FURTHER INFORMATION ON BNL DEALINGS
Henry B. Gonzalez, (TX-20)
(House of Representatives - March 29, 1992)


[Page: H1107]

The SPEAKER pro tempore (Mr. Volkmer). Under a previous order of the House, the gentleman from Texas [Mr. Gonzalez] is recognized for 60 minutes.

Mr. GONZALEZ. Mr. Speaker, I continue the presentation to my colleagues in the Congressional Record on the policies, or rather what has been called policy, but contradictory and I think to the detriment of the national interest, with respect to the executive branches principally, though not quite altogether disassociated from some either congressional indifference or abdication making it possible to have the rather sad and tragic tale of the relationship with Iraq, and the fact that the documentation that I am presenting today and which I will append at the end of the special order clearly reveals that in retrospect there was good reason to conclude that Iraq and its leader, Saddam Hussein, had every reason to believe that they were pursuing what they have long pursued, which was their claim to those areas that are in the present country known as Kuwait every since the partition of part of the Middle East or the Persian Gulf.

The tragic thing is that we have not learned anything, and I will demonstrate why from this rather woeful narration of terrible foreign policy errors, and involving again in the background and lurking as sort of a fertile ground floor contradictory policy individuals who in effect and morally speaking had a conflict of interest and should not have been making the decisions they did and should have recused themselves at the time, which they did not, and Presidents who for whatever reason in their structured inner council arrangements were indifferent to what was going on just right around them or in the basement of the White House.

Now, all this presentation is for the purpose of showing how banking and financial activities, both national and domestic as well as international, are at the bottom of the whole series of tragic developments, not only in this and almost everything else that we can consider to be a continuing matter of concern for our national interests, and this is where we come in, the Banking Committee.

Now, as I have said before, we first in the name of the committee looked into this almost 2 years ago. As a matter of fact, it was 3 years ago that I noticed a small item in the Wall Street Journal indicating that an agency bank of a foreign bank, known as the Italian Bank, BNL, which means Banca Nazionale del Lavor, which is really again Italian Government owned.

This is the thing that all through the consideration in our committee from the beginning and the first International Banking Act in 1978 which I caused to bring about after the hearings that I had caused to have in San Antonio, my home town, in 1975 and the fact that our country is very vulnerable and has no regulatory oversight method of accountability for this huge amount of money now known as Foreign Bank or Foreign Financial,

which amounts to a huge $800 billion and which, of course, at any given moment can have a tremendous impact on whatever we do as a domestic policy matter. This is the reason for the concern. We are not interested in trying to show up the ineptness or the clumsiness or the negligence per se of personnel, other than as it has resulted in a very dangerous situation as far as the framework of regulatory accountability that our country still fails to provide.

Now, today's statement will show that the administration repeatedly misled the Congress and the American people about the use of the CCC, the Commodity Credit Corporation guaranteed program for Iraq, and which was the reason my eye caught that little article saying that $3 billion worth of letters of credit for Iraq were being issued through the Atlanta, GA, agency of this Italian bank. It seemed to me even then that amount of billions of dollars, and to my distress I discovered that was just one of the last crunches of letters of credit, that the sum total would amount to $5 billion.

Now, I think the undesirable part of that is that those letters of credit issued on the basis of the guarantee through the CCC are taxpayer-guaranteed, so the taxpayer now has a bill of somewhere around $3 billion being dumped in its lap. I use the $3 billion that would feed our domestic needs in the very committee that I chair, because we have jurisdiction of everything from housing to economic stabilization, otherwise known as wage and price controls and, of course, the community or the infrastructure of the community development. That is our jurisdiction.

I can tell you what we could do with the money that this reflects for such things as the distressful homelessness problem which is basically a critical shelter or housing problem that has grown up in the last 10 years.

So when we look at it from that standpoint, that viewpoint, of course we consider it a matter of urgency that we plug those crevices in our laws that make it possible for these activities, plus many others that we know and suspect, such as drug money laundering that are financed through just a small amount or segment of this huge $800 billion that is loose in our country. It can be multiplied tremendously and quickly, and through the use of the banking system, through not only the Italian bank, which in turn used the Morgan Bank, for instance, as its syndicator, that is the fancy word that is used, and then the Morgan Bank in turn found methods to involve German banks, French banks, and believe it or not, our old friend the BCCI.

There again, we have our laws and we had a few amendments this last November when we passed the Banking Act of 1991, but it is not enough.

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[TIME: 1230]

We were able to get the Federal Reserve Board to go along only after we had these revelations, and over the protest of the Attorney General, who was trying to get us to drop the hearings. So, it has not been easy.

Even now we have not had access to the documents that the committee subpoenaed. We were able to prevail, in a unanimous committee, to subpoena over 100 documents from Federal Reserve, State Department, CIA. And it is strange that some of these agencies that you would think would say, `We are not about to,' like the CIA, have been more or less forthcoming than some of the others, even the Federal Reserve. But through one of those fateful things that some of the documents we could not get from the Fed we were able to get from our colleagues, from the Italian Senate and its distinguished chairman, Senator Carta, who is heading an investigative committee on this matter; that is, BNL and its letters of credit to Iraq, and others, its involvement with BCCI, because it is going to cost the Italian taxpayers about $2 billion, as well.

So, through him and his generosity we got the documents that the Federal Reserve said we could not have because they were, of course, over in Rome. Anyway, we got them.

It helped considerably because it rounded out a fuller picture of the intricacies of this very byzantine arrangement.

Now, we have proved that the administration engaged in a policy permitting such things as intelligence-sharing with Iraq, which had started during the war between Iraq and Iran.

Now, when you look at it from that standpoint and at the time that it began after President Reagan took Iraq off the list of nations labeled as terrorist nations, that opened the gates under our laws to everything, commercial, every other kind of intercourse.

But at that time it was feared that Iraq might lose that war and Iran was looked upon as the more undesirable element that would seriously and maybe perhaps for the foreseeable future, disturb whatever it is they call the balance of power in the Middle East.

Rightly or wrongly, the decision was made to aid Iraq, even to the point of intelligence-sharing, through the CIA and other intelligence agencies, with Iraq.

The unfortunate thing is that on the other hand and in order to evade the 1982 Boland Act restricting appropriated funds from going down to the Contras in Nicaragua, the administration then turns around and, through its agents, Israel, was able to contact Iran and promised and in fact delivered armament.

So, we found ourselves thinking we were so smart we could lend money and credit and intelligence, and also supplies in pretty substantial amount and prevailed on other countries to send armament to Iraq, but they, too, were also providing Iran, and so did we, with the so-called Iran/Contra scandal.

Naturally, with our traditional contempt for other peoples whom we consider inferior, we did not

guess that each one of those countries would know that we were playing such a duplicitous role. Of course, it did.

Besides, we did not seem to be sensitive to the history, and that is that Iraq and Israel had been in a state of war since 1948-49, and were then.

The additional fact that Iran is not an Arabic nation, it is a non-Arabic nation, and the fact that Syria, which had been considered the most implacable enemy there as far as Israel is concerned, through the Lebanon situation, was the only Arab nation to go against Saddam Hussein. But if anybody thinks it was done in the name of any noble purpose and not because of this very, very complicated power struggle that is ceaseless and has been from time immemorial in the Middle East, just does not know what the facts are.

And when I reported last week that as long ago as 7 or 8 months ago--mind you, it was more than that, about 9 months ago, shortly after the so-called end of the Desert Storm--that Syria obtained 300 improved Scuds from North Korea. So I was interested to see, 3 days later, last week, the President--I guess he was answering some questions--saying, `We are intervening and protesting to North Korea to see if we can prevail upon them to stop sending Scuds to the Middle East,' meaning Iran.

Well, North Korea--does North Korea produce those Scuds? That is a question I would like to have answered. The improved Scuds? Those are Russian-derived.

But on the other hand, even with all of this, we still have not learned anything. Our policy with respect to North Korea, for instance, our policy with respect to China, the People's Republic of China, which is the last communist, or rather is the largest communist stronghold in the world, and the fact that even as late as last year we had our National Security Adviser going to China and coming back and saying, `Well, you know, they have promised they are going to abide and that they are not sending any more armaments to the Middle East.'

Well, China had been visited by three Secretaries of Defense, three Presidents, and on each one of those they promised they were not going to send arms to the Middle East. On one of them they got the license to manufacture the Silkworm missile. Now, that is American. We gave it to Red China.

So, as late as a year ago more or less, we have the National Security Adviser going and saying, `Oh, they have now promised to stop.' But they had said they stopped 2 years before.

So, we constantly want to be deceived and fooled, and we have lost control of that, anyway.

But it should have been obvious the moment we began this sort of schizophrenic combination of what passes for diplomatic commerce, we had all the agencies from the Commodity Credit Corporation to the Export-Import Bank to the Department of Commerce and 80 of our big corporations running over to see how much they could get over in Iraq, but losing sight of the fact that as far as the geopolitical situation was concerned, as I said a few minutes ago, a state of war still exists and has existed since 1948 with the State of Israel.

So, today what I want to bring out is how this, as a continuing problem, not having learned anything, still further compounds our dilemma as far as our international financial relations are concerned.

Recall that these countries work through what they call their central bank; the Central Bank of Iraq, for instance. But in those countries the officers are interchangeable. Saddam Hussein's son-in-law was both the secretary or minister for military procurement as well as commerce and as well as dictating in the name of the Central Bank of Iraq.

Now, the bad part of our laws is, as the Federal Reserve tells us, `We can't give you information, because in this reciprocal world we can't tell you what the central banks and who is behind those Central Bank deposits.'

So, it is entirely possible as I am speaking right here that Saddam Hussein could have millions of dollars squirreled away in their own banking system, without any of our agencies really knowing that, right now as I am speaking.

It sounds incredible, but sometimes they say truth is stranger than fiction.

Now, what I have here now is the documentation showing the so-called Iraq options paper, which means that the administration made a decision to continue the intelligence-sharing at least until May 1990.

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[TIME: 1240]

Remember, Mr. Speaker, it was on August 2 that Iraq invaded Kuwait. But as late as May we still had, even through the Iraqi war with Iran had ended, it had terminated, and supposedly and in fact the disturbing thing is that, when Mr. Robert Gates was being questioned by the Senate for appointment as a Director of the CIA, he told the Senators that that in fact had happened, that with the termination of the war, why they had no further intelligence exchanges. But the same Mr. Robert Gates was in charge of the national security and the intelligence with CIA at the time.

Mr. Speaker, these papers show that the national security and the State Department were using the intelligence-sharing arrangements with Iraq as a foreign policy tool and raises a myriad of new questions about the scope and the duration of the intelligence-sharing arrangements with Iraq.

Now mind you, as long as that continued, remember, with the interchangeability and these countries' government not like ours; they do not have separation of powers or anything that the financial and the banking is inextricably linked, and, if they have access to our intelligence resources, what were those resources? Has the Congress ever been given a report? If so, I do not know about it.

In 1984, with Iraq being considered in serious jeopardy of losing that war with Iraq, President Reagan signed a national security decision directive authorizing the CIA to engage in a limited intelligence-sharing program with Iraq. At that time Mr. Robert Gates was a Deputy Director for intelligence at the CIA, and he had overall responsibility for preparing the intelligence to be shared under this arrangement. In April 1986, 2 years later, the intelligence-sharing authority was further modified by the National Security Council to allow for the sharing of additional types of information related to the results of Iraq's military operations, which means procurement and everything else. In October 1986 the authority was modified again to permit yet additional types of information to flow to Iraq. Like what? What would be those additional informational flows?

Now by October 1986, Mr. Gates was the Deputy Director of the CIA. In recent congressional testimony he stated that in 1986 he had delegated the management of the intelligence-sharing arrangement with Iraq to Richard Kerr. Until today the public believes that the intelligence-sharing arrangements with Iraq ended in 1988 with the end of the Iraq-Iran war.

Now the Senate report indicates, and this was of October 24, last year, 1991, that the Senate Select Committee on Intelligence released a report entitled `Nomination of Robert M. Gates to be Director of Central Intelligence.' This report contains a section entitled, `Sharing Intelligence with the Government of Iran.' This section provides the Congress and the American public with details of the administration's policy of sharing intelligence information with Iraq.

Regarding this intelligence-sharing arrangement the report concludes, and I quote, `that intelligence sharing continued on a sporadic basis until 1988, when the war between Iraq and Iran ended.' A second passage backs up the assertion that intelligence sharing with Iraq ended in 1988, the passage which deals with the nature of the intelligence-sharing arrangement. It indicates that the intelligence information provided to Iraq was related solely to the Iran-Iraq war, and it reads, and I quote, that United States assistance was limited to providing intelligence and advice with respect to the pursuit of the war, end of quote. Since Iraq and Iran ended their pursuit of war by agreeing to a cease-fire in August 1988, this passage provides additional support to indicate that the sharing arrangement with Iraq ended in 1988.

The Senate report is misleading because the Committee on Banking, Finance and Urban Affairs has these documents that the intelligence-sharing arrangement did not end in 1988.

In April 1990, then-National Security Deputy Director Robert Gates presided over an NSC deputy's committee meeting on Iraq. The meeting was called to discuss the rapidly deteriorating relations between the United States and Iraq and the explore ways to forestall that deterioration. Now this is in April 1990.

After the meeting, a list of policy options for dealing with Iraq was crafted by the Near East and South Asia section of the State Department. The list was referred to as the Iraq option paper. The options paper, dated May 16, 1990, contains a menu of Government programs that the administration can supposedly use as leverage to mitigate Iraq's increasingly belligerent actions.

On May 16, 1990, the State Department forwarded the paper to NSC Director Brent Scowcroft. The cover sheet accompanying the option paper states, and I quote, `that attached is a paper containing a list of options for

responding to recent actions and statements by the Government of Iraq.' It was prepared at the request of the deputy's committee which met on April 16:'

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We ask that you pass this paper to Robert Gates for his review and circulate it to obtain the views of the deputy's committee members and concerned agencies in advance of further discussions by the deputy's committee.

The paper contains over a dozen policy options, and under each is a short summary of the props and cons related to the pursuit of each particular option. One of the more prominent political options listed in the paper deals with the United States-Iraq intelligence cooperation programs, and it states this: `Intelligence cooperation. Intelligence exchanges have waned,' waned, not stopped, `since the gulf war cease-fire. Pro: They will provide Iraq with limited information and Iranian military activity that would be missed. Con: Ending this contact would close off our very limited access to the important segments of the Iraqi establishment.' Obviously the intelligence-sharing program between the United States and Iraq was still operational as of May 16, 1990.

On May 29, 1990, 13 days later, a second NSC deputy's committee meeting was convened to go over the options paper and to develop a strategy for dealing with Iraq. The meeting was held at the White House situation room. The agenda for the meeting shows a meeting to be comprised of three segments, as follows:

Segment 1, intelligence update presented by CIA: segment 2, review of United States-Iraq programs and policy options presented by the State Department; and, segment 3, summary presented by Robert Gates.

Taken together, the April and the May 1990 NSC deputy's committee meeting show that of course Mr. Gates played a key role in the formulation of the Bush administration's policies toward Iraq. They also reveal the awareness of the intelligence-sharing arrangements between Iraq and the United States.

Now in September 1990 the Senate Intelligence Committee began an investigation to determine if the Congress was properly notified about the intelligence-sharing agreement with Iraq so that during the 1991 confirmation hearing the issue of intelligence sharing with Iraq received additional attention.

[TIME: 1250]

I have quoted from the pertinent sections.

The Senate committee found no evidence in the report that they had that indicated Robert Gates himself took any action to keep the oversight committee from being informed. The revelation that Mr. Gates was aware that the intelligence-sharing arrangement between the United States and Iraq was ongoing at least until May 16, 1990, raises these new questions about his role as Deputy Director of the NSC between 1989 and 1991.

In the setting of the NSC Deputy's Committee meetings, the options paper illustrates that the United States-Iraq intelligence-sharing arrangement was thought of and used as a foreign policy tool.

Now, these are very basic things, and I have said repeatedly that we have gotten into trouble in our country when we stray from basics, basics involving everything from fundamental constitutional provisos and guidances and precedents to either judgmental decisionmaking matters.

I am going to quote from Senator Howard Metzenbaum of Ohio. He said this during the floor consideration of the nomination:

The Iraq case provides a clear example of why the intelligence committees have a right to be concerned about liaison relationships *** now we have CIA agreement on an important point. When intelligence liaison goes beyond routine cooperation and is used by the NSC as a tool of foreign policy, the intelligence committees shall be informed as a matter of course.

The revelation that intelligence-sharing with Iraq continued well into 1990 also raises new questions about the administration's reporting to the Senate and House Intelligence Committees. Based on the fact that the Senate committee report on the Gates nomination contains that fact that shows differently, I just do not know to what extent the Senate was informed.

That the United States was engaged in intelligence-sharing with Iraq well into 1990 raises a myriad of policy questions. At a minimum, it raises new questions about the scope and duration of that sharing arrangement. It raises new questions about the testimony that Mr. Gates gave, and besides that, this is in my book the fundamental question: Under what authority was the intelligence-sharing arrangement with Iraq carried out? Was the CIA involved in the post-cease-fire intelligence-sharing arrangement? What role did the State Department and the NSC play in the arrangement, and what did they know?

Did the post-cease-fire intelligence liaisons with Iraq require the administration to inform the Congress of such activities? Did the intelligence-sharing policy send Saddam Hussein the wrong signal? I conclude that it did.

I think when we look at these things from an overall bird's-eye view, we can see why. Saddam Hussein, together with his precedessor leaders in Iraq, had always contended that that portion of Kuwait that they claim had been wrongfully subdivided by the British when the British were in power properly belong to Iraq.

So here we have this very intimate relationship, and a very costly one, between the United States and Iraq, obviously saying, `You are the side we favor.'

Why should we have been so surprised? In fact, before the outbreak of the shooting, of course, then we read about the rather contradictory reported behavior of Ambassador Glaspie and how she had this conversation with Saddam Hussein, and in effect Saddam Hussein said, `You know, we are grateful for your understanding and your support.'

So obviously we were not really evaluating all of the ingredients of that equation over there.

Now, what was the gain to the United States for sharing intelligence with Iraq? What was the gain to the United States for going on these huge taxpayer-guaranteed outlays, not only through the Commodity Credit Corporation but the Export-Import Bank? It was in the name of balancing our international trade account and getting U.S. businesses involved. Many of them did get involved, but there was cupidity on the part of our policymakers and some American citizens and businessmen who failed to realize that they were being taken, that Saddam Hussein was interpreting that as obtaining out of 3 billion or so of those letters of credit of the total 5 that Iraq defaulted on, at least half of that that went to direct arms procurement and chemical weapons procurement.

There was the big gun, the giant gun whose inventor was assassinated in Belgium. That was very close to realization, and the money that was going to complete that was part of the money raised in the United States and funneled through these corporations in a way that really should have been quickly recognized as going not to provide grain and food but armaments, not only traditional armaments but sophisticated devices, nuclear, with computers and what not.

I brought this out last year, that as a matter of fact the Defense Department had clearly warned the Export-Import Bank. We did not have documentation showing they had done the same thing with the CCC, but I am sure it did happen because we had what I would call the interagency committees that met. That included Agriculture, the State Department, and the CIA, and they sat there, and the military intelligence and the Defense Department intelligence actually warned the State Department. But it was the State Department that dominated, and as I showed last week and week before last, we had then-Vice President Bush and later Secretary Baker actually intervening on behalf of these credits and pushing and actually lobbying very strongly. So we had the State Department dominating in some cases, and to the detriment of what would be considered the sum total of the national defense interests, these are important oversights, and as I say, the overarching background being our financial and banking resources and activities as the actual base or predicate.

Everything that happens eventually has a financial or a banking premise, even the hostage taking in Iran, as I pointed out earlier.

I am going to more or less round this out by quoting the chairman of the Senate Intelligence Committee. I am quoting here:

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I am a believer in the oversight process because it is virtually the only way that the American people--not Members of Congress, but the American people, with their elected representatives acting on their behalf--

Well, of course, we are supposed to be representing the American people--
have to make sure that the most secret programs of our Government are operated in a way which is not only cost-effective, but perhaps even more important, consistent with the basic bedrock values to which we are committed as Americans, and that the law and the Constitutional processes be followed. We had the tragedy in this country of the Iran-Contra affair because this was a failure to notify the oversight committees.

[TIME: 1300]

I will end the quote there, because I think that is very naive. Obviously it was not to notify, but to deceive the committees in the Congress, to evade the law passed by Congress known as the Boland Act.

Mr. Speaker, I will continue this at a later time and end up by presenting the suggested legislation we will be recommending for first our committee, and hopefully my colleagues in the full House of Representatives.

Mr. Speaker, I include for the Record the National Security Council document dated May 18, 1990, referred to earlier:

National Security Council,
Washington, DC, May 18, 1990.
Memorandum for:

Dr. Carnes Lord, Assistant to the Vice President for National Security Affairs.

Mr. Robert Kimmitt, Under Secretary of State for Political Affairs, Department of State.

Mr. Charles Dallara, Assistant Secretary for International Affairs, Department of the Treasury.

Mr. Paul Wolfowitz, Under Secretary of Defense for Policy, Department of Defense.

Mr. Dennis Kloske, Under Secretary for Export Administration, Department of Commerce.

Mr. Richard T. Crowder, Under Secretary for International Affairs and Commodity Programs, Department of Agriculture.

Mr. Richard J. Kerr, Deputy Director of Central Intelligence, Central Intelligence Agency.

Admiral David E. Jeremiah, Assistant to the Chairman, Joint Chiefs of Staff.
Subject: NSC/Deputies Committee Review of PCC Paper on Iraq (S).

In response to the NSC/Deputies Committee meeting of April 16, the PCC has prepared an options paper on Iraq (Tab A), listing all U.S. economic and political programs that might be used to respond to recent Iraqi actions and statements. Based on your consideration of the options outlined in the PCC paper, I would like to have your agency's position on options for those programs for which your agency is responsible or in which you have a direct interest by noon Wednesday, May 23. (S)

If you have any further questions, the NSC point of contact is Ms. Sandra Charles, 395-3552. (U)
BRENT SCOWCROFT

Assistant to the President for
National Security Affairs.

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U.S. Department of State,
Washington, DC, May 16, 1990.
Memorandum for: Brent Scowcroft, The White House.
Subject: Options Paper on Iraq.

Attached is a paper containing a list of options for responding to recent actions and statements by the Government of Iraq. It was prepared at the request of the Deputies Committee, which met on April 16, 1990. We ask that you pass this paper to Robert Gates for his review, and circulate it to obtain the views of Deputies Committee members and concerned agencies in advance of further discussion by the Deputies Committee.

J. Stapleton Roy,
Executive Secretary.

--

--

Iraq: Options Paper

The following list of options for responding to recent actions and statements by Iraq was prepared at the request of the NSC Deputies Committee, which met on April 16, 1990. The only intention is to be comprehensive: the list does not advocate any particular option or group of options. It offers a range of choices from the largely symbolic to a virtually total economic embargo and political break with Iraq. (A non-proliferation PCC will develop specific options for steps in the area of export controls and licensing.)

ECONOMIC

Ban Oil Purchases: The largest benefit Iraq receives from the United States is through our oil purchases, which could total more than $3 billion in 1990. PRO: Oil provides the wherewithal for Iraq's efforts to develop its own non-conventional military production capacity. A total ban on U.S. oil purchases would have some short-term impact. CON: In the longer run, Iraq would soon find other buyers. Such action might also have an impact on U.S. oil prices.

CCC Program: This is the largest program we currently have with Iraq. All the sanctions legislation on the Hill, aside from Inouye-Kasten, exempts CCC. PRO: Since Iraq's record of repayment on CCC-guaranteed loans is good and USDA's review will probably give Iraq a fairly clean bill of health, suspension of CCC at this point would be a strong political statement. CON: It would violate our policy against using food as a political weapon and hit some U.S. agricultural exporters hard. It might also lead Iraq to default on CCC-insured loans. Other countries would sell these commodities to Iraq.

Exim: In January the President waived the statutory prohibition on Exim programs with Iraq. The program could be cut off by rescinding or suspending the waiver. PRO: It would be a clear, relatively easy to accomplish public gesture containing a political message. CON: The Exim facility is not essential to the Iraqis, but its suspension would harm some U.S. producers.

Licensing/Trade: Current controls on exports to Iraq are already very restrictive, but new controls could be added to ban sale of all possible dual use items. Congress is considering new controls to ban such sales to all states in the region, including Iraq. A non-proliferation PCC will look at possible options in this area in the near future.

Full Trade Embargo: PRO: It would send a strong signal. CON: This would mean a virtual end to relations with Iraq. Our allies would not go along and, indeed, would jump in to take our place wherever they could.

POLITICAL-BILATERAL

Reduce Embassy Staff: PRO: Withdrawing our Ambassador or reducing Embassy staff (with parallel reductions at the Iraqi Embassy here) would clearly demonstrate our displeasure to the Iraqis. CON: It would further limit our ability to work in Baghdad and strain an Embassy staff that is already short-handed. Removing other Embassy staff (the DATT, for example) would not impress the Iraqis but could seriously reduce mission effectiveness.

Cultural: USIS runs several programs, including a self-sustaining and very popular English instruction program and a small number of exchanges. It also plans to help establish a Baghdad headquarters for U.S. archeologists working in Iraq. PRO: Cutting these programs would be a symbolic gesture. CON: Its only substantive impact would be on the persons involved.

Drug Enforcement: Iraq had its first-ever consultations with DEA this year and expressed interest in getting DEA training for a small number of police officers. PRO: Cancellation of the training would, again, have some symbolic importance. CON: It would have little practical effect for the Iraqi Government.

Intelligence Cooperation: Intelligence exchanges have waned since the Gulf War ceasefire. PRO: They still provide Iraq with limited information on Iranian military activity that would be missed. CON: Ending this contact would close off our very limited access to this important segment of the Iraqi establishment.

Presidential Message: Saddam Hussein likes the personal touch. PRO: A carefully crafted message from the President could be effective if it hit hard on our key concerns, proliferation and regional tension (conflict through a miscalculation by either Iraq or Israel), but also emphasized a continued desire for improved relations. CON: It could be construed here as being soft on Saddam.

Iraqi Opposition: The political opposition to Saddam and the Ba'ath Party, such as it is, is down-at-the-heels, mostly in exile, and (apart from some Kurds) lacks a following in Iraq. We could, nonetheless, find some public way to acknowledge it--the Kurds especially. There is little to recommend this option.

POLITICAL-MULTILATERAL

Move Toward Normalization with Iran: PRO: A change in policy toward a more neutral or even pro-Iranian stance in international fora (UNSC, IMF, World Bank, etc.) would be a strong signal. CON: It also would send paranoia-meters in Baghdad off the end of the scale. It would raise basic questions about our policy in the Gulf and the region as a whole that would have to be addressed here. Iraq's reaction would be unpredictable.

Isolate Iraq: We could use diplomatic pressure with our friends in Cairo, Amman, and Sanaa to encourage resistance to Iraq's efforts to make itself a political and military leader of the Arab World. PRO: This would help limit Iraq's influence. CON: It could bring an unpredictable reaction from Baghdad and could, in fact, backfire in important Arab capitals.

Human Rights: We could sponsor or encourage further action on Iraq's human rights record bilaterally and in a number of international fora. PRO: We have already criticized Iraq's human rights policies on the record, and Saddam is clearly sensitive to such criticism. CON: It would be difficult to get Nonaligned support for further action on Iraq in international organizations. Saddam has demonstrated time and again that he will not allow public pressure, especially from foreigners, to influence his behavior.

Joint Action with Allies: Possible joint action on Iraq would be an appropriate subject for consultations with our allies and for consideration at the Houston Economic Summit. PRO: Concerted steps by the United States, Western Europe and Japan on such issues as technology transfer would be of much greater concern for the Iraqis than anything the U.S. might do unilaterally. CON: Consensus on concrete measures would be difficult to achieve, and failure to agree on serious joint action could even encourage the Iraqis to ignore our concerns.

DRAFT: NEA/MGA:JRMcGhee.

SENGAGEN 282 4/25/90 x76111.

CLEAR: NEA/NGA:LEPope; NEA:EWGnehm; NEA:JHKelly.

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National Security Council
Washington, DC, May 24, 1990.
Memorandum for:

[Page: H1112]

Mr. Carnes Lord, Assistant to the Vice President for National Security Affairs.

Mr. Stapleton Roy, Executive Secretary, Department of State.

Ms. Emily L. Walker, Executive Secretary, Department of Treasury.

Col. George P. Cole, Jr., Executive Secretary, Department of Defense.

Mr. Robert S. Ross, Jr., Executive Assistant to the Attorney General, Department of Justice.

Ms. Susan Nelson, Executive Assistant to the Secretary, Department of Agriculture.

Mr. Joseph S. Casper, Director of Executive Secretariat, Department of Commerce.

Brig. Gen. Thomas E. White, Jr., Executive Assistant to the Chairman, Joint Chiefs of Staff.

Mr. Lawrence Sandall, Executive Secretary, Central Intelligence Agency.
Subject: NSC/Deputies Committee Meeting on Iraq (S).

There will be a meeting of the NSC/Deputies Committee on Tuesday, May 29, at 4:30 p.m. in the White House Situation Room to discuss U.S. policy options for Iraq. An agenda for the meeting is attached. (S)

Please notify my office of your agency's participants (principal plus one) for this meeting. (U)

William F. Sittmann,
Executive Secretary.

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The NSC/Deputies Committee Meeting

Date: May 29, 1990.

Location: White House Situation Room.

Time: 4:30-5:30 p.m.

IRAQ

Agenda

I. Intelligence Update, CIA.

II. Review of U.S.-Iraqi Programs and Policy Options, State.

III. Summary, Robert Gates.

END