Iraq: U.S. Military Items Exported or Transferred to Iraq in the 1980s
(Letter Report, 02/07/94, GAO/NSIAD-94-98).

This unclassified version of a classified 1992 GAO report discusses U.S.
policy and practices on sales of U.S. military equipment to Iraq during
the 1980s.  Since 1980, U.S. policy has been to deny export licenses for
commercial sales of defense items to Iraq, and the Pentagon has not made
any foreign military sales to Iraq since 1967.  In contrast, U.S. policy
on sales to Iraq of dual-use items--items with both civilian and
military uses--has not been constrained by security controls.  As a
result, the Commerce Department approved licenses for exporting $1.5
billion worth of dual-use items between 1985 and 1990.  The licensed
items included computers and other high-tech equipment, civilian
helicopters, and machine tools. In addition, several countries shipped
U.S. military equipment to Iraq without U.S. approval, including
ammunition and howitzer spare parts.  In five cases, countries proposed
that they serve as transshipment points for military equipment for Iraq,
proposals that the State Department rejected.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-94-98
     TITLE:  Iraq: U.S. Military Items Exported or Transferred to Iraq 
             in the 1980s
      DATE:  02/07/94
   SUBJECT:  Arms control agreements
             Export regulation
             International trade regulation
             International trade restriction
             Foreign military sales policies
             Foreign trade policies
             Foreign military sales
             Military materiel
             Foreign governments
             Dual-use technologies
IDENTIFIER:  Iraq
             Middle East
             United Arab Emirates
             Kuwait
             Saudi Arabia
             TOW Missile
             C-130 Aircraft
             
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Cover
================================================================ COVER


Report to the Chairman, Committee on Foreign Affairs, House of
Representatives

February 1994

IRAQ - U.S.  MILITARY ITEMS
EXPORTED OR TRANSFERRED TO IRAQ IN
THE 1980S

GAO/NSIAD-94-98

IRAQ


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense
  UAE - United Arab Emirates

Letter
=============================================================== LETTER


B-256123

February 7, 1994

The Honorable Lee Hamilton
Chairman, Committee on Foreign
 Affairs
House of Representatives

Dear Mr.  Chairman: 

We are providing you with this unclassified version of our classified
report dated March 11, 1992, addressed to you as Chairman of the
Foreign Affairs, Subcommittee on Europe and the Middle East, House of
Representatives, and to the Honorable Mel Levine, a Member of
Congress at that time.  The Honorable John M.  Spratt Jr., Chairman,
Subcommittee on Commerce, Consumer, and Monetary Affairs, Committee
on Government Operations, House of Representatives, requested that
the report be declassified.  The Departments of State, Defense, and
Commerce reviewed the report and agreed that it could be issued in
its present form.  We are sending a copy of the report to Chairman
Spratt. 

In response to your request, we made this review because of concerns
that certain Middle East countries may have served as transshipment
points for U.S.  arms ultimately bound for Iraq, and our 1989
classified report findings that three other countries made
unauthorized sales of coproduced equipment to Iran and Iraq. 

Our objectives were to determine (1) what the U.S.  policy and
practices were regarding sales of U.S.  military and related
equipment to Iraq during the 1980s and what sales were approved, (2)
whether there were patterns of diversion of U.S.  arms from the
Middle East and three additional countries to Iraq during the 1980s,
and (3) whether a shipment of U.S.-origin mortar bomb fuses was
diverted from the United Arab Emirates (UAE) to Iraq. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Since 1980, U.S.  policy has been to deny export licenses for
commercial sales of defense items to Iraq, except when the items were
for the protection of the head of state.  As a result of the
exception, license applications valued at $48 million were approved. 
The Department of Defense (DOD) has not made any foreign military
sales to Iraq since 1967.  In contrast, U.S.  policy toward Iraq for
sales of dual-use items (items that have both civilian and military
uses) was not constrained by national security controls, and there
were few applicable foreign policy controls until August 1990.  Thus,
the Department of Commerce approved the licenses for exporting $1.5
billion of dual-use items to Iraq between 1985 and 1990. 

Available information showed two cases of unauthorized transfers of
U.S.  military items to Iraq by Middle East countries.  Although
three other Middle East countries and one of the other countries had
proposed to serve as transshipment points of military equipment for
Iraq, the proposals were turned down by the Department of State. 
There were also two additional cases of diversion to Iraq by two of
the three other countries, and one case of possible diversion-related
activity by the third.  While this data does not suggest patterns of
diversion, we were unable to determine whether other unauthorized
transfers were made. 

Because of sovereign political sensitivities, we were unable to visit
UAE to conduct a physical inspection; therefore, we could not
determine whether the U.S.-origin mortar bomb fuses shipped to UAE
were diverted to Iraq.  We, therefore, recommended that the U.S. 
Ambassador use an alternative method to verify that the fuses are
still in UAE's possession.  After issuance of our classified report,
the U.S.  Embassy in UAE reported that its personnel verified that
the U.S.-origin mortar bomb fuses shipped to UAE were not diverted to
Iraq. 


   BACKGROUND
------------------------------------------------------------ Letter :2

U.S.  exports of defense articles and services on the U.S.  munitions
list are controlled by the Department of State under the Arms Export
Control Act of 1976, as amended.  When foreign governments or parties
wish to purchase defense articles and services directly from U.S. 
firms, the firms must obtain export licenses from the Department of
State.  License applications are reviewed on a case-by-case basis,
taking into account that exports to Communist countries and
terrorist-supporting countries are prohibited.  If, however, the
foreign parties elect to make such purchases through DOD's foreign
military sales, which are subject to DOD approval, export licenses
are generally not necessary.  Written approval must be obtained from
the Department of State before a defense article or service
previously exported from the United States can be transferred to a
third country.  Under the Arms Export Control Act, the State
Department is required to notify Congress of any substantial
violations involving unauthorized transfers. 

U.S.  exports and reexports\1 of dual-use items are controlled and
licensed by Commerce under the Export Administration Act of 1979, as
amended.  Controls are based on national security and foreign policy
considerations.  National security controls are maintained on
strategic commodities and technical data, worldwide, to prevent the
diversion of such items to controlled countries.  Controls based on
foreign policy considerations are maintained to further U.S.  foreign
policy goals.  License applications for exports subject to national
security controls can be referred to DOD for review, whereas those
subject to foreign policy controls can be referred to State for
review.  Other departments and agencies, such as the Department of
Energy, Nuclear Regulatory Commission, and the Subgroup on Nuclear
Export Coordination, can also participate in licensing decisions. 


--------------------
\1 A controlled commodity previously exported from the United States
to a foreign destination that is to be reexported from the foreign
country requires approval from the U.S.  government. 


   U.S.  POLICY AND PRACTICES
   REGARDING SALES OF MUNITIONS
   LIST ITEMS TO IRAQ
------------------------------------------------------------ Letter :3

Commercial sales of munitions list items to Iraq required
State-approved licenses.  Since 1980, U.S.  policy prohibited
licensing sales of munitions list items to Iraq, except when the
items were for the protection of the head of state.  The policy was
based on the rationale that the United States should not aid either
belligerent in the Iran-Iraq War.  According to State officials, the
exception for protection of the head of state was used to sell Iraq
items that would not increase Iraqi military capability and items
that had low risk of being diverted to the Iraqi military. 

Between 1983 and 1990, State approved 19 license applications, mostly
for sales of communication devices, valued at $48 million and
disapproved 25 licenses valued at $2.6 million.  However, according
to State officials, 4 of the 19 licenses approved in July 1990,
valued at $43 million, were revoked immediately after the Iraqi
invasion of Kuwait on August 2, 1990, and no items were shipped. 
Approved items and their stated end uses for 11 of the 19 approved
licenses are detailed in appendix I.  In two of the approved cases,
the Iraqi military was the end user.  The cases were approved because
an Iraqi Air Force official, along with a civil aviation official,
certified that the equipment would be used at civilian airports. 

According to a State official, Iraq became ineligible to participate
in U.S.  foreign military sales when it broke diplomatic relations
with the United States in the wake of the 1967 Arab-Israeli War.  Its
ineligibility continued when Iraq was subsequently placed on the list
of terrorist-supporting countries.  Consequently, no U.S.  military
equipment has been sold to Iraq through the government-to- government
channel since 1967.  Although removed from the terrorist-supporting
list in 1982, Iraq remained ineligible because U.S.  policy
prohibited the sale of military items to either belligerent in the
Iran-Iraq War.  Iraq was again added to the terrorist list in
September 1990. 


   U.S.  POLICY AND PRACTICES
   REGARDING SALES OF DUAL-USE
   ITEMS TO IRAQ
------------------------------------------------------------ Letter :4

Dual-use items considered as strategic commodities and technical data
are controlled by the Department of Commerce under section 5 of the
Export Administration Act, national security controls.  These
controls enforce the U.S.  policy of restricting exports that would
make a significant contribution to the military potential of any
country or combination of countries that would prove detrimental to
the national security of the United States.  Section 5(b) of the
Export Administration Act requires the President to establish a list
of controlled countries for national security controls.  While
section 5(b) specifies that the controlled countries are those that
are contained in section 620(f) of the Foreign Assistance Act of
1961, the President may add or remove countries from the list based
on certain criteria.  Traditionally, the controlled countries have
been the former Soviet bloc and other Communist countries or state
sponsors of terrorism. 

Iraq was not included on the original list of controlled countries;
thus, according to Commerce officials, Commerce had no legal basis to
deny Iraq any of the national security controlled items, unless it
believed that the items would be diverted to controlled countries. 

Other dual-use items are controlled for foreign policy reasons under
section 6 of the Export Administration Act.  Most foreign policy
controls relate to the broad issues of human rights, antiterrorism,
regional stability, chemical and biological warfare, and
nonproliferation of nuclear arms and nuclear capable missiles.  Items
under antiterrorism control also include all the national security
controlled items destined for military end use.  Therefore, if a
country is on the list of terrorist-supporting countries, as
determined by the Secretary of State, all national security
controlled items destined for military end use in that country would
be controlled because of foreign policy, even though the country is
not a controlled country for national security purposes. 

Iraq was removed from State's list of terrorist-supporting countries
in 1982.  A Commerce official told us that this made Iraq eligible to
purchase aircraft, helicopters, and national security controlled
items for military end use.  A State document showed that within 2
months after Iraq was removed from antiterrorism controls, an
application by a U.S.  firm to sell Iraq six aircraft was approved. 
According to Commerce records, between 1985 and 1990, aircraft,
helicopters, and related parts, worth $308 million, were approved for
sale to Iraq. 

Commerce officials told us that because Iraq was removed from
antiterrorism controls and because controls on missile technology and
chemical and biological warfare were not in place until the late
1980s, few foreign policy controls were placed on exports to Iraq
during the 1980s.  They said that this, along with the lack of
national security controls, resulted in a long list of
high-technology items being sold to Iraq during the 1980s. 

Commerce data showed that between 1985 and 1990, it approved 771
licenses, valued at $1.5 billion, for sales to Iraq, while only 39
applications were rejected.  According to Commerce, another 323
applications valued at $442 million were returned to the applicants
without action, primarily due to incomplete information.  Sixty-three
of the license applications were sent to State for foreign policy
review.  State recommended approval for 58 and disapproval for 5. 
Commerce acted in accordance with State's recommendations. 

The bulk of the items licensed were computers and other electronics,
and other items such as civilian helicopters and machine tools were
also licensed.  Dollar wise, the largest amounts involved three
licenses, totaling more than $1 billion for heavy duty trucks. 
Commerce subsequently informed us that these trucks were never
actually shipped to Iraq.  A Commerce official told us that Commerce
was informed by the exporters that the purchasers for these trucks
withdrew from the sales agreements at the last minute. 


   DIVERSIONS AND REQUESTS FOR
   TRANSFERS TO IRAQ
------------------------------------------------------------ Letter :5

One country transferred various U.S.-origin ammunition to Iraq
between 1981 and 1984, and another country probably transferred
U.S.-origin ammunition to Iraq in 1986, both without U.S.  approval. 
More recent data showed two additional cases of unauthorized
transfers of U.S.-origin items from these countries to Iraq.  In
1986, one transferred U.S.-made ammunition fuses, valued at $8
million, to Iraq.  The other transferred various howitzer spare parts
to Iraq. 

In 1985, a European company sold weapon conversion kits to Iraq for
helicopters that Iraq had purchased from the United States with
assurance of nonmilitary use.  While it is not clear whether the kits
contained U.S.-origin equipment, based on Iraq's earlier assurance,
the United States would not have approved the sale.  However, it is
not clear whether or not the helicopters were actually militarized. 

Two cases of arms diversion to Iraq involved Middle East countries. 
A State official believes that so few Middle East diversions were
detected because Iraq was being well supplied with arms from other
countries.  In 1984, State received reports that a Middle East
country had transferred TOW missiles to Iraq.  Based on these
reports, State delivered a protest to that government.  In 1986,
State received reports that Saudi Arabia had transferred U.S. 
munitions to Iraq.  In response to State's inquiry, the Saudi
government said that 300 MK-84 2,000-pound bombs were inadvertently
mixed in with a shipment of non-U.S.  origin munitions sent to Iraq
in February 1986.  State informed Congress of this unauthorized
transfer under section 3 of the Arms Export Control Act, citing it as
a small quantity of unsophisticated weapons. 

In commenting on this report, the Department of State said that, with
the exception of the single transfer of bombs by Saudi Arabia, of
which Congress was notified in accordance with the Arms Export
Control Act, the State Department reviewed the other allegations of
unauthorized transfers to Iraq and did not find them to be credible. 
Regarding State's comment, we are not privy to the information that
determined the reported transfers were not credible.  Our discussions
of these cases are as they are reflected in the documentation we were
able to obtain.  Moreover, in connection with one of the cases, we
acquired information, which remains classified, that indicates
additional quantities of items were transferred. 

In five instances, third parties requested the United States to allow
them to transfer military equipment to Iraq.  In 1982, a Middle East
country asked that it be allowed to transfer U.S.-origin howitzers
and C-130 aircraft to Iraq.  In the same year, a European country
requested that the United States sell howitzers, and cobra and
Blackhawk helicopters to Iraq, using it as the intermediary.  State
turned down both requests, citing the U.S.  policy of not aiding
either belligerent in the Iran-Iraq War.  In 1983, another country
requested battle tanks from the United States so that it could, in
turn, send its Soviet-made tanks to Iraq.  According to a DOD
official, who was working for State when this request was made, the
United States turned down the request.  In 1986, a Middle East
country requested the purchase of night vision devices for Iraqi
helicopters, using it as the conduit.  In January 1990, another
Middle East country requested permission to transfer $400,000 in
U.S.-origin howitzer spare parts to Iraq.  The United States turned
down both of these requests, again citing the policy of not aiding
either belligerent in the Iran-Iraq War. 


   DISPOSITION OF MORTAR FUSES
------------------------------------------------------------ Letter :6

In November 1988, a shipment of 4,000 M-734 mortar bomb fuses was
licensed by the State Department for sale by a U.S.  company to a
military unit in UAE.  The fuses were to be shipped first to a west
European firm, where they were to be installed onto 81mm mortar
bombs.  Sales of the mortar bombs to the UAE unit were licensed
separately by the west European country's government.  According to
the west European firm's shipping documents, the 81mm mortar bombs
containing the M-734 fuses were shipped in October 1989 to Dubai,
UAE, and arrived at the Port of Dubai in November 1989. 

As a condition for obtaining the State Department license, the UAE
unit certified that the bombs containing the fuses were for its sole
use and would not be resold or reexported.  However, in July 1990, an
allegation was made to Congressman Levine's office that the mortar
bombs had been transferred to Iraq.  Subsequently, we were asked, as
part of the request, to determine whether this diversion had
occurred. 

In February 1991, because of the Gulf War and the restricted travel
conditions, we asked the U.S.  Embassy in UAE to inspect the mortar
fuses on our behalf.  We provided the Embassy with the information
necessary to identify the particular shipment of mortar bombs
containing the fuses and to perform a physical inspection at UAE's
ammunition warehouse.  The Embassy stated that it had made previous
inquiries about the fuses and had obtained documentary evidence that
the fuses were still in UAE's possession.  The Embassy also pointed
out the political sensitivity of asking to inspect UAE's ammunition
warehouse.  We then asked for the documentary evidence, which
consisted of a faxed reply from UAE stating that the fuses were
received in November 1989 and were for the sole use of UAE.  This
information was not sufficient enough for us to be able to determine
the ultimate disposition of the mortar fuses.  Therefore, in May
1991, we requested that the Embassy make arrangements for us to visit
the UAE's ammunition warehouse.  The Embassy, citing the political
sensitivities, declined to make the arrangements. 

Following the issuance of our classified report, the U.S.  Embassy in
UAE sent us a cable.  The cable stated that on July 7, 1992, Embassy
personnel fully and properly accounted for all mortar bomb fuses in
question.  The Department of State also reported that the UAE
cooperated fully in the investigation. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

We recommended in our classified report that, because of the
Embassy's concern over political sensitivity that might result from
our visit, the Secretary of State should direct the U.S.  Ambassador
in UAE to use an alternative method to physically verify that the
fuses are still in UAE's possession or obtain documentation to
demonstrate that they have been used for the purpose for which they
were provided.  We also recommended that the Secretary of State
provide written confirmation of this verification and/or
documentation to our office.  As previously mentioned, this
recommendation was addressed in July 1992. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

We obtained written comments on a draft of the classified report from
DOD and the Departments of Commerce and State.  (See apps.  II, III,
and IV.) DOD concurred that the report is factually accurate and
provided no further comments.  The Department of Commerce asked that
some additional data be added to the section on dual-use licensing,
which was done.  The Department of State made some technical
comments, which have been incorporated in the report, as appropriate. 

Subsequently, in response to our request for a declassification
review of the original report, the Department of State provided
written comments.  (See app.  V.) Its comments are fully reflected in
this unclassified version.  However, we were unable to reach full
agreement with all the original classifying agencies regarding the
wording of this unclassified report version until December 1993. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :9

We conducted our review at DOD, the Departments of State and Commerce
in Washington, D.C.  To obtain information on U.S.  policies on
exports to Iraq, we met with officials from Commerce and State.  We
also reviewed applicable statutes and regulations governing export
controls and Commerce's and State's publications.  In addition, we
reviewed State's cables and memorandums, back to 1982, for any export
policy statement applicable to Iraq. 

We obtained licensing information from Commerce for all applications
for exports of dual-use items to Iraq between 1985 and 1990.  From
State, we obtained licensing information on all applications for
exports of munitions items to Iraq between 1983 and 1990.  We also
obtained copies of some approved munitions licenses. 

To determine whether there was a pattern of arms diversions to Iraq,
we met with export control enforcement officials from Commerce and
U.S.  Customs, officials from State and DOD with expertise in Foreign
Military Sales, and intelligence officials from State and DOD.  We
also reviewed DOD intelligence reports and State records, dating back
to 1982, for any diversion cases detected by the agencies. 

To obtain information necessary for identifying the shipment of
mortar fuses, we contacted officials of the U.S.  and western
European companies.  We tried to arrange for a physical inspection of
the fuses at United Arab Emirates' ammunitions warehouse but were
unable to make arrangements with State because of political
sensitivities. 

Our work was performed between August 1990 and September 1991 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :9.1

We plan no further distribution of this report until 7 days after its
issue date.  At that time, we will send copies to other interested
congressional committees and to the Secretaries of Defense, Commerce,
and State. 

Please contact me on (202) 512-4128 if you or your staff have any
questions concerning this report.  Major contributors to this report
were Stewart L.  Tomlinson, Assistant Director; Davi M.  D'Agostino,
Adviser; and John P.  Ting, Evaluator-in-Charge. 

Sincerely yours,

Joseph E.  Kelley
Director-in-Charge
International Affairs Issues


MUNITIONS LICENSES APPROVED
=========================================================== Appendix I

The following are 11 of the 19 approved licenses that we obtained. 

Commodity                Value      Date  End user            End use
------------------  ----------  --------  ------------------  ------------------
Data privacy        $1,105,159   7/27/90  Ministry of         Securing embassy
device                     \a\            Foreign Affairs,    communications
                                          Iraq

Data privacy        25,291,119   7/27/90  Presidential        Securing
device                      \a            Office, Iraq        presidential
                                                              communications

Data privacy         1,378,930    10/25/  Presidential        Securing
device                                89  Security Command,   presidential
                                          Iraq                communications

Data privacy            29,577   8/15/89  Administrative      Securing
device                                    Officer,            communications
                                          U.N. Forces, Iraq

Speech and voice       198,400   8/02/89  Presidential        Prevent
scrambler                                 Security Command,   eavesdropping
                                          Iraqi Palace

Speech and voice       489,604   5/19/88  Presidential        Prevent
scrambler                                 Security Command,   eavesdropping
                                          Iraqi Palace

Communications and     165,860   7/07/86  President of Iraq   To be installed on
navigations                                                   President's
equipment                                                     helicopter

Electronic               3,185   4/22/86  Iraqi Air Force     Spare part for air
component                                                     traffic control
                                                              system

Communications       1,255,000   5/21/85  Iraqi Air Force     To boost voice
amplifiers                                                    signals of air
                                                              traffic control

Revolvers and              914   9/28/84  Presidential        For use by Iraqi
pistol                                    Palace              officials

Image intensifier        8,800    11/21/  Space and Research  For astronomical
                                      83  Center, Iraq        spectrographs
--------------------------------------------------------------------------------
\a These are two of the four licenses that were revoked immediately
after the Iraqi invasion of Kuwait on 8/2/90.  No items were shipped
under the four licenses. 

Source:  Department of State




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
=========================================================== Appendix I




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
COMMERCE
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE DEPARTMENT OF
STATE
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)




(See figure in printed edition.)Appendix V
ADDITIONAL COMMENTS FROM THE
DEPARTMENT OF STATE
=========================================================== Appendix I



(See figure in printed edition.)

