other than a reference to MoD contracts with the General Company for Grain Manufacturing, which suggest that the MoT was procuring for food.

According to Al Salih, in addition to the UN OFF and the trade protocols, the MoT coordinated trade outside of UN sanctions with a number of other countries, including UAE, Qatar, Oman, Algeria, Tunisia, Yemen, and Sudan. These were essentially frameworks for cooperation and free trade that allowed for the import and export of domestically produced products without license or tax.

Facilitating Illicit Procurement With Cover Contracts

There is some debate among Iraqi sources regarding the MoT’s role in providing false cover contracts for sensitive imports. According to one former official, the MoT provided “cover” contracts for military-related goods, such as communications equipment, computers, and military clothing obtained via the Jordan, Syrian, and Turkish trade Protocols. Considering the political sensitivity surrounding these agreements, none of Iraq’s neighbors wanted to be scrutinized by the international community for doing business with the Iraqi military, either for civilian (dual-use) or overtly military goods. False cover contracts would have been easier to hide in the flow of trade occurring over Iraq’s borders with Syria, Jordan, and Turkey.

  • This source is corroborated by annotations on captured tables of Syrian and Turkish trade contracts, which reveal that every entry listing the MoT as the sponsoring government agency was concealing the MIC and MoD as the true end users for the goods.
  • Captured records also show that MoT contracted with the Syrian firm SES International (a known provider of military and dual-use goods to Iraq) for $11.3 million of goods from December 2000, over 80 percent of which was for goods and services for two MIC manufacturing companies.
  • Muhammad Mahdi Al Salih, the former Minister of Trade, recalled that the MoT had conducted business with SES, but only for civilian goods, including deformed bars and timber under UN OFF, and for Mitsubishi pickups under the Syrian trade Protocol. He denied that the MoT ever procured goods for MIC manufacturing companies.
  • The former head of the MIC, Huwaysh, who did not believe that the MoT had ever procured goods for these two companies, later corroborated Al Salih’s denial.

Facilitating Illicit Trade Through Commercial Attaches

According to Al Salih, the MoT’s commercial attache (CA) program began in 1983. CA’s were eventually posted in Jordan, Syria, Turkey, Egypt, Sudan, Algeria, Moscow, Belarus,and China. In many of these offices, there was only a single employee, but the office in Jordan ultimately employed four individuals, headed by a Commercial Counselor and included a CA and a dedicated accountant. According to a former high-ranking Iraqi Government official, these individuals were managed and paid for by the MoT, but reportedly acted independently and were not required to report back to the MoT.

CAs worked from Iraq’s embassies abroad and served as special trade ambassadors working in Iraq’s interest. Common roles for CAs included:

  • Working in the Iraqi Embassy to register foreign companies for trade with Iraq.
  • Checking to see whether foreign companies should be blacklisted for dealings with Israel.
  • Facilitating trade with foreign suppliers.
  • According to reporting, some IIS officers worked under cover as CA. ISG assesses that it is possible the MoT was not aware of this IIS presence in its ranks.
  • According to Al Salih, CA in the trade protocol states (Jordan, Syria, and Turkey) were aware of the bank accounts used to transfer protocol cash profits (30 to 40 percent of all contracts) into Iraq.
  • CAs in Jordan, and to a lesser extent, Syria and Turkey, also followed up on all Iraqi Government financial transactions from the trade Protocols.

In the mid-1990s, the Jordan desk was the most important CA for Iraq. The Amman Commercial Counselor and his deputy were responsible for facilitating all UN OFF contracts, the trade protocol business (the Syria and Turkey protocols did not exist until after 1999), and any additional private trade from the military and security service entities. Facilitating these contracts focused on opening letters of credit in Jordanian banks and following up with payment when receipt of the goods was confirmed in Baghdad. The CA accountant followed contract implementation, tax collection, and tracked any fees.

  • As an example, captured documentation details that individuals at the CA’s office in Amman opened letters of credit for the payment of $2.275 million to a Lebanese company in 2000.
  • Supporting documentation shows that this was for BMP-2 IFV 30-mm cannon barrel-manufacturing technology from the Former Federal Republic of Yugoslavia (FRY).
  • There is no indication, however, from the documentation that the CA staff was aware of the exact nature of the contract.
  • In the late 1990s the importance of the CA’s office in Jordan declined. A year before OIF, the MIC removed cash from the CA’s office in Jordan because of weak activity, and appointed a military representative to represent its interests.

According to the former Minister of Trade, the MIC, and SOMO arranged contracts with Syria directly through the CA in Syria and the Commercial Bank in Syria. It is more likely, however, that the CA in Syria had a less active role with MIC and SOMO, particularly in the payments process, because business in Syria was conducted through payment on supply rather than letters of credit.

  • Supporting intelligence shows in one case that SOMO authorized the 5th Syrian Commercial Bank in Damascus to transfer funds directly to a Syrian middleman working for the Syrian-based SES with no mention of the CA.
  • In May 2002 Iraq’s Al-Basha’ir Trading Company instructed the Syrian firm where and how to distribute funds received from Iraq’s Oil Ministry (probably on behalf of Iraqi military).

As with the Syrian Protocol, the January 2000 Turkish Protocol operated on a payment on supply basis, and therefore probably did not involve the CA in Turkey.

Jordanian Case Study

Commercial attaches worked on behalf of the MIC to make purchases and transfer money for payment in foreign countries. The timeline in Figure 36 shows the events related to a purchase of and payment transfer for materials from Jordan, according to translated documents.

Ministry of Defense

UN sanctions after Operation Desert Storm severely hindered the MoD’s overt procurement of weapons, ammunition, and other military goods. The Regime, however, did not abandon conventional military procurement, developing instead an illicit procurement program based on supplemental budgeting, the MIC, and the use of other ministries to conceal the procurement of dual-use goods.

  • The Presidential Diwan, Presidential Secretary, and Saddam Husayn developed a supplemental process to fund numerous programs outside of the state budget, including the MoD’s illicit conventional procurement.
  • Saddam empowered the MIC to pursue his continuing illicit procurement, using front companies and trade intermediaries to avoid international scrutiny.
  • As the UN OFF program opened additional trade opportunities, non-security ministries would purchase dual-use items and redirect them to the MoD.
  • This mutually supporting relationship between the MoD, MIC, and Saddam’s illicit funding mechanism also supported the procurement needs of the RG and SRG.

MoD Procurement Leadership

The Minister of Defense reviewed all MoD procurement and, in coordination with the Presidential Diwan, could approve MoD procurement requirements up to $2 million. The MoD Chief of Staff (CoS) and subordinate supply directors processed and coordinated procurement requirements for approval at higher levels, but could not approve MoD procurement. For procurement requirements greater than $2 million, the Minister of Defense was required to participate in a more deliberative process involving the MIC, Presidential Secretary, and the President. The MoD did not have final approval authority for these high cost procurement programs.

MoD Procurement Directorates

According to Sultan Hashim Ahmad Al-Ta’i, the former MoD, the Ministry of Defense was divided into directorates, the two largest being the Directorate of Armament and the Directorate of Weapons and Supplies.These two Directorates were the MoD’s primary procurement organizations (see Figure 37).

Directorate of Armament and Supplies.According to Al-Ta’i,the Directorate of Armament and Supplies procured non-weapons related supplies necessary for the military to carry out its missions. These consumable items included, but were not limited to, office supplies, military rations, and military uniforms.

Directorate of Weapons and Supplies. According to Al-Ta’i and Abid Hamid Mahmud al-Tikriti, the former presidential secretary, the Directorate of Weapons and Supplies had two key procurement-related roles: acquiring weapons and ammunition and supporting foreign procurement delegations. Prior to 1990, the Directorate of Weapons and Supplies directly procured weapons and materials for the MoD from both domestic and foreign sources. After the imposition of UN sanctions with UNSCR 661 in 1990, the directorate was no longer able to obtain weapons abroad and depended on the MIC to execute foreign procurement.

MoD’s Procurement Leadership at the Onset of Operation Iraqi Freedom

Minister of Defense: Staff Gen. Sultan Hashim Ahmad Al Ta’i. As the Minister of Defense, he approved all MoD procurement proposals submitted by the Chief of Staff. Sultan was also a member of the “Committee of Three” which had oversight and control over the Iraqi defense budget.

Chief of Staff: Staff. Gen. Ibrahim Ahmad ‘Abd-al-Sattar Muhammad. Ibrahim was directly responsible for MoD procurement activities. He could reject, but not grant final approval on MoD procurement decisions.

Director of Weapons and Supplies: Staff Maj. Gen. Taleb ‘Uwayn al-Juma’a Al Tikriti. Taleb was responsible for coordinating MoD weapons procurement via the MIC from 1999 to 2003.

Director of Armaments and Supplies: Brig. Nabil Rahman. Nabil was responsible for the procurement of products such as military uniforms, supplies, and other consumable items used to support military operations.

  • According to Al-Ta’i, the MIC was responsible for 95 to 99 percent of MoD procurement. Data from the Syrian trade protocols; however, indicate that this percentage was probably closer to 70 percent. In any case, the MIC negotiated contracts, identified foreign and domestic sources for prohibited items (often via its front companies), and arranged the delivery of goods for the MoD.
  • After 1997, Al-Ta’i dealt directly with the head of the MIC, Abd al-Tawab Mullah Huwaysh, and his two deputies, Dagher Muhammad Mahmud and Muzahim Sa’ab Al-Hasan, on substantive procurement issues.
  • The Directorate of Weapons and Supplies coordinated with the MIC on MoD procurement projects via regular meetings. These meetings addressed a range of day-to-day procurement issues, including the mechanics of requesting and delivering items, financing procurement contracts, addressing complaints over late deliveries, and adjudicating problems related to poor quality equipment.

According to Al-Ta’i, the Directorate of Weapons and Supplies participated in several MIC-coordinated defense procurement delegations each year, providing expertise in weapons pricing and how foreign systems could best improve Iraq’s defense capabilities.

  • When Iraq hosted these delegations, the MIC handled, negotiated, and signed procurement contracts on behalf of the MoD.
  • Taleb Uwayn Al-Juma’a, the Chief of the Directorate of Weapons and Supplies, usually served as the MoD delegate for these visits. When accompanying the MIC abroad Uwayn was subordinated to the MIC leadership.
  • The only time MoD procurement was not coordinated by the MIC was when the Minister of Defense or his Chief of Staff headed the Iraqi delegations.
  • Uwayn developed some overseas procurement contacts from MIC sponsored travel to Yugoslavia and Russia. Uwayn also traveled to Syria two or three times, on one occasion with Huwaysh.

Budgeting and Financing Military Procurement

As with the other Iraqi ministries, the MoD operated two budgetary processes: one deliberate and the other supplemental. The formal MoD budget was small, preplanned, and approved via a deliberative process involving multiple ministries and commissions. The MoD’s formal budget was used to purchase non-sanctioned items and fund the basic operation of the force.

  • According to data from a captured general government budget document, containing only operating expenditures, Iraqi defense spending was $124.7 million in 2002. This figure, however, does not represent true Iraqi defense spending, as the former Regime did not list defense spending in its general budget during the 1990-2003 sanctions Regime.

In sharp contrast to the MoD’s formal budget, the supplemental MoD budget was controlled by Saddam and was used for illicit procurement of prohibited items.

  • Typically, Iraqi military units identified requirements and forwarded them up the chain of the command to the directorate head.
  • The director reviewed and forward procurement requirements to the Chief or Deputy Chief of Staff who would review the procurement recommendations and forward them to them to the Minister of Defense, Al-Ta’i.

Although other Iraqi ministries were required to work within their formal budgets, Al-Ta’i could request more money from the Presidential Diwan. On some occasions, however, the MoD supplemental budget requests were routed through Saddam’s secretary, Abid Hamid Mahmud, who could make decisions more rapidly than the Diwan.

  • Although Mahmud has stated that he had no role in MoD procurement, we judge that he played a role in high-priority procurement for the MoD, based on his position and statements by another high-level Iraqi military officer. This officer asserted that a September 2002 supplemental request for Internet satellite communications for the MoD was routed through the Presidential Secretary. The Secretariat subsequently arranged for the purchase through a Syrian company.

Ultimately, Saddam personally approved the funding for classified MoD, MIC, and IIS projects; informed the governmental bodies of his approval via Mahmud, and used Mahmud to distribute supplemental funding for the projects.

MoD Procurement Process

After 1991, MoD procurement depended on the nature of the item required. If the UN prohibited the goods, the illicit procurement process accomplished the procurement. If the items were dual-use goods, they were procured via the channels described elsewhere in the chapter.

Illicit Procurement for the MoD. After the UN imposed sanctions in 1990, member states were prohibited from exporting conventional military goods to Iraq. As a result, Saddam tasked the MIC to obtain prohibited materials and equipment on behalf of the MoD. According to al-Sattar, the former MoD CoS, the Minister of Defense coordinated all foreign illicit procurement directly with the MIC.

  • The MIC and MoD negotiated specific weapons procurement requirements at a “Coordination Conference” held every three months at the MIC headquarters in Baghdad.

According to a former high-ranking MIC offcial, a Special Committee for Procurement for the MIC, MoD, and SRG was established in mid-2002 (see Figure 38). The Special Committee reviewed and recommended security-related procurement requirements, which were then approved by Huwaysh, and ultimately passed to Qusay for approval.

  • The committee’s first task was to develop Iraq’s air defense system.
  • ISG has found very little corroborating evidence of the existence of this committee. Even if it coordinated significant procurement in the nine months before the regime was removed, it is likely Saddam still retained the final approval on expensive or politically sensitive procurement projects.

Dual-Use Goods Defined

“Dual-Use Goods” are items that might be of use to the military, but were not specially or originally designed or modified for military use. The term “goods” includes equipment, chemicals, materials, components (including spare parts), technology, and software.

The term “dual-use goods” can be contrasted with “military goods” that were specially or originally designed for use by the military.

UN Sanctions on the Procurement of Conventional Military Goods

All member states of the United Nations were prohibited from exporting conventional military goods to Iraq by UNSCR 661, 670, and 687. Some countries, however, failed to abide by these international agreements and permitted their nationals to participate in the sale of conventional military goods to Iraq. Some nationals involved in this illicit arms trade were associated with, or in some cases directly related to, their national leaders. For more detailed information see and Annex H, UN Security Council Resolutions Applicable to Iraq and Annex J: The Procurement of Conventional Military Goods in Breach of UN Sanctions

Dual-Use Goods Procurement for the MoD. For routine procurement requirements, the Diwan reviewed the Minister of Defense’s requisitions and identified an appropriate ministry to prepare the contract to purchase the items domestically or through foreign sources.

  • Most Iraqi ministries served as false end-users for MoD dual-use goods procurement. For example, the Building Ministry purchased engineering equipment and heavy machinery, the Health Ministry procured medical equipment, and the Transportation Ministry obtained trucks for the MoD.
  • When possible, the MoD initiated contracts in coordination with the MIC. For example, if the MoD needed vehicles it would go directly to the MIC vehicle supplier.
  • Once the items were purchased and the delivery made, the purchasing ministry would notify the MoD that its equipment had arrived. The MoD would then arrange to deliver the shipment to its subordinate units.

The MoD reimbursed these other government ministries, via the Diwan, with money from the general MoD budget—concealing the source of the money. The MoO, through SOMO, also helped the MoD by funding purchases via the UN OFF program or with illicit oil revenue schemes.

Procurement for the Republican Guard and Special Republican Guard

The RG and SRG requested weapons systems and other military goods via the MoD. The MoD and MIC, in turn, used their associated front companies and trade networks to procure conventional military equipment for the RG and SRG from foreign sources. Qusay Husayn, as the “Honorable Supervisor” of the RG and SRG, ensured they received the most modern military equipment in the Iraqi Army (see Iraq’s Security Services Annex for additional information on the RG and SRG).

RG and SRG Procurement Leadership and Budget. From 1996 until the fall of the Regime, Mahmud Rashid Ismail Al-Ani served as the Director of Electrical and Mechanical Engineering in the RG and the chief procurement adviser to both the RG and SRG. He reported directly to the RG Chief of Staff, General Saif Al-Din Al-Rawi.

  • Al-Ani also monitored the manufacture of supplies for the RG. Consequently, he attended a monthly meeting at the MIC with the Commander and Directors of the RG.
  • Qusay reportedly respected Al-Ani’s technical expertise as evidenced by choosing him to represent the RG in overseas delegations.
  • Al-Ani also enjoyed a close relationship with Abd al-Tawab Mullah Huwaysh, the head of the MIC, most likely because they were related.

From 2000 onwards, the RG’s annual budget was derived from the national military budget. Although the mandated budget at the MoD-level fluctuated yearly, the RG budget never exceeded 40 percent of the overall Iraqi Armed Forces budget. The SRG budget never exceeded 10 percent of the overall RG budget. The RG budget was Qusay’s responsibility, but the Office of the Secretariat submitted requisitions to the Chief of Staff’s office to obtain funds for the RG.

RG and SRG Procurement Process. According to Kamal Mustafa, the former RG Secretary, RG commanders met with the RG Headquarters staff twice per fiscal year to prepare a requisition list for equipment shortages and spare parts. This list was then forwarded to the Office of the Secretariat, via the Office of the RG Chief of Staff for action. The SRG sent its shortage list directly to the Secretariat for inclusion in the overall RG requirements list. The Director of the Office of the Secretariat managed the flow of resources for the RG and SRG. He also coordinated budgetary matters between the RG and the rest of the Iraqi military community. After the Office of the Secretariat approved the procurement requirements, the MoD Directorate of Weapons and Supplies, led by Staff Major General Taleb Uwayn Juma’h, obtained the items in accordance with standard MoD procedures.

  • According to a former high-ranking MIC official, the RG and SRG had their own additional procurement channels after 1999 and had wide authority to procure items on their own. Qusay’s prominent role in the RG organizations gave them a predisposition for obtaining illicit goods via Syria, according to one source.
  • Between 2000 and 2002, the Iraqi Government purchased thousands of supply and personnel transport vehicles for the RG and SRG by the Ministry of Transportation and Communication (MoTC). Turkey, Russia, France, Germany, and South Korea supplied these vehicles, according to a former senior Iraqi cabinet minister.

According to captured documents and other evidence the MoD, MIC, and its associated front companies obtained conventional goods for the RG and SRG from Russia, Syria, and Belarus. (For more details on these breaches of UN sanctions see Annex J: The Procurement of Conventional Military Goods in Breach of United Nations Sanctions). The RG and SRG most likely used their operational budgets to purchase common military supplies and consumable materials. As with the rest of the MoD, the RG and SRG also benefited from other ministries purchasing dual-use goods on their behalf.

After the requested equipment was delivered to Iraq, the MoD Directorate of Weapons and Supplies sent the Office of the Secretariat an official letter notifying that the equipment was available. Once the goods were delivered to the RG and deemed acceptable, the Secretariat authorized the MoO to pay the appropriate ministry or commission.

Military Industrialization Commission

By the late 1990s, Iraq was eagerly trying to acquire foreign military by goods and technical expertise for its conventional military and missile programs using a network of Iraqi front companies, some with close relationships to high-ranking foreign government officials. The billions of dollars of revenue generated by the various protocols, illicit surcharges, and oil smuggling schemes drove the explosive growth in military imports. This allowed MIC to smuggle millions of dollars worth of military equipment into Iraq in contravention of UN sanctions.

Procurement Leadership in the MIC

From its founding in 1987, the MIC was directly subordinate to the office of the presidency. It eventually consisted of 10 research companies, 36 manufacturing companies, eight training centers, two stand-alone units; three front companies and the headquarters office (see Figure 39). The headquarters, located in Baghdad had two deputies and nine directorates: administrative and financial, commerce, research and development, projects, technical, internal monitoring, legal, training and procurement, and the National Monitoring Directorate. The Minister’s office consisted of the secretary’s office, the secret correspondence office, the special correspondence office handling mail between MIC and the ministries and between the headquarters’ directorates and the individual companies.

MIC: Beneficiary of Illicit Funds

Revenues from oil protocols with Jordan, Syria, and Turkey increased the MIC budget by approximately 6,400 percent between 1996 and 2003. During this period, MIC Director and Deputy Prime Minister, Abd al-Tawab Mullah Huwaysh (see Figure 40), transformed the MIC into a more efficient and profitable bureaucracy.

  • According to a high-level MIC official, the MIC budget grew from $7.8 million in 1996 to $350 million in 2002 to $500 million in 2003. The MIC covered its operating costs through internal ministry-to-ministry sales of goods and services, including a 3 percent surcharge on items imported for the MoD by Al-Basha’ir—a MIC front company.
  • According to the same official, the MIC also had a hard currency budget of approximately $365 million, of which $300 million came from illicit oil trade with Syria, Jordan and Turkey. The remainder of the hard currency budget came from the Presidency, sales to foreign companies in Iraq, profits from the Arab Company for Detergent Chemicals (ARADET), and foreign investment (see Figure 41 below for more detail).

The MIC budgeting process started at the company level every June and continued through September. Companies gathered their plans for production, procurement, and salaries for the upcoming year and submitted them to the Directorate of Administration and Finance in the MIC headquarters. The Directorate of Administration and Finance compared the figure with the historical figures and tried to reduce the size of the budget. Then the Technical, Project, Trade, and Research Directorates were asked to review and comment on the company figures.

When the Directorate of Administration and Finance had processed the companies’ budgets, the 21 directors-general of MIC discussed them during budget meetings. These budget meetings were conducted much like court proceedings, and the group made decisions on each proposed budget. The budget figures were adjusted accordingly, and a final budget for each company was issued.

The company budgets for the 51 subordinate MIC companies, for MIC headquarters, and for the eight MIC training centers were consolidated into one budget. Unlike other ministries, the MIC did not have to submit its budget to the Finance Ministry, but it did send a summary report to the Secretary of the CoM. The summary report did not contain detailed figures or descriptions. Abd al-Tawab Mullah Huwaysh had the discretionary authority to reallocate funds within the budget, as he felt necessary.

MIC Banking and Financing

The MIC had its own bank accounts—two each in Jordan, Lebanon and Baghdad—that it used to store hard currency. Rather than having the purse strings controlled by many people in the organization, there were actually only three men most responsible for the transfer of funds from the Iraqi Government to the supplying companies: Jasim Ahmad Hasan, Muhammad Salih Abd al-Rahim, and Hashim Karim ‘Abbas, of whom were all members of the MIC’s Commercial Directorate. The Commercial Directorate was concerned mainly with payment and payment methods, and with delivery of the contracted items after MIC and the supplier signed contracts. The MIC could authorize payments for small contract amounts, but for larger amounts Huwaysh sought permission from Presidential secretary Abid Hamid or through the Presidential Diwan.

  • According to captured documents, Hasan and ‘Abbas are listed on hundreds of bank accounts throughout Jordan.
  • Captured documents also include bank statements and correspondence directing MIC to release funds to suppliers.
  • According to two sources in the Commercial Directorate, their department was funded with a monthly budget of approximately $2 million.

Funds originated at the Presidential Palace and were authorized to be transferred by Saddam. On behalf of Saddam Husayn, Ahmad Husayn Khudayir al-Samarra’i, President of the Diwan, authorized the funds to be sent to the CBI. The Governor of CBI, Isam Rashid al-Huwaysh (no relation to Abd al-Tawab Mullah Huwaysh), forwarded the funds to the MIC accounts at the Rafidian Bank in Baghdad. Abd al-Tawab Mullah Huwaysh controlled the Rafidian accounts. He determined how much was to be sent to each foreign bank account based on project funding, and ordered transfers of exact amounts to specific banks and account numbers. Huwaysh was responsible for authorizing each transfer to each account in Jordan and Lebanon. Following the transfers, al-Rahim, ‘Abbas, and Hasan then controlled the funds in the Jordan and Lebanon bank accounts.

All of these accounts were related to Iraqi trade contracts, for the payment of foreign suppliers to the Iraqi government. When a contract was signed with a supplier, a bank letter-of-credit was opened on behalf of the supplier. The goods were delivered to a company owned by MIC or working for the MIC. The goods were inspected, and then Huwaysh was notified. Huwaysh then notified the Commercial Department at MIC, and then the Commercial Department sent a memo to ‘Abbas, al-Rahim, and Hasan. The three of them then sent a memo to the Jordan or Lebanon bank to release the funds in the form of a letter of credit to the supplier.

The MIC used accounts in the Al-Itihad and Al-Ahay banks in Beirut. According to a high-level official with the MIC, approximately one month prior to OIF, Huwaysh dispatched Hasan and Munir Mamduh Awad al-Qubaysi, Director of Al-Basha’ir, to Beirut on a mission to recover MIC funds still held in Beirut banks. Their instructions were to travel to Beirut, secure the funds, transfer them to the Iraqi embassy in Damascus and then return to Baghdad. Huwaysh had ordered a review of outstanding contracts more than a year old and as a result was able to identify $100 to $150 million in these banks that had not been disbursed.

  • According to two sources in the Commercial Directorate, prior to the war there was a meeting in Baghdad with members of the Commercial Section and the Legal Section of the MIC. They claim that Hasan and al-Rahim were ordered to remove $47 million from the banks in Lebanon and Jordan.
  • They attempted to withdraw funds from the Jordan National Bank but were informed that they did not have that amount of funds available because of unauthorized withdrawals from suppliers.
  • One of the two sources in the Commercial Directorate stated that Hasan and Ali Jum’a Husayn Khalaf canceled approximately 60 lines of credit and were able to withdraw $6 million in currency from the Jordan National Bank, which they then took to the Iraqi Embassy in Syria.

The information provided by these two sources contradicts Huwaysh’s statement that in early April 2003, he traveled to Syria to determine why Hasan and al-Qubaysi had not returned to Baghdad. According to Huwaysh, he had not been able to determine what had happened to the two gentlemen or the funds.

Items Procured by the MIC via Front Companies

Iraq’s MIC had two primary avenues for procuring materials and manufacturing equipment outside of UN OFF channels. One avenue involved the use of import committees and the other a straightforward contracting process to purchase items from foreign suppliers. The MIC obtained large amounts of imported materials and production equipment through a process described by a senior Iraqi:

  • During the annual budget formulation process, managers of MIC facilities identified imported products that their enterprises needed to support their production plans for the following year. After the MIC approved the annual budget at the beginning of each calendar year, the managers prepared tenders for the required imports. The MIC then distributed the tenders at the annual Baghdad Trade Fair and advertised them in Iraqi trade papers.
  • The MIC received bids on the tenders from potential suppliers indicating price, terms; for example, ‘X’ offered to provide some equipment for $1 million. Bids on the tenders from potential suppliers were submitted to a MIC import committee. Originally there was just one import committee, but the volume of imports grew in later years to the point where a second import committee was established to handle the volume. The import committees met every night at the Baghdad International Trade Fair site.
  • The import committees would then take the original tenders and subject them to a rebidding process. For example, company ‘Y’ could offer to supply the same equipment as company ‘X,’ but for $500,000 less than its competitor’s bid, a large saving compared to the original price. Through this process, the import committees saved the MIC millions of dollars. The committees issued quarterly reports on the amounts of money saved. Huwaysh was very proud of this bidding process and often gave the committee members bonuses based on the amount of money saved.
  • The MIC issued a contract when the import committee accepted a bid on the goods. We speculate that the contracted companies were then responsible for obtaining the goods—importing them from Jordan, Syria, Turkey, or elsewhere as necessary—and delivering them to the MIC customer.
  • Engineers from the MIC Technical Directorate always headed the import committees. Other members of the committees included representatives from the MIC Commercial, Administration and Finance, and Legal Directorates, along with an IIS representative from MIC security.

Items Procured via the MIC’s Link to Iraqi Intelligence

The other procurement avenue operated through the MIC “Special Office” and enlisted the IIS to locate suppliers of particularly sensitive or obviously military items, such as weapons and ammunition (for more details see the IIS procurement section of this chapter and the RSI IIS annex). Items purchased through the Special Office were then shipped to Iraq via third countries using front companies as buyers. MIC procurement companies played a key role in these import activities, as did several front companies with ties to top Syrian leaders. During the annual budget formulation process, managers of MIC facilities identified imported products that their enterprises needed to support their production plans for the following year.

The MIC and the IIS formed a special channel for importing sensitive goods and services—dual-use or related to weapons and munitions manufacturing—particularly those that required the assistance of foreign government officials. A source within the MIC Commercial Directorate of stated that the IIS was “involved in everything.” The IIS was the final authority on MIC contracts due to its direct relationship with Saddam.

In November 1997, Saddam approved a MIC proposal to enlist the IIS to develop new procurement, technology transfer, and technical assistance channels to supplement the existing MIC Commercial Directorate channels, according to a source with direct access.

  • Huwaysh formed the MIC-IIS relationship to support Iraq’s missile program after Saddam instructed him to improve Iraq’s missile capabilities.
  • Ties flourished after the death of IIS Director Rafi’ Dahham al-Tikriti in October 1999 and the subsequent appointment of Tahir Jalil Habbush al-Tikriti as IIS Director. A Joint MIC—IIS nomination group initially directed the joint effort.

Dr. Hadi Tarish Zabun, the head of the MIC Research and Development Office, led the MIC end of this second procurement channel. Senior MIC officials have described Dr. Zabun as very capable and powerful. Dr. Zabun is clearly one of the key figures in the Iraqi clandestine procurement story.

  • Dr. Zabun’s office handled all of the secret, special contracts with Russia, Belarus, Yugoslavia, Ukraine, and Bulgaria.
  • Dr. Zabun attended all meetings related to these contracts, and managing these contracts became a huge task for the Special Office.

According to an Iraqi official, the IIS’s procurement activities operated through the IIS Scientific and Technical Information Office, designated M4/4/5. . The Research and Development Office cooperated closely with M4/4/5 to find sellers of the sensitive materials and equipment sought by the MIC.

  • Dr. Zabun coordinated MIC—IIS business dealings, with much of the coordination occurring directly between the Director of M4/4/5 and Dr. Zabun.
  • M4/4/5 desk officers worked closely with IIS officers in overseas stations to find the suppliers. Desk officers had specific country responsibilities.
  • Directives and other communications with the IIS stations in embassies abroad were transported via diplomatic pouch.

An Iraqi official described the coordination process (see Figure 42).

  • MIC requirements—for information, materials, technology, or technical assistance—were sent upward from MIC manufacturing establishments to Huwaysh.
  • Huwaysh then sent an official “Secret, Confidential, and Immediate” communication through Zabun to IIS Director al-Tikriti. Dr. Zabun strictly controlled all communications on MIC-IIS dealings. A special IIS courier element actually carried the correspondence back and forth.
  • The request then descended through the IIS M4 Directorate chain-of-command to the director, who sent it to the appropriate desk officer for action.
  • The desk officer then made arrangements with the field stations, issued tenders, and so on.

When the field officer located potential sellers or received bids, the Director of M4/4/5 would work with Dr. Zabun to broker a meeting between principles in MIC and the desk officer and others involved in the procurement effort.

  • Typical participants in these meeting included Dr. Zabun, the M4/4/5 director, their deputies, the M4/4/5 desk officer who was involved in setting up the transaction, personnel from the MIC establishment seeking the procurement, the heads of the MIC Commercial and Finance Directorates, and often Munir Mamduh Awad al-Qubaysi, head of the MIC procurement company Al-Basha’ir.
  • This group probably considered the terms of the proposed deal and discussed methods of transport and payment for the goods.
  • Huwaysh probably made the final decision on most major procurement actions.

Dr. Hadi Tarish Zabun: The MIC’s Procurement Expert

MIC Director Huwaysh considered Dr. Hadi Tarish Zabun as his right-hand man for conducting foreign procurement deals. Dr. Zabun was the acting Director General of the Al Milad Company (MIC’s largest domestic research and development company) prior to taking over the MIC Directorate of Research and Development and the MIC Special Office. He also served as Huwaysh’s expert on the missile industry.

MIC Front Companies

The MIC used front companies to accomplish those business transactions it could not conduct amid UN scrutiny. Front companies handled the tasks of smuggling oil, funneling UN OFF revenues, and importing weapons and dual-use materials sanctioned by the UN. The MIC formed many of these companies in 1991 to bypass UN sanctions and spread the transfer of funds through a wider variety of companies to avoid international attention (for a full list see Annex K: Suspected Front Companies Associated With Iraq).

  • The MIC operated three primary procurement front companies that were critical to Iraq’s clandestine import activities: Al-Basha’ir, Al-Mafakher, and ARMOS.
  • These companies also had a close association with the IIS and used connections that the IIS had in foreign countries to procure goods.
  • The IIS was also heavily involved in the operation of these companies by having IIS personnel in middle and upper management and in security operations.

The most important of these companies was Al-Basha’ir, which was formed by Husayn Kamil and managed by Munir Mamduh Awad al-Qubaysi. The companies ARMOS and Al-Mafakher were created later by the head of MIC, Abd al-Tawab Mullah Huwaysh, to help facilitate competition among MIC front companies in importing banned goods and to improve productivity. Apparently, Huwaysh deemed these companies to be so important to MIC that around 1998 he moved responsibilities for the companies from one of his deputies to the Commercial Directorate. This allowed him to exert greater control over the operation of the companies, according to a former Regime official.

  • There was a large network of international companies and banks with which these front companies traded. Some were merely banks or holding companies, primarily in Syria and Jordan that purchased items from the manufacturer and acted as cutouts before sending the items to Iraq under false documents.

The networks of these companies still exist through their former employees, even as the old offices now stand empty. The owners and employees of former front companies may be seeking to become a part of the post-Saddam Iraqi business community.

Bidding Process With MIC Committees. According to a former civil engineer, the MIC bidding process began when a MIC facility generated a requirement, called a tender. There were two kinds of tenders, regular or invitation.

  • Regular tenders were open and could be bid upon by any contractor or private company approved by MIC security, including foreign contractors.
  • Invitation tenders were issued when specialty items were required that could only be supplied by specific companies. In addition to MIC security approval, it is most likely the IIS and/or MFA also vetted these companies. The invitation tenders were issued directly to company agents in Iraq and Jordan, not to the foreign companies directly.
  • This approval process was a result of Iraqi officials’ concerns over foreign companies with hidden connections to Israel. According to captured documents, the MIC blacklisted a Bulgarian company because a Russian-Israeli businessman owned it.

Interested foreign and domestic supply companies then offered bids for the tenders through the MIC legal department. The MIC Procurement Committee, an informal seven-member panel, selected the best bid based on the offered price and the preference rating of the particular supply company. After a tender was awarded to a specific supplier, the MIC facility that originated the tender passed the contract to a MIC trading company such as Al-Basha’ir, ARMOS, or Al-Mafakher. These companies worked through the approved supplier to conduct the actual procurement.

The Al-Basha’ir Trading Company. The MIC established the Al-Basha’ir front company in 1991. The company’s names has been discovered on hundreds of contracts for weapons and dual-use materials, as well as legitimate day-to-day goods and supplies. The company traded in items such as construction materials, foodstuffs, and power generators to cover its real activity, which was coordinating with neighboring countries to facilitate the purchase of illicit military equipment. The company was headed by Munir Mamduh Awad al-Qubaysi, a former 15-year employee of the IIS. Because of his connections, relations between Al-Basha’ir and the IIS were especially close from the time he became Director of the company in the late 1990s.

  • Contrary to some sources, Al-Basha’ir was owned and operated by the MIC. Al-Qubaysi’s history with the IIS and the fact that many other members of the Al-Basha’ir staff were also IIS officers, led many to assume Al-Basha’ir was an IIS front company.
  • The last chairman of Al-Basha’ir’s board of directors was the head of the MIC’s Administration and Finance Directorate, Raja Hasan Ali Al-Khazraji.

ISG judges that several Regime members exerted varying degrees of influence over the Al-Basha’ir procurement process. There is, however, conflicting reporting of who was in control of Al-Basha’ir procurement. Several sources have stated that it was the MIC Director, Abd al-Tawab Mullah Huwaysh. Reportedly, Qusay Saddam Husayn al-Tikriti and a committee comprised of senior officials of the SSO met with Al-Basha’ir trustees to direct the procurement of prohibited materials and to authorize payments.

  • Trustees included al-Qubaysi, Jasim Ahmad Hasan, and Muhammad Salih Abd al-Rahim. Qusay and his advisers would tell the Al-Basha’ir trustees what items they wanted purchased about twice a month.
  • Qusay made all final decisions on procurement and expenditures.
  • Prior to Qusay, Husayn Kamil, Saddam Husayn’s, son-in-law held this position.

Al-Basha’ir participated in the bidding process for the MIC by splitting the company into foreign and domestic sections. The split allowed Al-Basha’ir to increase its ability to communicate within the company and its offices abroad and for the import of military and security-related equipment. One set of documents would show the actual items to be procured and then the Al-Basha’ir trustees would prepare a second set of procurement documents with benign end-use items to conceal the true nature of the illicit activity.

  • For example, Al-Basha’ir described spare tank parts as air conditioning systems. Al-Basha’ir would then prepare the bank transfers for the seemingly innocuous items.
  • One set of papers for the actual items were either given to the SSO, or in some cases taken to the homes of some of the Al-Basha’ir officials.
  • The company would offer small contracts to the Iraqi companies, while large contracts would be based on a recommendation from the director of the IIS, ‘Uday Husayn, Qusay, Vice President Taha Yasin Ramadan al-Jizrawi, or Saddam.

Al-Qubaysi was largely responsible for Al-Basha’ir’s success, according to an Iraqi official with direct access to the information. He ran the company well and maintained a close relationship with the IIS. As a result of this relationship, Al-Basha’ir could use its IIS liaison, Majid Ibrahim Sulayman, to facilitate purchases with IIS field stations around the world.

Al-Qubaysi also had a close relationship to the Shalish family and with other prominent personalities in Syria, and he opened the connection with the SES International in Syria. Dr. Asif Shalish was head of the Syrian firm SES, while his uncle, Dhu Al-Himma ‘Isa Shalish, owned the company and is the Chief of Presidential Security for his cousin, President Bashar al-Asad. Close relations with the Syrians allowed Al-Basha’ir to garner the bulk of the trade through Syria, which became the primary route for Iraq’s illicit imports over the last years before the war.

  • The SES and Lama companies are two of the major holding companies for Al-Basha’ir goods in Syria.
  • Fifty-four percent of all MIC purchases through the Syrian Protocol were through Al-Basha’ir, according to captured SOMO documents.

The IIS used the Al-Basha’ir front company to facilitate a deal with the Bulgarian JEFF Company to obtain T-72 tank parts and Igla MANPADS, according to a former MIC senior executive. The goods were either flown to Baghdad under the guise of a humanitarian mission or they were delivered via Syria. If coming via Syria, illicit military goods typically arrived via the Latakia Port and then were then trucked to Iraq in SES company vehicles.
Information from contracts found and data derived from the records of the SOMO indicates that the Al-Basha’ir Company was also a major broker in Iraqi oil smuggling(see Figure 43).

  • The Jordanian branch of Al-Basha’ir signed contracts for the export of oil and oil products from Iraq, according to SOMO records.
  • SOMO records indicate Al-Basha’ir signed 198 oil contracts from November 1999 through March 2003. The contracts were for fuel oil, usually at $30 per ton, and gas oil, usually at $80 per ton. Almost all were for export by ship through the Arabian Gulf, although the destination of two contracts was listed as “North,” which usually meant Turkey.
  • The value of the contracts totaled $15.4 million. This is the amount to be paid to SOMO. We do not have information about the amount of money Al-Basha’ir earned from the trade.

ARMOS Trading Company. ARMOS, a joint Iraqi MIC—Russian venture, was initially proposed by a Russian general named Anatoliy Ivanovich Makros. Makros, a former Soviet delegation leader in the 1980s, MIC, and IIS founded ARMOS in 1998. Makros’ original scheme was to bring Russian technical experts into Iraq with cooperation from MIC and IIS through ARMOS. Despite the Russian ties, however, MIC officials dominated the company (see Figures 44 and 45).

  • Dr. Hadi Tarish Zabun, head of the MIC Special Office, was chairman of the ARMOS Board of Directors.
  • Siham Khayri al-Din Hassan, a Romanian-educated economist who had worked in the MIC Commercial Directorate, was the manager of ARMOS.
  • Munir Mamduh Awad al-Qubaysi, manager of Al-Basha’ir, was also on the board of directors, along with a representative of the IIS M23 Directorate (MIC Security). (see the IIS procurement section of this chapter and the RSI IIS annex.)

ARMOS had a much smaller staff than Al-Basha’ir. But despite its size, the company achieved good results, according to an Iraqi official with direct access to the information. ARMOS conducted approximately 5 percent of the amount of business of Al-Basha’ir, but five times more than Al-Mafakher. In comparison to al-Qubaysi, however, Hassan wielded relatively little power.

  • ARMOS served as the conduit for many Russian contracts, including contracts for aircraft engines for the Iraqi Air Force, according to another official.
  • Captured documents show that ARMOS was involved in a deal to import MI-8 helicopter engines from Russia through Syria in 2001.

Captured documents detail an agreement in 2002 between Iraq and Russian experts, Mr. Shakhlov and Mr. Yusubov for the procurement of Russian missile technology and equipment in which ARMOS acted as a liaison between them. The documents also mention how the Iraqis used the Russian organization for victims of nuclear disasters as a cover for the operation. The use of a charitable organization in this transaction highlights the variety of methods used by the Iraqi front companies to conceal their activities. The contract reads, “as for the second party (the Russian Nuclear Disaster Victims Fund Institution) blockade imposed on Iraq will not be considered a forceful circumstance.”

  • The value of the contracts was for a total of $600,000.
  • Some $100,000 for the Russian Standard Military Specifications system.
  • Another $500,000 for the Schematic Diagram System.

According to Huwaysh, although the company was organized primarily to do business with Russia, in 2002 the MIC granted ARMOS access to other potential markets, including Bulgaria and Ukraine. This new access was similar to that of Al-Basha’ir.

  • In May 2002, ARMOS was offered Bulgarian electro-chemical gun-barrel machining (ECM) from a Cypriot gray arms broker, Green Shield.

Al-Mafakher for Commercial Agencies and Export Company. The MIC established the Al-Mafakher for Commercial Agencies and Export Company, Ltd in 2001. Adil Nafik, a former Al-Basha’ir Deputy Director, managed Al-Mafakher. According to a former MIC employee, the company was considered ineffective, mainly because of its inefficient staff and the fact that it was a newly established business.

  • Al-Mafakher was much smaller than Al-Basha’ir—with just six employees—and conducted only 1 percent of Al-Basha’ir’s business.
  • Al-Mafakher had investment abroad, including a 50-percent share in Elba House in Jordan and a 25-percent stake in a Tunisian company, possibly named Parabolica, which manufactured leaf springs for automobiles.

Iraqi Intelligence Service

Saddam used the IIS to undertake the most sensitive procurement missions. Consequently, the IIS facilitated the import of restricted dual-use and military goods into Iraq through Syria, Jordan, Belarus, and Turkey. The IIS had representatives in most of Iraq’s embassies in these foreign countries using a variety of official covers. One type of cover was the “commercial attaches” that were sent to make contacts with foreign businesses, set up front companies, and facilitate the banking process and transfers of funds as determined and approved by the senior officials within the government (see MoT Section, Facilitating Illicit Trade through Commercial Attaches). In June 2002, two IIS employees were transferred to the MFA and sent to work at the Iraqi Embassy in Belarus under the cover title of “attache,” according to a letters written between the IIS and MFA.

  • From 1994-1997, the IIS M19 Directorate of Commercial Projects used front companies to import prohibited items, according to reporting.
  • A general order by Saddam in 1998 to collect technology with military applications led to the formation of a committee consisting of the Presidential Secretary Abid Hamid Mahmud al-Tikriti, IIS Director Tahir Jalil Habbush al-Tikriti, MIC Director Abd al-Tawab Mullah Huwaysh, and the head of the Directorate of General Military Intelligence. This committee tasked Habbush to procure technologies when Huwaysh deemed the items to be of a sensitive nature.
  • In 1998, after Saddam Husayn issued a general order for the use of IIS in developing new procurement relationships, the IIS dissolved M19 and transferred procurement efforts to the M4 Directorate of Foreign Intelligence who had more direct access, infrastructure, and developed relationships with foreign countries, according to multiples sources.

IIS Procurement Leadership and Mission

IIS Procurement under the direction of Tahir Jalil Habbush al-Tikriti (see Figure 46) was part of a collaborative effort headed by the MIC to obtain equipment, materials, and expertise for Iraq despite UN sanctions. In 1997, Saddam approved a MIC proposal to enlist IIS to develop new procurement, technology transfer, and technical assistance channels outside of Iraq. Within the IIS, primary procurement activities took place in the Scientific and Technical Information Office (M4/4/5).

  • Prior to 1998, the IIS M-19 Directorate had both a Domestic Branch that dealt with Iraqi companies and a Foreign Branch that dealt with foreign trade, according to a former IIS officer with direct access. The Foreign Branch was headed by Sadak Shaban.
  • In accordance with a 1997 mandate from Saddam to improve Iraq’s missile capabilities, the MIC and IIS formed a joint effort to accomplish this goal, according to a senior MIC official. The participants included head of the IIS Scientific Intelligence Section and the head of the IIS, al-Tikriti.

The IIS officers stationed outside of Iraq were in a good position to carry out the mission of the MIC and IIS procurement without drawing the attention of the international community. IIS officers generally reported back to the Scientific and Technical Intelligence Section, designated M4/4/5. Dr. Zabun’s “Special Office” cooperated closely with M4/4/5 to find sellers of the sensitive materials and equipment sought by MIC. M4/4/5 desk officers worked closely with IIS officers in overseas stations to find the suppliers. Desk officers had specific country responsibilities.

  • After reorganizing the M19 Directorate into the M4/8 Division in 1998, the IIS operated several front companies in Syria, according to a former high-ranking IIS officer. The Director of M4/8 was Hasan al-’Ani.
  • Dr. Zabun coordinated the entire MIC—IIS business dealings, with much of the coordination occurring directly between the Director of M4/4/5 and Dr. Zabun.
  • For example, one officer was responsible for all Syrian and Bulgarian procurement; another was responsible for Russian and Yugoslav procurement, while others handled actions with North Korea, Egypt, and elsewhere. Directives and other communications with the IIS stations in embassies abroad were transported via diplomatic pouch.
  • The IIS, along with an Armenian-Iraqi named Ohanes Artin Dosh, established a front company in Switzerland with several subsidiaries, according to a high-ranking Iraqi official with direct access. Jaraco SA, a firm operated by Esfandiar and Bahman Bakhtiar was another IIS Front Company. The Iraqi Government gave the Bakhtiars 150,000 Swiss francs to establish this company. An unwritten agreement allocated equal shares of Jaraco to the IIS and to the Bakhtiars.

In some instances the sensitivity of the relationship between Iraq and the foreign country was such that it was easier for the company to set up a branch within Iraq to broker deals rather than for Iraq to operate within the foreign country. Most reporting suggests that IIS did place officers in foreign countries to operate companies; however, one former IIS officer with direct access stated that the IIS dealt with foreign companies through branches located in Iraq and exploited the employees of these companies.

  • According to a high-level MIC official, Neptun Trading Company had an office in Baghdad up until OIF. An alleged Russian military intelligence officer suggested Neptune would be a good company for the IIS to cooperate with to supply the Iraqi army with Russian items. Colonel Yevgeniy Turskiy, a Russian Military Attache to Iraq directed the company in Baghdad. A source from the DMI Section 6 stated that Neptun was run by Russian intelligence and was a cover company run out of the Russian Embassy in Baghdad.

IIS M16 Directorate of Special Logistics. The IIS M16 Directorate of Criminology has been a major concern to ISG because of its work with poisons and toxins. ISG does not know the full scope of M16’s activities, and we do not know the degree to which the Technical Consultation Company’s procurement efforts contributed to these activities. There is conflicting evidence that suggests M16 did procure banned items for its labs through illicit channels. The Director of M16, Nu’man Muhammad al-Tikriti, and other reports suggest that M16 was only involved in research and development and that it did not possess prohibited chemicals after 1997, according to multiple sources.

  • In late 2001 or early 2002, IIS M16 Officer Khalid ‘Alawi met the director of M4/4/5 to discuss procuring goods, including equipment used to analyze chemical materials. M4 was unable to obtain the equipment, and it was never delivered to M16.

IIS Procurement Cooperation with Foreign Intelligence Services

IIS also used its connections within foreign government intelligence services to facilitate the transfer of illicit goods into Iraq. Before the end of 2000, the Iraqi and Syrian Ministers of Transportation met to establish the Iraqi Organizing Office in the Syrian port of Tartus to facilitate the shipment of goods to Iraq via land, according to a former IIS officer with direct access. The operating manager was an IIS officer from the M5 Syria Directorate. The predecessor of the Iraqi Organizing Office was the Al-Noras Company operated by Muhammad Talad al-’Isa and a Syrian intelligence officer. Iraq used this arrangement to deliver heavy equipment transport vehicles, but ISG did not detect any weapons shipments.

  • In 1999, secret exchanges occurred after Iraq sent intelligence delegates from the IIS, represented by Abid Hamid Mahmud al-Tikriti, the MIC, and the Presidential Bureau to Syria. The discussions yielded an agreement that Syria would facilitate the transportation of material coming to Iraq by changing shipping documents to make the military equipment look like ordinary civil items, as well as changing end-user certificates to the Syrian Ministry of Defense.
  • Iraq had contracts with a Belarusian company—Belmetalenergo (BME)—and a joint Russian-Belarusian firm—Electric-Gaz-Com (EGC)—to import missile technology, parts and expertise. All contracted goods with Belarus were sent through Syria. The SES International would implement contracts for transportation of the goods to Iraq under the protection of Syrian intelligence for a fee of 10 percent of the contract price.

Items Procured by the IIS

In accordance with Saddam’s instructions to MIC Director Abd al-Tawab Mullah Huwaysh, the MIC-IIS relationship was formed to support to Iraq’s various missile programs. Although missile programs may have been the reason for the cooperative effort, the IIS also procured for the telecommunications industry, scientific research and development community, and the military. The following are examples of IIS deals that involved the procurement of such items:

  • In February 2003, Saddam ordered Al-Basha’ir Head Munir Mamduh Awad al-Qubaysi, Al-Milad Company Director General Sa’ad Abbass, and IIS M4/4/5 procurement officer for Syria and Bulgaria Majid Ibrahim Salman al-Jabburi to travel to Damascus, Syria to negotiate the purchase of SA-11 and Igla surface-to-air missiles, according to a source with good access. This team negotiated with ‘Abd al-Qadir Nurallah, manager of the Nurallah Company, to purchase the missiles from a Bulgarian firm, to provide end-user certificates, and to ship the weapons to Iraq.
  • In mid-2001, the Technology Transfer Department of the IIS procured between 10 and 20 gyros and 20 accelerometers from a Chinese firm for use in the Al-Samud ballistic missile, according to a former high-ranking official in the MIC. At approximately the end of 2001, the IIS also arranged for Mr. Shokovan from China to teach a course on laser and night-vision technology.
  • The IIS completely controlled all procurement from North Korea, according to a senior MIC official. Iraq signed a contract with North Korea to add an infrared-homing capability to the Volga missile to provide jamming resistance in 1999. Iraq also sought to improve the accuracy of its Al-Samud and Al-Fat’h ballistic missiles by obtaining inertial navigation systems, gyros, and accelerometers from North Korea. The IIS also completely controlled procurement via a Russian and Ukrainian company named Yulis that supplied small arms, Kornet antitank guided missiles, and night-vision equipment between 1999 and 2000.
  • Iraq sought assistance from the Russian company Technomash in developing a test bench for missile engines, missile guidance and control systems, and aerodynamic structures. The ARMOS Company signed a contract with a company in Poland to obtain Volga missile engines. The IIS completely controlled this transaction, which sought approximately 250 Volga engines.
  • The IIS facilitated a visit by a delegation from the South Korean company Armitel, and contracts were signed to procure fiber-optic equipment for military communications between 1997 and OIF, according to a former MIC senior executive. The contracts were valued at $75 million, and Iraq received more than 30 containers during two shipments, the first via Syria and the second via Lebanon. Middle companies in Syria and the UAE covered these contracts.
  • From 2000 until OIF, the IIS used the MIC Al-Basha’ir front company to facilitate a deal with the Bulgarian JEFF Company to obtain T-72 tank parts and Igla MANPADS, according to a former MIC senior executive.

IIS Front Companies

The IIS ran a number of front companies that were used to procure specialized items for its own use and for other security elements. The primary IIS Directorate handling these transactions was the M4/8 Directorate, previously known as the M19 Directorate. As of 1994, M4/8 was organized into three different sections, the domestic section, the foreign section, and the trading section (for more information on the IIS structure see the RSI IIS annex).

The Domestic Section, also known as Section One, was primarily responsible for creating front companies inside Iraq and facilitating trade with these companies to import/export oil, batteries, copper and food products. Section One also maintained front companies in the restaurant and retail businesses on behalf of the IIS Directorate of Counterintelligence (M-5). These M-5 front companies included the Al-Zaytun and Al-Amhassi restaurants (see Figure 47). Although M-5 owned these business establishments, they were leased to Iraqi nationals who were not associated with the Iraqi Government. Section One managed a total of eight companies within the trade, travel, and hauling industries, but as of June 2003, Al-Dala and Al-Yarmuk travel companies were the only front companies still operating in Baghdad.

The Foreign Section, also known as Section Two, conducted covert trade with overseas companies. Sadiq Sha’ban was the director of this section from 1994 to 1995 Salih Faraj was director in 1995, Sadiq Sha’bi from 1995 to 1997, and Husayn al-Ani from 1997 to 2003.

The Trading Section, also known as Section Three, dealt with the import and export computers, electronic equipment, listening devices, copper, and industrial products for use within the IIS and other government agencies. Starting in 1995, this section, while it was housed within the Projects Department, operated directly under the management of the IIS General Director. According to a former high-level official at the IIS, Walid Hadi, who served as the section’s director from 1989 until 2003, basically became a figurehead from 1995.

In 1997, M-19 Director Mana ‘Abdallah Rashid ordered a halt to all the activities of Section Two, because of the failure of one of the sections companies to deliver spare parts, tires, batteries, electronic equipment, and vehicles to the Office of the Presidency. During this same period, Hassan Khushnaw, the manager of a Section One front company, Al-Wadi Al-Akhad Trading, was caught attempting to smuggle copper out of Iraq. Khusnaw was subsequently arrested and jailed, along with the previous director of M-19, Sami Hanna. These incidents resulted in the permanent closure of the companies, except for Al-Yarmuk and Al-Dala. Sections One and Two were removed from M-19 and placed within the Counterespionage Directorate (M-5) and Directorate of Secret Service (M-4), respectively (see Figure 48). Section Three remained under the IIS Director’s office.

  • The term “Trade Office” was used internally, but when dealing with the outside world, the name “Technical Consultation Company” was used.
  • The Trade Office fell organizationally under Khudayir al-Mashadani, the head of the Special Office, M1, but Walid Hadi reported directly to Tahir Jalil Habbush al-Tikriti, the head of the IIS, according to an Iraqi official.

The M4/8 directorate operated several front companies in Syria. To manage these companies, the directorate was broken down into three sections, including commercial, accounting, and liaison sections. The liaison section coordinated activities between the commercial and the accounting offices. Some of the cover companies operated by the directorate included Al-Riat, Al-Manuria, and Al-Enbuah.

The IIS used companies that had contact with the outside world as a means of collecting foreign contact intelligence. The organization owned and operated a front company called Al-Huda Religious Tourism Company. Al-Huda was also known as the Al-Dhilal Religious Tourism Company, and was established after the conclusion of the Iran-Iraq war and subsequent exchange of prisoners.

  • The company’s ostensible purpose was to transport religious tourists to holy places in Iraq, such as Samara, Karbala and Najaf.
  • The IIS created the company as a way to gain access to the Iranian tourists once they were within Iraq and collected information through casual illicitation.
  • All of the employees of the company were IIS employees.

Special Security Organization

ISG has found little evidence that the SSO was used to procure WMD materials, prohibited or dual-use goods. This finding is consistent with the SSO’s mission of domestic only operations and inherent primary mission of securing Regime sites and leaders and monitoring the citizenry to ensure loyalty. The SSO associated laboratory, the Food Examination and Analysis Laboratory (FEAL), conducted food stuff testing but there is no evidence to date that FEAL used illicit channels to procure equipment for Iraq.

  • Amir Ibrahim Jasim al-Tikriti, a member of the SSO and a relative of Saddam, was sent to Poland in 2000 to work on his doctorate in mathematics. Although there he procured Volga engines and batteries on behalf of the IIS for Iraq, according to claims. The same source stated that this procurement relationship was largely a result of Amir’s relationship to Saddam and not because of his SSO affiliation.
  • After Abd al-Tawab Mullah Huwaysh became MIC Director in 1997, he decided that the SSO had no technical expertise and therefore had no procurement role with the MIC.

SSO Procurement Leadership and Mission

Although the SSO, under the direct supervision of Qusay Saddam Husayn al-Tikriti, may have played a small role in procurement outside of the country, it is more likely that the SSO’s role in the procurement process was limited to securing illicit shipments once inside Iraq. Senior members of the Regime, such as Abid Hamid Mahmud al-Tikriti, the former presidential secretary, were probably aware of this role for the SSO, but were most likely not directly involved in the process. SSO officials were also in charge of monitoring those involved in the procurement process, like the RG and SRG, to ensure their loyalty to the Regime was maintained.

  • According to authorization and shipping documents, between 1993 and March 2003, the State Company for Marketing Drugs and Medical Appliances, Kimadia, shipped dual-use chemicals and culture media to Iraq’s SSO. The items were supplied to SSO’s Walid Khalid.

Iraqi Atomic Energy Commission

According to multiple Iraqi sources, the IAEC was responsible for the development and retention of nuclear expertise in Iraq. The IAEC most likely relied on its own procurement department for acquiring materials and technology.

  • A foreign intelligence service revealed in 2002 that the IAEC was pursuing procurement contracts from a South African company for HF communications systems and 16,000 channel receivers.
  • Captured documents dated 2002 show direct negotiations with several Indian institutions for medical and chemical technology transfers.
  • Other documents dated 2002 reveal contracts to obtain vacuum furnaces manufactured in Russia.

Documentary evidence and debriefings, however, reveal that the IAEC also used the MIC, MIC front companies, and the IIS to procure foreign materials and technologies.

  • Internal memoranda dated January 1995 reveal that the IAEC was reviewing procurement contracts with the Al-Basha’ir Company, the Latif Company, and the Al Jubayl Office. These contracts were based on oil bartering—common practice before the UN OFF Program was accepted in 1996.
  • In July 1996,MIC, Al-Basha’ir Company, Ministry of Industry, and IAEC were passing correspondence regarding overdue debts to Al-Basha’ir totaling $14.2 million.
  • According to a former Iraqi scientist, the IAEC asked the MIC to obtain $3.5 million worth of computer cards in 1998.

In January 2002, according to a detained senior MIC official, Saddam directed the MIC to assist the IAEC with foreign procurement. On a few occasions the IAEC used MIC to procure goods, ostensibly as part of the IAEC modernization project. At this time, Saddam Husayn also directed the IAEC to begin a multi-year procurement project called the IAEC Modernization Program. This program, which was still functioning up to the Coalition invasion in 2003,strove to revitalize the IAEC capabilities. The chief improvements under the program included:

  • Creation of new machine tools workshop at Tuwaitha outfitted with new generic machine tools, including CNC machines (see Figure 49).
  • Improvement of the IAEC’s nonnuclear technical and manufacturing capabilities.
  • Budget increases that resulted in ten-fold salary increases and new recruiting efforts for IAEC scientists.

The IAEC’s procurement relationship with the IIS dates back to the late 1990s. The IIS procurement channel was reportedly reserved for sensitive foreign technical information and items prohibited by the UN sanctions. March 2002 IIS internal documents describe the creation of a committee to obtain resources for the IAEC.

Ministry of Transport and Communication

The Ministry of Transportation and Communication (MoTC) also facilitated and participated in the procurement of prohibited items for the former Regime. The MoTC transshipped sensitive commodities into Iraq using a range of deceptive practices designed to foil international monitoring efforts. The MoTC also served as a benign cover end user for the acquisition of dual-use items for the MoD and other Iraqi security services. The MoTC procured prohibited fiber-optic materials to improve the Iraqi telecommunications infrastructure. By evaluating thesecontributions, we judge that the MoTC played a small but important role in Iraq’s illicit procurement programs.

Mission and Key Procurement Companies under the MoTC

The MoTC was responsible for all internal movement of commercial goods in and out of Iraq. The MoTC accomplished this mission through 14 state-owned enterprises known as “General Companies”. Three of these stand out as playing key parts in facilitating illicit procurement for Iraq.

  • The Iraqi Land Transportation General Company (ILTC), which controlled all surface transport in and out of Iraq with the exception of fuel transport and railways.
  • The Iraqi-Syrian Land Transportation Company had offices near customs points at Tartus port in Syria to assist in the movement of goods into Iraq. This ILTC subordinate company seems to have been established to handle the increased transactions resulting from the Syrian Trade Protocol.
  • The Iraqi-Jordanian Land Transportation Company, an OFF shipping company run by MoTC, had an office in Aqaba, Jordan, and performed a similar role as the Syrian Land Transportation Company. ISG also suspects that the Iraqi-Jordanian Land Transportation Company was probably set up to accommodate trade from the Jordan Protocol.

Ministry of Higher Education and Scientific Research

Throughout the 1990s, Saddam Husayn used the Ministry of Higher Education and Scientific Research (MHESR), through its universities and research programs to retain, preserve, and protect Iraq’s indigenous scientific and WMD-related capabilities, including its research projects and knowledge base. The MHESR had close working ties with MIC, which supported the ministry by coordinating, directing, and implementing the Regime’s critical research and development activities, according to former MIC director Huwaysh. ISG also has uncovered one case where Iraq used the cover of its student exchange program to procure goods.

University Collaboration With MIC

The MIC maintained close working ties with the MHESR, links that entailed financial support for academic research and the provision of academic experts for MIC projects. These ties shaped MHESR academic priorities, provided an opportunity for MIC to directly commission academic research, and facilitated an exchange of personnel between the two entities.

The MHESR Research and Development Directorate, headed by Hasin Salih (and later by Al-Jabburi) developed a close working relationship with the MIC Research and Development Directorate (headed by Dr. Hadi Tarish Zabun) and the MIC General Director for Teaching. Salih was responsible for all research and development activities and would frequently meet with the Research and Development Directors from all the ministries to discuss work and research problems. The MIC’s interests were considered particularly important in the selection of research projects at the universities.

  • According to one source, prior to OIF, approximately 700 to 800 academics were regularly sent to work at the MIC or its companies for a few hours per week.
  • The MIC Director claimed that he increased the number of contracted university instructors working with the MIC from a handful in 1997 to 3,300 by 2002.
  • Twenty professors assisted the Al-Samud factory. They worked to solve technical problems and provide training for staff members at the factory. According to one source, however, many Iraqis considered the overall effort of limited value.
  • MIC missile experts also worked closely with the universities, in some cases supervising students with graduate research and in other cases teaching students at the universities.

Huwaysh involved himself in each phase of MIC-sponsored projects with the MHESR, including project applications, planning, development, and implementation. Huwaysh reviewed and approved all project proposals submitted by university deans, department heads or faculty advisers within Iraq. After receiving Huwaysh’s approval, the company and the university staff would discuss and agree to the parameters of the project. Then MIC opened the project up to a normal bidding process, inviting different institutions, including foreign nationals from Jordan and Syria, to tender bids for the project proposals. After scrutinizing incoming bids, university department heads conducted and then submitted a feasibility assessment of the proposal to the MIC. The MIC chose the final bidder; the contract price would be discussed when the contract had been finalized.

  • MIC closely monitored its research projects.MIC leadershipbiannually held “conferences” where university staff conducting MIC-sponsored research briefed the MIC leadership on the progress of their work. These conferences afforded the MIC opportunities to monitor progress on research projects, identify problems, and offer solutions to the researchers.

MIC Research Support at Universities

Documentary evidence reveals that MIC and its companies divided their research projects among Iraq’s major universities.

  • Baghdad University and Mustansiriyah University provided general multi-discipline support to MIC projects.
  • Mosul University provided support to the MIC in the areas of remote sensing and chemistry.
  • In another case, Basrah University provided support in polymer chemistry.

Other examples of specific projects sponsored by MIC companies include:

  • The Al Rashid State Establishment financed polymer research on thermal insulators for the Sahm Saddam (“Saddam’s Arrow”) missile.
  • The Al Huttin Company subsidized research on replacing brass shell casings with polyethylene.
  • The Al Huttin Company also funded research on heating rate problems in induction furnaces.
  • The Al Shahid Company financed research focusing on energy loss from the safety dump of copper from the furnace.
  • The Al Qa’Qa’a Company sponsored nitrocellulose research.
  • The Al Samud company paid for research on an inexpensive method to produce spherical iron molds.

Exploitation of Academic Exchanges for Procurement

Iraq’s academic exchange program—for both students and professors—was used to facilitate the transfer of dual-use technology, using home universities as false end users to illicitly acquire goods in support of Iraq’s WMD programs. By sending students and professors abroad, Iraq may also have been using both students and professors to transfer, support and advance Iraq’s intellectual and WMD “infrastructure.”

  • In 2000, Amir Ibrahim Jasim al-Tikriti, a member of the SSO, was sent to Poland to continue his mathematics doctorate on the assumption that he would return to the SSO upon completion of his studies. During that time in Poland, we judge that the IIS recruited or tasked al-Tikriti to facilitate the purchase of Volga missile engines for the Iraq’s Al-Samud II missile program. ISG has corroborating evidence that the MIC trading company ARMOS signed the contract(s) with a Polish firm for the Volga engines, and that the IIS controlled the entire acquisition.
  • According to reporting, approximately 250 Volga engines were purchased from a stock of old missiles and sent back to Iraq possibly with complicity of the Iraqi Embassy in Warsaw. Al-Karamah purchased the engines and originally stored them at the Samud factory, and then moved them to Ibn Al-Haytham.

Ministry of Agriculture

Throughout the 1990s, the Ministry of Agriculture (MoA) procured controlled items outside UN sanctions and then later outside the UN OFF Program for special projects as well as legitimate agricultural projects. The Iraqi front company Al-Eman Commercial Investments owned by Sattam Hamid Farhan al-Gaaod had a special relationship with the Agricultural Supplies Committee of the MoA. According to an Iraqi businessman, Al-Eman Commercial Investments from 1990 to 2003 supplied MoA with seeds, pesticide, veterinarian medicine, harvesters, tractors, water pumps and spare parts of machinery.

  • Before OIF, Al-Eman periodically sent shipments from Jordan to Iraq via the Iraqi Embassy. Jordan allowed the shipment of one container a month under diplomatic cover that did not require inspection.
  • In 1995, Al-Eman purchased a kit of reagents worth $5,000 from the Swiss firm Elisa for an organization named Al-IBAA, a special unit in the Iraqi MoA. Al-IBAA was connected to Saddam, had a special research facility and was granted an unlimited budget. Al-IBAA was able to obtain any equipment and support within Iraq that it needed and paid cash for all its orders.
  • According to a high-level Iraqi civilian official with direct access, the MoA took control of one of the food testing labs, which was used to test Saddam Husayn’s food. Equipment for the lab was purchased through the Iraqi–Jordanian Protocol. Dr. Sabah of the Veterinary College was instrumental in these purchases (see Figure 50).

The MoA also used the MIC to obtain goods that were deemed especially difficult to procure given the restrictions of UN sanctions. At the same time, the MIC would occasionally identify the MoA as a false end user to obtain restricted dual-use goods.

  • Between 1992 and 1998, the MIC was responsible for all chemical procurement in Iraq. The MIC brought active ingredients into the country using false bills of lading, formulated the product, and then distributed the final product to the appropriate ministry. For example, the MIC smuggled insecticides—probably Malathion and Parathion—into Iraq, formulated them at Al-Tariq, and subsequently provided them to the MoA.
  • In late 2002, the MIC and IIS directed Iraqi businessman, Sattan Al Ka’awd (who may also be known as Sattam Al-Gaaod), to approach a Croatian engineer, Miroslav, and other Croatians to purchase restricted precursor chemicals from Croatia. According to an Iraqi businessman with direct access, Al Ka’awad was tasked for this activity due to his close working relationship in the past with the Iraqi Government. The end user of the chemicals was reportedly the MoA but the actual recipient was said to be involved in CW activities, according to the same source.

Ministry of Interior

ISG has not discovered evidence that the Ministry of Interior (MoI) was involved in the procurement of WMD materials, prohibited items, or dual-use goods. This finding is consistent with the MoI internally focused mission. In addition, prior to OIF, the MoD not the MoI administratively controlled security groups that may have been involved in illicit procurement activities.

Front Company Conglomerates: Al-Eman and Al-Handal

In addition to the major front companies already mentioned in this report, the Iraqi Government and its citizens set up hundreds of other front companies both within the country and around the world for the purpose of smuggling prohibited items into the country. We now know of over 230 of these front companies, many of which were created for a single transaction and never used again. There were, however, several major front companies that participated in the majority of this illicit business, some of which were government-sponsored and one large conglomerate, Al-Eman, which was privately owned.

The term “Iraqi front company” has become pervasive in terms of Iraq’s procurement networks. One definition of an Iraqi front company is an Iraqi company or Iraqi controlled company, operating either within Iraq or abroad that knowingly partakes in international commerce with the intent to acquire goods or services for an Iraqi client using deceptive trade practices. Deceptive practices could include misleading or colluding with suppliers, intermediaries, or others involved in the acquisition, shipping, or payment processes. This would include such actions as misrepresenting the origin or final destination of goods, or misidentifying the goods, the end user, or end use. Complicating matters, many of these companies were involved in legitimate trade, with illicit activity playing a less significant role. The association of the IIS with a company also suggested Iraqi influence and front activity.

The assumption and general appearance was that many Iraqi companies involved in international trade, as a norm, were aware of deceptive trade channels and took advantage of them in dealing with both routine and sensitive acquisitions. However, the government’s association and influence with trade companies varied. Some companies may not have had a choice, but others found it in their financial interest to get involved, and therefore approached and competed for government contracts.

Al-Eman, directed by Sattam Hamid Farhan Al-Gaaod (see Figure 51) had its start in the early 1990s, and up until OIF, was the largest network of Iraqi front companies with a number of subsidiaries operating in Baghdad, Iraq, Dubai in the UAE, and Amman, Jordan. Al-Eman companies have been observed for the last 10 years as they procured dual-use and military goods for the Iraqi Government, and were heavily involved in the UN OFF kickback scheme. Al-Gaaod used his relationships with Saddam and ‘Uday Saddam Husayn al-Tikriti, and Husayn Kamil to both acquire contracts for supplying the various ministries with sanctioned materials, smuggling oil, and he used those relationships to intimidate others.

  • Al-Eman is essentially a family-run business, with strong family ties linking most of the subsidiary firms.
  • The accountants in Al-Eman are key figures with the best overall knowledge of the company’s activities.
  • Al-Eman did considerable business with Syria through the “Syrian Protocol,” an arrangement of false purchases and kickbacks that laundered funds for Iraqi purchases.

The Al-Eman Group was also involved in the OFF kickback scheme through the Jordan National Bank and embassy commercial attaches. Upon completion of services under UN OFF, the Banque Nationale de Paris deposited payments in the National Bank of Jordan, which provided banking services to Al-Eman. The National Bank of Jordan automatically deducted a 10-percent performance/kickback from the UN OFF payment. The National Bank of Jordan then deposited the kickback amount into accounts controlled by the Iraqi Regime. The CAs in the Iraq embassies played a key role in orchestrating procurement and financial activity. The attaches arranged collection and transferred kickbacks, and Al-Eman worked very closely with them.

The Al-Eman Network

Dozens of companies were included in the Al-Eman network, most of which were either owned or operated by members of the Al-Gaaod family. The following table (see Figure 52) is a sampling of some of the Al-Eman companies and their role in acquiring materials for the Iraqi government:

Key Al-Eman Owners: Sattam Hamid Farhan Al-Gaaod and His Family. Extended family plays a key role in Al-Eman operations. As of March 2003, three of Sattam Hamid Farhan Al-Gaaod’s cousins ran subsidiary or affiliated companies in the network.

  • Jalal Al-Gaaod owns the subsidiary Sajaya.
  • Talal Al-Gaaod functions in a public relations role for the family.
  • Hamid Al-Gaaod is owner of the Al-Yanbu Company.

Al-Gaaod’s Ties to Iraqi Leadership

Al-Gaaod was one of Saddam’s most trusted confidants in conducting clandestine business transactions, often traveling abroad using an Ecuadorian passport. Just prior to March 2003, he traveled to Sweden and Ukraine on behalf of Qusay.

  • Al-Gaaod also had a close partnership with ‘Uday and Husayn Kamil, and was a key player in the MIC.
  • He assisted As’ad Al Ubaydi Hamudi, the brother of Dr. Nazar Al ‘Ubaydi Hamudi, a scientist involved in producing chemical weapons, in obtaining contracts with the Al Qa’qa’a General Company, The Atomic Energy Company, the Al-Karamah State Establishment the Al Basil General Company, the Al Muthanna State Establishment and over 25 other companies within the MIC from 1992 until 2002.
  • Al-Gaaod, Dr. Nazar, and Assad are all linked to the Al Abud network described in the CW section of this report.

The Iraqi Regime arrested both Talal and Hamid Al-Gaaod in 1996 as a result of unspecified financial and contractual problems related to deals with the MoA. As of late 2001, Sattam Hamid Farhan Al-Gaaod’s brother, Abd al-Salam Farhan Al-Gaaod was running a firm called Al-Arab Agencies. This company was used for shipping, operating primarily out of Basrah. Al-Arab handled many of the firm’s transport requirements and petroleum exports via the Gulf.

  • Another of Sattam’s brothers, Najib Al-Gaaod, was involved in the procurement of spare parts for Russian-made tanks as late as 2001. According to captured documents, Najib Al-Gaaod’s company, Al-Talh Office Co. provided an offer to the MIC for 12 T-72 tank engines, dated 1 February 2000 for a net price of 900,000 Euros.
  • The same documents also included an offer dated 1 February 2001 for spare parts of T-55 tanks.
  • The company letterhead stated that it had offices in Moscow, Yugoslavia, and Jordan.

Although Sattam Hamid Farhan Al-Gaaod has admitted to an Iraqi who was interviewed by ISG that he would smuggle oil out of Iraq and foodstuffs into Iraq in violation of the UN OFF agreement, he has stated that he believed this to be legitimate business. According to the interviewee, it was unnecessary to alter the packaging of the goods to conceal the true nature of the contents, because it was only food. ISG judges that Al-Gaaod’s statements have routinely been designed to overly downplay his role in the former Regime.

Sattam Al-Gaaod’s Relationship With the IIS. Al-Gaaod has denied being involved in the IIS, while other sources have claimed that he was an active member at least since 1993.

  • His brothers, Abd al-Salam Farhan Al-Gaaod, Abd al-Salam Farhan al-Gaaod, Abd al-Salam Farhan al-Gaaod, and Najib Hamid Farhan al-Gaaod were all members of the IIS.
  • Sattam Hamid Farhan Al-Gaaod was able to use his connections with the IIS to import items prohibited by the UN, including chemicals.

The IIS frequently used businessmen with international connections to import goods, including nonmilitary goods, into Iraq. Al-Gaaod associates suspected he had IIS links based on a number of factors.

  • A high-level government official observed that Al-Gaaod must have had government contacts to avoid Regime interference. He believed Al-Gaaod was in the IIS because he was not a Ba’ath Party member and was not in the government, yet he was a “powerful man.”
  • The source asserted that, generally, IIS connections allowed Iraqi businesses to contact the best suppliers in other countries to obtain sanctioned items.

Al-Handal General Trading Company

Closely tied to Saddam’s family and to the IIS, the firm Al-Handal Trading received preferential treatment in the issuance of Iraqi procurement tenders. The head of the firm, Wadi al-Handal, has established several subsidiary companies under the firm to facilitate acquisition of sensitive goods for Iraq. All of the Al-Handal connections are based in Baghdad.

The Al-Handal General Trading Company was established originally in Dubai to import car parts and accessories into Iraq, but in the wake of the Gulf war, Wadi al-Handal quickly recognized that broadening his business line could make enormous profits. Wadi established several subsidiary companies under Al-Handal (see Figure 53). The company used two primary means to move proscribed equipment into Iraq. The first was using ships leaving Dubai, and smaller items were carried on board in personal luggage and off-loaded in Basrah. Al-Handal had at least one vessel berthed in Alhamriya Port, Dubai. Wadi’s preferred method was to use his brother in Amman, Sabah al-Handal, who owned a plastic pipe company. Equipment would be delivered to Sabah’s company, be labeled as plastic pipe or related equipment, and then shipped onward into Iraq overland.

  • Al-Huda is the main holding company for Al-Handal General Trading.
  • Al-Huda is the mechanism Wadi used to establish and control other front companies, and much of the firm’s acquisition business was conducted through Al-Huda.

There are at least three different front companies in Iraq that use the name Al-Huda. Al-Huda Religious Tourism Company is an unrelated, well-known IIS front that oversees and monitors tourists coming into Baghdad to visit holy sites. Another Al-Huda company was owned by ‘Uday Saddam Husayn al-Tikriti. According to a cooperative source, the company, however, Al-Huda Industrial Holdings, owned by Wadi al-Handal, made use of the similarity in the names to the company’s benefit. Reportedly, al-Handal used these “IIS ties” to intimidate competitors in Baghdad and may also have used the perception that he was associated with the IIS while competing with other companies for contracts.

 



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