THE ROSTOW GANG
Henry B. Gonzalez, (TX-20)
(House of Representatives - July 07, 1992)


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

Mr. GONZALEZ. Mr. Speaker, today I will provide an update on the Rostow gang which will reveal that President Bush, his legal adviser, Boyden Gray, and National Security Adviser Brent Scowcroft, were all directly involved in the efforts to thwart the congressional investigation of the Iraq policy. I will also detail some of the more prominent examples of why the President is continuing to thwart the Banking Committee's inquiry of the Banca Nazionale del Lavoro. These include new evidence that shows that 2 days prior to winning approval for a $1 billion fiscal year 1990 Commodity Credit Corporation program for Iraq--those are taxpayer-guaranteed programs--the National Security Council and the State Department received a detailed secret CIA report on BNL indicating that BNL loans were used to fund Iraq's clandestine missile and nuclear weapons procurement program.

The report concludes that a failure to approve the $1 billion fiscal year 1990 CCC program for Iraq would harm the United States-Iraq relations. The White House staff intervened in the BNL investigation being conducted by the U.S. attorney in Atlanta GA. Critical intelligence information about the BNL scandal was withheld from prosecutors in Atlanta until after the Iraqi invasion of Kuwait.

In my floor statement of March 16 this year I revealed how the Bush administration had set up a high-level interagency group of lawyers to thwart or obstruct these congressional investigations of prewar Iraq policy. I did not have evidence that the President or most of his closest advisers had direct involvement in the attempt to stem the flow of Iraq information to the Congress. We did know that the President, both as President and before as Vice President, has intervened in behalf of aid to Iran. We did not have the documentation showing his participation in this elaborate net that was initiated by the lawyer for the NSC, Rostow, in order to keep Congress in ignorance.

Last week I obtained new evidence showing that the President and at that time his principal adviser, John Sununu, and Brent Scowcroft and Mr. Robert Gates, the Director of the CIA, and Boyden Gray, all had direct roles in limiting congressional access to Commerce Department export licensing information on Iraq. These were the licenses that were doctored before they were given to another Member, a distinguished Member of our Congress, of the House of Representatives, in which the purpose, for military purposes, of those licenses were blotted out.

Before I get into the details of the new evidence, let me refresh my colleagues' memories about what I call the Rostow gang. In April 1991, the National Security Council's legal adviser, Mr. Rostow, called a high-level, interagency meeting to discuss congressional investigations of Iraq policy prior to the invasion of Kuwait on August 2, 1990. The meeting was chaired by Nick Rostow, the

individual referred to, the General Counsel to the NSC. Mr. Rostow's previous experience includes playing a key role in the White House efforts to cover up the Iran-Contra scandal and to obstruct a 1988 GAO investigation of then-Vice President Bush's ties to Panamanian leader and drug lord, one Gen. Manuel Antonio Noriega. Also at the meeting were President Bush's General Counsel, Boyden Gray, and the top lawyers for the Departments of Justice, Defense, State, Treasury, Commerce, Agriculture, Energy, and the CIA. Each of the agencies had received requests for information from the Congress, and these lawyers were responsible for overseeing the collection and submission of the information. That is where I referred to this high-level legal team as the `Rostow gang.'

The Rostow gang established a process whereby a congressional investigation had to hurdle a series of increasingly difficult barriers in order to obtain information from an executive branch agency. Ostensibly the function of the group was to review documents and information applicable to congressional requests for Iraq-related information and to establish a coordinated approach for the dissemination of this information.

On the surface, that is understandable. If you are in the executive branch and you have requests from various committees and members of the committees from the Congress, yes, what is wrong with coordinating? That is one thing. But in reality this gang was established to limit and control and otherwise deprive this flow of information to the Congress, to delay it through dilatory practices, as they did with our Banking Committee. That was true even after the Banking Committee had issued about 50 documents or subpoenas, and we still are not getting the information. In reality, this was the main purpose of this gang, as well as to permit the White House to also regulate the flow of potentially embarrassing Iraq-related information to the Congress.

Now, all executive branches have done this. I have been in this Congress and I have been very fortunate and blessed to have been a Member of this great body known as the U.S. House of Representatives for 30 years and 7 months, and I can recall the 1974 episodes. I also remember the so-called Houston memorandum, Houston then being one of President Nixon's highly placed Security Council, and there were other related agency leaders. I remember the memorandum he prepared. Then, believe it or not, there were other side Executive promulgations all under the secrecy of the President's National Security Council, either advisory or as memorandums, which were even intended to suspend the 1974 general elections, if necessary.

The whole point of all this basically, and the reason I am triggered off in my interest, is that we are at this time and period in our country's development facing the greatest constitutional crisis since the

adoption of the Constitution, including the Civil War. Now, that has not come true yet, but that does not diminish our responsibility. We are charged under the Constitution to respect the integrity and the independent coequality and separateness of this body.

So the records obtained by the committee indicate that the Rostow gang met at least eight times during April, May, and June last year, 1991. The Banking Committee recently received documentation indicating that President Bush participated directly in the process of the Rostow gang. On June 5, 1991, there was a meeting of the Rostow gang chaired by the President's legal adviser, Boyden Gray. Lawyers from the State, Treasury Commerce, and Justice Departments were in attendance. The meeting was called to discuss a long pending Commerce Department request for Iraq licensing information and to discuss congressional requests for data, including my own Banking Committee's request.

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Most of the meeting was dedicated to the different strategies that could be used to limit the flow of information to Congress. Claims of executive privilege, which we received one from Treasury, were mentioned most often.

It is clear from interviews, documents, and notes that the strategy of the Rostow gang was to try to claim executive privilege or deliberate the process over as many documents as possible. The Congress was not to have the entire story on the administration's Iraq policy. It was hoped that making these claims would work to deny Congress the most embarrassing and damaging information on Iraq.

As I said before, not only executive agencies, but all people in power, whether it is political power, money power, or religious power, will do everything to try to not disclose an embarrassing mistake. We know that.

The Houston memorandum, for instance, was highly secret. It was kept from the American people. Everybody else knew about it. Finally it was published intact in a book by the assistant to J. Edgar Hoover, Mr. Sullivan, who died under, some people claim, mysterious circumstances. There he has it in the book.

So here is the Congress though, the Representatives of the people, supposedly, denied information through this highly secure state of national matters, that they alone, the American people and the Congress do not know about, but everybody outside of the United States knows. Let me tell you about that later on.

Congressional challenges to the fallacious executive privilege claims only worked to deny the submission of information. One agency's notes indicate that Robert Kimmett of the State Department

advocatd the delaying of a request for information as long as possible so that the congressional subpoena authority would lapse at the end of the 1st session of the 102d Congress.

They knew that. As a matter of fact, we in the Banking Committee unanimously passed out these subpoenas and renewed them. This way the committee would have to go to its members for subpoena authority which would delay the production of documents for still more months.

The following quote from notes of a Rostow gang meeting provides a feel for the strategy that this group deployed. `By Monday, identify the most sensitive documents in each agency. We will go to the mat. There are many of these that will head toward denial.'

Several Cabinet members, including Secretary of State James Baker and Education Secretary Lamar Alexander, were apparently opposed to certain aspects of the Rostow gang process. Notes indicate that they thought better of obstructing the Congress to the point of being subpoenaed.

Secretary Baker also did advocate withholding information related to the State Department's position on certain Commerce Department export licenses that were to be submitted to Congressman Gejdenson.

On October 26, 1991, Commerce Department memorandum states, `Note: Kimmett/Baker (per Matheson): Do not want agency recommendations to be provided but will not argue for Executive privilege.'

Other agency documents indicate that Brent Scowcroft played a prominent role in determining what information should be provided to the Congress. I should say that is Gen. Brent Scowcroft, the National Security Directory for this administration.

For example, a Commerce Department note related to the submission of a sanitized list of export license information to subcommittee Chairman Doug Barnard of the Government Affairs Committee states, `Up to Scowcroft at the NCS.'

Other Commerce Department notes state, `Scowcroft willing to stand up and be counted.'

Yet others state, `Scowcroft will take the lead on asserting executive privilege.'

Mr. Robert Gates is also listed as a recipient of several Commerce Department memos dealing with the submission of information to Congress. So is Mr. Mosbacher, the former Secretary of Commerce from Texas. In fact, notes related to Mr. Mosbacher's response to a congressional subpoena for documents related to National Security Directive 315, NSD-315, and National Security Review 17, NSR-17, are rather interesting.

The notes state:

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Secretary Mosbacher will have to appear before Congress or run the risk of contempt, or appear without documents and still run risk of contempt. Able to say President directed him to withhold. No criminal risk. Burford, U.S. Attorney, will not prosecute when officials withhold at direction of President on Executive privilege grounds.

The previous quote appears to indicate that the Rostow gang was contemplating what potential criminal liabilities lay ahead if Commerce Department Secretary Mosbacher refused to comply with a congressional subpoena. It certainly appears that the President is willing to allow his name to be used as a defense for not complying with the law.

What could the White House and the Commerce Department be hiding that would be that sensitive? The question arises, did the President know his top advisers were using his name and good office as a shield?

So far I have shown that Brent Scowcroft, Robert Mosbacher, James Baker, and other Cabinet-level members of the Bush administration participated in the efforts to limit the flow of information to the Congress.

What is most astonishing and disturbing is that the President of the United States appears to have been directing this effort. Notes from one Rostow gang meeting quotes the President's legal adviser, C. Boyden Gray:

The President will want to meet with all Cabinet Secretaries one-to-one to work it out adequately internally. Very sensitive. Sununu impressed with the significance.

That is not the only occasion that the President had a lead role in the Rostow gang process. A Commerce Department memorandum dealing with the submission of information to Congressman Gejdenson again states:

This memorandum is to report that Counsel to the President, C. Boyden Gray indicated this week it may be necessary to have Cabinet level discussions with the President on Executive privilege issues.

The same Commerce Department memorandum states:

On June 4, 1991, Chairman Gejdenson sent you, Secretary Mosbacher, a letter reiterating his request and complaining that we had not provided any documents. We, Commerce, will soon seek to meet with his staff to discuss a possible accommodation under which we would begin providing information. Any such accommodation will have to be cleared by the White House.

Any such accommodation would have to be cleared by the White House. These notes indicate that the President has participated in the effort to stem the flow of Iraq-related information to the Congress. The fact that President Bush would require his Cabinet to go along with the scheme is startling. With all the responsibilities associated with the Presidency of the United States, it is reminiscent of the Watergate days, that the President and his top advisers should have time to consider such trivial matters. The time and effort spent on developing schemes to thwart congressional oversight is monumental.

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It is too bad the President didn't put as much effort into high level interagency meetings designed to ensure that law enforcement agencies had enough resources to track down and prosecute companies that violated United States export control laws related to illegal export to Iraq.

Now come these notes, and the question is, how come there are no indictments of these companies like Matrix-Churchill that were helping to arm Iraq? Where is the Carlos Cardoen indictment? Sadly there has been no high-level Presidential directive aimed at bringing the United States companies that armed Iraq to justice. Instead, scarce resources are spent on coverup.

The President and his top advisers took an oath of office to uphold the Constitution, as we all do. The courts have repeatedly ruled that the Constitution granted the Congress a legitimate right to executive branch information, yet the President and his closest advisers have shown a complete disdain for the Congress and the Constitution.

These are frightened officials who apparently cannot face having their actions judged by the Congress. They hide behind the cloak of secrecy rather than facing up to their actions. The President, or at least people acting in his name and apparently with his knowledge, has conspired to keep the truth about his Iraq policy from the very public that elected him and fought and died to support his efforts in the gulf.

After reading the Rostow gang documents and seeing the great lengths to which the President has gone to stop investigations of his Iraq policy one can only wonder what everybody is hiding. Did the President do more than just coddle, powder, and diaper Saddam Hussein? As Frank Lemay said in his now famous October 13, 1989, memo, `If smoke indicates fire we may be facing a four alarm blaze.'

I will now provide some details on the secrets that the President does not want the public to know about the BNL scandal and his handling of the CCC Program for Iraq.

A CIA report of November 6, 1989, indicates termination of the $1 billion fiscal year 1990 CCC Program will harm United States-Iraq relations.

In recent weeks President Bush has been characterizing his administration's actions for Iraq as proper and above board. `We were just trying to bring Iraq and Saddam Hussein into the society of law-abiding nations.' What a funny way to do that, by arming them, arming him in a way that I will show later on was unparalleled with any other country outside of the top two superpowers. He states that his plan was to woo Saddam Hussein with agriculture credits in order to encourage Iraq to join the family of nations, as I said. At least the President is now admitting that his policy failed, but he is still intent on misleading the public about certain aspects related to the CCC Program for Iraq and the BNL scandal and how the credits were multiplied, obtained through the BNL scheme of financing and this elaborate network of procurement that Iraq built up for military hardware, including chemical weaponry and nuclear.

In particular, the President claims that the decision to approve the $1 billion fiscal year 1990 CCC Program for Iraq in November 1989 was a well thought out, prudent approach to allocating taxpayer resources. He also vehemently claims that the United States did not help enhance Iraq's missile and nuclear, biological, and chemical weapons capability. Both of these assertions are untrue.

While recently addressing an agriculture group the President stated:

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I think we properly used these (CCC) credits for what they were designed to do, and I think it's been beneficial to American agriculture and I'm going to continue to use them in a way that's beneficial to American agriculture with the national interest of the United States foremost in my mind. So I can't say it's been perfect, but I do think that the department and I hope the White House has done a good job in the implementation of the law and the using of these credits.

It is obvious that the White House and the State Department did not act properly in granting the $1 billion in CCC credits to Iraq in November 1989. They ignored many warning signs in granting agricultural credits to Iraq as well as what I am not mentioning here, and that is quite a number of hundreds of millions of dollars in export-import guarantees, on which Iraq has defaulted. For example, Iraq was not creditworthy, and this was known and set forth, when the decision was made to give them $1 billion in those new credits in 1989. The

Iraq CCC Program was rife with corruption. We brought that out in the hearing we had in the committee, which at that time nobody was paying much attention to last year, and there was no proof that commodities destined for Iraq in the shape of agriculture commodities ever arrived in Baghdad.

The Lemay memo of October 13, 1989, indicated that there was a risk that Iraq was diverting agriculture credits to pay for weapons and nuclear equipment. In fact, just this morning it was announced on the radio that the United Nations is demanding access to the Iraqi Ministry of Agriculture's records. Clearly the United Nations suspects that Saddam Hussein used the CCC Program to acquire weaponry.

Well, I would like at this point in the Record, and I ask consent to do so, to refer to an article that I first read before the firing started in the Persian Gulf. And it was from, it is from the Bulletin of the Atomic Scientist. So many of my colleagues and others in the news media seem to think that I came across this and that the documents that I have been putting in the Record would be the exclusive source. Absolutely not. I had been triggered by such articles as this and others.

This article is entitled `Fueling the Fire: How We Armed the Middle East.' And in it it says on the very first page, `The arms-trade danger is underscored by the relative ease with which Saddam Hussein was able to assemble a massive arsenal of conventional weapons. Between 1981 and 1988,' that was the Iran-Iraq war in which, I think, very few Americans realized we were wholeheartedly committed by the Reagan administration on the side of Iraq, `Iraq purchased an estimated 46.7 billion dollars' worth of arms and military equipment from foreign suppliers, the largest accumulation ever of modern weapons by a Third World country. Included in the largesse were some 2,300 modern Soviet and Chinese tanks, 64 Mirage F-1 fighters armed with Exocet missiles,' and it was one of those from Iraq that killed 37 of our sailors in the Persian Gulf, `2,650 armed personnel carriers, and 350 Scud-B surface-to-surface missiles.'

Now, this article appears, and it is very extensive, and I am going to put it in the Record, I brought it to the attention of the staff.

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I analyzed it, and I wondered how in the world we could have helped the very country that the President was already engaged in one of the largest expeditionary forces in the history of our Armed Forces against. The date of this article was December-January; that is, 1990-91. So it had to be prepared and printed before, long before any shooting started. I read it before the shooting started. It was after that that I introduced my impeachment resolution.

If the Members will read further they will see in this article where they precisely bring out the help that continued to go to Iraq or Saddam Hussein; that is, after the cessation of the active shooting war between Iran and Iraq. At this time I include that material in the Record:

Fueling the Fire: How We Armed the Middle East

(BY MICHAEL T. KLARE)

(Michael T. Klare is the five-college associate professor of peace and world security studies based at Hampshire College, Amherst, Massachusetts. He is the author of American Arms Supermarket (1985).)

Warning that `the virtually unrestrained spread of conventional weaponry threatens stability in every region of the world,' President Jimmy Carter attempted in the mid-1970s to constrain U.S. military sales in the Third World and to negotiate a mutual curb on arms exports with the Soviets. These efforts failed. Carter's attempt to limit U.S. military sales collided with the use of arms transfers as an instrument of diplomacy--especially in the Middle East--and his overtures to Moscow were forestalled by a resurgence of Cold War tensions. Since then, no serious effort has been made to curb international arms trafficking, and sales to the Third World have skyrocketed. As Carter predicted, unrestrained commerce in conventional arms has fueled local arms races and inspired aggressive powers like Iraq to employ their bulging arsenals in unprovoked attacks on neighboring countries. If the present crisis in the Persian Gulf is to have any positive outcome, therefore, it should be to demonstrate the urgent need to curtail the global arms trade.

The arms-trade danger is underscored by the relative ease with which Saddam Hussein was able to assemble a massive arsenal of conventional weapons. Between 1981 and 1988, Iraq purchased an estimated $46.7 billion worth of arms and military equipment form foreign suppliers, the largest accumulation ever of modern weapons by a Third World country. 1 Included in this largess were some 2,300 modern Soviet and Chinese tanks, 64 Mirage F-1 fighters armed with Exocet missiles, 2,650 armored personnel carriers, and 350 Scud-B surface-to-surface missiles. 2 These and other imported weapons enabled Baghdad to prevail in the Iran-Iraq War and subsequently fed Hussein's vision of Iraqi dominion over Kuwait and the western Gulf area.

U.S., French, and British troops now face the unappealing prospect of head-on conflict with Hussein's well-armed forces, but Western officials and arms suppliers are understandably reluctant to discuss their role in enlarging the Iraqi arsenal. Although direct U.S. arms sales to Iraq have been largely blocked since the late 1950s when Iraq became a client of the Soviet Union, Washington has on occasion permitted sales of military-related science and technology. Soviet leaders are also tight-lipped about Moscow's contributions to Hussein's military capabilities. But Iraq would not represent such a powerful threat to global peace and stability if world leaders has agreed to the mutual restraints Jimmy Carter proposed in 1977.

On the basis of this experience, U.S. officials should be wary of transferring more arms to the Middle East--at least until some multilateral constraints are in place. Instead, the Bush administration has decided to proceed with a new round of multibillion-dollar sales to friendly nations in the region. In August, Bush authorized the transfer of 150 M-60A3 tanks, 24F-15 aircraft, and 200 Stinger anti-aircraft missiles to Saudi Arabia (a $2.2 billion deal), and in September he approved a $21 billion package of tanks, aircraft, and missiles. The White House subsequently agreed to downsize the second package in order to allay congressional concerns, but the items removed from this sale are incorporated into another package scheduled for early 1991. Bush also agreed in principle to sell $1 billion worth of additional military hardware to Israel, and forgave a $7 billion Egyptian arms debt in order to allow new military sales to Cairo. Meanwhile, as Aerospace Daily reported in early September, other major suppliers--including France and Britain--have been flocking to the Middle East, looking for new military sales of their own, helping to insure that 1990 and 1991 will break all existing records for arms sales to the region.

In approving new arms exports, the administration maintains that the weapons will help deter further Iraqi aggression. But most of the weapons ordered in 1990 and 1991 will not be delivered until 1992, 1993, or thereafter--long after the present crisis in the Gulf has been resolved by one means or another. these new arms shipments will then be available for other military purposes, regardless of the administration's claims. The intended beneficiaries of these sales will continue to purse their own political and military objectives--often risking armed combat with their neighbors in the process. The most likely outcome of fresh arms deliveries to the middle East will thus be intensified regional tensions and a heightened risk of armed conflict.

This prospect dampens hope that the Persian Gulf crisis will help usher in a new era of peace and stability, as some in Washington suggested. `Out of these troubled times,' George Bush told a joint session of Congress on September 12, `a new world order can emerge,' on in which `the rule of law supplants the rule of the jungle, [and] nations recognize the shared responsibility for freedom and justice,' While the Gulf crisis has engendered an extraordinary degree of international cooperation, it has not resulted in any talks on controlling the conventional arms trade. As long as contentious regional powers are able to obtain large quantities of sophisticated weapons, the prospects for averting future conflict are not promising.

The risk of escalating conflicts in volatile Third World areas has led nations to agree on the need to prevent sales of chemical and nuclear weapons and to curb the diffusion of ballistic missile delivery systems. Despite repeated crises, however, there are no such constraints on conventional weapons--especially on modern tanks and aircraft that can be used for aggressive military moves of the sort undertaken by Iraq. Are curbs on arms transfer possible?

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`REVERSE DEPENDENCY'

Many countries offer some type of weapon for sale, but the trade in major combat systems is highly concentrated. According to the congressional Research Service of the Library of Congress, in the 1980s the United States and Soviet Union accounted for three-fifths of all arms sales to the Third World, and five other nations--France, Great Britain, West Germany, Italy, and China--shared another 22 percent. These nations remain the source of most heavy weapons supplied to Middle Eastern countries, and it is their sales policies that must be addressed if the flow of combat gear is to be constrained.

Many factors--political, economic, and military--figure in these nations; rems export behavior. For the superpowers, economic considerations have generally played a secondary role to political and strategic considerations. Samuel Huntington suggested in 1987 that U.S. and Soviet involvement in the Third World reflects `the bipolar structure of world politics and the competitive relationship they have with each other.' In their mutual quest for strategic advantage, each superpower has sought to expand its own perimeter of influence while `minimizing the power and influence of the other.' 3 As part of this process, each side has used arms transfers to lure new allies into its own camp or to discourage existing allies from breaking away.

This use of arms transfers began in the Middle East in 1955, when President Gamal Abdel nawser of Egypt turned to Moscow for the modern weapons the West had denied him. By giving Egypt advanced weapons, Moscow forged a de facto alliance with Cairo, and succeeded, for the first time, in leaping over the ring to hostile states organized by the United States to contain Soviet power in Eurasia. This feat prompted Washington to establish arms-supply relationships with other countries in the region, including Iran, Israel, Jordan, and Saudi Arbai. These moves, in turn, aroused anxiety among the more radical Arab regimes, leading Syria, and the Iraq to forge military ties with the Soviet bloc. Egypt switched sides following the October War of 1973, but the Middle Eastern arms acquisition patterns established in the mid-to-late 1950s have remained essentially intact to this day.

In justifying U.S. arms transfers to the Middle East, U.S. leaders repeatedly asserted that supplier and recipient were bound by common opposition to communist expansionism. For their part, Soviet leaders stressed the common struggle against imperialism. However, the recipients' principal motive for acquiring arms was not the struggle between communism and imperialism, but rather a desire to offset the military might of their regional rivals or to deter attack by an antagonistic neighbor. As Stephen M. Walt suggested in his masterful study of Middle East alliance patterns, `The superpowers sought to balance each other, [while] their clients sought outside support to counter threats from other regional states.' 4

At first glance, this system has a certain logic: each party receives something it wants, and the various arms deliveries balance each other out. In reality, however, the system is fundamentally unstable. No recipient is content with balancing its rivals, but seeks a margin of advantage--either to allow for a preemptive strike (should that be deemed necessary), or to compensate for the other side's perceived advantages. Any major weapons delivery to one side automatically triggers a comparable but larger delivery to the other, prompting a new round of deliveries to the first party, and so on. The only break in this grim pattern occurs when one side or the other seeks to forestall an imminent shift in military advantage to the opposing side by launching a preemptive attack--as has occurred again and again in the Middle East.

This instability is mirrored in the relations between client and supplier. By agreeing to provide arms to a client, the supplier seeks a local ally for its ongoing struggle against the other superpower. Once the relationship has been forged, however, the recipient comes to expect continuing and even expanded arms deliveries in exchange for its continued loyalty to the supplier--and any reluctance on the part of the supplier will be condemned as evidence of inconstancy and unreliability. Such charges usually have the effect of prying additional or more advanced weapons out of the supplier's hands.

The result is `reverse dependency.' The patron finds itself beholden to the good will of the client, and must satisfy the client's appetite for modern arms. As Walt points out, `A large [military] aid relationship may actually be a reflection of the client's ability to extort support from its patron, rather than being a sign of the patron's ability to control its client.' For the Soviet Union, the principal beneficiaries of reverse dependency were Egypt (until 1973), Syria, and Iraq; for the United States, they were Iran (until 1978), Israel, and Saudi Arabia.

CARTER, IRAN, AND CATT

It was the U.S. arms-supply relationship with Iran that first prompted U.S. policymakers to perceive a need for restraints. The relationship was initially forged in 1954, after the U.S. Central Intelligence Agency engineered the overthrow of Mohammed Mossadeq and installed Shah Mohammed Reza Pahlavi as virtual dictator. During the late 1950s and throughout the 1960s, Washington provided Iran with a steady, but not exorbitant, supply of munitions in order to balance Soviet military deliveries to neighboring Iraq. In the early 1970s, however, there was a sharp increase in U.S. arms deliveries as the Shah, with mounting oil revenues at his disposal, sought to greatly enhance Iran's overall military capabilities. Iran's desire for arms was complemented, moreover, by a U.S. desire to recover some of the petrodollars sent to the Middle East in the aftermath of the 1974 OPEC oil price increase, and to implement the so-called Nixon Doctrine, which called for Third World allies to shoulder more of the burden of regional defense against Soviet-backed insurgents and regimes.

Between 1972 and 1978, Teheran ordered $20 billion worth of advanced U.S. armaments--the largest arms export endeavor ever concluded with a Third World nation up to that point. For the first time, U.S. officials agreed to transfer front-line U.S. combat equipment, including F-14 aircraft, Spruance-class destroyers, and Phoenix air-to-air missiles. These sales were widely applauded by Defense Department officials and American arms makers. But Congress became concerned when the scale of the transactions were revealed and when it was disclosed that U.S. companies were using bribes to get Iranian officials to sign military orders. According to a 1976 Senate Foreign Relations Committee staff report, `U.S. arms sales to Iran were out of control' in the early 1970s, with senior administration officials routinely approving the Shah's extravagant arms purchases.

Suggesting that the United States had become `a kind of arms supermarket into which any customer can walk and pick up whatever he wants,' 5 Sen. Hubert H. Humphrey in 1975 sponsored legislation to give Congress veto power over major U.S. military sales. The resulting measure, later incorporated into Section 36(b) of the Arms Export Control Act of 1976, gives Congress some control over arms transactions, but unfavorable court decisions, and a waive allowing the president to overrule congressional reservations when he concludes that critical national security issues are at stake--which Bush used to rush tanks and aircraft to Saudi Arabia in September--have diluted congressional power.

With Carter's election in 1976, the momentum shifted to the White House. On May 13, 1977, Carter formally adopted an `arms export restraint policy'--Presidential Directive No. 13 (PD-13)--which imposed an annual ceiling on the dollar value of U.S. arms sales to all non-NATO nations except Israel, Japan, South Korea, Australia, and New Zealand, and restricted the export of certain high-technology weapons to Third World countries. `I have concluded,' Carter affirmed on May 19, `that the United States will henceforth view arms transfers as an exceptional foreign policy implement, to be used only in instances where it can be clearly demonstrated that the transfer contributes to our national security interest.' 6

The Carter policy also called for negotiations with other suppliers--including the Soviet Union--that might lead to the adoption of multilateral curbs on arms transfers. Carter made clear that the United States would adhere to self-imposed limits only so long as it appeared likely that other major suppliers would follow suit. `I am initiating this policy,' Carter noted, `in the full understanding that actual reductions in the worldwide traffic in arms will require multilateral cooperation.'

At Carter's urging, U.S. and Soviet representatives began the Conventional Arms Transfer Talks (CATT). Most observers expected little progress, and were surprised when the first few rounds of talks, held in Washington and Helsinki in December 1977 and May and July 1978, resulted in agreement on parameters of a regime to restrain conventional arms transfers. In October 1978, U.S. negotiator Leslie Gelb testified that `harmonized national guidelines' similar to those of the London Suppliers' Group (for nuclear technology) were `realistic possibilities.' 7 But before further progress could be achieved, CATT fell prey to a souring international environment and to bureaucratic wrangling within the Carter administration that pitted Gelb against the president's hawkish security adviser, Zbigniew Brzezinski; no further talks were held after a fruitless negotiating session in December 1978. 8

By late 1979, Carter's unilateral arms restraint policies and the CATT process had been essentially abandoned. The decline in presidential enthusiasm for these measures was prompted, to a considerable degree, by Iran's Islamic revolution and the Soviet invasion of Afghanistan--events that largely erased any public or congressional support for U.S. initiatives of this type. In a more fundamental way, however, the policy of restraint was doomed from the start by the administration's failure to question the politics of arms sales. Washington still viewed arms transfers as an effective tool for diplomacy--one of the few such tools available--and Carter was never able to significantly reduce the role of military sales in U.S. relations with such allies as Egypt, Iran, Israel, Jordan, and Saudi Arabia.

The fate of Carter's initiatives became apparent early on. In February 1978, only nine months after PD-13 was signed, the White House approved a multibillion-dollar sale of advanced jet fighters to Egypt, Israel, and Saudi Arabia. The `aircraft sale of the century,' as it was called at the time, had been in the works for several years, and its cancellation would have provoked howls of dismay from the nations involved, along with threats to shop elsewhere--threats Carter was not prepared to face. For much the same reason, Carter then approved a new $8 billion arms request from the Shah, despite Iran's internal unrest, which his advisers warned could result in chaos. Any hopes of keeping arms exports under the ceiling Carter had set were dashed in 1979, when, as part of the Camp David Accords, the United States agreed to provide billions of dollars worth of new arms to Israel and Egypt.

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`ARMS REPLACE SECURITY PACTS'

By the time Ronald Reagan became president in 1981, arms export restraint was no longer a major objective of U.S. foreign policy. Nonetheless, Reagan felt compelled to denounce his predecessor's initiatives and to promulgate a new, open-door approach to foreign military sales. In a May 1981 speech unveiling the new policy, Undersecretary of State James L. Buckley affirmed that `this Administration believes that arms transfers, judiciously applied, can complement and supplement our own defense efforts and serve as a vital and constructive instrument of our foreign policy.' 9 Reagan quickly approved the sale of F-16 fighters to Pakistan, F-15s and AWACS radar patrol planes to Saudi Arabia. AH-1 Cobra helicopter gunships to Jordan, and similar items to other U.S. clients in the Middle East and Asia.

U.S. arms flowed to the Third World in record amounts. Capped by a $5 billion sale of F-15s and AWACS to Saudi Arabia, total U.S. military sales rose to $19.1 billion in fiscal 1981, an all-time record. Only the oil-induced recession of 1983-84, which greatly constricted the spending ability of would-be Third World arms buyers, prevented new records from being set in subsequent years. The recession notwithstanding, Washington continued to use arms sales to extend U.S. influence abroad and to counter similar efforts by the Soviet Union. `Arms sales are the hard currency of foreign affairs,' an unidentified State Department official told U.S. News and World Report in 1983. `They replace the security pacts of the 1950s.' 10

What was true for Washington was true for Moscow. Lacking funds to offer economic assistance or capital investment, Soviet leaders employed the one foreign policy tool available to them in seeking influence abroad: arms transfers. According to the Congressional Research Service, Soviet arms transfers to the Third World from 1981 to 1988 amounted to a whopping $139 billion (in constant 1988 dollars), an amount that exceeds the U.S. total by a significant margin. The major recipients of Soviet arms in the 1980s were clustered in the Middle East and South Asia, with the largest deliveries going to Algeria, India, Iraq, Libya, Syria, and the two Yemens.

As in past years, both superpowers also sought to woo away each other's allies and clients, often using arms transfers in the process. The Soviet Union, for instance, has readily supplied Jordan and Kuwait with modern weapons when leaders of these countries encountered difficulty in obtaining high-tech systems from the West. The United States, for its part, has encouraged several long-standing Soviet allies, including India and Iraq, to diminish their military dependence on the Soviet Union. Consistent with this policy, the Reagan administration raised no objection to French sales of advanced missiles and aircraft to Iraq, or to Brazilian sales of multiple-launch rocket systems. In a further effort to pull Baghdad out of the Soviet orbit, Reagan (and later Bush authorized the sale to Iraq of $1.5 billion worth of sophisticated U.S. scientific and technical equipment--much of which has apparently been used in the development of conventional, nuclear, and chemical weapons. Indeed, so eager was Washington to forge links with Iraq that Reagan and Bush continued to allow deliveries of such equipment even after it had become evident that this technology was being diverted for military purposes, and long after Iraq had used chemical weapons in attacks on Iran and its own Kurds.

As a result of these deeply entrenched arms-supply patterns, many Middle Eastern nations now possess arsenals comparable or superior to those found among the front-line states in NATO and the Warsaw Pact. But if the genesis of these arms-supply relationships was the early Cold War, it would seem logical for them to fade as the Cold War draws to a close. U.S. and Soviet leaders have lent some credence to this assumption. In an August 1990 letter to U.N. Secretary-General Javier Perez de Cuellar, Soviet Foreign Minister Eduard Shevardnadze wrote that `the Soviet Union considers that the inclusion on the U.N. agenda of the problems of restricting international sales and supplies of conventional weapons is a logical development of the trend toward the internationalization of the dialogue on most important questions of world politics.' 11 President Bush and Secretary of State James Baker have made similar comments, noting that the control of conventional arms transfers should be considered along with efforts to curb the proliferation of nuclear arms, chemical weapons, and ballistic missiles.

Despite progress on the rhetorical front, however, the superpowers have taken no steps to curb their exports of conventional arms to the Third World. As noted above, the United States has announced record-breaking sales to Saudi Arabia, and sales of sophisticated arms to Egypt, Israel, Turkey, and the United Arab Emirates are in the offing. The Soviet Union continues to supply major equipment to India, Libya, and Syria, and was pouring arms into Iraq until the moment Saddam Hussein ordered the invasion of Kuwait.

Economic conditions have something to do with this. The Soviet Union is desperately in need of hard currency for its industrial rehabilitation, and weapons are among the few commodities it can successfully market abroad. Arms exports give U.S. weapons manufacturers an attractive `safety valve' at a time of declining military spending at home. But political factors remain a major determinant of the superpowers' arms transfer policies. Moscow and Washington once sought Third World allies in their struggle with one another; today they seek allies in order to better position themselves for global influence in an uncertain, polycentric era.

In the view of senior U.S. strategists, this era is likely to witness the emergence of regional powers, many of which will be armed with weapons of mass destruction, and some will be hostile to long-term U.S. interests. `The emergence of regional powers is rapidly changing the strategic landscape,' President Bush noted in an address to the U.S. Coast Guard Academy in May 1989. `In the Middle East, in South Asia, in our own hemisphere, a growing number of nations are acquiring advanced and highly destructive capabilities,' posing a significant threat to U.S. security. In this environment, any effort by the United States to protect its overseas interests through military means--as in Operation Desert Shield--will require the cooperation of friendly Third World powers. `Where American intervention seems necessary,' the U.S. Commission on Integrated Long-Term Strategy affirmed in 1988, `it will generally require far more cooperation with Third World countries than has been required in the past.' 12

And cooperation is secured through arms transfers. In arguing for congressional approval of the administration's September 1990 emergency arms package for Saudi Arabia, Under-secretary of State for International Security Affairs Reginald Bartholomew told the House Foreign Affairs Committee that these sales are intended to `develop the interoperability that will allow the U.S. and other friendly forces to reinforce the Saudis more effectively should that ever again be necessary,' and to `help contribute to stronger and more stable post-crisis security arrangements.' 13 In other words, arms sales are the essential glue for the `regional security structure' that Secretary of State James Baker told the House Foreign Affairs Committee on September 4 the administration wants to establish in the Middle East.

Whether the Soviet Union has similar intentions cannot be determined. It is clear that Soviet leaders want to maintain close ties with regional powers like Syria and India, and to establish new ties--cemented by arms transfers if necessary--with other powers in the region. Potential buyers are still able to play one suitor off against the other, obtaining favorable conditions for the acquisition of ever more capable weapons. Whatever impact the end of the Cold War may have in other areas, it has not diminished the intensity of local arms races--or the likelihood of regional conflict--in the Middle East.

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SEVEN WAYS TO CURB ARMS

There is no escape from this pattern if the major powers continue to view arms exports as tools of convenience in their quest for political advantage, and if regional powers continue to rely on military means to resolve disputes with their neighbors, U.S. and Soviet leaders--and subsequently, the leaders of France, Britain, and China--must be convinced that a stable international order cannot be achieved in a world of uncontrolled arms transfers, and that curbs on arms are essential to post-Cold War stability. At the same time, Middle Eastern leaders must be persuaded that the best hope for long-term protection against dissension and bloodshed lies with a regional peace agreement that respects the national aspirations of unrepresented peoples, eliminates nuclear and chemical weapons, and limits the acquisition of offensively oriented conventional weapons.

These objectives may take years of effort, but intermediate goals could build momentum for more sweeping and long-lasting objectives. Seven measures could produce real improvements in global security:

Reconvene the CATT talks. As the only U.S.-Soviet negotiations ever undertaken in this field, the Conventional Arms Transfer Talks are a useful mechanism. At the original sessions, CATT negotiators reportedly reached agreement on many basic elements of nomenclature, scope, and applicability which could save months of future talks and consultations. Resuming CATT talks would also send a powerful signal to other suppliers and to recipients that the two superpowers had agreed on the need to constrain the arms traffic.

If the talks are resumed, the two sides should agree to set a mutual ceiling on arms transfers (perhaps $8-10 billion each per year) while pledging to negotiate lower levels in subsequent talks, after experience has been gained in implementation and verification. The superpowers should also agree to ban or restrict the sale of particularly inhumane and destabilizing weapons such as wide-area cluster bombs, fuel-air explosives, incendiary devices, shoulder-fired anti-aircraft missiles, and long-range bombers.

Expand and enhance the MTCR. The Missile Technology Control Regime, established in 1987 to restrict exports of ballistic missile technology, represents an important precedent for multilateral action. But it has critical defects: several countries that have played a vital role in the transfer of missiles and missile technology to areas of conflict are not signatories--notably Argentina, Brazil, China, and the Soviet Union. And the MTCR generally exempts technology used in developing missiles for space exploration, most of which can be converted to military use.

To be effective, the MTCR needs to be substantially strengthened. Including the Soviet Union should be the most immediate priority, particularly as Soviet officials have already met with their U.S. counterparts to discuss possible cooperation in this area, and an agreement would be consistent with policy statements issued by Soviet leadership. It would then be easier to persuade other holdouts to join. Restrictions on the transfer of sensitive technology, including space-related technology, should be tightened.

Establish controls on other advanced military systems. Instruments similar to the MTCR should be established for controlling the export of other destabilizing weapons, including cruise missiles, submarines, and deep-penetration strategic bombers.

Convene an international conference on nuclear and chemical disarmament in the Middle East. No lasting progress toward regional security can be made unless the nations of the Middle East agree to restrict possession of weapons of mass destruction and their means of delivery. A Middle East agreement will require progress in other areas, including boundary disputes. But the history of East-West negotiations demonstrates that progress on arms control will not occur unless countries talk to one another, and preliminary negotiations can often result in the adoption of confidence-building measures that help set the stage for political accommodation.

When the crisis in the Gulf is resolved, efforts should be made to convene a U.N.-sponsored regional conference on nuclear and chemical disarmament, which might also provide the impetus for adopting confidence-building measures tailored to the Middle East. These could include international inspection and monitoring of nuclear and chemical facilities; establishing `hot lines' for communication between hostile nations in a crisis; and mutual promises to sign and abide by the Nuclear Non-Proliferation Treaty and the proposed Chemical Weapons Convention. A U.N. conference could also develop into an ongoing negotiating process, as did the Conference on Security and Cooperation in Europe.

Impose economic and trade sanctions against nations developing nuclear weapons. The U.N. trade embargo has prevented the transfer of materials and technology to Iraq's weapons development and production facilities, including its nuclear and chemical installations. These sanctions should be maintained until Baghdad agrees to dismantle its nuclear and chemical weapons facilities under international inspection. When the current crisis is over, the United Nations should develop an array of trade and economic sanctions to apply against nations that persist in developing such weapons after international norms are established. Sanctions could be limited to a ban on transfers of military technology in the case of states that agree to participate in regional negotiations, or entail more stringent measures if states refuse to participate in such a process.

Reduce or restrict international aid to nations developing domestic arms industries. Many of the more affluent Third World countries are developing elaborate military-industrial complexes modeled on those found in the major military powers of the industrialized `North.'

These complexes contribute to the worldwide diffusion of conventional weapons, and, in the case of Iran and Iraq, help to sustain regional wars of great duration and ferocity. Most of these countries receive significant technical and economic assistance from the North that enables them to divert scarce national resources to pet military projects. In the future, such assistance--whether provided by individual governments or my multilateral agencies like the World Bank--should be denied to states that divert an excessive share of their national income to military-industrial purposes.

Establish an international clearinghouse for intelligence on clandestine arms technology transfers. Iraq's apparent success in acquiring sophisticated arms-making technologies through black market arms channels highlights the need to collect and process intelligence on clandestine arms operations. A clearinghouse could track suspicious `front' operations in target countries and inform police and military authorities of any apparent wrongdoing. Such a mechanism might draw on the staff and experience of COCOM (the Co-ordinating Committee for East-West Trade Policy), the Western agency established to intercept transfers of high-technology goods to the Soviet bloc.

In the absence of controls, the arms trade will continue to operate as in the past, and there will be a continuing series of regional crises and conflicts. But these seven measures could significantly improve the global security environment and set the stage for a comprehensive solution to the Middle East's outstanding security concerns.

Presidents Bush and Gorbachev have spoken glowingly of the new world order they hope to construct on the ruins of the Cold War system. But a new order cannot be built on the premises that have guided international behavior in the past. Obsolete practices will have to be abandoned, particularly the practice of supplying implements of war in return for political promises and favors. Only when munitions are eschewed as an instrument of statecraft and diplomacy will a more peaceful order be possible.

FOOTNOTES

1 Richard F. Grimmett, Trends in Conventional Arms Transfers to the Third World by Major Supplier, 1981-1988 (Washington, D.C.: Congressional Research Service, Library of Congress, 1989), p. 51.

2 Stockholm International Peace Research Institute, SIPRI Yearbook 1990 (Oxford and New York: Oxford University Press, 1990), and earlier editions.

3 Samuel P. Huntington, `Patterns of Intervention: America and the Soviets in the Third World,' The National Interest (Spring 1987), pp. 19-20; for a discussion of supplier and recipient motives, see Andrew J. Pierre, The Global Politics of Arms Sales (Princeton: Princeton University Press, 1982).

4 Stephen M. Walt, The Origins of Alliances (Ithaca, N.Y.: Cornell University Press, 1987), pp. 50-103.

5 Quoted in New York Times, Oct. 19, 1975.

6 U.S. Congress, House Committee on Foreign Affairs, Changing Perspectives on U.S. Arms Transfer Policy, Report by the Congressional Research Service, 97th Cong., 1st sess., 1981.

7 U.S. Congress, House Committee on Armed Services, Indian Ocean Arms Limitations and Multilateral Cooperation on Restraining Conventional Arms Transfers, Hearings, 95th Cong., 2d sess., 1978, p. 17.

8 See Jo L. Husbands and Anne Hessing Cahn, `The Conventional Arms Transfer Talks,' in Thomas Ohlson, ed., Arms Transfer Limitations and Third World Security (Oxford; Oxford University Press, 1988), pp. 110-25.

9 James L. Buckley, address, Aerospace Industries Association meeting, Williamsburg, Va., May 21, 1981 (U.S. State Department transcript).

10 Quoted in Wall Street Journal, June 19, 1983.

11 Izvestiya, Aug, 16, 1990 (translated in Foreign Broadcast Information Service-Sov-90-159, Aug. 16, 1990, p. 6).

12 U.S. Commission on Integrated Long-Term Strategy, Discriminate Deterrence (Washington, D.C.: U.S. Government Printing Office, 1988), p. 10.

13 Testimony, October 3, 1990 (State Department text).

Here is the President telling us now that he would continue, and depend on him to protect the national interest, these agricultural credits. Here are the records, which we have already published in the Congressional Record, from the Federal Reserve Board members at the Advisory Council, the National Advisory Council to the Export-Import, the professional credit analyzer saying, `But look, Iraq has defaulted with six other countries,' most of those that had obtained these arms that I just referred to in the bulletin of the Atomic Scientist, and it is not creditworthy, but then here comes the Vice President at that time and then later the President, Bush; here comes the Deputy Secretary of State, one Eagleberger; and here comes Secretary of State James Baker and says, `No, no, this is essential to maintain our relations with Iraq. We have to do this. It is essential to our political foreign policy.'

This is where I came in. This is where I still am, because at this moment there is no telling how many BNL's and BCCI's which incidentally, Mr. Speaker, our committee is not finished with yet, there are right now, because of our lax defense of our national interests from the standpoint of safety and soundness, not only of our banking system, but the use of our credit and our Government's credit. We have learned nothing since then. We are now doing the same thing with other countries that conceivably, and God forbid, I pray daily does not happen, the so-called Balkan area in flames, yet is has enlarged and it is headed that way. We are exposed with millions of dollars in guarantees to some of these countries that might be on the opposite side before too long, such as with China.

We not only consider China as a favored nation trading partner, but we have also extended some governmental guarantees that I think are just absolutely fantastic and unbelievable.

Our committee has jurisdiction, in accordance with the definition of the rules providing its jurisdiction, on all credit-issuing activities. This is where we come in. This is why some colleagues seem surprised when I say, `We have jurisdiction over Farmer Mac, the credit-issuing secondary banking system, and all of this system is shaky.' It is very shaky. We are in an acute critical condition.

However, there seems to be no general awareness, like in 1988 there seemed to be and there was a planned effort not to reveal the serious conditions of the S&L's. Incidentally, the banking system, too, even though it has been denied, but today it is the banking system, and still continuing S&L conditions.

How can the Federal Reserve Board, which is our monetary policymaking body, be able to set the right monetary policy for a country if it has no knowledge about $1 trillion of this kind of money floating around in this country? I am not talking about the external money, international, I am talking about that that can be leveraged with just a small chunk of it. My estimate is that in this there is at least $1 trillion involved in the drug money laundering illegality that is so nefariously adverse to the best interests of our country, and at the bottom of it all is financing, banking. That is why we are concerned.

I am not interested in the foreign policy, but I am if that politics of foreign policy is used to cancel out the policy of the monetary-setting bodies, and our central bank, as it is known. That is where I come in and that is where I have stayed.

The main memo of October 1990, indicated that there was a risk that Iraq was diverting, as I said and repeat, credits to pay for weapons and nuclear equipment. In fact, just this morning, I repeat, the United Nations certainly suspects it and they are there now in Baghdad, camping out. They have been refused access, but they are still there.

It is clear that the administration violated its own policy and used food as a political tool. All these years we have been denying it to the world, and here it is. Ambassador April Glaspie admitted that, and I placed the record in the Congressional Record. The decision to approve the fiscal year 1990 CCC Program for Iraq is not without cost. To date the taxpayer is out more and still in default

over $400 million, but 10 American banks have already been paid out $1.2 billion of taxpayers' money, so the exposure to the taxpayer for these activities, not counting the Export-Import Bank, will be around $2 billion. How desperately our States, our cities, our communities, our school system needs just a little chunk of that $2 billion, which could make a big difference to any one of our more seriously detrimentally impacted communities. We are out. The taxpayer is going to have to make up for the default on those guarantees.

The Italian bank, and nobody seems to realize, even some of the people, the regulatory authorities, do not seem to realize that when we talk about foreign banks, like the BNL, we are not talking about an entity like a United States bank or a private bank. These are all government-owned banks.

The Italian Government, the Italian Senate, to which, incidentally, I owe a great debt of gratitude, particularly to the chairman, Senator Carta of Rome, who did a magnificent job in its investigating committee. They came over and I met with them. In fact, when the Federal Reserve Board would not give me some documents we found a way to get them from this other source, so that the Italian Government and the taxpayers of Italy will be out about another $2 billion on BNL for that and other involvement, incidentally, where BNL and BCCI dovetail. It is like a giant web, a big web. We touch one end and the whole thing quivers.

The decision to approve that fiscal year 1990 CCC Program for Iraq is not without cost, I repeat. That is not the end to this costly story of imprudent and improper management. It gets worse. Two days prior to winning approval for $1 billion, the National Security Agency and the State Department received a detail secret CIA report on BNL. The CIA report is entitled, `Iraq-Italy, Repercussions of the BNL-Atlanta Scandal.' The report was prepared by the CIA's special division, the Office of the Near East and Southeast Asia Analysis.

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[TIME: 1500]

I am writing and I have sent a letter to the CIA Director asking him to declassify this report so that it can be made public, to wit: to us, the Congress.

The secret report indicates that BNL loans were used to fund Iraq's clandestine military procurement network which was operating in the United States and Europe. The report indicates that several of the BNL-financed front companies in the network were secretly procuring technology for Iraq's missile programs and nuclear, biological, and chemical weapons programs.

The President recently denied point blank that the White House or the State Department knew of the charges that Iraq was diverting United States assistance to build nuclear weapons. The President was quoted as saying:

We didn't know that. The State Department didn't know that. You can talk about what one State Department employee * * * and if we had known it wouldn't have happened.

Given the contents of the CIA report the President's statement seem rather disingenuous. The White House and State Department were keenly aware that BNL loans were tied to Iraq's highest priority weapons programs. The CIA also had plenty of information in its files showing that the Iraqis involved in the BNL scandal represented the highest levels of the Iraqi Government.

For example, one of the unindicted coconspirators in the BNL scandal is Hussain Kamil. Mr. Kamil is Saddam Hussein's son-in-law and at the time he was in charge of Iraq's massive military industrialization effort. At the time of the BNL scandal the CIA listed him as the second most powerful man in Iraq. At this point I would like to place a telex in the Record showing Kamil wishing the employees of BNL a happy Easter.

The telex referred to is as follows:
March 26, 1989.

For the attention of Mr. C. Drougol:

I would like to express my greetings and personal good wishes for you and your family and all your staff at Del Lavoro Bank-Atlanta on the occasion of the Easter festivities. Wishing you all happiness, good health, and prosperity.
HUSSAIN KAMIL HASAN,

The Ministry of Industry
and Military Production.

Another example is Safa Al Habobi, one of the Iraqis indicted for his role in the BNL scandal. Al Habobi was the head of Iraq's secret military technology procurement network. He directed how much of the BNL money was spent and at the time of the BNL raid the CIA lists him as an Iraqi intelligence agent.

It is important to note that the BNL investigation in Atlanta was not provided access to the CIA report on BNL or the CIA information on Mr. Kamil and Mr. Al Habobi and others. In fact, the committee has been told that requests for CIA information went unanswered until after the Iraqi invasion of Kuwait--1 year after the BNL raid.

The lack of CIA cooperation with the prosecutors in Atlanta was a calculated administration effort to conceal the true nature of the BNL scandal and to hide the level of Iraqi Government complicity in the scandal. The CIA could have easily opened its files and allowed the Atlanta prosecutors to know what they were up against. New leads could have been pursued, but that is not what happened. Instead the CIA was silent. It is downright criminal that the CIA did not help the prosecutors in Atlanta understand BNL's role in funding Iraq's military technology procurement network. Astonishingly, it appears that the Bush administration wanted Iraq's clandestine procurement activities to continue.

It is beyond me how the President and his advisors can claim that the decision to approve $1 billion in CCC credits for Iraq was prudent. Providing Iraq with a billion dollars in additional credit while knowing of Iraq's sinister intentions is inexplicable. How can the administration explain that? Clearly they don't want to.

The CIA report also sheds light on the reasons why the President authorized the release of the CCC credits for Iraq despite all the ominous warning signs.

In the late summer of 1989 Iraq was in dire financial straits. Iraq badly needed the $1 billion allocation of CCC credits in order to meet the food demands of its people. When the BNL raid occurred in August 1989, investigators found over $4 billion in unreported loans to Iraq--$4 billion, not million, billion--three quarters of a billion of the loans were guaranteed by the CCC Program. One of the main focuses of the investigation was fraud against the CCC Program.

Starting in August 1989, it was obvious that the new fiscal year 1990 CCC Program for Iraq was in trouble. On top of the BNL scandal the Treasury Department, OMB, and the Federal Reserve doubted that Iraq could make good on $1 billion in new guarantees that had been planned for fiscal year 1990. In September 1989, these agencies balked at that Agriculture Department proposal to go ahead with the full $1 billion program.

The State Department and White House were stunned. Together they were just completing work on a new Bush administration policy for the Middle East called National Security Directive 26. The publicly available part of NSD 26, which was signed by the President on October 3, 1989, states:

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Normal relations between the U.S. and Iraq would serve our long-term interests and promote stability in both the Gulf and the Middle East. The U.S. Government should propose both economic and political incentives for Iraq to moderate its behavior and to increase our influence with Iraq.

The CCC Program for Iraq was the largest economic incentive the United States had to offer--termination of the program would frustrate the President's orders. A State Department memo to Secretary Baker dated October 26, 1990, states:

Earlier this month the President signed NSD-26 mandating pursuit of improved economic and political ties with Iraq. Our ability to influence Iraqi policies in areas important to us, from Lebanon to the Middle East peace process, will be heavily influenced by the outcome of the CCC negotiations.

Consequently, the White House and NSC devised a strategy to win approval for the corruption riddled program. In early November, Secretary of State James Baker called Agriculture Secretary Clayton Yeutter pledging his support for the full $1 billion program. At the same time Deputy Secretary of State Lawrence Eagleburger called his counterparts at the OMB and Treasury Department to ask for their support for the full $1 billion program for Iraq.

What is generally not known is the role the CIA report played in the decision to grant the CCC credits for Iraq. The CIA report states that a failure to approve the full $1 billion CCC Program for Iraq will harm United States-Iraq relations. It was with that secret information in hand that the White House and State Department went to the NAC Deputies Committee meeting of November 8, 1989. The various agencies discussed the proposal for the CCC Program for Iraq. Notes of the meeting state:

The State Department's Robert Kimmitt stated that his comments reflected the views of Secretary Baker who believed that the program in Iraq was crucial to the U.S. bilateral relationship with Iraq. He noted that in National Security Directive 26 the President had called for improvement of the U.S. relationship with Iraq and bilateral trade expansion offered a good means to achieve that end. To abruptly terminate the CCC program in Iraq would, he said, clearly run counter to the President's intention and would furthermore cause a deterioration in our relationship with the Iraqis.

The high level lobbying effort paid off. This time the CCC Program for Iraq was approved. The CIA report shows that unless the full $1 billion CCC Program was approved, the President's goal of improving relations with Saddam Hussein as spelled out in NSD-26 would be frustrated. Making NSD-26 work appears to be the main motive and driving force behind the decision to release the CCC credits. The problem was that NSD-26 was flawed--closer relations with the brutal Saddam Hussein was not a prudent strategy.

It is reasonable to infer that the President himself authorized the release of the CCC Program for Iraq and it is the President who should answer to the taxpayers for this faulty judgment. That inference is supported by recently acquired Treasury Department notes of November 7, 1989, which state: `Non-attributable: Rumor: White House ordered release of the $1 billion.'

These revelations are important for several reasons. First and foremost is the striking stupidity in giving Saddam Hussein $1 billion in credit when he is obviously intent on building weapons of mass destruction. The administration clearly had more in mind than helping American farmers.

The Bush administration had a policy of not allowing food to be used as political weapons, yet clearly the CCC Program was used as a political tool and not a market enhancement mechanism as the highest levels of the administration have claimed in recent congressional testimony.

[TIME: 1510]

The decision to approve the CCC credits also shows that prudent management was abandoned for political expediency, and yet in recent testimony before the Banking Committee Mr. Lawrence Eagleburger stated:

I intend to make clear that the administration followed a prudent policy toward Iraq, including the management of the CCC Program.* * *

Now, this is the same Mr. Eagleburger, Deputy Secretary of State, when in his appearance before a committee, looks at me and says, `Well, it was not until I saw in the Congressional Record in preparation for this hearing the cable memorandum that you put in the Record that I did not even know existed.' I said, `Well, you signed it.' He said, `That is true.' It is signed as Acting Secretary of State. But somebody sent that cable. To whom? To our Ambassador in Baghdad. What did the cable say? It said, `Hey, we are going to get that help for Saddam Hussein. Be sure to tell him,' but then the last paragraph said, `But do not tell anybody back here in the States.'

So when we bring this out, the Deputy, with great ado, alams the document on the table in our committee hearing room and says, `That proves I did not know about this. I would never have written such a stupid paragraph.' Well, who then is acting? Who is responsible for anything then?

If I should send a cablegram like that and it is over my signature, I should not be answerable for that? I should blame some unknown, undetermined, unidentified, locally placed State Department Foreign Service Officer somewhere? Of course not.

But those are the times we are living in. Yes, we made a mistake, but nobody is taking responsibility, no accountability.

What are we waiting for in our country? What is the net dead-end result of all of this on levels reflected, as I can tell you in hearing after hearing in the Banking Committee, from the high and the low and the banking and big financial experts and all? `Yes, sure, but we are not responsible,' because, you know, everybody was riding that merry-go-round at the time. You know, that was the thing to do. But who answers for it? And what are you going to do to make up for these crass errors, and if not greedy, greed-driven activities, and redeem such as it can the national interest? No volunteer there.

The scandal does not end here. The committee has learned that in late October-early November 1989 the White House called the assistant U.S. attorney in Atlanta to discuss the BNL case.

Last week the committee was provided access to a pile of long lost Treasury Department notes on the NAC. The committee asked for them in October 1990, and they were recently uncovered and turned over by an honest Treasury Department lawyer.

These meticulous and comprehensive notes were taken by a dedicated career Treasury Department employee who was assigned responsibility for monitoring the BNL scandal and the NAC decision on the fiscal year 1990 CCC Program for Iraq.

Last, the committee staff, and let me here give credit to the staff that has been the most rewarding. We have very limited staff, but Mr. Dennis Kane, who has been in the forward of this, under the most able direction of the staff director, Mr. Meek, Kelsay Meek, with credit for painstaking night after night all night, weekends all night, poring through these documents, assembling them, and then consulting and identifying.

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Mr. DORGAN of North Dakota. Mr. Speaker, will the gentleman yield?

Mr. GONZALEZ. I am happy to yield to the gentleman from North Dakota.

Mr. DORGAN of North Dakota. Mr. Speaker, I wanted to observe that I have watched the gentleman in the well, the gentleman from Texas [Mr. Gonzalez], take the floor over recent months on this same subject, and I think that the House of Representatives owes the gentleman from Texas [Mr. Gonzalez] a debt of gratitude for the work he has done.

Mr. GONZALEZ. I thank the gentleman from North Dakota [Mr. Dorgan].

Mr. DORGAN of North Dakota. Clearly something strange has gone on here under the cloak of great secrecy in which billions of dollars have flowed in unusual ways that have apparently ended up buying weapons for Saddam Hussein, and the gentleman from Texas [Mr. Gonzalez] has been determined to find the answer to these questions that have been posed, and I think the House owes him a debt of gratitude. I do not know where this all leads. I do not know where it all ends up, nor I suspect does the gentleman from Texas, but the American people deserve the truth. They wanted to know what has happened.

Mr. GONZALEZ. The gentleman is correct.

Mr. DORGAN of North Dakota. What happened, why it happened, under what conditions it happened, who authorized it. That is what the gentleman from Texas seeks, and I hope that he will pressure all of the forces in the House and in the whole Congress and in the executive branch to make sure the mechanisms are available for you to get at the truth so that the American people can understand what the truth is.

Mr. GONZALEZ. I thank the gentleman very much, I say to the gentleman from North Dakota [Mr. Dorgan]. I deeply appreciate that, and particularly coming from a gentleman I honor and esteem highly. I want him to know that he has succinctly stated the main underlying motivation that guides us here, and as I said, insofar as these collateral issues touch on the banking and financial and the safety and soundness of our system, which unfortunately and sadly is not so safe and so sound, as the gentleman well knows, and the gentleman has developed quite an expertise in that line even though he is not a member of the Banking Committee, and we respect him very much. But I thank the gentleman again for his generous words.

So we had last week finally provided a look at a pile of Treasury Department notes on the NAC. It resisted, denied, in fact, I had one letter in which Treasury interposed executive privilege, but we persisted and finally, last week, the staff was permitted to look at some of these documents, not all that we are still looking for, and the committee asked for them in October 1990. That is over a year and a half ago.

We were told that, `Well, we did not know'; they did not know they had them. So here they uncovered them last week, and they were turned over to an honest Treasury Department lawyer, probably a career.

You know, we always forget how many dedicated career, what we used to call civil service, but which has been undone, that on the subleadership level, and I know in the case of the regulators and the old Home Loan Bank Board how many heroically performed despite facing either the loss of their careers or the removal of their jurisdiction if the big cheeses up in D.C. did not like what they were doing.

Now, what I have said all along is that secrecy by its very, very identification is an enemy of democracy.

I have served, and I have been privileged, as I have said before time and time again, to serve on the local legislative level 3 years, 39 years and 8 months ago city council of my city, State senate 5 years, and 30 1/2 years here, 30 years and 7 months here on this level, and I can honestly tell anybody that I know of no occasion in which I would participate or know of any participation in any matter that had to be secret, that the doors could not be thrown open, the windows opened, and I cannot for the life of me understand all of this penchant for secrecy other than the fear of ridicule for being shown up to have made a very dumb mistake.

Well, we all make mistakes, but if we then try to deny it, and then what is worse, cover up or obstruct the legitimate jurisdictionally wise organ of our Government that is directly responsible to the people itself, the knowledge and the inclination that men such as J. Madison and the ones who wrote the Constitution say is indispensable.

This employee had regular contact with the various agencies involved in the handling of the BNL scandal and the decision to approve the CCC Program for Iraq. This includes regular contact with the State Department, Agriculture Department, Federal Reserve, and the Justice Department. The contacts also included the White House.

On November 7, 1989, this individual had a conversation with a fellow Treasury Department employee and the assistant U.S. attorney in Atlanta, Ms. Gail McKenzie. The notes of the conversation read:

McKenzie: She has been called by the White House--got impression (they are) concerned about embarrassment level.

It is clearly improper for the White House to be calling an assistant U.S. attorney to talk about an open criminal case--especially a case as sensitive as the BNL case. A call from the White House could certainly be perceived as threatening.

This revelation raises a myriad of questions:

Who at the White House made the call?

Who at the White House authorized the call?

Was the prosecutor required or asked to reveal grand jury secrets?

Who at the Justice Department was aware of the call?

Did the Justice Department approve of the call?

Why was the call made in the first place?

It is interesting to note that during recent hearings before the Judiciary Committee whether to appoint an independent counsel Attorney General Barr did not inform the committee that the White House called the prosecutor in Atlanta to discuss the BNL case. Clearly someone at the White House wanted the prosecutor to know that the BNL investigation was an extremely important case.

ROSTOW GANG STILL ACTIVE

I am sorry to report that the President's efforts to thwart the Banking Committee's investigation of BNL and Iraq policy are still quite active. On May 15, 1992, the Attorney General sent me a letter stating that the Banking Committee would not be provided access to classified information. The Attorney General spuriously claimed that I harmed the national security by placing documents in the Congressional Record during my floor statements on BNL.

I should note that the Attorney General did not send his letter until nearly 4 months after I entered the first documents in the Congressional Record. In fact, the Attorney General's letter arrived just after the Bush administration started getting negative press for its failed policy toward Iraq.

On numerous occasions I have asked the Attorney General and the State Department to demonstrate how the documents I placed in the Congressional Record harmed the national security. Not surprising, neither has replied and I bet they never will because the documents in no way harmed the national security.

The truth is that the President and his advisers are hiding behind the cloak of national security to cover up embarrassing and potentially illegal activity related to his policy toward Iraq.

[Page: H6014]

INDEPENDENT COUNSEL

The Judiciary Committee is now contemplating appointment of an independent counsel to investigate potential criminal activities associated with the Bush administration's policy toward Iraq. It is now clear that the President, Brent Scowcroft, and other top advisers had their hands in the effort to thwart congressional oversight of Iraq policy.

We know that the administration submitted false Commerce Department export licensing information to the Congress. Before today all we knew was that Dennis Kloske was pointing his finger in the direction of the White House.

We now know that the White House called the assistant U.S. attorney in Atlanta just prior to deciding to approve the $1 billion fiscal year 1990 CCC Program for Iraq in November 1989. That was clearly improper.

We know that the White House and State Department had CIA information showing how the loss of BNL loans could harm Iraq's procurement effort which apparently was the linchpin of the policy to mollify Saddam Hussein, a man who a few months later would be referred to as Adolf Hitler by President Bush.

The White House wanted to keep the money and the technology flowing to Saddam Hussein. And naturally, today they do not want to talk about it. But it will not go away. The people of this country are entitled to know what happened and why.

[TIME: 1520]

The SPEAKER pro tempore (Mr. Andrews of New Jersey). Under a previous order of the House, the gentleman from Indiana [Mr. Burton] is recognized for 60 minutes.

[Mr. BURTON of Indiana addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]

The SPEAKER pro tempore. Under a previous order of the House, the gentlewoman from Maryland [Mrs. Bentley] is recognized for 60 minutes.

[Ms. BENTLEY addressed the House. Her remarks will appear hereafter in the Extensions of Remarks.]

The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Georgia [Mr. Ginrich] is recognized for 60 minutes.

[Mr. GINGRICH addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]

The SPEAKER pro tempore. Under a previous order of the House, the gentleman from California [Mr. Dreier] is recognized for 60 minutes.

[Mr. DREIER of California addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]

END