Iraq Survey Group Final Report
Procurement Suppliers During the Decline Phase, 1991 to 1996
ISG has identified entities from three countries that began supporting Iraq with illicit procurement during the post-Gulf war “decline” phase in the Regime: Romania, Ukraine, and Jordan. Romania and Ukraine had just emerged from the Soviet bloc with an excess of military hardware and expertise and a need for hard currency. Jordan, which profited primarily from allowing transshipment, argued that Iraq was a major trading partner before 1991 and trade with Iraq was a necessity.
According to a high-level official of the former Iraqi regime, trade between Iraq and Romania flourished during the Ceauscescu era (1965 to 989). The IIS had an active presence in Romania throughout this period and MIC engineers were active in procurement programs directed from the Iraqi Embassy in Bucharest.
- In the mid-1990s, reporting indicated that the Iraqi MFA and MIC were both interested in changes to Romanian export controls over nuclear, biological, and chemical weapons and their associated technologies.
According to documents identified by UNSCOM in Operation Tea Cup, Iraq reestablished a procurement relationship with the Romanian firm Aerofina in February 1994. The Iraqis and Romanians conducted two to three delegation visits between Bucharest and Baghdad to discuss sending Romanian missile experts to Iraq to assist with design and guidance control problems in the Al Fat’h missile, later called the al Samud, and to obtain missile parts and related raw materials.
- By August 1994, several procurement contracts had reportedly been signed.
- In November 1995, the Iraqi’s sent a letter to Aerofina requesting that the missile repair part shipments be temporarily stopped due to concerns over the quality of the goods.
- As a result of UNSCOM’s operation (see inset), the Romanian Government acknowledged in 1998 that Aerofina sold Iraq weapons parts in 1994 via an intermediary company in Jordan.
According to a source with good access, a Romanian source provided analytical equipment and testing for SG-4 tank gyroscopes and gyroscopes intended for missile applications to Iraq in the late 1990s. This equipment may have been used to ascertain the quality of illicitly imported gyroscopes because Iraq could not manufacture them domestically. The name of the Romanian supplier was not specified.
In March 1998, Iraqi intelligence conducted an operation to smuggle weapons and military equipment from Romania in violation of UN sanctions, according to a reliable source. Walid al-Rawi, an IIS agent stationed in Romania, was sending pictures of tanks and military equipment available for sale from Romania back to Baghdad. An Iraqi diplomatic pouch was used to transfer the photographs. There is no further information concerning the type, number, or source of the conventional military goods purchased.
- Al-Rawi used Qatar and Dubai in the United Arab Emirates (UAE) as transshipment points for the illicit goods. Bribes were used to circumvent customs inspections at ports.
Al-Rawi obtained financing for the military goods by requesting money from Baghdad. If approved, the cash was reportedly sent to Romania via Geneva.
According to captured documents, Romania’s Uzinexport SA was contracting in October 2001 to provide Iraq withequipment, machinery and materials linked to a magnet production line for an Iraqi V-belt drive project. This company worked with a mix of Iraqi front companies and intermediaries that were representing the MIC, the Iraqi lead for the project. The magnets—assembled by the Iraqis with Romanian help—could have been suitable for systems used to spin gas centrifuge rotors for the enrichment of uranium. Although there is no evidence that the magnets were employed in the production of gas centrifuges, the capability to indigenously produce magnets would have allowed Iraq to maintain knowledge and skill-sets in this area.
- The various front companies and trade intermediaries involved in the project included the Jordanian branch of the Iraqi firm Al-Sirat, the Jaber Ibn Hayan General Company, the Aa’ly El-Phrates company, and the Ali Al-Furat Trading Company. Jordan may have been used as a transshipment point for the magnet technology.
- Captured documents indicate that the total sum of the contract awarded to Uzinexport for the V-belt project was $4,607,546. This was paid though a combination of cash, letters of credit, oil, and raw materials.
Ukraine was one of the first countries involved in illicit military-related procurement with Iraq after the first Gulf war. Iraqi delegation visits to Ukraine were first evident in 1995. These visits were reciprocated in Iraq from 1998 to 2003. The highest-levels of the Ukrainian Government were reportedly complicit in this illicit trade as demonstrated by negotiations conducted in regard to the sale of a Kolchuga antiaircraft radar system to Iraq in 2000. In addition, Ukrainian state and private exporting companies independently facilitated the transfer of prohibited technologies and equipment, mainly in the missile field, to the embargoed Regime.
UNSCOM’s Operation Tea Cup (1995 to 1998)
From 1995 to 1998, UNSCOM inspectors conducted “Operation Teacup,” a sting operation designed to reveal Iraq’s efforts to procure prohibited military and WM- related goods.
- The operation was launched after the defection of Saddam’s son-in-law, Husayn Kamil, in 1995. Thousands of WMD-related documents were captured by the UN at Husayn Kamil’s chicken farm, including the al Samud contracts (see the Husayn Kamil and The Saga of the “Chicken Farm” Documents insets in the Regime Strategic Intent chapter.)
- As a result of this sting mission, the UN videotaped Iraqi buyers (including Dr. Hashim Halil Ibrahim Al ‘Azawi) negotiating with Romanians for prohibited gyroscopes.
According to IIS memos to the Iraqi Embassy in Kiev, Ukraine, was an important political ally for Iraq. After the initial business contacts in the mid-1990s, the government of Iraq embarked in a diplomatic exchange with Ukraine in 2001. ISG judges that Saddam’s goal with this relationship was to gain access to Ukraine’s significant military production facilities, including a large portion of the former Soviet space and rocket industry.
- The recovered IIS memos further indicated that the former MIC Director Huwaysh visited Ukraine in 2002 hoping to develop a closer industrial partnership.
- By 2001, the commercial exchange between the two countries reached $140 million. Captured documents indicate that Iraq strove to make “sure that the Ukrainian share from the oil for food program [got] bigger” to encourage further trade between the two countries.
ISG has recovered further documentation disclosing representatives from Ukrainian firms visited Iraq to coordinate the supply of prohibited goods from the early 1990s until on the onset of OIF. Information supplied by an Iraqi scientist indicates that Iraqi delegations visited Ukraine in 1995.
- By 1998, the Iraqi Al-Karamah State Establishment hosted numerous visits from Ukrainian suppliers seeking contracts assisting Iraq with its missile program.
- Mr. Yuri Orshansky, from the Ukrainian Company MontElect, led the Ukrainian visits. Orshansky’s relationship with Iraq began in September 1993 when he arrived in Baghdad accompanied by Dr. Yuri Ayzenberg from the Ukrainian firm Khartron, a known company with missile guidance system design capability. Within 2 months, an Iraqi delegation reciprocated the visit to Ukraine.
- While in Ukraine, Orshansky, Ayzenberg, and General Naim (the head of Iraq’s Scud missile guidance program) executed a “protocol” amounting to an outline of future cooperation between the parties for missile-related technologies.
Professor Yuri Orshansky and the MontElect Company
Yuri Orshansky, a professor of electronics and director of the Ukrainian MontElect Company, was the key facilitator between Saddam’s Regime and Ukraine.
- He was a member of the Iraqi Ukrainian Committee for Economic and Trade Cooperation.
- In December 2000, he was made an honorary consul for Iraq in Kharkov.
- For his efforts, Orshansky was awarded 1.5 million barrels of oil by Taha Yasin Ramadan. From 1998 to 2000, he also received more than 6 million barrels from Saddam via the secret oil voucher system. Iraq’s State Oil Marketing Organization (SOMO) estimated that Orshansky earned about $1.85 million in profit from these gifts (refer to the Known Oil Recipients, Annex B).
Between 1993 and 1995 Orshansky traveled to Iraq at least six times. During this period, Iraq sent at least four delegations to Ukraine.
Orshansky continued to visit Iraq in 1998 to 2003 and, through his company MontElect, he transferred a range of equipment and materials to the Al-Karamah State Establishment including:
- Engines for surface-to-air Volga 20DCY missiles in 2001.
- 300 liquid fuel motors to be used in al Samud I missiles.
- According to a former Iraqi government official, Iraq also signed a contract for Orshansky to design and build a plant to produce tiethylamine (TEA) and xlidene—the two components of TEGA-02 (missile fuel).
- The technology included guidance components for surface-to-air missiles, assistance in the development of batteries for the latest antiaircraft missiles, providing equipment for missile research and possibly assisting in the establishment of a college for training of missile expertise.
- Cooperation was initiated by Iraq requesting quotes on a test stand for rocket motors, a series of gyroscopes and accelerometers for missile-guidance systems and high precision machine tools for manufacturing missile components.
In 2000, Ukraine-Iraq relationship became public-knowledge when the Ukrainian Government was implicated in selling Iraq a Kolchuga antiaircraft radar system. President Leonid Kuchma was accused of personally approving the Kolchuga sale, worth $100 million, via a Jordanian intermediary.
- Evidence of Ukrainian Government complicity in the sale to Iraq was based on a secret 90-second audio recording made 10 July 2000 by Mykola Melnychenko, a former counter-surveillance expert in a department of the Ukrainian Security Service (SBU), according to press reports. The recorded conversation involved President Kuchma, Valery Malev, the head of Ukspectsexport, a state export agency, and Leonid Derkach, the former SBU Chairman. Kuchma allegedly authorized Derkach to export 4 Kolchuga radar systems to Iraq via Jordan. Kuchma also gave Malev permission to bypass export controls for the deal.
- Initially, Ukrainian Government denied the allegations but then changed its position on the issue several times. First, it denied that the meeting had ever taken place. Later it admitted that the meeting had taken place and that President Kuchma had authorized the sale, but argued that the sale had not been completed. (No Kolchugas have been found in Iraq.)
- It is interesting to note that the Government of Ukraine lifted export restrictions on Kolchuga radars four days after Kuchma authorized the sale to Iraq. After this deal, Ukraine and Iraq signed a trade and technical cooperation agreement in October 2000. Ukraine parliament ratified the agreement in November 2001.
The Iraqi IIS, MIC, and the associated MIC front companies also acquired military-related goods from Ukraine. According to information obtained in an interview with the former MIC Director ‘Abd al-Tawab Mullah Huwaysh:
- In 2001, the IIS purchased five motors for unmanned aerial vehicles (UAVs) from the Ukrainian company Orliss for the MIC and Ibn Fernas. The Orliss company representative was by a female physician named Olga Vladimirovna. The motors were allegedly transported from Ukraine to Iraqi via Iraqi diplomatic pouch.
- In another instance an “Olga” (most likely Ms. Vladimirovna from Orliss) was known to have assisted the MIC with a carbon fiber filament winding and insulating material project. She was also the point of contact, in late 2002, for a contract with an unspecified Ukrainian supplier for missile engines and gyroscopes, but none of these items were ever delivered. The MIC only received some models of the gyroscopes.
In addition to gyroscopes and motors, Iraq sought missile fuel from private Ukrainian companies. Huwaysh stated that Iraq approached Ukraine for diethylene triamine (DETA) and AZ-11 (a mixture of 89 percent DETA and 11 percent UDMH). The MIC intended to use the fuel for the HY-2 missile system. Iraq reportedly had approximately 40 HY-2 missiles but only had sufficient fuel for 15 of them. Iraq, however, never received either the AZ-11 or its components.
By 2003, recovered documents and intelligence indicate that the ARMOS Trading Company was playing a greater role an intermediary between Iraq and Ukraine. ARMOS was a joint venture with a Russian company established by MIC to import technology and assist in the acquisition of materials and equipment for MIC and other Iraqi ministries.
- ARMOS specialized in bringing both Russian and Ukrainian experts into Iraq and represented Russia and Ukraine during business transactions, mainly for the financing of military goods transactions (See the MIC Front Company section for further details on ARMOS).
- Documents indicate that ARMOS and MontElect were involved in offers of military equipment for Al-Karamah in January 2003. Signatures on the recovered documents implicate ARMOS, Al-Karamah, Sa’ad General Company, the Trade Office of the MIC, and Dr. Sergey Semenov of MontElect. The documents also revealed the use of Syrian transportation companies and use of the Iraqi-Syrian Protocol to facilitate the transaction. Iraq made two payments of $405,000 for the equipment.
Jordanian companies performed a variety of essential roles from 1991 through 1999 that aided and abetted Iraq’s procurement mechanism: transportation hub, financial haven, one of several illicit revenue sources, and overall illicit trade facilitator (see the Trade Protocol section).Firms from Jordan facilitated the transshipment of prohibited military equipment and materials to the Iraqi Regime. Iraqi front companies conducted the vast majority of this illicit trade. This trade included the following:
- Captured documents reveal that a company called Mechanical Engineers and Contractors shipped missile parts to Iraq. Payment was made through the Jordan Investment and Finance Bank according to the guidelines established by the Iraq-Jordan Trade Protocol.
- A high-level former Iraqi government official stated that during 2002, compressors used in nitric acid production and Russian missile control systems destined for MIC front companies were shipped through Jordan.
- A $50 million contract was signed for the Iraqi Electricity Commission in 2002, for the purchase of Russian-made cables designed to withstand explosions.
Multiple sources indicate that the former Iraqi Regime also received offers from Jordanian companies for items such as global positioning system (GPS) equipment, metrological balloons, gyroscopes, video gun sights, electronic countermeasures equipment, and communications equipment.
- In February 2003, Iraq’s Abu Dhabi Company sought to purchase a large quantity of field telephones and some frequency hopping radios from Jordan.
- In February 2003, Iraq’s Orckid General Trading Company sought details of solid-state gyroscopes available through a Jordanian company. High performance gyroscopes can be used in UAVs, avionics and platform stabilization.
- The Iraqi firm Al-Rabaya for Trading in Baghdad contracted with a Jordanian firm, for US manufactured GPS equipment. The parties of the contract were identified as Munir Mamduh Awad al-Qubaysi, Managing Director or Iraq’s Al-Basha’ir Trading Company, and Dr. Sa’di ‘Abass Khadir, Director General of the Al-Milad General Company, companies run by the MIC.
The Al-Eman Investment Group employed many private subsidiaries to procure goods through Jordan for Iraq. An Iraqi businessman with direct access to the information affirmed that both the UN OFF program and the trade Protocol were used as mechanisms for conducting illicit trade. Al-Eman’s Vice President, Karim Salih, also acquired Al-Samud missile engine parts for the MIC.
- Iraqi businessmen stated that the Al-Eman Establishment conducted business with many Iraqi ministries and was a critical component of the Iraqi illicit procurement apparatus.
- According to an Iraqi businessman with extensive Regime contacts, a Jordanian company, with offices in Amman and Baghdad, delivered engine spares for turboprop trainer aircraft owned by the Iraqi military. This Middle Eastern firm also dealt with the Iraqi Ministry of Information and the MoT, and had extensive contacts with the Iraqi CA in the Iraqi Embassy to Jordan in Amman. The firm did not manufacture goods; it simply acted as a broker for Iraq.
- The MIC procured banned items with the assistance of the Iraqi CA in Jordan. In 2000, a former high-ranking Iraqi official stated that a payment of $2.275 million was made to a Lebanese company for BMP-2 (armored vehicle) 30-mm cannon barrel-manufacturing technology. This technology originated with an arms firm called Yugoimport-FDSP, a firm based in the former Federal Republic of Yugoslavia known for violating UN sanctions on Iraq.
Methods Used To Hide Illicit Procurement via Jordan. According to a high-level source from the Al-Eman network, the Jordanian Government aided Iraqi efforts to conceal its illicit trade activity through its decision announced in October 2000 to terminate an inspection agreement with Lloyd’s Registry. This agreement, in force since 1993, permitted Lloyd’s to inspect only non-OFF goods coming through the Port of Aqaba. All OFF goods were monitored at all points of entry. Lloyd’s, however, was not required to report illicit cargo (see Ministry of Transport section).
- An Iraqi customs official with direct access believed that the IIS operated several front company offices at the Turaybil checkpoint on the Iraq-Jordan border. These included Al-Etimad and Al-Bashair. Any goods destined for these companies received special treatment at the border.
A Jordanian businessman with extensive business contacts with the former Iraqi Regime asserted that official Jordanian approval was required for all trade with Iraq. Individual shipments had to be approved by the Jordanian security committee; the goods were sometimes photographed. Fawaz Zurequat, a possible Jordanian intelligence officer, who may have been imprisoned after 1999 because of his involvement with trading with Iraq, was a key Jordanian contact in this process.
- An Iraqi customs official believed that the trade with Jordan was very useful for acquiring prohibited goods, particularly vehicles and computers. The Iraqi Directorate of Military Intelligence (DMI) had two shipments per week through Turaybil after 2000—Iraqi customs officials were not permitted to check these goods.
Transport Routes for Procurement via Jordan. Iraq had formal agreements with Jordan during the 1990s. Jordan was the primary route through which Iraqi material moved. The IIS had a presence at key Jordanian transport nodes.
- Abdul Karim Jassem (Abu Lika) was the IIS representative at Al-Aqaba Port for three years until OIF.
- Turaybil on the border of Iraq and Jordan was the main entry point for illicit trade. A former high-ranking government official asserted that the IIS, DMI, and the Directorate of General Security had large offices there and enjoyed close liaison relationships with their Jordanian intelligence counterparts. Maj. Gen. Jihad Bannawi was head of the IIS section at Turaybil.
- Al-Eman had its own shipping division to transport goods to Iraq. It shipped goods through the Jordanian, Syrian, and Turkish official border checkpoints according to an Iraqi businessman, the supplier shipped goods through Aqaba Port or Amman airport.
Financing Procurement via Jordan. After 1999, the most important Jordanian contribution in assisting Iraq’s illicit procurement apparatus was access to Jordan’s financial and banking systems. An Iraqi businessman assessed that before 1996, 95 percent of Iraqi trade was conducted through Jordanian Government-run banks. After 1996, Jordanian banks handled only 30 percent of that trade, mostly from Russia. Document exploitation reveals that the Central Bank of Iraq (CBI) and the Iraqi SOMO provided the funds to Jordanian banks, which were spent by MIC, Iraqi front companies, Iraqi intelligence organs, and the commercial and military attachés present in the Iraqi Embassy in Jordan.
The MIC maintained bank accounts in Jordan for the purpose of making foreign purchases. A senior executive in the MIC confirmed that the MIC Minister, Abd-al Tawab Mullah Huwaysh, directed the opening of accounts in Jordan. These accounts were in the name of the Iraqi CA in Jordan, Selman Kadurm Abd Ghidau, and an unidentified accountant. The accounts were at five different Jordanian banks, but most of the money was deposited at the Al-Ahli (or Jordan National Bank) (see the Revenue section and the Banking section).
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