Commodity Credit Corporation Iraq Program

Under its GSM-102 and GSM-103 programs the Commodity Credit Corporation of the Department of Agriculture guarantees repayment to American banks that finance foreign purchases of American farm products. Iraq became eligible after the administration of Ronald Reagan removed it from the list of state sponsors of terrorism in 1982. The Atlanta branch of Banca Nazionale del Lavoro became the principal lender under the guarantees.¹

Growth

Iraq bought less than 135 million dollars of American farm goods in fiscal 1982, without guarantees. In fiscal 1983 the department approved 401.9 million dollars in guarantees. Iraq's share of the whole program rose from 8 percent that year to 26 percent in fiscal 1988, when it received more than a billion dollars and was the second largest recipient. The department approved 1.1 billion again for fiscal 1989, "despite growing concerns over Iraq's creditworthiness." The total from 1983 to 1990 came to about five billion dollars. Under the separate Export Enhancement Program American exporters also received an estimated 157.2 million dollars in bonuses on Iraqi purchases of 509.8 million.¹

In September 1988, after the gassing of Kurdish civilians, Congress considered sanctions. The State Department wrote to the House Foreign Affairs Committee on September 13 that Iraq had used chemical weapons against its Kurdish population and that the United States "had more to gain from maintaining a cooperative relationship with Iraq than from isolating the country." No sanctions were enacted.¹

After the Raid

The FBI raided the Atlanta branch on August 4, 1989. President George H.W. Bush signed National Security Directive 26 that October, directing the government to "pursue economic and political incentives for Iraq to moderate its behavior," with "particular emphasis on expanding United States-Iraq oil industry related trade." On October 6 Secretary of State James Baker assured Tariq Aziz that American concern over proliferation was worldwide and not directed at Iraq. Iraq asked for more than a billion dollars in guarantees for fiscal 1990. The department, citing creditworthiness and its "apprehension about findings of possible program irregularities surfacing in ongoing investigations," offered 400 million, which Iraq refused "because it wants the full amount approved and does not want to be tied to the BNL investigation unless concrete evidence of complicity is found." The department then offered 500 million, with a second 500 million to follow "after successful conclusion of the BNL investigation." Iraq took the first and rejected the condition.¹²³

Representative Henry B. Gonzalez told the House on May 18, 1992: "When the BNL offices were raided in Atlanta in August 1989, investigators uncovered massive fraud, placing the entire CCC Program for Iraq in jeopardy. So the White House and NSC, armed with National Security Directive 26, sprang into action in order to save the CCC Program for Iraq." His committee's document requests named Brent Scowcroft, the president's counsel C. Boyden Gray, Gray's deputy John Schmitz, Richard Haass of the National Security Council staff, and Clayton Yeutter, the secretary of agriculture. A department memorandum of April 2, 1990, recorded that the second tranche was being withheld. By that month, Gonzalez said, "it was apparent the BNL indictment was being delayed." The indictment came on February 28, 1991, the day the ground war ended.²

Diversion

On July 21, 1992, Gonzalez quoted an intelligence report of July 1990, "Iraq's Growing Arsenal," which identified Iraq's State Establishment for Oil Refining and Gas Processing as "a dedicated front for procuring chemical weapons related components."⁴

The trade embargo of August 2, 1990, ended the program. The corporation then had about two billion dollars at risk on Iraqi guarantees. Gonzalez called the Italian bank "a bank that cost the taxpayers two billion-plus dollars."¹²