The Iran Brief®

Policy, Trade & Strategic Affairs

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

The Death Lobby: How the West Armed Iraq

by Kenneth R. Timmerman

Copyright © 1991 by Kenneth R. Timmerman. All rights reserved.

Chapter 16: The Gang's All Here

(pp309-346)

With the end of the Iran-Iraq war, businessmen around the world were expecting to cash in. Both countries had been heavily damaged by the war, and needed extensive infrastructure repairs. Estimates of just how much damage had been caused ranged from $200 billion to as high as $500 billion. But on one thing the experts agreed: the war had hit Iran much harder than it had Iraq. By the end of 1988, it was apparent that the Iranian economy was in shambles, and the Islamic regime's record of supporting international terrorism did not make the Western powers eager to finance reconstruction. Iraq, on the other hand, was making all the right noises--if the mute agony of massacred Kurds was ignored. It planned to open its economy to foreign investment, and hastened to announce a myriad of gigantic "reconstruction" projects, such as the $1 billion PC2 petrochemicals complex. Businessmen from France, West Germany, Italy, Japan, Britain, and the U.S. flocked to Baghdad, eager to stake their claim to the next gold rush.

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

Global rescheduling was what Saddam feared the most, since it would have put a damper on his mounting ambitions. One by one, he let his suppliers know that Iraq intended to reward those countries and companies that had kept the faith during the dark days of the Iran-Iraq war. Juicy new contracts would be shovelled their way... on condition that they shied away from any London Club arrangement, that would have put his economy under international surveillance. The business lobbies and the arms salesmen got the point, and pressured their respective governments to find "creative" solutions to Iraq's debt.

The West German government was one of the first to react. Export credits for Iraq were reinstated in 1988, after a July 1 meeting in Bonn between Chancellor Kohl and Iraqi Foreign Minister Tarek Aziz. A further meeting between Kohl's principal deputy for intelligence affairs, Wolfgang Schauble, and Iraqi Vice President Taha Moheddin Marouf, was held in Bonn on November 23, and focussed specifically on expanding trade. The West German government pledged to maintain its easy-going attitude when it came to industrial exports to Iraq. As Lorenz Schomerus, who was in charge of export policy at the West German Economics Ministry explained, "nobody saw any interest in maintaining strict controls."

When the figures for the end of the year came in, German understanding of Iraq's "special needs" shone through clearly. The Federal Republic managed to sell $826 million worth of high-technology products to Iraq in 1988, more than double the sales of the year before. In 1989, West German high-tech exports would roar past the $1 billion mark. The vast majority of these Iraqi purchases were going into known weapons plants, such as Taji, Badr, Saad 16, the Fallujah and Kerbala missile works, and the al-Hillah rocket fuel and explosives plant. It was a great victory for Herr Schomerus, who never lost an occasion to explain that his employer, after all, was the Ministry for Economic Affairs, not against them.

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

With the end of the war, the U.S. voluntarily shifted its commercial policy toward Iraq. Industrial exporters were openly encouraged by the State Department, the Commerce Department, and the Business 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 were purchasing one out of every four barrels of oil the Iraqis exported.

The U.S.-Iraqi relationship had all the trappings of a solid partnership. President Reagan was not going to see all that good business go down the drain just because of a few Kurds. Neither was George Bush. Senate hearings on Iraq in January 1989, after Bush's inauguration, led to new legislation calling for drastic trade sanctions on Iraq, to punish Iraq for using chemical weapons against its own citizens. The Senate Bill, called the Chemical and Biological Control 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 CCC guarantees 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 one imposed by the United Nations following Iraq's invasion of Kuwait.

One of President Bush's first official acts was to veto the Iraq sanctions. The new Administration meant not merely to continue business as usual with Iraq, but to ensure that business got better. In the early months of the Bush Administration, the White House issued a National Security Decision Directive calling for improved relations and business activity in Iraq. All U.S. government agencies were called upon to implement the new policy. With open encouragement from the Bush Administration, U.S. trade with Iraq climbed past the three billion dollar mark in 1989, and was set to go higher, until Saddam Hussein burst the bubble by his invasion of Kuwait.

 

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

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

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

Despite Von Wedel's initial reluctance to deal with individuals he considered to have flown in from Outer Mongolia , BNL confirmed Central Bank of Iraq credit number 88/3/2407, and made an initial payment of $6,154,534.50 in August 1988. Odd details about the Alabama company and this contract emerged later. In one document filed by BNL lawyers in Atlanta, they alleged that XYZ "was a start-up company with absolutely no prior experience in international commerce or finance; that XYZ was somehow introduced to the possibility of participating in a major construction project in Iraq through an unsolicited telecopy from a company--Matrix Churchill Corp--it had allegedly never heard of, which was managed and controlled by Iraqi Nationals; that XYZ agreed to pay Matrix Churchill a "finder's fee" of $1.4 million if XYZ secured the contract... and that the United States Department of Commerce has refused to date to issue an export license for one of the pieces of machinery that XYZ wishes to export because of the potential for use of the equipment in manufacturing arms and the inability of the Department to confirm the bona fide nature of the alleged importer."

Unwittingly or not, XYZ Options had become an Iraqi front company. Orders for specific pieces of equipment for the weapons plants originated in Baghdad, were transmitted to Safa Haboby in London, who sent them on to Matrix Churchill Corp. in Ohio. But even these screens were not enough to satisfy the Iraqis. Matrix Churchill then hired XYZ Options to sign contracts on its behalf with thirty other suppliers from a list provided by Safa Haboby and another Iraqi named Abdul Qaddumi, a "project manager" at Matrix. Banking documents and telexes show that suppliers included Pratt & Whitney, the aircraft engine manufacturer, General Industrial Diamond of New Jersey, Waida of Japan, EWAG in Switzerland, and other machine-tool companies in Brazil and Europe. But nowhere is there mention of Safa Haboby's TDG. Haboby's concern was to hide his involvement as much as possible from the U.S. authorities, and did not want to appear as the final purchaser.

He had excellent reasons for such caution. One consignment of computer-controlled machine-tools ordered by XYZ was intercepted by U.S. Customs officers on its way to Iraq from GTE Valenite in Royal Oak, Michigan. Shipping documents showed the destination to be the Huteen State Establishment in al-Iskandariyah, which was part of the industrial belt south of Baghdad. Huteen was not just a weapons plant; it was one of the largest weapons complexes in Iraq, and even the Department of Commerce was having difficulty avoiding that fact.

Because of Commerce Department doubts, Moore Special Tool of Bridgeport, Connecticut, began having trouble getting a computer-controlled jig grinder worth $380,564 cleared for export to Iraq. The Commerce Department suspected it could be used for military ends, and requested additional information from the company. Jig grinders are essential for manufacturing nuclear weapons, and for the production of very high-precision components such as gyroscopes, which are needed for ballistic missile guidance systems. The Department of Energy has identified Moore Special Tools as the sole U.S. source of jig grinders for U.S. nuclear weapons programs, and because of this, blocked a takeover attempt by Fanuc of Japan.

Richard Kendrick of XYZ Options had been in the machine-tool business for thirty years and fully understood the strategic nature of the Moore jig grinder, but he said he was convinced that the Iraqis were serious about building up a legitimate machine-tool industry, since they had sent 33 plant technicians to Alabama for training and intended to send more. He offered to take U.S. Embassy officials in Baghdad around the Badr and Huteen plants, to reassure them about Iraqi intentions to manufacture only commercial parts such as truck engines and transmissions.

Moore was not the only company having difficulties with its export licenses. A subsequent request to ship metal-working machines worth $5,559,977 to Huteen shows that the Department of Commerce understood the true nature of the Huteen weapons complex. It also shows that they understood in detail the involvement of BNL Atlanta, and yet sounded no alarm bells. In the file accompanying DoC case number D006442, investigators noted that they called Christopher Drogoul at BNL Atlanta, who was financing the deal, "in an attempt to get end user information" about Huteen. Drogoul shrugged them off with the excuse that "the letter of credit in question was received by the bank in the same batch as a number of other letters of credit relating to the Badoush [sic] Dam project." Incredible as that explanation appeared, Commerce let the matter drop. A further attempt to purchase $185,000 worth of computers, which was eventually turned down, said the equipment was needed at Huteen "to handle its huge workload."

The Huteen complex included several different production lines to manufacture everything from explosives and propellants, to Cardoen cluster bombs. But why did the Iraqis need the specially-hardened machine-tool bits? According to former Deputy Undersecretary of Defense Steve Bryen, it may have been for cutting and shaping depleted uranium, to manufacture artillery rounds similar to those used by the U.S. Army's latest tank, the Abrams M1A2. "The theory--and so far, it's only a theory," Bryen said, "is that they received large quantities of depleted uranium from Eastern Europe, and especially, East Germany, which produces tons of the stuff every year as nuclear waste." Depleted uranium is extremely hard, and eats up large quantities of machine-tool bits when it is shaped. Hence the need to have a virtually endless supply of them made in Iraq, so they wouldn't have to bother with export licenses again. Kendrick didn't blink when questioned about the possibility of manufacturing uranium penetrators. "Sure these machines could do it, and we sold them other machine-tools which we use here in the U.S. to make uranium fuel pellets for nuclear power plants. But the Iraqis got them without all the radiation protection, which would make it pretty hairy if they ever wanted to use them for that purpose. I mean, their operators would have a very short life span if they did that."

 

Sadiq Taha of the Central Bank in Iraq journeyed to Atlanta on October 4, 1988, to work out a new $300 million loan agreement with Drogoul. Taha, who was still under medical treatment in the U.S. for a heart ailment, was accompanied by a man who gradually replaced him as the principle Iraqi negotiator, Raja Hassan Ali. Besides working for the Central Bank, Ali said he was Director General of Iraq's Ministry of Industry, and had been put in charge of financing Iraq's industrialization projects. Like so many other Iraqi purchasers in those days, he conveniently forgot to identify his Ministry by its full name.

The second loan agreement was signed on October 6. The official document specifies that the money was intended to finance "the construction of industrial projects and/or the purchase of equipments, materials and services from the U.S.A. and/or other countries." It was a long way from grain credits, which is how Drogoul got started in Iraq. Now BNL was doing business directly with the Ministry of Industry and Military Industrialization. BNL was providing the money Iraq needed to build up its weapons plants. For Drogoul's sake, the Iraqis spoke only about a project to build a hydroelectric dam across the Euphrates at Badush, not far from the Saad 16 design bureau. The head of the Badush Dam project, Abdul Muneim Rashid, came to Washington, DC, to meet with Drogoul and U.S. government officials in August 1988. Rashid was later indicted for his participation in the BNL blunder.

In a letter attached to the Second Loan agreement, Christopher Drogoul can almost be heard counting his profits "We are pleased to refer 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 the Ministry of Industry of the Republic of Iraq during 1989." In return, the Iraqis promised to give Drogoul the lion's share of the lucrative CCC business for 1989, as well as Exim bank credits, which export bankers considered to be a cash cow.

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

Drogoul signed the Third Protocol, on December 3,1988, apparently without telling anyone else at the BNL Atlanta branch. This time, Sadiq Taha was replaced by Raja Hassan Ali from MIMI and a new man from the Central Bank, Abdulwahad Toma. They travelled quietly to Washington, DC for the signature, far from the eyes of key bank personnel. Court documents in Atlanta say it was here that Raja Hassan Ali first suggested to Drogoul that they work out a more discrete formula for handling the industrial financing projects. They called 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 that Safa Haboby used front companies to order the equipment. Whenever the Iraqis had bills to pay they simply sent notice to BNL of the amount, and the money was paid into a series of clearing accounts. According to the indictment handed down by the Assistant U.S. Attorney in Atlanta, this procedure "effectively concealed not only BNL-Atlanta as the source of the funds generated, but also the identities of ultimate recipients of the funds and the purposes for which they were used."

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

 

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

When the two Germans arrived, they were taken immediately to the Ministry of Industry and Military Industrialization, just across the road from the Rashid Hotel. Once again, they were shown the blueprints of the gas ultracentrifuge, a virtual double of the MAN design. Then the two were taken by car on the road to Samarra, to visit the top secret centrifuge production unit in Taji, code-named Factory 10.

"It looked like a very modern factory," Stemmler told the Sunday Times. "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 had initially been built during the Iran-Iraq war to manufacture artillery barrels. Now, it was also making gas centrifuges for uranium enrichment. "They were producing lots of them (outer casings)," Stemmler recalled. "That is why Mr Busse was called to be there."

The problem was in one of the milling machines that spun the outer casings. "They asked me real production questions," Busse said when he discussed his trip with a reporter from the Sunday Times Insight team. "For example, on the end caps for centrifuges. I told them you can produce them by forging or by lathe or by cutting from steel sheet."

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

In a confidential briefing to the West German Bundestag, Economics Minister Helmut Haussmann admitted that Federal intelligence agencies had extensive knowledge about West German involvement in Iraqi weapons programs, but had done nothing about it. After naming dozens of West German companies, he singled out Busse and Stemmler for their efforts to assist the Iraqi nuclear weapons program. "Components and system parts of the Iraqi gas ultracentrifuge show the engineering characteristics of various types of German gas ultracentrifuge," Haussmann told a Parliament committee. "The assumption is being made that an important role in this was played by two former employees of the MAN Technologien GmbH Company in Munich... After they left the company, both of them were in Iraq for extended periods in 1988 and 1989. They also attempted, without success, to obtain other centrifuge experts for Iraq." Haussmann hastened to add that a criminal investigation of Busse and Stemmler "yielded no evidence to confirm suspicions of illegal technology transfer." Of course not. Advising the Iraqis on the most efficient German techniques for enriching uranium into weapons-grade fuel was perfectly legal and okay under German law.

 

The uranium enrichment program was advancing rapidly. With the launching of full-scale centrifuge production in Taji, and the experimental cascade up and running in Thuwaitha, it was only a matter of two or three years before Iraq would obtain enough highly-enriched uranium to make a bomb. Over the next eighteen months, Iraqi procurement agents (TDG, Technical Corps for Special Projects, Industrial Projects Company, H+H Metalform, etc) purchased large quantities of maraging steel on the open market, which was shipped to Taji to be cut into end caps and other centrifuge parts. They also attempted to buy finished end caps and ring magnets, which suggested snags in local production (maraging steel is extremely hard, brittle, and difficult to machine). Because they had taken the clandestine route to the bomb, they had to expect problems. What was extraordinary in Iraq's case was just how quickly those problems were resolved. "Iraq's progress was directly proportional to the amount of money they threw at the problem," one Defense department analyst explained. "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 only avenue to the bomb Iraqi scientists were pursuing. In June 1991, United Nations inspectors visiting Iraq stumbled upon a truck convoy loaded with equipment as it was leaving the Abu Ghraib military base outside Baghdad. They trucks were carrying large objects, draped in cloth, which the UN team suspected to have been stripped from a bombed-out plant near Taji a few weeks earlier. (That plant, which they believed had housed manufacturing equipment for gas ultracentrifuges, 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 in al-Fallujah. But when they tried to approach the trucks, Iraqi soldiers blocked their way and fired warning shots over their heads.*

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

The incident was widely publicized and let to international protests that Saddam Hussein was flaunting the United Nations, and Iraq's international obligations as a signatory of the Nuclear Non-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 the bomb. In September 1988, he ordered his procurement networks to launch an all-out effort to purchase nuclear triggering devices called krytrons. These miniaturized electronic switches were the key to detonating a nuclear explosion, but they were only available from a handful of companies in the United States and Britain. Their sale was tightly controlled..

Hussein Kamil never believed for a second he would have any difficulties obtaining his precious switches in the U.S. Indeed, on February 10, 1988 one of his network's best suppliers, Leybold AG of West Germany, had obtained an export license from the Department of Commerce in the U.S. to purchase vacuum pumps and numerical controllers worth $888,000 for the Taji ultracentrifuge project, and an initial batch of 184 capacitors similar to krytrons had been acquired legally from a San Diego company called Maxwell Laboratories. But they had not been up to nuclear specifications, and the Iraqis needed more.

Jack Kelly headed the Strategic Investigations Unit at the U.S. Customs Service in Washington. His job was to bring technobandits of all stripes to justice. In an interview in Washington, he expressed admiration for the professionalism of the Iraqi procurement network. " The Iraqis were much more sophisticated than the Iranians had ever been. They knew what they wanted, where to find it, and had a well-established purchasing structure in the U.S. and in Europe. They activated this network in 1987, when their need was the greatest. We only 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 his two sons out of school in Monza, Italy and decided to resettle in West Germany. He had recently been indicted by a Rimini judge for selling arms to Iraq. Although the charges were soon dismissed, his brush with the law convinced him that it was time to seek a milder climate.

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

In September 1988, Abbas and Daghir made contact with a Massachusetts company, EG&G, whose name had been given to them by friends in Pakistan (Pakistan had done business with EG&G in 1984). But EG&G got suspicious, and refused to quote a price on the krytrons.

The next call the Iraqis made met with more success. They located a high-tech firm in California called CSI Technologies. The president of the company, Jerold Kowalsky, said sure he'd take a look at the capacitors 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 Kassim Abbas, but to the local office of the U.S. Customs Service. He explained the request he had just received from the two Iraqis. It was clear to him that the only equipment corresponding to the Iraqi specifications was a type of krytron which could only be used for nuclear detonation. In fact, his company made them to equip the Midgetman 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, and Kowalsky agreed to let him pose as a CSI employee. They code-named the proposed sting Operation Argus. It would take nearly 18 months to come off; but when it did, it would explode with a bang.

 

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

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

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

In early March 1989, a Belgian Air Force C-130 cargo plane took off from a military airport and headed for Amman, Jordan, carrying the first 12 tons of small grain powder ordered by Bull's agents from PRB. Later that month, the first horizontal firing trials of the prototype super-gun were held near the Saad 16 missile research center outside Mosul. The gun was placed on a specially-built rail to test 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 needed was a sure source of advanced composites and carbon fiber materials of the kind the Egyptian Abdelkader Helmy had tried to purchase in the U.S. Bull spotted an ideal company up in Belfast, Northern Ireland, that made exactly the materials they wanted. LearFan had been up on the auction block since 1985, when it failed in a venture to make business aircraft out of composite materials. When Bull discovered them, their premises had been rented out for storage, but all the manufacturing equipment was intact.

Haboby and his legal advisor, Fadel Khaddum, proposed the next steps. Rather than buying the company directly, they set up a front called the Canira Technical Corporation Ltd and registered it in Northern Ireland. Canira was owned on a 50-50 basis by SRC and TDG, and stood for CANada-IRAq. Just to make sure their ownership could not be traced, Canira turned around and set up another front company called SRC Composites Limited, which in turn bought the LearFan factory in Belfast. Soon afterwards, the new management at LearFan applied to the North Ireland Industrial Development Board for a $3.6 million development grant, to put the company back on its feet. After all, 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 a satellite launcher, it had become a full-fledged weapons system.

After the horizontal trials in March 1989, Saddam Hussein ordered Bull's technicians to dismantle the gun so it could be hauled down to a specially-prepared site for permanent installation. The new site had been dug out of the Jebel Makhoul, a ridge of mountains just to the east of the Baiji oil refinery, and was so well protected that only the tip of the 56 meter-long barrel stuck out. Documents relating to the next series of firing trials show that the super-gun was inclined at a 45 degree angle. It was a hopeless position for launching satellites, but it was ideal for a ballistic trajectory. With Bull's new rocket-assisted projectiles, Baby Babylon was capable of 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, it could hit Israel--at least, that's what Gerald Bull told the Iraqis. Each shell would carry approximately 500 kg of high explosives to a range of 1,000 kilometers. It was as good as the Condor II, and it certainly put less of a dent in the Iraqi budget.

 

Saddam's appetite for arms grew even more intense with the end of the Iran-Iraq war. Not only had he sustained his military forces throughout eight years of combat, he had nearly doubled their size and their equipment. If the bulk of the weaponry came from the Soviet Union and China, which supplied thousands of tanks and artillery pieces, 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 in Iraq. Each "success" in transforming or adapting an existing weapon system created additional demands, and new ambitions. In the end, Saddam wanted to have it all. He wanted to at least equal the exploit of South Africa, which in braving the UN arms embargo imposed in 1977 had succeeded in creating its own armaments industry "from the earth to the sky." While Iraq did not possess the same wealth of minerals as did South Africa, it had enough oil to buy them on the open market. Like the South Africans, Saddam wanted total control over the entire weapons manufacturing process, from pouring the steel and bending it into shape, to the final line of computer code that guided a missile to its target.

The Taji weapons complex provided one of the keys to Saddam's ambition. Already, Thyssen Rheinstahl of West Germany had built a steel plant at Taji, which was churning out the basic materials needed for a wide variety of weapons. Since 1986, Ferrostaal and dozens of West German subcontractors were building a "universal forge" at Taji, with the full knowledge and approval of the Bonn government. According to documents quoted Hans Leyendecker and Richard Rickelmann of Der Spiegel and interviews with German customs officials, the plan was to build 1,000 artillery pieces per year at Taji, in calibers ranging from 105 mm to 203 mm.

And in a separate production unit built by Kloeckner Industries of West Germany, Iraqi tanks were being rebuilt. In addition to retrofitting older T-54 and T-62, Iraqi officials say they began to assembly the newer T-72 in Taji in early 1989, in a license agreement signed with Bumar-Labedy of Poland. They called the new tank the "Asad Babil," or Lion of Babylon. But Iraqi armaments engineers, such as Lt. General Amer Rashid, were not content with just assembling the tanks from knock-down kits. They argued that once you factored in the cost of building the plant, kit assembly did not lead to any appreciable savings in the overall unit cost of the tank. He and his colleagues at MIMI wanted Taji to become a huge military and civilian steel manufacturing center for all sorts of applications, including tank bodies and tank armor. To finance it all, they turned to the BNL branch in Atlanta.

BNL shelled out hundreds of millions of dollars to manufacturers in Italy, West Germany, Great Britain, and the U.S., to turn Taji into one of the most modern, complete weapons facilities in the world. 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 a contract worth $89.7 million, to build a steel rolling mill at Taji for special steels. Contractual documents list Iraqi interests with precision. They wanted "Engineering steel, spring steel, bearing steel, free cutting steel, high tensile steel, steel for welding electrodes, tool steel, and stainless steel," in thicknesses ranging from 5.5 millimeters to 7 centimeters. "That's the size of most armor plate," noted former Deputy Undersecretary of Defense Steve Bryen.

Cecelia Danieli, who doubles as Managing Director and Chief Executive Officer, said in interviews that her company was not building a weapons plant. "This was a rolling mill intended for purely civilian products," she insisted. "It was for the construction industry." In a subsequent interview once Operation Desert Storm was underway, she insisted that her company "did nothing wrong, since we never delivered a thing. The contract was suspended because of the UN embargo before we could ever get past the foundation work."

Unlike Ferrostaal, where 750 cases of documents were seized by German prosecutors that included complete blueprints of the artillery pieces to be manufactured at Taji, the Italian government has discovered no smoking gun at Danieli. And U.S. intelligence experts readily acknowledged that Taji was so big it included sizeable civilian and military production areas, separated by a road. But the Danieli steel was no ordinary product; it consisted of six different, highly-sophisticated alloys with clear military applications. And it was only the prelude to a far bigger contract, worth $377.2 million, to build a second turn-key steel mill at the Khor al Zubair industrial complex near Basra. This deal, code-named the Ashtar Project, was signed on March 4, 1989 and called for production of two million tons per year of hot rolled strip steel, to be made from scrap iron and sponge iron. It was one way of recycling the older tanks: put them into the smelter, and forge new ones.

 

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

 

The BNL's Christopher Drogoul was having second thoughts. On the one hand he was eager for the huge, and unexpected Iraqi business. The Atlanta branch of BNL was turning a good profit. His superiors were happy. Furthermore, Drogoul was getting only the most positive feedback from U.S. officials in Washington and in Baghdad, where he now travelled with increasing frequency. BNL had become an instrument of U.S. foreign policy; the idea, as Richard Murphy and others at the State Department explained, was to "bring Iraq back into the community of nations" by trade and by aid. On the other hand, Drogoul didn't like the idea that BNL Atlanta had become the only bank in the world to issue new credits for Iraq. Like most businessmen, bankers dread working alone. And Drogoul was beginning to fear he had ventured 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 lengthy telex sent to Sadiq Taha only days after signing the Third medium term loan Protocol in December 1988, Drogoul laid his doubts out on the table.

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

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

At that time, we extended CCC guaranteed facilities and related unguaranteed facilities in order to ensure the success of your foodstuffs import program. This support was extended even though we put aside a generally accepted banking practice of maintaining a diversified portfolio so as not to be too dependent on a particular source of loan income. I will add that we were only too happy to provide support [...].

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

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

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

But Drogoul dropped his attempt to limit the Iraqi loans almost as soon as he began. Instead, on January 11, 1989 he faxed Raja Hassan Ali at the Ministry of Industry and Military Industrialization to "keep our name out of the picture until we have agreed to handle transaction" through Option A or Option B. "If Option B is selected, it is not necessary for supplier even to know our name." For Drogoul and 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 on a plant in Ameriya, to separate copper from brass. The idea was to recycle the millions of spent artillery shell casings the Iraqis had fired off during the war, to make copper wire and new artillery shells.Ameriya was conveniently located nearby the Fallujah missile works. Centrifugal Casting Machine also came to collect on its contract to install machines to manufacture "water and sewage pipe" at the Badr General Establishment in the Baghdad suburb of al-Yusufiyah. The Badr plant also made bombs and artillery shells. Dozens of other letters of credit were issued by BNL in the first two months of 1989 alone. On February 10, Yavuz Tezeller, of the Turkish grain trader Entrade, submitted documents prepared by the Compagnie Europeene du Sud in Luxembourg relating to a $4.5 million shipment of rolled steel to Iraq. On February 15, Raja Hassan Ali informed Drogoul of a new $96 million project he wanted to split up into several smaller letters of credit. Two days later, Ali came back and asked for a $30.7 million facility, to fund purchases from the Bulgarian state arms trading organization, CE Kintex.

Almost all of these deals involved deliveries to Iraqi weapons plants. Many required Department of Commerce export licenses. And yet, neither Drogoul, Von Wedel, or their colleagues seemed to have batted an eye.

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

Meanwhile, the U.S. Customs blocked a February 1989 shipment bound to Iraq of sophisticated vacuum pumps, from a Rochester, New York manufacturer. The pumps were designed for use in a gas ultracentrifuge 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 Congressional subcommittee by declaring that Iraq was "actively pursuing" a nuclear weapons program. According to nuclear proliferation expert, Leonard Spector, this was the first time a high-ranking intelligence official in the U.S. had gone on the record to warn about the Iraq's nuclear activities since the destruction of the Osirak reactor by Israel in June 1981.

 

An Iraqi delegation headed by one of Hussein Kamil's top Deputies arrived in Rome on March 2, 1989, for an extended negotiating session with the Italian government. Now that the war with Iran was over, the Iraqis said they wanted their frigates. They were referring to the four Lupo class frigates and six Assad class corvettes ordered in 1981 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. But officials from the Cantieri Navali Riuniti shipyards of Genoa, and from the munitions firm Oto Melara, were adamant. Before they released the frigates they wanted their money, they said. They claimed that Iraq had only paid $441 million out of the total contract value of $2.646 billion.

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

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

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

The Italians were aghast. The munitions in question--large quantities of sophisticated Otomat surface-to-surface missiles (an Italian equivalent of the Exocet) and a wide assortment of naval ordnance--had been manufactured in anticipation of a 1986 delivery. The three-year arms embargo meant they had been stored in warehouses and would need a thorough revision to make sure their sophisticated electronics systems were still functioning.

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

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

As the Italians began to dig, they discovered that the Swiss bank accounts the Iraqis claimed to have used were controlled by an investment company called Kapital Beratung AG. Discreet requests for information were put out to the Swiss authorities, intelligence sources say, to discover what had become of the company and its accounts at the SBS. After checking the commercial registry, the Swiss reported that Kapital Beratung was liquidated on September 14, 1982 and declared bankruptcy on February 4, 1983. The registry also showed that Kapital Beratung belonged to a Zurich holding company called Trans-KB, whose Vice-President, Hans W. Kopp, was the husband of the Swiss Justice Minister. After that, the trail went cold. Kopp's alleged involvement in a billion dollar drug money laundering operation run by the Lebanese Sarcachi brothers had forced the resignation 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 to a fourth Iraqi loan request from Raja Hassan Ali at the Ministry of Industry during a visit to TDG in London. This open ended loan, worth an incredible $1.155 billion, was enough to cover 25% of all their industrial purchases for 1989. Drogoul made no attempt to control how the Iraqis spent the money. They could purchase machinery, whole companies, or even arms, and BNL would front for the bills. During Saddam's reign, Iraq went from self-sufficiency as a food producer to near total dependence on imports, while building up a huge arms industry to become self-sufficient in defense. From Iraq's ploughshares, Saddam proposed to forge swords. And BNL was there to pay for the conversion.

Drogoul may not have understood why the Iraqis wanted so much money, but Huygues de l'Estoile certainly did. He was in charge of International Sales at Dassault Aviation in France. No sooner had Amer Rashid won his $400 million door prize in Rome than he headed for Paris, where he was joined by Amer al-Saadi, to hammer out an entirely 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, just across the street from the U.S. Embassy in Paris and the Place de la Concorde. They were accompanied by a host of technical experts and by Hussein Kamil's bagman, Fadel Khaddum. The delegation made the rounds of all that was powerful and influential in France: the Finance Ministry, 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 what they had done for them during the war, and understood how difficult it had been. "They were saying: 'Believe in us again.'"

The Iraqis attended their last, but most important meeting on March 21, 1989, out at Dassault's luxurious Mirage 2000 chalet in the posh suburb of Vaucresson. Minutes of the meeting, and subsequent interviews with most of the participants, show in detail just what the Iraqis meant.

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

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

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

Phase III: delivery, with some local assembly in the final stages at Saad 25, of 54 Mirage 2000-S "strike" aircraft. This newest version of the Mirage 2000 was equipped as a low-level penetration bomber, with a sophisticated terrain-following radar that would allow these planes to sneak in under enemy air defenses.

Financing remained the one sticking point. Participants in the negotiations say that Fadel Khaddum tried to convince Dassault to use the 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 government provided export financing and insurance. The contract was to be executed 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, indigenous aerospace industry. On the other, they wanted to ensure that no one--not even the French--could interfere in their military programs in the future. If they needed to overhaul their planes, or build new ones, 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. Baghdad itself becomes a festival of colored lights. But April 28, 1989 was a birthday unlike all the others. This year, Saddam had decided to prepare an additional surprise for his subjects, his arms suppliers, his bankers and technology brokers. He called it the First Baghdad International Exhibition for Military Production. Its symbol was an Iraqi flag shaped into the form of a dove. Its slogan was "Defence equipment for peace and prosperity." It was not Saddam's idea of a joke.

The theme song for the arms fair was "The Gang's All Here." One hundred forty-eight companies from twenty-eight countries paid hefty prices to open stands and exhibit their equipment. In addition to the arms salesmen, many machine-tool companies were present--an unusual occurrence at arms fairs. The Bulgarians, Poles, Hungarians, and Romanians were out in force, showing 1960s machine-tools driven by Japanese Fanuc controllers. The Germans and the Austrians were there, proposing equipment and turn-key military factories, just as they had done in Egypt two years before. The Chinese also came, setting up their own pavilion, where they showed an artillery counter-battery spotter which used a Hewlett Packard computers.

The Franco-Lebanese middleman, Hussein Zeineddine, greeted visitors to the French pavilion as if he held the keys to all that was inside. Zeineddine was barely 30, but his International Trading Group had mailbox offices on the Champs-Elysée in Paris, in Geneva, and in Liechtenstein, and had already managed to earn the ire of many legitimate ·rms exporters. A former employee of the French government export agency, SOFMA, Zeineddine was apparently fired for questionable business practises. But the Iraqis loved him, and set him up in the entry hall to the French pavilion. So did Christopher Drogoul, of BNL. Zeineddine's ITG was awarded four separate BNL loans in 1989, worth $3,744,988. Zeineddine boasted of his access "to a large network of manufacturers in the high-tech markets," for products as varied as tantalum capacitors, microwave antennas, spectrum analyzers, and discrete semi-conductors. His speciality 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 to look. Bull was the proud father of two dramatic new Iraqi weapons systems on display: the gigantic Majnoon and al-Fao self-propelled howitzers, which married a French gun, a Spanish truck, and a Swedish cab. He and Cowley had set up shop at the stand of Astra Holdings, a British financial group which had recently bought out PRB in Belgium on promises of a $1 billion contract with Iraq. Soon, both groups would go bankrupt.

But stealing the show was Matrix Churchill, which had been rebaptized "Nasser" for the occasion by its Iraqi owners. In fact, the Iraqis just took Matrix Churchill brochures and pasted on a sticker bearing the Nasser name and an address in Taji. They didn't even bother to change the company logo. If you peeled the sticker away, underneath you could still read the Churchill name. Iraqi officials openly acknowledged that they had bought out the company in an effort to duck Western export controls. "We are now making three axis machine tools here in Iraq," they said at the arms fair. "Soon we will be making five axis machines, with computerized numerical control." With few exceptions, these machines were going into the weapons factories.

Normally, sophisticated machine-tools like these were barred from export to most Third World countries and to the Soviet bloc, because of their importance for weapons manufacturing, but by purchasing Matrix Churchill the Iraqis simply skirted the embargo. It was brilliant.

The only major Iraqi supplier not officially present at the Baghdad Arms Fair was the United States, which had withdrawn its participation a few days before the show began, apparently anxious not to arouse speculation that the U.S. government was prepared to authorize arms sales to Iraq. Instead of a U.S. pavillion, with U.S. weaponry on show, American companies arranged for private delegations to attend the show. Some, such as General Motors, even got to meet with Hussein Kamil. The U.S. military attaché in Baghdad received orders from Washington not to wear his uniform when he toured the show. He and other U.S. embassy officials, dressed in ordinary business suits, took photographs of every Iraqi weapon they could see.

The arms show opened on a note of tragedy, when an Egyptian pilot flying an Alphajet trainer that had been assembled in Helwan, Egypt, overshot the runway at Baghdad's al-Muthena airport, and mistakenly turned toward the Presidential Palace. The war with Iran might be over, but Saddam's Republican Guard was ever alert. Before the Egyptian could manoeuvre out of forbidden airspace, his Alphajet was torn to shreds by Soviet-built anti-aircraft guns positioned on the palace roof, and crashed into a residential area of Baghdad, killing twenty. The pilot and his navigator were seriously injured when they ejected.

The Arms Fair was intended to show the world what the Iraqis could do, and to convince foreign partners that Iraq was still the best game in town. "All over the world you can hear people bragging about how much they will do," Lt. General Amer Rashid pointed out, "and at the end of the day they have nothing. We have chosen to keep silent all these years, even as others mocked us. Today we have something to show that no one can deny." Although it was not strictly speaking the first time Iraq had ever shown locally-made weapons systems, it was the 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 what many 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 built Mirage F1 fighter-bomber. General Maurice Schmidt was the French Chief of Staff. He had come to Baghdad as the personal representative of French Defense Minister, Jean-Pierre Chevènement, an ardent admirer of Saddam Hussein. Schmidt too admired the independence and hard work the Iraqis displayed. But when he saw what the Iraqis had done with the Mirage he could hardly contain himself.

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

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

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

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

De l'Estoile then took the General in his white képi and summer dress uniform over to another plane sitting on the tarmac of al-Muthena airport. It was a Soviet-built MiG 23. "See that refueling probe?" 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 to explain that the Iraqis had adapted the French refueling probe to the Soviet fighter without ever asking Dassault. In a subsequent interview following Iraq's invasion of Kuwait, General Schmidt said it was here, at the Baghdad arms fair, that he first "began to wonder whether we hadn't gone a bit too far" in Iraq. "I realized we had better begin paying closer attention to what the Iraqis were developing 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 by his two Deputies, Amer al-Saadi, and Amer Rashid. Together, the three of them greeted their guests at the entrance of a pavilion designed to resemble a large desert tent. Serge Dassault and Huygues de l'Estoile were met with Arabic-style kisses. So were the bankers from BNL, Christopher Drogoul, and Paul Von Wedel, who showed up for the event. Like a kid, Paul Von Wedel watched the planes cavorting in the sky 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. Their Iraqi guide, Fadel Khaddum, had intended to reassure them by the trip. But in the end, he sewed more doubts than he resolved. Von Wedel says he learned with surprise that Hussein Kamil had issued a decree that all future contracts for Iraq had to go through TDG, which was authorized to charge suppliers a 10 to 15% consulting fee for its services. "A consulting fee is a sophisticated term for kick back," Von Wedel commented. The Iraqi minister was on the take.

Later, it became apparent that Hussein Kamil was taking direct kickbacks from the Iraqi government as well. Just before the arms fair he purchased $120 million worth of state-owned manufacturing establishments, as part of a widely-publicized drive to privatize Iraqi industry after the war. But when Kamil couldn't pay, the Revolutionary Command Council (run by his father-in-law) passed a decree waiving payment for the factories, "in appreciation of Hussein Kamil's services to military industrialization." Saddam liked to keep the family jewels close to home.

To anyone interested in putting it all together (and few really cared at the time), the Iraqis displayed weapons that had been manufactured at no fewer than nineteen identifiable manufacturing plants--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. Al Nassira made RPG-7 anti-tank rockets. Al Jaleel made mortars of all calibers, from the 60 mm commander variety, to the 160 mm giant that had to be towed behind a truck. The Saddam factory made 122 mm howitzers under a Yugoslav license. Sawary was making a wide variety of commando patrol boats, based on fiberglass Crisscraft boats imported legally from the U.S. The Salah al Din electronics plant, built by Thomson-CSF of France, was making proximity fuzes and other control mechanisms for the al-Hossein and al-Abbas ballistic missiles, and assembling sophisticated ground-surveillance radars (Thomson-CSF models 2215 and 2230), for integration in a meshed air defense network intended to cover all of Iraq. Of course, many of these and other arms factories were financed with loans provided by Chris Drogoul and Paul Von Wedel of BNL.

European arms salesmen present at the Baghdad fair acknowledged that they had heard of as many as "eighty separate Saad projects, run by the State Organization for Technical Industries," SOTI. At one point, "Saad" was a generic name given to any weapons factory. Later, they were renamed after famous battles and heros. The plants became known 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 finger over the rough welding joints of an Iraqi bomb. "They don't lose any sleep over quality control, do they. And you know something? In the end, they're right. We spend a fortune trying to smooth out those rough edges. We make three-star bombs, polished as a mirror, and as expensive as jewels. But in the end, they're all the same. They only get used once and the guy who's on the receiving end of one of these is never going to complain because of a few manufacturing defects."

Iraqi engineers were proud of their creation. In the pavilion where they displayed the al-Hossein and al-Abbas missiles, one Iraqi ballistics expert claimed he had waited five days just to meet an American journalist who had written extensively about the Iraqi defense establishment in the past. He addressed the American by his last name, then his first name, then his middle name. Then he proceeded to tell him exactly how Iraqi engineers from the Military Production Authority had solved the problem of increasing the range of the SCUD-B missile so it would hit Tehran. "We tinkered with the fuel," he winked. "Think cryogenic."

In his opening speech at the fair, Hussein Kamil announced that Iraq was now manufacturing "three different types" of fuel-air explosives. He didn't mention how Iraq had come to master this sophisticated technology, nor the extensive Iraqi contacts with Honeywell and MBB.

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

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

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

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

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

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

"Iraq's main goal today is to create an industrial base," De l'Estoile explained. "Military production is important, but it is not all. In 10-15 years, 50% of Iraqi exports will be probably be products other than oil. I believe the days of outright arms purchases by Iraq are over. And we at Dassault are ready to play the game. As far as I'm concerned, it is an ineluctable step. There's simply no getting around it."

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

"We are discussing the first stage of a long program," De l'Estoile acknowledged, referring to the gigantic Fao Project. "You begin 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 the Iraqis the complex art of aircraft manufacturing, until they were capable of going it alone. "Iraq has a driving ambition to become an industrial power," he concluded, "and it has the means to accomplish this goal. No banker can seriously say that Iraq does not have a future."

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

To reinforce their case, Spain's state-owned Construcciones Aeronauticas S.A. had their entry, the CASA C101, flown into Baghdad from Jordan, where it was in service with the Royal Jordanian Air Force. Saddam Hussein had close personal ties to Jordan's King Hussein, and would shift one squadron of his Mirage F1 to a Jordanian Air Force base later that summer, to fly surveillance flights along the border with Israel. The Spaniards were counting on their Jordanian card to help them sell their plane. Within three day of arriving in Baghdad, they managed to get Iraqi pilots flying their aircraft for the first time, and convinced Hussein Kamil to send a MIMI delegation to corporate headquarters in Madrid for further talks.

"What we have to offer is ten years of experience in technology transfer and local production," a top company officer said. "Co-production is a priority market for us." Competition for the Fao project was hot and heavy. Everyone wanted to help Iraq build its military aircraft industry, and they were offering substantial government credits to back their proposals. But the strongest competitor to the Alphajet was without a doubt the British Aerospace Hawk. Far superior to the Spanish or Italian planes, it could also be configured as a single-seat ground support fighter. And the British were dead serious about breaking into the Iraqi military market. Alan Clark, 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 sophisticated player, and was better known to the men at British Aerospace for having been a former director of the company. "I don't know what hat he's wearing today," said one of the BAe team in Baghdad. "But I can tell you this: he is pretty bloody senior."

 

The subject of British-Iraqi relations was a sensitive one, but David Hastie was better prepared than most to take advantage of the slippery terrain. He had a keen understanding of the Iraqi military. Better yet, he had an in-depth knowledge of recent events, for having played a major role in shaping them. He understood one thing about Iraq that many others overlooked: you could not prepare the future without knowing the past.

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

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

There were other contacts as well. Once Iran was subjected to an international arms embargo, the Iranian government set up a buying office on London's Victoria Street, just a stone's throw away from Scotland Yard. Most of Iran's attempts to procure tanks, aircraft, missiles, and electronics on the black market went through Ãondon until the end of the war, despite increasingly strained relations between Britain and Iran. It now appears that Britain's MI5 was monitoring its activities around the clock, and passed on some of the intelligence gleaned on Iranian arms purchases in Europe to Saddam's half-brother and intelligence chief, Barzan Ibrahim al-Tikriti.

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

The British were anxious to get their piece of the Iraqi pie. If they couldn't get the big one, the billion dollar Hawk deal, they would chip away at their competitors on the terrain where the British were at their best: intelligence. French arms salesmen in Baghdad perceived the British advances as the war went on, but were powerless to do anything about them. In 1985, the French lost two major contracts to British electronics companies. Marconi signed a huge contract to supply "troposcatter" microwave transmitters, that should have gone to Thomson-CSF in France. This sophisticated military communications equipment allowed Iraqi forces to dispatch orders from Baghdad to the southern front without relying on the phone lines (and confounded Allied intelligence during Operation Desert Storm). Racal stole a second deal from Thomson, this time to build a factory for its Jaguar frequency-hopping radios, the most advanced military radio then on the market anywhere in the world. But that was nothing compared to the business now in the offing. David Hastie had been dispatched to Iraq to snatch the Fao contract out of the hands of the French.

David Hastie and Huygues de l'Estoile knew each other well and respected each other. But it was the type of respect you reserved for an old and brilliant enemy. "Did you notice the reception the Iraqis gave Serge Dassault?" Hastie commented one afternoon during a conversation in the British Aerospace trailer on the tarmac of Al-Muthena airport. "They all stood up when he approached the reviewing stand and gave him an ovation. He was treated like a visiting hero." Hastie could afford to be generous. After a fight lasting 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," he sniped. De l'Estoile had suffered the biggest defeat of his career when David Hastie convinced the Royal Saudi Air Force to select the Tornado over a twin-engine version of the Mirage 2000 in 1987. "They didn't dare, because then everybody would have seen that all the Saudi pilots were British."

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

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

Hussein Kamil was particularly impressed to learn that British Aerospace had been selected by the U.S. Navy to conduct its pilot training program for the Hawk. "This is what the Iraqis want," Hastie said. "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 French arms suppliers approximately $2 billion in arrears. They owed civilian contractors another $4 billion, most of it from contracts at least five years old. It was a miracle the sum was not higher.

Serge Dassault and Jacques Deville of Aerospatiale threw a gala reception for their Iraqi clients in the palm-shaded gardens of the Hotel Rashid. All evening long, Serge Dassault stood in a corner by the steps leading down into the garden, just in case the Minister, Hussein Kamil, showed up. Dassault was so eager to make his first real export sale after taking over the company upon his father's death 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, he tried to reassure Dassault of his support. "You know I have always done everything I could," Courage whispered, "to help further French arms sales to Iraq." Sometimes, the Iraqis made odd requests to Ambassador Courage. Once, they asked him to blacklist a French newspaper reporter who had written "unfavorable" stories about Iraq during the war with Iran. Courage dutifully cabled the message back to Foreign Minister Roland Dumas, but was non-plussed when the Iraqis invited the same reporter back to Baghdad a year later. Unwilling to take a chance at offending his patrons, Courage gave orders to the embassy staff not to meet the reporter during his stay.

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

Another long-time Baghdad hand ridiculed the stance of the French Finance Ministry, which he believed was going to sabotage the Mirage 2000 and Alphajet deal. "Iraq's military debt to France today only amounts to 6% of our total military sales to Iraq since the Gulf war began. We could afford to simply wipe the slate clean, if that were the price of getting these new contracts."

At the height of the party, where white-jacketed waiters carried silver platters of shishkebabs, fruit juice, and Iraqi sweets, Dassault's co-host, Jacques Deville, was called out to an urgent meeting at the Ministry. Hussein Kamil greeted him in his private office suite with good news. Iraq finally agreed to make the down payments on the Tulip and Jacinthe helicopter contracts, so production could begin. In return, Kamil wanted Aerospatiale to submit plans to build a helicopter assembly line in Iraq, to build Aerospatiale's latest anti-tank machine, the Panther. Aircraft was not enough. To have a complete aerospace industry, Kamil argued, you needed to build helicopters as well.

 

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

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

Khairallah commanded the respect of the professional officers because he was not just another of Saddam's "yes-men," a mere vehicle of Presidential humor. He intervened on their behalf with Saddam. In 1985, for instance, it was Khairallah who had succeeded in convincing Saddam to relinquish control over the choice of bombing targets, allowing Air Force Commander General Saad Shaaban to plan his missions according to strictly military criteria. Before this major shift in how the war was run, Saddam had insisted on being consulted before every bombing campaign, and tended to choose highly visible "political" targets, while ignoring major targets of military significance. The decision to grant more independence to military planners gave a dramatic boost to their effectiveness.

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

One of the first commanders to distinguish himself in this way was Lt. General Maher Abdul Rashid. In July 1984, General Rashid was interviewed by Washington Post correspondent Rod Norland not long after Iraq's first acknowledged use of poison gas. It is not known whether Rashid's comments angered Saddam at the time, but they were reproduced 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 Iraqi victories in April 1988, Khairallah's popularity with the professional officers' corps had soared to unprecedented heights. Much of the credit for the final "victory" was directed Khairallah's way. Saddam had almost taken a back seat to his cousin, who was becoming a public figure in his own right. Once again the specter of a challenge to Saddam's rule from the Army had become real.

The first hint that resentment against Saddam was brewing just under the surface occurred in June 1988, when Lt. General Maher Rashid took public issue with Saddam over a question of medals. Rashid had led the successful battle to retake Fao after a two year Iranian occupation. But when the time came to distribute medals Saddam 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 the 7th Army were not rewarded as well, he threatened to resign and let people know why. Saddam's response was not long to come. In June 1988, General Rashid was arrested, and he has not been heard of since. Some sources believe Saddam arranged an "accident" for him a few months later, although this has never been confirmed. Meanwhile, Saddam divorced his second son, Kusay, from Rashid's daughter. Rashid had become an outcast, a pariah.

The arrest of General Rashid came as a shock to Adnan Khairallah and to many other top Army officers. While it is not known whether Khairallah was actually plotting a coup, or with other Tikritis joined in his disenchantment over the President's megalomania, Saddam now 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 top Iraqi officers were executed.

In the end, it was a family feud that that got the better of Khairallah. Through the intercession of his food-taster and personal valet, Kamal Hana Gegeo, Saddam had begun to taste the joys of extra-marital sex. He became so enamored of one mistress, the daughter of a prominent Baghdad merchant, that Saddam proposed taking her as a second wife. The love affair soon blossomed into a family scandal. Saddam's eldest son, Uday, feared he would lose his position as heir-apparent if his father repudiated his mother to remarry. In a drunken fury one evening in October 1988, he burst into a high-society reception in Baghdad, stormed past Suzy Mubarak, the visiting wife of the Egyptian President, insulted Saddam's Vice President, Taha Moheddin Marouf, then sought out Kamal Gegeo and beat him to death with a club.

Later that evening, Saddam called his son into his private office on the second floor of the Presidential palace. "With which hand did you strike Kamal Gegeo?" he asked. Uday held up a hand, and his father shot a hole through it with his revolver. Meanwhile, Uday's mother, Sajida, heard the shouting, and called on her brother for help. When Khairallah came running into Saddam's study a few minutes latter, it was all he could do to keep the Iraqi President from pistol-whipping his own son to death. Uday was admitted to hospital later that night. His wounds were explained away to the Iraqi press as a suicide attempt. Something broke between Saddam and his cousin, Adnan Khairallah, that night. Their relationship would never recover.

Tipped off by a phone call from Khairallah, King Hussein of Jordan flew in shortly before dawn at the controls of his private jet, to console Saddam over the behavior of his son. The Jordanian monarch was probably the only confidant Saddam had. "This kind of thing happens with boys," he said. "You mustn't get carried away by your emotions." It was all he could do to keep Saddam from hopping on board his aircraft and flying to Cairo, to apologize publicly to Hosni Mubarak. If he couldn't kill his son,Saddam intended to disown him and his lineage (which included his wife, and Khairallah) for good.

Rumors that Khairallah was in danger spread like wildfire across the Gulf in the coming months. Khairallah himself told the Kuwaiti Defense Minister, Nawaf al-Ahmad al-Sabah, that he felt his life was in danger and that dire things were about to happen in Iraq. By spring 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 a helicopter in Kurdistan the day before. It had been a "crazy storm," Saddam said. And yet, of the three helicopters flying in formation over the mountains, only Khairallah's had gone down. Later, French apologists for Saddam would come to his defense. "There really was a sandstorm," one said. "I was there, and you could hardly see a thing."

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

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