The Iran Brief®

Policy, Trade & Strategic Affairs

An investigative tool for business executives, government, and the media.

The Death Lobby: How the West ArmedIraq

by KennethR. Timmerman

Copyright © 1991 by Kenneth R. Timmerman. All rightsreserved.

Chapter 16: The Gang's All Here


With the end of the Iran-Iraq war, businessmen around the worldwere expecting to cash in. Both countries had been heavily damaged bythe war, and needed extensive infrastructure repairs. Estimates ofjust how much damage had been caused ranged from $200 billion to ashigh as $500 billion. But on one thing the experts agreed: the warhad hit Iran much harder than it had Iraq. By the end of 1988, it wasapparent that the Iranian economy was in shambles, and the Islamicregime's record of supporting international terrorism did not makethe Western powers eager to finance reconstruction. Iraq, on theother hand, was making all the right noises--if the mute agony ofmassacred Kurds was ignored. It planned to open its economy toforeign investment, and hastened to announce a myriad of gigantic"reconstruction" projects, such as the $1 billion PC2 petrochemicalscomplex. Businessmen from France, West Germany, Italy, Japan,Britain, and the U.S. flocked to Baghdad, eager to stake their claimto the next gold rush.

Problems soon became apparent. Iraq was deeply in debt, perhaps byas much as $70 billion, if you included the $35 billion in"protection money" Saddam Hussein had extorted from his Arabneighbors to save them from Islamic Iran. The Finance Ministries inWest Germany, France, Britain, and Italy sounded quiet notes ofalarm. They argued that a "London Club" of Iraq's creditors shouldconvene to hammer out a global rescheduling of the Iraqi debt, so newcontracts could be launched on a more sound footing.

Global rescheduling was what Saddam feared the most, since itwould have put a damper on his mounting ambitions. One by one, he lethis suppliers know that Iraq intended to reward those countries andcompanies that had kept the faith during the dark days of theIran-Iraq war. Juicy new contracts would be shovelled their way... oncondition that they shied away from any London Club arrangement, thatwould have put his economy under international surveillance. Thebusiness lobbies and the arms salesmen got the point, and pressuredtheir respective governments to find "creative" solutions to Iraq'sdebt.

The West German government was one of the first to react. Exportcredits for Iraq were reinstated in 1988, after a July 1 meeting inBonn between Chancellor Kohl and Iraqi Foreign Minister Tarek Aziz. Afurther meeting between Kohl's principal deputy for intelligenceaffairs, Wolfgang Schauble, and Iraqi Vice President Taha MoheddinMarouf, was held in Bonn on November 23, and focussed specifically onexpanding trade. The West German government pledged to maintain itseasy-going attitude when it came to industrial exports to Iraq. AsLorenz Schomerus, who was in charge of export policy at the WestGerman Economics Ministry explained, "nobody saw any interest inmaintaining strict controls."

When the figures for the end of the year came in, Germanunderstanding of Iraq's "special needs" shone through clearly. TheFederal Republic managed to sell $826 million worth ofhigh-technology products to Iraq in 1988, more than double the salesof the year before. In 1989, West German high-tech exports would roarpast the $1 billion mark. The vast majority of these Iraqi purchaseswere going into known weapons plants, such as Taji, Badr, Saad 16,the Fallujah and Kerbala missile works, and the al-Hillah rocket fueland explosives plant. It was a great victory for Herr Schomerus, whonever lost an occasion to explain that his employer, after all, wasthe Ministry for Economic Affairs, not against them.

American exporters were not going to take a back seat to theGermans, now that the war was over. U.S. exports to Iraq also took agiant leap forward in 1988, breaching the $1 billion mark for thefirst time ever. Unlike the Federal Republic, however, the bulk ofU.S. exports consisted of food products. Iraq was now the biggestforeign market for companies like Comet Rice, which figuredprominently among the contributors to the U.S.-Iraq Business Forum.High-technology goods shipped from the U.S. tended to be specializeditems unavailable on other markets. If the dollar value was less, themilitary value was high.

With the end of the war, the U.S. voluntarily shifted itscommercial policy toward Iraq. Industrial exporters were openlyencouraged by the State Department, the Commerce Department, and theBusiness Forum to seek Iraqi contracts, and before the year was out,the U.S. became the largest single buyer of Iraqi oil. From 1988 on,companies such as Coastal Oil, Chevron, Conoco, and Occidental werepurchasing one out of every four barrels of oil the Iraqis exported.

The U.S.-Iraqi relationship had all the trappings of a solidpartnership. President Reagan was not going to see all that goodbusiness go down the drain just because of a few Kurds. Neither wasGeorge Bush. Senate hearings on Iraq in January 1989, after Bush'sinauguration, led to new legislation calling for drastic tradesanctions on Iraq, to punish Iraq for using chemical weapons againstits own citizens. The Senate Bill, called the Chemical and BiologicalControl Act of 1989, passed on January 25. It called on the U.S.government to block export licenses to Iraq of sensitive technology,and to cut off U.S. government-supported loans, including the CCCguarantees and credits from the Exim Bank. Worse, it stipulated that"the United States shall not import any good, commodity, or service"from Iraq. It amounted to a trade embargo as complete as the oneimposed by the United Nations following Iraq's invasion ofKuwait.

One of President Bush's first official acts was to veto the Iraqsanctions. The new Administration meant not merely to continuebusiness as usual with Iraq, but to ensure that business got better.In the early months of the Bush Administration, the White Houseissued a National Security Decision Directive calling for improvedrelations and business activity in Iraq. All U.S. government agencieswere called upon to implement the new policy. With open encouragementfrom the Bush Administration, U.S. trade with Iraq climbed past thethree billion dollar mark in 1989, and was set to go higher, untilSaddam Hussein burst the bubble by his invasion of Kuwait.


Paul Von Wedel still remembers the day when Bill Muscarella firstgave him a call at BNL. Muscarella ran a small outfit in Tuscaloosa,Alabama, called XYZ Options, that had just won a $14 million contractwith Iraq's Ministry of Industry (and Military Industrialization) tobuild a tungsten-carbide machine-tool bit plant for the Badr StateEstablishment in al-Youssifiyeh, an industrial suburb just south ofBaghdad. It was Safa Haboby from TDG in London, the Ministry's buyingoffice, who told Muscarella to pick up his money at BNL.

As Von Wedel remembers, Muscarella had never talked to a bankerbefore, and didn't really know how to begin. "I'm always impressedwith people who have to give their titles," Von Wedel said. "If theyworked for or owned a good company they wouldn't have to say who theyare or what they are."

In an affidavit submitted to Federal Court in Atlanta, XYZ VicePresident, Richard W. Kendrick, explained that the June 12, 1988contract with Iraq's Machinery Trade Company was "to furnish thearchitectural services to construct three interconnected factorybuildings, and to furnish the machinery, equipment, and machine toolsto be installed within those buildings, all of which will comprisethe factory for manufacturing carbide tools." In a subsequentinterview, he explained that the Iraqis expected to slash between $14and $16 million per year from their import bill just by making thetungsten-carbide cutting bits themselves. "These were generic tools,"he said. "They could be used for just about everything, includingweapons."

Despite Von Wedel's initial reluctance to deal with individuals heconsidered to have flown in from Outer Mongolia , BNL confirmedCentral Bank of Iraq credit number 88/3/2407, and made an initialpayment of $6,154,534.50 in August 1988. Odd details about theAlabama company and this contract emerged later. In one documentfiled by BNL lawyers in Atlanta, they alleged that XYZ "was astart-up company with absolutely no prior experience in internationalcommerce or finance; that XYZ was somehow introduced to thepossibility of participating in a major construction project in Iraqthrough an unsolicited telecopy from a company--Matrix ChurchillCorp--it had allegedly never heard of, which was managed andcontrolled by Iraqi Nationals; that XYZ agreed to pay MatrixChurchill a "finder's fee" of $1.4 million if XYZ secured thecontract... and that the United States Department of Commerce hasrefused to date to issue an export license for one of the pieces ofmachinery that XYZ wishes to export because of the potential for useof the equipment in manufacturing arms and the inability of theDepartment to confirm the bona fide nature of the allegedimporter."

Unwittingly or not, XYZ Options had become an Iraqi front company.Orders for specific pieces of equipment for the weapons plantsoriginated in Baghdad, were transmitted to Safa Haboby in London, whosent them on to Matrix Churchill Corp. in Ohio. But even thesescreens were not enough to satisfy the Iraqis. Matrix Churchill thenhired XYZ Options to sign contracts on its behalf with thirty othersuppliers from a list provided by Safa Haboby and another Iraqi namedAbdul Qaddumi, a "project manager" at Matrix. Banking documents andtelexes show that suppliers included Pratt & Whitney, theaircraft engine manufacturer, General Industrial Diamond of NewJersey, Waida of Japan, EWAG in Switzerland, and other machine-toolcompanies in Brazil and Europe. But nowhere is there mention of SafaHaboby's TDG. Haboby's concern was to hide his involvement as much aspossible from the U.S. authorities, and did not want to appear as thefinal purchaser.

He had excellent reasons for such caution. One consignment ofcomputer-controlled machine-tools ordered by XYZ was intercepted byU.S. Customs officers on its way to Iraq from GTE Valenite in RoyalOak, Michigan. Shipping documents showed the destination to be theHuteen State Establishment in al-Iskandariyah, which was part of theindustrial belt south of Baghdad. Huteen was not just a weaponsplant; it was one of the largest weapons complexes in Iraq, and eventhe Department of Commerce was having difficulty avoiding thatfact.

Because of Commerce Department doubts, Moore Special Tool ofBridgeport, Connecticut, began having trouble getting acomputer-controlled jig grinder worth $380,564 cleared for export toIraq. The Commerce Department suspected it could be used for militaryends, and requested additional information from the company. Jiggrinders are essential for manufacturing nuclear weapons, and for theproduction of very high-precision components such as gyroscopes,which are needed for ballistic missile guidance systems. TheDepartment of Energy has identified Moore Special Tools as the soleU.S. source of jig grinders for U.S. nuclear weapons programs, andbecause of this, blocked a takeover attempt by Fanuc of Japan.

Richard Kendrick of XYZ Options had been in the machine-toolbusiness for thirty years and fully understood the strategic natureof the Moore jig grinder, but he said he was convinced that theIraqis were serious about building up a legitimate machine-toolindustry, since they had sent 33 plant technicians to Alabama fortraining and intended to send more. He offered to take U.S. Embassyofficials in Baghdad around the Badr and Huteen plants, to reassurethem about Iraqi intentions to manufacture only commercial parts suchas truck engines and transmissions.

Moore was not the only company having difficulties with its exportlicenses. A subsequent request to ship metal-working machines worth$5,559,977 to Huteen shows that the Department of Commerce understoodthe true nature of the Huteen weapons complex. It also shows thatthey understood in detail the involvement of BNL Atlanta, and yetsounded no alarm bells. In the file accompanying DoC case numberD006442, investigators noted that they called Christopher Drogoul atBNL Atlanta, who was financing the deal, "in an attempt to get enduser information" about Huteen. Drogoul shrugged them off with theexcuse that "the letter of credit in question was received by thebank in the same batch as a number of other letters of creditrelating to the Badoush [sic] Dam project." Incredible asthat explanation appeared, Commerce let the matter drop. A furtherattempt to purchase $185,000 worth of computers, which was eventuallyturned down, said the equipment was needed at Huteen "to handle itshuge workload."

The Huteen complex included several different production lines tomanufacture everything from explosives and propellants, to Cardoencluster bombs. But why did the Iraqis need the specially-hardenedmachine-tool bits? According to former Deputy Undersecretary ofDefense Steve Bryen, it may have been for cutting and shapingdepleted uranium, to manufacture artillery rounds similar to thoseused by the U.S. Army's latest tank, the Abrams M1A2. "Thetheory--and so far, it's only a theory," Bryen said, "is that theyreceived large quantities of depleted uranium from Eastern Europe,and especially, East Germany, which produces tons of the stuff everyyear as nuclear waste." Depleted uranium is extremely hard, and eatsup large quantities of machine-tool bits when it is shaped. Hence theneed to have a virtually endless supply of them made in Iraq, so theywouldn't have to bother with export licenses again. Kendrick didn'tblink when questioned about the possibility of manufacturing uraniumpenetrators. "Sure these machines could do it, and we sold them othermachine-tools which we use here in the U.S. to make uranium fuelpellets for nuclear power plants. But the Iraqis got them without allthe radiation protection, which would make it pretty hairy if theyever wanted to use them for that purpose. I mean, their operatorswould have a very short life span if they did that."


Sadiq Taha of the Central Bank in Iraq journeyed to Atlanta onOctober 4, 1988, to work out a new $300 million loan agreement withDrogoul. Taha, who was still under medical treatment in the U.S. fora heart ailment, was accompanied by a man who gradually replaced himas the principle Iraqi negotiator, Raja Hassan Ali. Besides workingfor the Central Bank, Ali said he was Director General of Iraq'sMinistry of Industry, and had been put in charge of financing Iraq'sindustrialization projects. Like so many other Iraqi purchasers inthose days, he conveniently forgot to identify his Ministry by itsfull name.

The second loan agreement was signed on October 6. The officialdocument specifies that the money was intended to finance "theconstruction of industrial projects and/or the purchase ofequipments, materials and services from the U.S.A. and/or othercountries." It was a long way from grain credits, which is howDrogoul got started in Iraq. Now BNL was doing business directly withthe Ministry of Industry and Military Industrialization. BNL wasproviding the money Iraq needed to build up its weapons plants. ForDrogoul's sake, the Iraqis spoke only about a project to build ahydroelectric dam across the Euphrates at Badush, not far from theSaad 16 design bureau. The head of the Badush Dam project, AbdulMuneim Rashid, came to Washington, DC, to meet with Drogoul and U.S.government officials in August 1988. Rashid was later indicted forhis participation in the BNL blunder.

In a letter attached to the Second Loan agreement, ChristopherDrogoul can almost be heard counting his profits "We are pleased torefer to the signature today of the new Medium Term Loan Agreement,"he writes, "and to confirm to undertake to provide additional[sic] USA dollar 500 million loan to be utilized by theMinistry of Industry of the Republic of Iraq during 1989." In return,the Iraqis promised to give Drogoul the lion's share of the lucrativeCCC business for 1989, as well as Exim bank credits, which exportbankers considered to be a cash cow.

A few weeks later, Drogoul travelled to London to visit Taha in ahospital, where the Iraqi was awaiting a donor heart. But the Iraqibanker was not so ill he didn't seize the occasion to introduceDrogoul to the man in charge of spending the BNL money: Dr. SafaJawad Haboby. With Haboby at this meeting at the London headquartersof TDG was Fadel Khaddum, Hussein Kamil's bagman.

Drogoul signed the Third Protocol, on December 3,1988, apparentlywithout telling anyone else at the BNL Atlanta branch. This time,Sadiq Taha was replaced by Raja Hassan Ali from MIMI and a new manfrom the Central Bank, Abdulwahad Toma. They travelled quietly toWashington, DC for the signature, far from the eyes of key bankpersonnel. Court documents in Atlanta say it was here that RajaHassan Ali first suggested to Drogoul that they work out a morediscrete formula for handling the industrial financing projects. Theycalled it "Option B."

Instead of processing the money in the normal way, Option B used"front" accounts to pay for Iraqi purchases, in the same way thatSafa Haboby used front companies to order the equipment. Whenever theIraqis had bills to pay they simply sent notice to BNL of the amount,and the money was paid into a series of clearing accounts. Accordingto the indictment handed down by the Assistant U.S. Attorney inAtlanta, this procedure "effectively concealed not only BNL-Atlantaas the source of the funds generated, but also the identities ofultimate recipients of the funds and the purposes for which they wereused."

By this point, it was clear that BNL's principle business in Iraqwas no longer grain.


In the summer of 1988, the German nuclear engineer, BrunoStemmler, returned to Iraq. At the request of his Iraqi hosts,Stemmler brought along a former colleague from MAN Technologies inWest Germany, Walter Busse. The 76-year old German was an old MiddleEast hand. In the 1950s and 1960s, he worked in Egypt for PresidentGamel Abdel Nasser, helping to design ballistic missiles and militaryjet engines. Before retiring, Busse had been in charge of centrifugeproduction at MAN Technologies, which was why he was in Baghdad; theIraqis had a production problem they wanted to solve. A West Germanintelligence report shows that the pair stayed for several months in1988 and 1989, helping the Iraqis iron the kinks out of thecentrifuge program.

When the two Germans arrived, they were taken immediately to theMinistry of Industry and Military Industrialization, just across theroad from the Rashid Hotel. Once again, they were shown theblueprints of the gas ultracentrifuge, a virtual double of the MANdesign. Then the two were taken by car on the road to Samarra, tovisit the top secret centrifuge production unit in Taji, code-namedFactory 10.

"It looked like a very modern factory," Stemmler told the SundayTimes. "The buildings were low and spread out over an enormous area,so that it could not be easily destroyed by aircraft."

Stemmler says the Iraqis told him that the Taji plant hadinitially been built during the Iran-Iraq war to manufactureartillery barrels. Now, it was also making gas centrifuges foruranium enrichment. "They were producing lots of them (outercasings)," Stemmler recalled. "That is why Mr Busse was called to bethere."

The problem was in one of the milling machines that spun the outercasings. "They asked me real production questions," Busse said whenhe discussed his trip with a reporter from the Sunday Times Insightteam. "For example, on the end caps for centrifuges. I told them youcan produce them by forging or by lathe or by cutting from steelsheet."

Both Germans insist they had no idea the Iraqis were buildingultracentrifuges for uranium enrichment. "If you are producing parts,you don't know what they are parts for," Busse said. "I was onlythere to do consultancy work on production." But the parts theydiscussed--centrifuge casings, end caps made of specially-hardenedmaraging steel, and ring magnets made of samarium cobalt--were soparticular and so rare that the combination of them in one placecould only mean one thing.

In a confidential briefing to the West German Bundestag, EconomicsMinister Helmut Haussmann admitted that Federal intelligence agencieshad extensive knowledge about West German involvement in Iraqiweapons programs, but had done nothing about it. After naming dozensof West German companies, he singled out Busse and Stemmler for theirefforts to assist the Iraqi nuclear weapons program. "Components andsystem parts of the Iraqi gas ultracentrifuge show the engineeringcharacteristics of various types of German gas ultracentrifuge,"Haussmann told a Parliament committee. "The assumption is being madethat an important role in this was played by two former employees ofthe MAN Technologien GmbH Company in Munich... After they left thecompany, both of them were in Iraq for extended periods in 1988 and1989. They also attempted, without success, to obtain othercentrifuge experts for Iraq." Haussmann hastened to add that acriminal investigation of Busse and Stemmler "yielded no evidence toconfirm suspicions of illegal technology transfer." Of course not.Advising the Iraqis on the most efficient German techniques forenriching uranium into weapons-grade fuel was perfectly legal andokay under German law.


The uranium enrichment program was advancing rapidly. With thelaunching of full-scale centrifuge production in Taji, and theexperimental cascade up and running in Thuwaitha, it was only amatter of two or three years before Iraq would obtain enoughhighly-enriched uranium to make a bomb. Over the next eighteenmonths, Iraqi procurement agents (TDG, Technical Corps for SpecialProjects, Industrial Projects Company, H+H Metalform, etc) purchasedlarge quantities of maraging steel on the open market, which wasshipped to Taji to be cut into end caps and other centrifuge parts.They also attempted to buy finished end caps and ring magnets, whichsuggested snags in local production (maraging steel is extremelyhard, brittle, and difficult to machine). Because they had taken the clandestine route to the bomb, they had to expect problems. What wasextraordinary in Iraq's case was just how quickly those problems wereresolved. "Iraq's progress was directly proportional to the amount ofmoney they threw at the problem," one Defense department analystexplained. "And they threw lots of it into the centrifuge program.Much more than a country like Pakistan, or even Brazil."

[Insert with update]

It is now known that the centrifuge program was not the onlyavenue to the bomb Iraqi scientists were pursuing. In June 1991,United Nations inspectors visiting Iraq stumbled upon a truck convoyloaded with equipment as it was leaving the Abu Ghraib military baseoutside Baghdad. They trucks were carrying large objects, draped incloth, which the UN team suspected to have been stripped from abombed-out plant near Taji a few weeks earlier. (That plant, whichthey believed had housed manufacturing equipment for gasultracentrifuges, had been empty when they inspected it in May). U.S.spy satellites tracked the whereabouts of the suspect truck convoy,and in on June 28 the inspectors closed in on it again, this time inal-Fallujah. But when they tried to approach the trucks, Iraqisoldiers blocked their way and fired warning shots over theirheads.*

*[Footnote if necessary: Newsweek, July 8, 1991].

The incident was widely publicized and let to internationalprotests that Saddam Hussein was flaunting the United Nations, andIraq's international obligations as a signatory of the NuclearNon-Proliferation Treaty.


With the nuclear physicists so close to their ultimate goal,Hussein Kamil decided it was time to begin the final push to get thebomb. In September 1988, he ordered his procurement networks tolaunch an all-out effort to purchase nuclear triggering devicescalled krytrons. These miniaturized electronic switches were the keyto detonating a nuclear explosion, but they were only available froma handful of companies in the United States and Britain. Their salewas tightly controlled..

Hussein Kamil never believed for a second he would have anydifficulties obtaining his precious switches in the U.S. Indeed, onFebruary 10, 1988 one of his network's best suppliers, Leybold AG ofWest Germany, had obtained an export license from the Department ofCommerce in the U.S. to purchase vacuum pumps and numericalcontrollers worth $888,000 for the Taji ultracentrifuge project, andan initial batch of 184 capacitors similar to krytrons had beenacquired legally from a San Diego company called MaxwellLaboratories. But they had not been up to nuclear specifications, andthe Iraqis needed more.

Jack Kelly headed the Strategic Investigations Unit at the U.S.Customs Service in Washington. His job was to bring technobandits ofall stripes to justice. In an interview in Washington, he expressedadmiration for the professionalism of the Iraqi procurement network." The Iraqis were much more sophisticated than the Iranians had everbeen. They knew what they wanted, where to find it, and had awell-established purchasing structure in the U.S. and in Europe. Theyactivated this network in 1987, when their need was the greatest. Weonly got onto Ùhem on the tail end of the curve. Before then,we just don't know how much stuff got through."


When the school year ended in June, Abdul Hussein Abbas pulled histwo sons out of school in Monza, Italy and decided to resettle inWest Germany. He had recently been indicted by a Rimini judge forselling arms to Iraq. Although the charges were soon dismissed, hisbrush with the law convinced him that it was time to seek a milderclimate.

Kassim Abbas stayed on in Italy, and in mid-1988 set up a branchof his European Manufacturing Center in Great Britain with anotherIraqi named Ali Ashour Daghir. The new company was called Euromac(London). Established in the suburb of Thames Ditton, convenientlyclose to London's Heathrow airport, Euromac (London) was officiallyin the business of exporting food products and air conditioningsystems. In fact, Kassim Abbas and Ali Daghir took orders from SafaHaboby, who headed the Iraqi procurement network in Europe. Anxiousas ever to disguise his own activities, Haboby decided to use Euromacas a front for purchasing the precious krytrons.

In September 1988, Abbas and Daghir made contact with aMassachusetts company, EG&G, whose name had been given to them byfriends in Pakistan (Pakistan had done business with EG&G in1984). But EG&G got suspicious, and refused to quote a price onthe krytrons.

The next call the Iraqis made met with more success. They locateda high-tech firm in California called CSI Technologies. The presidentof the company, Jerold Kowalsky, said sure he'd take a look at thecapacitors they needed. He asked them to fax over the specifications,and he'd get back to them.

When Kowalsky got the fax, his first call was not the KassimAbbas, but to the local office of the U.S. Customs Service. Heexplained the request he had just received from the two Iraqis. Itwas clear to him that the only equipment corresponding to the Iraqispecifications was a type of krytron which could only be used fornuclear detonation. In fact, his company made them to equip theMidgetman ballistic missile. What should he do?

Stay on it, the Customs officer told him. String them along.

Customs assigned Special Agent Daniel Supnick to the case, andKowalsky agreed to let him pose as a CSI employee. They code-namedthe proposed sting Operation Argus. It would take nearly 18 months tocome off; but when it did, it would explode with a bang.


Gerald Bull was a can-do man, and he impressed the Iraqis terriblywith his efficiency. The Babylon Project was moving ahead faster thananyone could have foreseen. Bull's procurement network in Europe hadbeen prepared long in advance for this momentous undertaking. Allthey had been waiting for was the word go.

In November 1988, Bull's Space Research Corporation contractedwith its part-owner, PRB of Belgium, to purchase 235 tons of MBMdouble base extruded powder for the giant rocket-powered projectilesof the Babylon gun. The contract was worth $17.86 million. Just toplay safe, PRB listed Jordan as the destination of the shipments inall documents they submitted to the Belgian government. An end-usercertificate was even provided by the Royal Jordanian Armed Forces,stating that the special propellants (25 tons of small grain, and 210tons of large grain powder) were intended for use by the JordanianArmy and would not be re-exported to a third country.

Meanwhile, Christopher Cowley of ATI had already made arrangementsto cast pipe segments for the 350mm "Baby Babylon" gun with SheffieldForgemasters and Walter Summers in Great Britain. On February 25,1989, a special Iraqi Air Force Ilyushin 76 cargo plane arrived atManchester airport to take on a precious cargo: three giant steeltubes, each ten meters long and weighing several tons. Once they werestrapped into the giant cargo plane's hold, Iraqi Airways specialflight IA 14707 took off. On the flight plan logged with the airportauthorities, its destination was clearly marked: Mosul, Iraq.

In early March 1989, a Belgian Air Force C-130 cargo plane tookoff from a military airport and headed for Amman, Jordan, carryingthe first 12 tons of small grain powder ordered by Bull's agents fromPRB. Later that month, the first horizontal firing trials of theprototype super-gun were held near the Saad 16 missile researchcenter outside Mosul. The gun was placed on a specially-built rail totest new high-speed projectiles.

Back in Britain, Bull was hard at work with Safa Haboby, procuring"special materials" for the Babylon Project. What they most neededwas a sure source of advanced composites and carbon fiber materialsof the kind the Egyptian Abdelkader Helmy had tried to purchase inthe U.S. Bull spotted an ideal company up in Belfast, NorthernIreland, that made exactly the materials they wanted. LearFan hadbeen up on the auction block since 1985, when it failed in a ventureto make business aircraft out of composite materials. When Bulldiscovered them, their premises had been rented out for storage, butall the manufacturing equipment was intact.

Haboby and his legal advisor, Fadel Khaddum, proposed the nextsteps. Rather than buying the company directly, they set up a frontcalled the Canira Technical Corporation Ltd and registered it inNorthern Ireland. Canira was owned on a 50-50 basis by SRC and TDG,and stood for CANada-IRAq. Just to make sure their ownership couldnot be traced, Canira turned around and set up another front companycalled SRC Composites Limited, which in turn bought the LearFanfactory in Belfast. Soon afterwards, the new management at LearFanapplied to the North Ireland Industrial Development Board for a $3.6million development grant, to put the company back on its feet. Afterall, they argued, it would mean new jobs.

Only 14 months after launching the Babylon Project with Iraq,Gerald Bull's dream was finally taking flesh. But instead of asatellite launcher, it had become a full-fledged weapons system.

After the horizontal trials in March 1989, Saddam Hussein orderedBull's technicians to dismantle the gun so it could be hauled down toa specially-prepared site for permanent installation. The new sitehad been dug out of the Jebel Makhoul, a ridge of mountains just tothe east of the Baiji oil refinery, and was so well protected thatonly the tip of the 56 meter-long barrel stuck out. Documentsrelating to the next series of firing trials show that the super-gunwas inclined at a 45 degree angle. It was a hopeless position forlaunching satellites, but it was ideal for a ballistic trajectory.With Bull's new rocket-assisted projectiles, Baby Babylon was capableof reaching targets 700 kilometers away. From the Baiji firing base,that meant it could hit Kuwait. But its big brother, the S-1000,could do better than that; with the new canard-controlled rockets, itcould hit Israel--at least, that's what Gerald Bull told the Iraqis.Each shell would carry approximately 500 kg of high explosives to arange of 1,000 kilometers. It was as good as the Condor II, and itcertainly put less of a dent in the Iraqi budget.


Saddam's appetite for arms grew even more intense with the end ofthe Iran-Iraq war. Not only had he sustained his military forcesthroughout eight years of combat, he had nearly doubled their sizeand their equipment. If the bulk of the weaponry came from the SovietUnion and China, which supplied thousands of tanks and artillerypieces, the expensive, high-tech weapons came from the West--nearly$17 billion worth from France alone.

As direct arms purchases dropped off toward the end of 1986,Saddam intensified efforts to develop a home grown arms industry inIraq. Each "success" in transforming or adapting an existing weaponsystem created additional demands, and new ambitions. In the end,Saddam wanted to have it all. He wanted to at least equal the exploitof South Africa, which in braving the UN arms embargo imposed in 1977had succeeded in creating its own armaments industry "from the earthto the sky." While Iraq did not possess the same wealth of mineralsas did South Africa, it had enough oil to buy them on the openmarket. Like the South Africans, Saddam wanted total control over theentire weapons manufacturing process, from pouring the steel andbending it into shape, to the final line of computer code that guideda missile to its target.

The Taji weapons complex provided one of the keys to Saddam'sambition. Already, Thyssen Rheinstahl of West Germany had built asteel plant at Taji, which was churning out the basic materialsneeded for a wide variety of weapons. Since 1986, Ferrostaal anddozens of West German subcontractors were building a "universalforge" at Taji, with the full knowledge and approval of the Bonngovernment. According to documents quoted Hans Leyendecker andRichard Rickelmann of Der Spiegel and interviews with German customsofficials, the plan was to build 1,000 artillery pieces per year atTaji, in calibers ranging from 105 mm to 203 mm.

And in a separate production unit built by Kloeckner Industries ofWest Germany, Iraqi tanks were being rebuilt. In addition toretrofitting older T-54 and T-62, Iraqi officials say they began toassembly the newer T-72 in Taji in early 1989, in a license agreementsigned with Bumar-Labedy of Poland. They called the new tank the"Asad Babil," or Lion of Babylon. But Iraqi armaments engineers, suchas Lt. General Amer Rashid, were not content with just assembling thetanks from knock-down kits. They argued that once you factored in thecost of building the plant, kit assembly did not lead to anyappreciable savings in the overall unit cost of the tank. He and hiscolleagues at MIMI wanted Taji to become a huge military and civiliansteel manufacturing center for all sorts of applications, includingtank bodies and tank armor. To finance it all, they turned to the BNLbranch in Atlanta.

BNL shelled out hundreds of millions of dollars to manufacturersin Italy, West Germany, Great Britain, and the U.S., to turn Tajiinto one of the most modern, complete weapons facilities in theworld. It was Iraq's attempt to build tanks and artillery pieces"from the earth to the sky."

On January 24, 1989 Danieli SpA, of Udine, Italy, signed acontract worth $89.7 million, to build a steel rolling mill at Tajifor special steels. Contractual documents list Iraqi interests withprecision. They wanted "Engineering steel, spring steel, bearingsteel, free cutting steel, high tensile steel, steel for weldingelectrodes, tool steel, and stainless steel," in thicknesses rangingfrom 5.5 millimeters to 7 centimeters. "That's the size of most armorplate," noted former Deputy Undersecretary of Defense SteveBryen.

Cecelia Danieli, who doubles as Managing Director and ChiefExecutive Officer, said in interviews that her company was notbuilding a weapons plant. "This was a rolling mill intended forpurely civilian products," she insisted. "It was for the constructionindustry." In a subsequent interview once Operation Desert Storm wasunderway, she insisted that her company "did nothing wrong, since wenever delivered a thing. The contract was suspended because of the UNembargo before we could ever get past the foundation work."

Unlike Ferrostaal, where 750 cases of documents were seized byGerman prosecutors that included complete blueprints of the artillerypieces to be manufactured at Taji, the Italian government hasdiscovered no smoking gun at Danieli. And U.S. intelligence expertsreadily acknowledged that Taji was so big it included sizeablecivilian and military production areas, separated by a road. But theDanieli steel was no ordinary product; it consisted of six different,highly-sophisticated alloys with clear military applications. And itwas only the prelude to a far bigger contract, worth $377.2 million,to build a second turn-key steel mill at the Khor al Zubairindustrial complex near Basra. This deal, code-named the AshtarProject, was signed on March 4, 1989 and called for production of twomillion tons per year of hot rolled strip steel, to be made fromscrap iron and sponge iron. It was one way of recycling the oldertanks: put them into the smelter, and forge new ones.


To celebrate his "victory" over Iran, Saddam decided to build aTriumphal Arch at the entry to Baghdad. It was a monumental affair,towering 140 feet above the highway. The arch was formed by a pair ofcrossed swords held aloft by gigantic bronze hands. From the scabbardof each sword was strung a net bag full of Iranian helmets, supposedto have been taken from actual battlefield casualties. If the Greekspictured victory with wings, in Saddam's warped world she continuedto bear arms--his arms, in fact. The German company that built themonument says it was given a photograph of Saddam's own forearms touse as a model. The Triumphal Arch may have been their onlycompletely legitimate contract with Iraq. The builders were H+HMetalform, the same company which had built another monument toSaddam, by supplying him with equipment for the uranium enrichmentproject.


The BNL's Christopher Drogoul was having second thoughts. On theone hand he was eager for the huge, and unexpected Iraqi business.The Atlanta branch of BNL was turning a good profit. His superiorswere happy. Furthermore, Drogoul was getting only the most positivefeedback from U.S. officials in Washington and in Baghdad, where henow travelled with increasing frequency. BNL had become an instrumentof U.S. foreign policy; the idea, as Richard Murphy and others at theState Department explained, was to "bring Iraq back into thecommunity of nations" by trade and by aid. On the other hand, Drogouldidn't like the idea that BNL Atlanta had become the only bank in theworld to issue new credits for Iraq. Like most businessmen, bankersdread working alone. And Drogoul was beginning to fear he hadventured way out into left field where no one else was willing to go,so he tried to scale back the size of the Iraqi loans. In a lengthytelex sent to Sadiq Taha only days after signing the Third mediumterm loan Protocol in December 1988, Drogoul laid his doubts out onthe table.

"I would like to express my appreciation to you and to all yourstaff who have worked diligently in the furtherance of our relations[...].

As you may be aware, our involvement in providing finance on alarge scale was initiated in 1986... during a period when manyinstitutions were reticent to provide financial support to Iraq inview of the general drop in oil prices, in view of the weakness ofthe U.S. dollar, and given the conflict between your country andIran.

At that time, we extended CCC guaranteed facilities and relatedunguaranteed facilities in order to ensure the success of yourfoodstuffs import program. This support was extended even though weput aside a generally accepted banking practice of maintaining adiversified portfolio so as not to be too dependent on a particularsource of loan income. I will add that we were only too happy toprovide support [...].

Lately, the world economic indicators have improved. The price ofoil has risen from its lows of 1986, and most importantly theconflagaration [sic] which has torn your country appears tobe ended... The process of rebuilding and industrializing will be anexpensive and time-consuming process. Here too, we are pleased to beof assistance, as evidenced by our recent commitments.

[...]You will certainly agree that neither of ourinstitutions should be too dependent upon each other, especially nowthat the trials of the past years are behind your country and youneed to diversify your sources of finance.

In view of all the above, we wish to take this opportunity torequest that we begin to scale back our level of activity to normaland prudent banking levels. [...] We would like to requestthat we begin the process of reducing your overall dependence on us,and to do so we propose not to provide any further facilities infavor of Iraq for the time being, except for short term trade lines."

But Drogoul dropped his attempt to limit the Iraqi loans almost assoon as he began. Instead, on January 11, 1989 he faxed Raja HassanAli at the Ministry of Industry and Military Industrialization to"keep our name out of the picture until we have agreed to handletransaction" through Option A or Option B. "If Option B is selected,it is not necessary for supplier even to know our name." For Drogouland his colleagues at the bank, secrecy soon replaced prudence.

From then on, the demands for new credits began flowing in.SerVaas Inc of Indiana came to collect $8.3 million to start work ona plant in Ameriya, to separate copper from brass. The idea was torecycle the millions of spent artillery shell casings the Iraqis hadfired off during the war, to make copper wire and new artilleryshells.Ameriya was conveniently located nearby the Fallujah missileworks. Centrifugal Casting Machine also came to collect on itscontract to install machines to manufacture "water and sewage pipe"at the Badr General Establishment in the Baghdad suburb ofal-Yusufiyah. The Badr plant also made bombs and artillery shells.Dozens of other letters of credit were issued by BNL in the first twomonths of 1989 alone. On February 10, Yavuz Tezeller, of the Turkishgrain trader Entrade, submitted documents prepared by the CompagnieEuropeene du Sud in Luxembourg relating to a $4.5 million shipment ofrolled steel to Iraq. On February 15, Raja Hassan Ali informedDrogoul of a new $96 million project he wanted to split up intoseveral smaller letters of credit. Two days later, Ali came back andasked for a $30.7 million facility, to fund purchases from theBulgarian state arms trading organization, CE Kintex.

Almost all of these deals involved deliveries to Iraqi weaponsplants. Many required Department of Commerce export licenses. Andyet, neither Drogoul, Von Wedel, or their colleagues seemed to havebatted an eye.

On February 22, Drogoul and Von Wedel went to London to meet withSafa Haboby, Fadel Khaddum, and Abdul Qaddumi of TDG and MatrixChurchill. The bankers were escorted on a day trip up to the MatrixChurchill manufacturing plant in Coventry, to get their first reallook at the type of business they were financing. It had little to dowith grain. When they returned to the TDG offices, Haboby asked themif they could manage to fund the huge Danieli steel projects in Iraq,which by themselves would swallow up $468 million of the BNL creditline for Iraq. Drogoul said he could see no objection to this.

Meanwhile, the U.S. Customs blocked a February 1989 shipment boundto Iraq of sophisticated vacuum pumps, from a Rochester, New Yorkmanufacturer. The pumps were designed for use in a gasultracentrifuge cascade for uranium enrichment.

A few days later, on February 22, Rear Admiral Thomas A. Brooks,the Director of U.S. Naval Intelligence, shocked a Congressionalsubcommittee by declaring that Iraq was "actively pursuing" a nuclearweapons program. According to nuclear proliferation expert, LeonardSpector, this was the first time a high-ranking intelligence officialin the U.S. had gone on the record to warn about the Iraq's nuclearactivities since the destruction of the Osirak reactor by Israel inJune 1981.


An Iraqi delegation headed by one of Hussein Kamil's top Deputiesarrived in Rome on March 2, 1989, for an extended negotiating sessionwith the Italian government. Now that the war with Iran was over, theIraqis said they wanted their frigates. They were referring to thefour Lupo class frigates and six Assad class corvettes ordered in1981 that had been built, fitted out with missiles and electronics...and embargoed by the Italian parliament since 1986.

The Italians agreed that the embargo no longer applied. Butofficials from the Cantieri Navali Riuniti shipyards of Genoa, andfrom the munitions firm Oto Melara, were adamant. Before theyreleased the frigates they wanted their money, they said. Theyclaimed that Iraq had only paid $441 million out of the totalcontract value of $2.646 billion.

The head of the Iraqi delegation, Lt. General Amer Rashidal-Ubaidi, was one of Iraq's most qualified military technicians. Hewas also a remarkable negotiator. Without blinking behind his austeresteel glasses, he told the Italians that Iraq was willing to pay theremainder of its debt--if Italy was prepared to make fresh loansavailable to Iraq. Before the Italians had time to object, he cameback with his second shot: Iraq was at any rate obliged to withholdsome $400 million, because the munitions it had ordered back in 1981were by now nearly ten years old.

"What do you mean, old? They are brand new!" the Italiansobjected.

"And so they were--five years ago," General Amer replied. "Weordered new weapons, and paid good money for them," he scolded. "Weintend to get new weapons, or nothing at all."

The Italians were aghast. The munitions in question--largequantities of sophisticated Otomat surface-to-surface missiles (anItalian equivalent of the Exocet) and a wide assortment of navalordnance--had been manufactured in anticipation of a 1986 delivery.The three-year arms embargo meant they had been stored in warehousesand would need a thorough revision to make sure their sophisticatedelectronics systems were still functioning.

General Amer had them over a barrel, and they knew it. Rather thanbreak off negotiations (especially since BNL Rome stood to lose$228.7 million in performance bonds, a report prepared by the CentralBank of Italy shows) the Italians gave in and agreed to manufacture anew complement of munitions. The "fabulously lucrative" Lupo deal wason the way to becoming a net loss. The little detail of the munitionscost the Italian taxpayer $400 million.

The Lupo deal may have cost much more besides. A secretParliamentary commission in Rome had been investigating Iraq'spayment record since 1987. What concerned them were Iraqi claims thatthey had advanced $1,824,500,000 dollars for the ships in June 1982,not just $441 million. The Iraqis presented the Italian governmentdeposit slips showing that the money had been paid into two numberedaccounts with the SBS Bank in Zurich--Account numbers P4 632.367-0and P4 632.367-2. But Fincantieri Navali Riuniti and Oto Melara stuckto their guns: they had never seen a penny more than the $441 millionadvance, and were willing to open up their ledgers to prove it.

As the Italians began to dig, they discovered that the Swiss bankaccounts the Iraqis claimed to have used were controlled by aninvestment company called Kapital Beratung AG. Discreet requests forinformation were put out to the Swiss authorities, intelligencesources say, to discover what had become of the company and itsaccounts at the SBS. After checking the commercial registry, theSwiss reported that Kapital Beratung was liquidated on September 14,1982 and declared bankruptcy on February 4, 1983. The registry alsoshowed that Kapital Beratung belonged to a Zurich holding companycalled Trans-KB, whose Vice-President, Hans W. Kopp, was the husbandof the Swiss Justice Minister. After that, the trail went cold.Kopp's alleged involvement in a billion dollar drug money launderingoperation run by the Lebanese Sarcachi brothers had forced theresignation of his wife from the Swiss government in January 1989.

The finances of Iraq, Inc. were getting murkier all the time.


Drogoul went off the deep end on April 8, 1989, when he agreed toa fourth Iraqi loan request from Raja Hassan Ali at the Ministry ofIndustry during a visit to TDG in London. This open ended loan, worthan incredible $1.155 billion, was enough to cover 25% of all theirindustrial purchases for 1989. Drogoul made no attempt to control howthe Iraqis spent the money. They could purchase machinery, wholecompanies, or even arms, and BNL would front for the bills. DuringSaddam's reign, Iraq went from self-sufficiency as a food producer tonear total dependence on imports, while building up a huge armsindustry to become self-sufficient in defense. From Iraq'sploughshares, Saddam proposed to forge swords. And BNL was there topay for the conversion.

Drogoul may not have understood why the Iraqis wanted so muchmoney, but Huygues de l'Estoile certainly did. He was in charge ofInternational Sales at Dassault Aviation in France. No sooner hadAmer Rashid won his $400 million door prize in Rome than he headedfor Paris, where he was joined by Amer al-Saadi, to hammer out anentirely different type of agreement with De l'Estoile.

It was the first time the two Amers had come to France together.The Iraqis had reserved an entire floor of the Hotel Crillon, justacross the street from the U.S. Embassy in Paris and the Place de laConcorde. They were accompanied by a host of technical experts and byHussein Kamil's bagman, Fadel Khaddum. The delegation made the roundsof all that was powerful and influential in France: the FinanceMinistry, the Chamber of Commerce, and the French Employers Union,the CNPF. The grand tour, as one participant put it, was intended to"send a clear message" to the French that the Iraqis appreciated whatthey had done for them during the war, and understood how difficultit had been. "They were saying: 'Believe in us again.'"

The Iraqis attended their last, but most important meeting onMarch 21, 1989, out at Dassault's luxurious Mirage 2000 chalet in theposh suburb of Vaucresson. Minutes of the meeting, and subsequentinterviews with most of the participants, show in detail just whatthe Iraqis meant.

Huygues de l'Estoile was accompanied by top officials from Snecma(M. Templier) and Thomson-CSF (J.F. Henin), the two indispensablepartners in any French military aircraft program. By the end of theafternoon, they and the Iraqis signed a protocol agreement, to buildan entire aerospace industry in Iraq over the next ten years. It wasa huge deal, worth $6.5 billion. They called it the Fao Project. Itinvolved three interlocking phases:

Phase I: construction of depot level maintenance facilities inIraq, to service Iraq's Mirage F1 fleet. Instead of sending theplanes back to France for their mid-life overhaul, scheduled to beginin 1991, the Iraqis wanted to rebuild the engines and airframes in abrand new plant.

Phase II: the construction of a separate aircraft factory, calledSaad 25, with tooling, training, and technology transfer, tomanufacture 134 Alphajet trainers. The Alphajet was a jointproduction of Dassault and the West German aerospace concern,Dornier, but because of West German arms export laws, only France wasallowed to market the plane.

Phase III: delivery, with some local assembly in the final stagesat Saad 25, of 54 Mirage 2000-S "strike" aircraft. This newestversion of the Mirage 2000 was equipped as a low-level penetrationbomber, with a sophisticated terrain-following radar that would allowthese planes to sneak in under enemy air defenses.

Financing remained the one sticking point. Participants in thenegotiations say that Fadel Khaddum tried to convince Dassault to usethe BNL credit line, but the French aircraft maker refused. Instead,the Fao Protocol signed on March 21 stipulated payment in cash, oil,and other energy goods, on condition that the French governmentprovided export financing and insurance. The contract was to beexecuted over a nine to fourteen year period.

The intention behind the Fao Project was double. On the one hand,the Iraqis wanted to lay the framework for an entire, indigenousaerospace industry. On the other, they wanted to ensure that noone--not even the French--could interfere in their military programsin the future. If they needed to overhaul their planes, or build newones, from now on they could do it themselves.


In Iraq, Saddam Hussein's birthday is a national holiday.Schoolchildren are encouraged to sing songs for their President.Hotels bake cakes. Cars and buses are festooned with flowers. Baghdaditself becomes a festival of colored lights. But April 28, 1989 was abirthday unlike all the others. This year, Saddam had decided toprepare an additional surprise for his subjects, his arms suppliers,his bankers and technology brokers. He called it the First BaghdadInternational Exhibition for Military Production. Its symbol was anIraqi flag shaped into the form of a dove. Its slogan was "Defenceequipment for peace and prosperity." It was not Saddam's idea of ajoke.

The theme song for the arms fair was "The Gang's All Here." Onehundred forty-eight companies from twenty-eight countries paid heftyprices to open stands and exhibit their equipment. In addition to thearms salesmen, many machine-tool companies were present--an unusualoccurrence at arms fairs. The Bulgarians, Poles, Hungarians, andRomanians were out in force, showing 1960s machine-tools driven byJapanese Fanuc controllers. The Germans and the Austrians were there,proposing equipment and turn-key military factories, just as they haddone in Egypt two years before. The Chinese also came, setting uptheir own pavilion, where they showed an artillery counter-batteryspotter which used a Hewlett Packard computers.

The Franco-Lebanese middleman, Hussein Zeineddine, greetedvisitors to the French pavilion as if he held the keys to all thatwas inside. Zeineddine was barely 30, but his International TradingGroup had mailbox offices on the Champs-Elysée in Paris, inGeneva, and in Liechtenstein, and had already managed to earn the ireof many legitimate ·rms exporters. A former employee of theFrench government export agency, SOFMA, Zeineddine was apparentlyfired for questionable business practises. But the Iraqis loved him,and set him up in the entry hall to the French pavilion. So didChristopher Drogoul, of BNL. Zeineddine's ITG was awarded fourseparate BNL loans in 1989, worth $3,744,988. Zeineddine boasted ofhis access "to a large network of manufacturers in the high-techmarkets," for products as varied as tantalum capacitors, microwaveantennas, spectrum analyzers, and discrete semi-conductors. Hisspeciality was technology transfer.

Gerald Bull was also on hand along with Chris Cowley of ATI,showing a 1/35 scale model of the super-gun to anyone who cared tolook. Bull was the proud father of two dramatic new Iraqi weaponssystems on display: the gigantic Majnoon and al-Fao self-propelledhowitzers, which married a French gun, a Spanish truck, and a Swedishcab. He and Cowley had set up shop at the stand of Astra Holdings, aBritish financial group which had recently bought out PRB in Belgiumon promises of a $1 billion contract with Iraq. Soon, both groupswould go bankrupt.

But stealing the show was Matrix Churchill, which had beenrebaptized "Nasser" for the occasion by its Iraqi owners. In fact,the Iraqis just took Matrix Churchill brochures and pasted on asticker bearing the Nasser name and an address in Taji. They didn'teven bother to change the company logo. If you peeled the stickeraway, underneath you could still read the Churchill name. Iraqiofficials openly acknowledged that they had bought out the company inan effort to duck Western export controls. "We are now making threeaxis machine tools here in Iraq," they said at the arms fair. "Soonwe will be making five axis machines, with computerized numericalcontrol." With few exceptions, these machines were going into theweapons factories.

Normally, sophisticated machine-tools like these were barred fromexport to most Third World countries and to the Soviet bloc, becauseof their importance for weapons manufacturing, but by purchasingMatrix Churchill the Iraqis simply skirted the embargo. It wasbrilliant.

The only major Iraqi supplier not officially present at theBaghdad Arms Fair was the United States, which had withdrawn itsparticipation a few days before the show began, apparently anxiousnot to arouse speculation that the U.S. government was prepared toauthorize arms sales to Iraq. Instead of a U.S. pavillion, with U.S.weaponry on show, American companies arranged for private delegationsto attend the show. Some, such as General Motors, even got to meetwith Hussein Kamil. The U.S. military attaché in Baghdadreceived orders from Washington not to wear his uniform when hetoured the show. He and other U.S. embassy officials, dressed inordinary business suits, took photographs of every Iraqi weapon theycould see.

The arms show opened on a note of tragedy, when an Egyptian pilotflying an Alphajet trainer that had been assembled in Helwan, Egypt,overshot the runway at Baghdad's al-Muthena airport, and mistakenlyturned toward the Presidential Palace. The war with Iran might beover, but Saddam's Republican Guard was ever alert. Before theEgyptian could manoeuvre out of forbidden airspace, his Alphajet wastorn to shreds by Soviet-built anti-aircraft guns positioned on thepalace roof, and crashed into a residential area of Baghdad, killingtwenty. The pilot and his navigator were seriously injured when theyejected.

The Arms Fair was intended to show the world what the Iraqis coulddo, and to convince foreign partners that Iraq was still the bestgame in town. "All over the world you can hear people bragging abouthow much they will do," Lt. General Amer Rashid pointed out, "and atthe end of the day they have nothing. We have chosen to keep silentall these years, even as others mocked us. Today we have something toshow that no one can deny." Although it was not strictly speaking thefirst time Iraq had ever shown locally-made weapons systems, it wasthe first time Iraq opened its doors to foreign manufacturers,military delegations and the press (few journalists deigned to come),to take a detailed, first-hand look at the Iraqi arsenal. And whatmany saw was a shock for which they were ill-prepared. Including,some of Iraq's oldest friends.

One poignant scene took place beneath the wing of a French builtMirage F1 fighter-bomber. General Maurice Schmidt was the FrenchChief of Staff. He had come to Baghdad as the personal representativeof French Defense Minister, Jean-Pierre Chevènement, an ardentadmirer of Saddam Hussein. Schmidt too admired the independence andhard work the Iraqis displayed. But when he saw what the Iraqis haddone with the Mirage he could hardly contain himself.

"What the hell is that?" he shouted at Dassault's Huygues del'Estoile, pointing to an unfamiliar missile hanging beneath the wingof the French fighter.

"Well, General. If you ask me, it looks like a Soviet-builtAS-14." The AS-14 was a laser-guided missile, somewhat akin to theFrench AS-30L which the Iraqis had bought in large quantities. TheAS-14, which was believed to incorporate stolen French technology,presented two distinct advantages over the French version: it had aslightly longer range, and it was much less expensive.

Schmidt looked De l'Estoile in the eye: "What have you people beenup to over here, anyway?"

"Don't look at me. We had nothing to do with this. The Iraqis havebeen working all by themselves. "

De l'Estoile then took the General in his white képi andsummer dress uniform over to another plane sitting on the tarmac ofal-Muthena airport. It was a Soviet-built MiG 23. "See that refuelingprobe?" De l'Estoile pointed to the nose of the Soviet fighter."That's one of ours."

Schmidt was not amused, even though De l'Estoile hastened toexplain that the Iraqis had adapted the French refueling probe to theSoviet fighter without ever asking Dassault. In a subsequentinterview following Iraq's invasion of Kuwait, General Schmidt saidit was here, at the Baghdad arms fair, that he first "began to wonderwhether we hadn't gone a bit too far" in Iraq. "I realized we hadbetter begin paying closer attention to what the Iraqis weredeveloping in the way of armament."

The arms fair was not only Saddam's birthday present to himself.It was Hussein Kamil's coming out party. He was the host, flanked byhis two Deputies, Amer al-Saadi, and Amer Rashid. Together, the threeof them greeted their guests at the entrance of a pavilion designedto resemble a large desert tent. Serge Dassault and Huygues del'Estoile were met with Arabic-style kisses. So were the bankers fromBNL, Christopher Drogoul, and Paul Von Wedel, who showed up for theevent. Like a kid, Paul Von Wedel watched the planes cavorting in thesky and cursed himself that he had run out of film.

The bankers had been on a visit up to the Badush Dam near Mosul,to take a first-hand glimpse at what their money had wrought. TheirIraqi guide, Fadel Khaddum, had intended to reassure them by thetrip. But in the end, he sewed more doubts than he resolved. VonWedel says he learned with surprise that Hussein Kamil had issued adecree that all future contracts for Iraq had to go through TDG,which was authorized to charge suppliers a 10 to 15% consulting feefor its services. "A consulting fee is a sophisticated term for kickback," Von Wedel commented. The Iraqi minister was on the take.

Later, it became apparent that Hussein Kamil was taking directkickbacks from the Iraqi government as well. Just before the armsfair he purchased $120 million worth of state-owned manufacturingestablishments, as part of a widely-publicized drive to privatizeIraqi industry after the war. But when Kamil couldn't pay, theRevolutionary Command Council (run by his father-in-law) passed adecree waiving payment for the factories, "in appreciation of HusseinKamil's services to military industrialization." Saddam liked to keepthe family jewels close to home.

To anyone interested in putting it all together (and few reallycared at the time), the Iraqis displayed weapons that had beenmanufactured at no fewer than nineteen identifiable manufacturingplants--most of which had completely escaped the notice of the West.Yarmuk, Tabuk, and al Qods made kalashnikov rifles and ammunition.Tarek made 9mm pistols under a license from Beretta in Italy. AlNassira made RPG-7 anti-tank rockets. Al Jaleel made mortars of allcalibers, from the 60 mm commander variety, to the 160 mm giant thathad to be towed behind a truck. The Saddam factory made 122 mmhowitzers under a Yugoslav license. Sawary was making a wide varietyof commando patrol boats, based on fiberglass Crisscraft boatsimported legally from the U.S. The Salah al Din electronics plant,built by Thomson-CSF of France, was making proximity fuzes and othercontrol mechanisms for the al-Hossein and al-Abbas ballisticmissiles, and assembling sophisticated ground-surveillance radars(Thomson-CSF models 2215 and 2230), for integration in a meshed airdefense network intended to cover all of Iraq. Of course, many ofthese and other arms factories were financed with loans provided byChris Drogoul and Paul Von Wedel of BNL.

European arms salesmen present at the Baghdad fair acknowledgedthat they had heard of as many as "eighty separate Saad projects, runby the State Organization for Technical Industries," SOTI. At onepoint, "Saad" was a generic name given to any weapons factory. Later,they were renamed after famous battles and heros. The plants becameknown as "al Fao," "al Qaddissiya," "Nassr," "Salah al Dine,""Huteen," al-Qaqaa," "al Muthena," "al Faris," "Salah al Din,""Huteen," al-Qaqaa," "al Muthena," "al Faris," and of course,"Saddam."

One French engineer who specialized in munitions ran his fingerover the rough welding joints of an Iraqi bomb. "They don't lose anysleep over quality control, do they. And you know something? In theend, they're right. We spend a fortune trying to smooth out thoserough edges. We make three-star bombs, polished as a mirror, and asexpensive as jewels. But in the end, they're all the same. They onlyget used once and the guy who's on the receiving end of one of theseis never going to complain because of a few manufacturingdefects."

Iraqi engineers were proud of their creation. In the pavilionwhere they displayed the al-Hossein and al-Abbas missiles, one Iraqiballistics expert claimed he had waited five days just to meet anAmerican journalist who had written extensively about the Iraqidefense establishment in the past. He addressed the American by hislast name, then his first name, then his middle name. Then heproceeded to tell him exactly how Iraqi engineers from the MilitaryProduction Authority had solved the problem of increasing the rangeof the SCUD-B missile so it would hit Tehran. "We tinkered with thefuel," he winked. "Think cryogenic."

In his opening speech at the fair, Hussein Kamil announced thatIraq was now manufacturing "three different types" of fuel-airexplosives. He didn't mention how Iraq had come to master thissophisticated technology, nor the extensive Iraqi contacts withHoneywell and MBB.

Lt. General Amer Rashid stood in front of a huge Soviet jet cargoplane, an Ilyushin-76, that his engineers had converted into a crudesort of AWACs, to detect enemy fighters as they approached Iraq andguide Iraqi intercepters to shoot them down. A careful examination ofthe plane showed that Western companies had provided the technologyto make it work. It used a Rockwell-Collins IFF pod slung underneath,and electronic countermeasures from Thomson-CSF in France, Selenia inItaly, and Marconi in the UK. But the principle foreign partner forthe "Baghdad 1" airborn warning and surveillance aircraft wasThomson-CSF of France, which was responsible for overall systemsintegration, and had built the specially-designed fiberglass andcomposite radome, which replaced the giant Ilyushin's belly doors.(It was a cheaper and easier solution than using a roof-top radardisk that turned, as on the American AWACs). Elements of the plane'savionics suite were built at Thomson's Saad 13 plant in al-Dour, inparticular, the main radar system, a Tiger-G. An initial contract,financed by BNL, covered the delivery of six of these radar units inkits, for assembly in Iraq. The program worked so well that theIraqis bought a license to manufacture the Tiger-G themselves. Theycalled it the Salahuddin G, using the new name of the Saad 13plant.

The Tiger-G radar was a sophisticated 2-D ground-based radar,which had never been designed for use in an AWACs plane. Perhaps thisis why Thomson-CSF never batted an eye at the deal. No one could haveimagined that the Iraqis would have adapted it by hanging it upsidedown inside the Ilyushin, to use as the principle radar for detectingincoming planes. It was sort of like stripping down a Volkswagon bugto make a dune buggy. "I don't believe in it for an instant," oneFrench aerospace executive said, after taking a close look at thedesign. "The Tiger-G gives out so much heat when it turns, the peoplemanning it in the back of that plane are going to fry after half anhour."

But Amer Rashid would have none of it. "See that plane?" he said,all admiration for the efforts of his co-workers. "We built thatentire system in just three months. Our men worked day and night toperfect it. Some of our engineers actually actually slept on thatplane, to be able to work late and get started again early the nextmorning. Because of the war, all of us were in a hurry. And thisallowed us to cut red tape. You know what they say: necessity is themother of all inventions."

Pride was an easy trickle-down in Iraq. But sometimes itmanifested itself dangerously. Serge Dassault and General MauriceSchmidt can still recall how they were forced to hit the deck on theVIP reviewing stand at al-Muthena Air Force base when an Iraqi pilotflew loops in his MiG-29 only fifty feet above the ground, and thenheaded straight for them, afterburners lit. Lt. Colonel Khalid Khalilwon applause from Hussein Kamil in person when he drove up to thereviewing stand after landing. That type of flying was forbiddenunder most air show rules, because it was dangerous, but it impressedthe hell out of Kamil and not a few of his foreign partners. Iraq wasthe new frontier, the Wild West of the complex East.

"So many of us wouldn't have come," said Huygues de l'Estoile, whokept his elegant French cuffs buttoned despite the heat, "if wedidn't believe in Iraq." Pressed about Iraq's growing financialdifficulties, the debonair French arms salesman swept them away withthe back of his hand. "Don't confuse a poor country with one that hasa budgetary problem. Iraq has oil resources almost equal to those ofSaudi Arabia. This is a rich nation, even though it has temporaryproblems paying its bills."

De l'Estoile was excited at the Baghdad fair, and wore his watchbearing the portrait of Saddam Hussein like a trophy of glory. It wassaid that his right hand--the one he signed contracts with--was worthmore than $50 billion. If all went well during the negotiations inBaghdad, that right hand would be worth another $6.5 billionmore.

"Iraq's main goal today is to create an industrial base," Del'Estoile explained. "Military production is important, but it is notall. In 10-15 years, 50% of Iraqi exports will be probably beproducts other than oil. I believe the days of outright armspurchases by Iraq are over. And we at Dassault are ready to play thegame. As far as I'm concerned, it is an ineluctable step. There'ssimply no getting around it."

After years of hesitation, De l'Estoile had virtually convincedhis boss, Serge Dassault, and engine builder Snecma, that the timehad come to relax restrictions on technology transfer. They hadalways feared license production in countries like Iraq, because itposed a potential threat to direct sales of military equipment in thefuture. But bit by bit, De l'Estoile had won the argument. Now it wastime to cash in.

"We are discussing the first stage of a long program," Del'Estoile acknowledged, referring to the gigantic Fao Project. "Youbegin by rebuilding existing systems, modifying them, upgrading them,modernizing them. The more you rebuild, the more you begin to build."That was the core of the Fao Project, he explained: to teach theIraqis the complex art of aircraft manufacturing, until they werecapable of going it alone. "Iraq has a driving ambition to become anindustrial power," he concluded, "and it has the means to accomplishthis goal. No banker can seriously say that Iraq does not have afuture."

The French were not alone in seeking to build the Iraqiaeronautics industry. Strong competition was coming from Spain,Italy, and Czechoslovakia, all of which had less sophisticated jettrainers to offer for export.

To reinforce their case, Spain's state-owned ConstruccionesAeronauticas S.A. had their entry, the CASA C101, flown into Baghdadfrom Jordan, where it was in service with the Royal Jordanian AirForce. Saddam Hussein had close personal ties to Jordan's KingHussein, and would shift one squadron of his Mirage F1 to a JordanianAir Force base later that summer, to fly surveillance flights alongthe border with Israel. The Spaniards were counting on theirJordanian card to help them sell their plane. Within three day ofarriving in Baghdad, they managed to get Iraqi pilots flying theiraircraft for the first time, and convinced Hussein Kamil to send aMIMI delegation to corporate headquarters in Madrid for furthertalks.

"What we have to offer is ten years of experience in technologytransfer and local production," a top company officer said."Co-production is a priority market for us." Competition for the Faoproject was hot and heavy. Everyone wanted to help Iraq build itsmilitary aircraft industry, and they were offering substantialgovernment credits to back their proposals. But the strongestcompetitor to the Alphajet was without a doubt the British AerospaceHawk. Far superior to the Spanish or Italian planes, it could also beconfigured as a single-seat ground support fighter. And the Britishwere dead serious about breaking into the Iraqi military market. AlanClark, who was now the Minister for Defense Procurement in Britain,dispatched his top aide to Baghdad to make the British case.

Assistant Secretary of Defense David Hastie was a sophisticatedplayer, and was better known to the men at British Aerospace forhaving been a former director of the company. "I don't know what hathe's wearing today," said one of the BAe team in Baghdad. "But I cantell you this: he is pretty bloody senior."


The subject of British-Iraqi relations was a sensitive one, butDavid Hastie was better prepared than most to take advantage of theslippery terrain. He had a keen understanding of the Iraqi military.Better yet, he had an in-depth knowledge of recent events, for havingplayed a major role in shaping them. He understood one thing aboutIraq that many others overlooked: you could not prepare the futurewithout knowing the past.

Saddam Hussein was fascinated by Britain, attracted by Britishefficiency and British discretion, while loathing what he termedBritain's "hegemonistic intentions" toward Iraq. The Iraqi Air Forcetried to convince Saddam to sign a billion dollar deal with BritishAerospace to purchase Hawk jet trainers in knock-down kits for localassembly in 1979, but the outbreak of the Gulf war (and Saddam'snatural suspicion of the British) put the deal on ice.

During the early years of the Iran-Iraq war, Britain hadmaintained discreet contacts in Baghdad. "We did our best to keep thebed warm," Hastie admitted. Some thirty to forty Iraqi pilots weretrained every year on British air bases and by private contractorssuch as CSE Aviation. "We weren't going to let the French get everycontract, now were we?"

There were other contacts as well. Once Iran was subjected to aninternational arms embargo, the Iranian government set up a buyingoffice on London's Victoria Street, just a stone's throw away fromScotland Yard. Most of Iran's attempts to procure tanks, aircraft,missiles, and electronics on the black market went throughÃondon until the end of the war, despite increasingly strainedrelations between Britain and Iran. It now appears that Britain's MI5was monitoring its activities around the clock, and passed on some ofthe intelligence gleaned on Iranian arms purchases in Europe toSaddam's half-brother and intelligence chief, Barzan Ibrahimal-Tikriti.

British intelligence also put Barzan in contact with former SAScommandos, who were available on "private contract" to help train newIraqi Special Forces units at a top secret base located on an islandin the middle of the Tigris river. A British firm, Racal Electronics,built the security perimeter for the base using sophisticatedelectronic sensors, "but no member of the firm was ever allowed ontothe island itself during the whole construction project," wrote oneof the British trainers. "It is probably the most sensitive militaryinstallation in the country."The "jungle ears" installed by Racal forthe Iraqi Special Forces were similar to devices first used by theGreen Berets in Vietnam to detect intrusions by Viet Cong guerillas.

The British were anxious to get their piece of the Iraqi pie. Ifthey couldn't get the big one, the billion dollar Hawk deal, theywould chip away at their competitors on the terrain where the Britishwere at their best: intelligence. French arms salesmen in Baghdadperceived the British advances as the war went on, but were powerlessto do anything about them. In 1985, the French lost two majorcontracts to British electronics companies. Marconi signed a hugecontract to supply "troposcatter" microwave transmitters, that shouldhave gone to Thomson-CSF in France. This sophisticated militarycommunications equipment allowed Iraqi forces to dispatch orders fromBaghdad to the southern front without relying on the phone lines (andconfounded Allied intelligence during Operation Desert Storm). Racalstole a second deal from Thomson, this time to build a factory forits Jaguar frequency-hopping radios, the most advanced military radiothen on the market anywhere in the world. But that was nothingcompared to the business now in the offing. David Hastie had beendispatched to Iraq to snatch the Fao contract out of the hands of theFrench.

David Hastie and Huygues de l'Estoile knew each other well andrespected each other. But it was the type of respect you reserved foran old and brilliant enemy. "Did you notice the reception the Iraqisgave Serge Dassault?" Hastie commented one afternoon during aconversation in the British Aerospace trailer on the tarmac ofAl-Muthena airport. "They all stood up when he approached thereviewing stand and gave him an ovation. He was treated like avisiting hero." Hastie could afford to be generous. After a fightlasting nearly ten years, he figured he had won.

De l'Estoile was less elegant when it came to British Aerospace."The Brits should have gotten the Saudis to bring in a Tornado," hesniped. De l'Estoile had suffered the biggest defeat of his careerwhen David Hastie convinced the Royal Saudi Air Force to select theTornado over a twin-engine version of the Mirage 2000 in 1987. "Theydidn't dare, because then everybody would have seen that all theSaudi pilots were British."

Hastie was a smooth operator, but he also came with some powerfulammunition to convince the Iraqis that Great Britain would be thebest cooperation partner for the aerospace project. For one thing,Iraq could purchase many of the machine tools from British companiesthey already owned, such as Matrix Churchill. In addition to that,Her Majesty's Government was prepared to offer a generous financingpackage of "soft loans" totalling $628 million, in addition tolong-term oil purchases. The French were notoriously weak when itcame to project financing. De l'Estoile had never succeeded inconvincing the red barons at the Finance Ministry, JacquesDesponts.and Philippe Raymond, who continued to veto his projects forIraq.

After meeting with Saddam's son-in-law, Hussein Kamil, DavidHastie knew that victory was within reach. The Iraqi Minister had ledhim to believe that he had chosen the British Hawk not because of itsperformance, or because it was slightly cheaper than the French."What Saddam really wants," Hastie revealed, "are American fighterplanes. I guess he figures that buying British is the next bestthing, a way of getting his foot in the door."

Hussein Kamil was particularly impressed to learn that BritishAerospace had been selected by the U.S. Navy to conduct its pilottraining program for the Hawk. "This is what the Iraqis want," Hastiesaid. "They want American-style training, American-style tactics,American-standard aircraft. If they can't get them from the U.S.,then they will get them from us."


Debt was a problem for the French. At this stage, Iraq owed Frencharms suppliers approximately $2 billion in arrears. They owedcivilian contractors another $4 billion, most of it from contracts atleast five years old. It was a miracle the sum was not higher.

Serge Dassault and Jacques Deville of Aerospatiale threw a galareception for their Iraqi clients in the palm-shaded gardens of theHotel Rashid. All evening long, Serge Dassault stood in a corner bythe steps leading down into the garden, just in case the Minister,Hussein Kamil, showed up. Dassault was so eager to make his firstreal export sale after taking over the company upon his father'sdeath in 1985 that he could scarcely concentrate on anything else.Friends he had known for years he brushed off with an absent sigh.

When the French Ambassador to Iraq, Maurice Courage, showed up, hetried to reassure Dassault of his support. "You know I have alwaysdone everything I could," Courage whispered, "to help further Frencharms sales to Iraq." Sometimes, the Iraqis made odd requests toAmbassador Courage. Once, they asked him to blacklist a Frenchnewspaper reporter who had written "unfavorable" stories about Iraqduring the war with Iran. Courage dutifully cabled the message backto Foreign Minister Roland Dumas, but was non-plussed when the Iraqisinvited the same reporter back to Baghdad a year later. Unwilling totake a chance at offending his patrons, Courage gave orders to theembassy staff not to meet the reporter during his stay.

"The Iraqis are shopping hard," said one French arms salesman atthe reception. "I don't expect Hussein Kamil to show up for oneminute. All this cinema is just an attempt to get Dassault to lowerhis price."

Another long-time Baghdad hand ridiculed the stance of the FrenchFinance Ministry, which he believed was going to sabotage the Mirage2000 and Alphajet deal. "Iraq's military debt to France today onlyamounts to 6% of our total military sales to Iraq since the Gulf warbegan. We could afford to simply wipe the slate clean, if that werethe price of getting these new contracts."

At the height of the party, where white-jacketed waiters carriedsilver platters of shishkebabs, fruit juice, and Iraqi sweets,Dassault's co-host, Jacques Deville, was called out to an urgentmeeting at the Ministry. Hussein Kamil greeted him in his privateoffice suite with good news. Iraq finally agreed to make the downpayments on the Tulip and Jacinthe helicopter contracts, soproduction could begin. In return, Kamil wanted Aerospatiale tosubmit plans to build a helicopter assembly line in Iraq, to buildAerospatiale's latest anti-tank machine, the Panther. Aircraft wasnot enough. To have a complete aerospace industry, Kamil argued, youneeded to build helicopters as well.


One person who failed to show up at the Baghdad Arms Fair wasDefense Minister Adnan Khairallah. Asked about his absence, RajaHassan Ali, who had donned his Brigadier's uniform for the durationof the show, said that Minister Khairallah was not even expected."You know, he is in quite poor health." But the poor health ofSaddam's cousin had little to do with his age or physical condition.He wasn't even lucky enough to have a "diplomatic" cold. He wassimply out of favor, and worse was on the way.

If Saddam had managed to sell the Gulf war to ordinary Iraqis ashis "Qaddisiya," or crusade, against the hereditary Persian enemy, hewas less successful in convincing the professional officers' corps ofhis prowess as a military commander. Khairallah was the go-betweenwho softened the rocky relationship between Saddam's Baath Party andthe Army. Without Khairallah, the Army would have balked on numerousoccasions at Saddam's orders. Even with his help, the officers'discontent nearly erupted into insubordination on at least twooccasions, in 1982 and in 1986. Both times the officers criticizedSaddam's handling of the war, and blamed him for major Iraqilosses.

Khairallah commanded the respect of the professional officersbecause he was not just another of Saddam's "yes-men," a mere vehicleof Presidential humor. He intervened on their behalf with Saddam. In1985, for instance, it was Khairallah who had succeeded in convincingSaddam to relinquish control over the choice of bombing targets,allowing Air Force Commander General Saad Shaaban to plan hismissions according to strictly military criteria. Before this majorshift in how the war was run, Saddam had insisted on being consultedbefore every bombing campaign, and tended to choose highly visible"political" targets, while ignoring major targets of militarysignificance. The decision to grant more independence to militaryplanners gave a dramatic boost to their effectiveness.

Another morale booster engineered by Khairallah was the decisionto allow the Iraqi press to mention the names of field commanders.Until then, they had remained anonymous, whether victorious ordefeated. Khairallah argued they would perform better if given thepublic recognition (or sanction) they deserved. The new ruling madehim immensely popular with the top officers, who could now play to acaptive audience at the rear.

One of the first commanders to distinguish himself in this way wasLt. General Maher Abdul Rashid. In July 1984, General Rashid wasinterviewed by Washington Post correspondent Rod Norland not longafter Iraq's first acknowledged use of poison gas. It is not knownwhether Rashid's comments angered Saddam at the time, but they werereproduced around the world. "When you are faced with insects,"Rashid said, "you use insecticide."

When the Gulf War ground to a halt after a string of Iraqivictories in April 1988, Khairallah's popularity with theprofessional officers' corps had soared to unprecedented heights.Much of the credit for the final "victory" was directed Khairallah'sway. Saddam had almost taken a back seat to his cousin, who wasbecoming a public figure in his own right. Once again the specter ofa challenge to Saddam's rule from the Army had become real.

The first hint that resentment against Saddam was brewing justunder the surface occurred in June 1988, when Lt. General MaherRashid took public issue with Saddam over a question of medals.Rashid had led the successful battle to retake Fao after a two yearIranian occupation. But when the time came to distribute medalsSaddam heaped honors on General Saadi Tuma, the "political General"who headed the Republican Guards, passing Rashid over completely.Backed by Khairallah, General Rashid stood firm. If his men of the7th Army were not rewarded as well, he threatened to resign and letpeople know why. Saddam's response was not long to come. In June1988, General Rashid was arrested, and he has not been heard ofsince. Some sources believe Saddam arranged an "accident" for him afew months later, although this has never been confirmed. Meanwhile,Saddam divorced his second son, Kusay, from Rashid's daughter. Rashidhad become an outcast, a pariah.

The arrest of General Rashid came as a shock to Adnan Khairallahand to many other top Army officers. While it is not known whetherKhairallah was actually plotting a coup, or with other Tikritisjoined in his disenchantment over the President's megalomania, Saddamnow saw him as a threat, and was seeking an excuse to get rid of him.In the weeks following the ceasefire with Iran, more than 100 topIraqi officers were executed.

In the end, it was a family feud that that got the better ofKhairallah. Through the intercession of his food-taster and personalvalet, Kamal Hana Gegeo, Saddam had begun to taste the joys ofextra-marital sex. He became so enamored of one mistress, thedaughter of a prominent Baghdad merchant, that Saddam proposed takingher as a second wife. The love affair soon blossomed into a familyscandal. Saddam's eldest son, Uday, feared he would lose his positionas heir-apparent if his father repudiated his mother to remarry. In adrunken fury one evening in October 1988, he burst into ahigh-society reception in Baghdad, stormed past Suzy Mubarak, thevisiting wife of the Egyptian President, insulted Saddam's VicePresident, Taha Moheddin Marouf, then sought out Kamal Gegeo and beathim to death with a club.

Later that evening, Saddam called his son into his private officeon the second floor of the Presidential palace. "With which hand didyou strike Kamal Gegeo?" he asked. Uday held up a hand, and hisfather shot a hole through it with his revolver. Meanwhile, Uday'smother, Sajida, heard the shouting, and called on her brother forhelp. When Khairallah came running into Saddam's study a few minuteslatter, it was all he could do to keep the Iraqi President frompistol-whipping his own son to death. Uday was admitted to hospitallater that night. His wounds were explained away to the Iraqi pressas a suicide attempt. Something broke between Saddam and his cousin,Adnan Khairallah, that night. Their relationship would neverrecover.

Tipped off by a phone call from Khairallah, King Hussein of Jordanflew in shortly before dawn at the controls of his private jet, toconsole Saddam over the behavior of his son. The Jordanian monarchwas probably the only confidant Saddam had. "This kind of thinghappens with boys," he said. "You mustn't get carried away by youremotions." It was all he could do to keep Saddam from hopping onboard his aircraft and flying to Cairo, to apologize publicly toHosni Mubarak. If he couldn't kill his son,Saddam intended to disownhim and his lineage (which included his wife, and Khairallah) forgood.

Rumors that Khairallah was in danger spread like wildfire acrossthe Gulf in the coming months. Khairallah himself told the KuwaitiDefense Minister, Nawaf al-Ahmad al-Sabah, that he felt his life wasin danger and that dire things were about to happen in Iraq. Byspring 1989, people like Raja Hassan Ali were admitting that he was"in bad health."

On May 6, only days after the Baghdad Arms Fair closed its gates,Saddam announced that Khairallah had been killed while flying ahelicopter in Kurdistan the day before. It had been a "crazy storm,"Saddam said. And yet, of the three helicopters flying in formationover the mountains, only Khairallah's had gone down. Later, Frenchapologists for Saddam would come to his defense. "There really was asandstorm," one said. "I was there, and you could hardly see athing."

Iraqi exiles say Saddam killed Khairallah with his own hand duringa drinking bout at his mountain hide-out in Sarsang, near Mosul, thenight before the supposed crash. "Adnan was family," they argue, "andyou don't let other people kill members of your family. If there iskilling to do, you do it yourself."

Khairallah was given a state funeral in Tikrit, and was said tohave left behind a fortune estimated at $3 billion--not bad for acountry boy from Tikrit. Saddam decreed that the Iraqi AWACs plane berenamed the "Adnan-1" in his honor, and publicly wept over his"loss." But he was careful to return Adnan to his family in a nailedcoffin, telling them not to open it because the corpse had beenhorribly disfigured in the fire that followed the helicopter crash.It is more likely they were forbidden to examine the corpse becausethat would have revealed the true circumstances of Khairallah'sdeath.