Spider’s Web: Bush, Saddam, Thatcher and the Decade of Deceit 
by Alan Friedman.
Faber, 455 pp., £17.50, November 1993, 0 571 17002 1
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The Unlikely Spy 
by Paul Henderson.
Bloomsbury, 294 pp., £16.99, September 1993, 0 7475 1597 2
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It was the patrician Alan Clark who most accurately summed up the approach of the British and American Governments to the 1980-88 Iran-Iraq war. Nothing, he reckoned, was better for business than a lot of foreigners killing one another. This has been true of all foreign wars throughout the ages, but for businessmen of the Clark mentality a hot war in the Eighties which demanded endless supplies of expensive weaponry and technology was almost too good to be true.

Neither Iran nor Iraq was officially allied to Britain, the US, Nato, or even Russia. There was no need to join in the war on either side. Not a single Westerner need lose their lives. On the other hand, the huge market created by the war was different in quantity and quality from anything that could be expected from the region in peacetime. Neither warring country had developed the military technology the war demanded. Both Governments were prepared to dig to the very pit of their people’s stomachs to buy killing machines at whatever prices the sellers demanded. There was only one obstacle. ‘Merchants of death’ are not popular; nor of course is war itself. From the start of the Iran-Iraq war, the United Nations strongly opposed it, calling on member states to impose and enforce an arms embargo. The United States Government and Congress proclaimed such an embargo for the entire period of the war. So, rather later and rather less emphatically, did the British Government.

These embargoes were a nuisance to the merchants of death, but no more than that. As luck would have it, the Iran-Iraq war coincided with the election of President Ronald Reagan and his wild bunch, in particular his special friend and constant adviser, the former advertising mogul he made director of the CIA, William Casey. Casey and the gang of right-wing fanatics he quickly promoted to the White House were obsessed with the clandestine. They didn’t think much of elected politicians, and preferred to carry out their policies behind the backs of Congress and the Senate. For them, the Iran-Iraq war held out glorious opportunities for covert profiteering. The world now knows about Irangate: the operation that enabled President Reagan, Vice-President Bush and all their men to help themselves to the proceeds of illegal arms sales to Iran, and spend most of their ill-gotten gains on financing terrorists fighting against the elected government in Nicaragua. Now, at last, people are beginning to find out about an even bigger scandal, Iraqgate: the operation which, with nods and winks from the same men, set up a vast clandestine machinery illegally to arm the dictatorship of Saddam Hussein.

Very early on in the war, Casey and Co decided to back Iraq. Perhaps they were influenced by the huge wealth of friendly dictatorships in Kuwait and Saudi Arabia, both of whom were hot supporters of Saddam. Perhaps they were still upset by the anti-US slogans of the 1979 Iranian revolution. Whatever the reason, Saddam was their man. Awkward political obstacles were quickly smoothed away. For instance, Iraq was high on the list of states boycotted by the US as ‘supporting terrorism’. Saddam obstinately continued to support terrorism of every kind, especially state terrorism against anyone in Iraq who opposed him. But in February 1982, Iraq was suddenly dropped from the proscribed list. In December 1983, Reagan’s special envoy visited Baghdad and covered Saddam with flowers. In November 1984, Reagan formally restored US diplomatic relations with Iraq.

So much could be done openly. Equipping Saddam’s army so that it became the fourth largest on earth had to be done secretly. Casey drew around him a network of people who worked outside – and against – official Government policy. Chief among them was James Guerin, a Bible-thumping chorister-entrepreneur from Connecticut, who made a fortune by flouting his Government’s policy on arm sales – especially to South Africa and Iraq. When he was short of money in 1987, Guerin came to Britain and tricked one of Britain’s oldest and most blue-blooded arms firms, Ferranti, into lobbing out five hundred million quid for his company, which wasn’t worth a tenth that much. Workers at Ferranti are still paying with their jobs for this monumental British business imbecility. Guerin is in prison for fraud. So, too, is Sarkis Soghanalian, an Iraqi-born fixer who worked assiduously with the CIA on Saddam’s behalf until, as usual, the CIA forgot he ever existed and left him to face the music. Both men worked closely with Carlos Cardoen, the Chilean Cluster Bomb King who has only two heroes, Pinochet and Saddam Hussein.

Cardoen’s factories in Iquique kept the Iran-Iraq war going nicely, killing and maiming hundreds of thousands of young men with his specially cheap cluster bombs. These could only have been manufactured with American technology which was made available to Cardoen courtesy of the CIA, in gross breach of the spirit and letter of US law. One of Cardoen’s admirers was the US Ambassador in Santiago from 1982 to 1985, James Theberge, who told his government that Cardoen was ‘a responsible recipient of US products’. When Theberge returned to Washington he worked for a Cardoen subsidiary, and was promptly recruited by Casey as a member of the CIA’s Senior Review Panel. Thus, as Alan Friedman wryly comments, he was a ‘paid employee of both the CIA and Carlos Cardoen. It was a comfortable closing of the circle.’

The Casey gang found a very effective, though not specially ingenious, way of avoiding the law and arming Iraq from the US. Arms could be sent through friendly non-combatant countries like Saudi Arabia, or, more often Jordan. Friedman shows how an entire arsenal of arms was sent to Saddam via Jordan through a secret network employing a Jordanian-born businessman, Fred Haobsh, and a CIA front corporation, Johnson Consultants. Another favourite conduit was Singapore, which received nine million anti-personnel mines, rather more than the three million people in peaceful Singapore could have needed.

Iraq demanded credits and money to buy all these goods, and the Casey gang had a plan for that too. They revived an obscure government loan guarantee programme which had been set up to encourage US farmers to sell their grain abroad. Under this scheme, hundreds of millions of US Government-backed dollars poured into Iraq, ostensibly for buying food, though the amount of ‘food’ bought occasionally raised eyebrows. On one occasion a loan was guaranteed which could have bought a packet of seeds for every man, woman and child in Iraq. These agricultural credits rose inexorably through the Eighties, until they totalled a thousand million dollars a year. But that was nothing like enough to satisfy Saddam Hussein (or the greed of the people who supplied him). What he wanted was a bank in America with an open and endless line of credit. That is precisely what he got. In the three years from 1987, the Atlanta branch of the Italian Government’s Banco Nazionale del Lavoro loaned nearly two billion dollars to Iraq. Accounts were kept secret, and interest rates were low. The vast majority of equipment supplied through these loans was related to Saddam’s military ambitions, especially after 1988 when the war with Iran – which he started – mercifully came to an end.

The entire business started to collapse when a couple of women staff at the BNL bank blew the whistle. Mela Maggi and Jean Ivey took the ‘grey books’ with the BNL branch’s secret accounts in to government lawyers, who were curiously embarrassed. There was no doubt that a huge fraud had been perpetrated – but by whom? Every effort was made by the Bush Administration to ensure that the blame was fixed on one man: BNL’s branch manager in Atlanta, Christopher Drogoul. Drogoul’s disturbing defence, however, was that the operation had been sanctioned from first to last by a covert conspiracy which led back to the Government itself. The Atlanta branch loans had been agreed by its Italian parent in Rome, which in turn had been instructed by the Italian Government. The Italian Government, moreover, was hand in glove with the CIA, which in turn was supported by the White House. The bank’s open line of credit to Saddam was, Drogoul alleged, a crucial part of the ‘tilt to Iraq’ policy which was started by Reagan and carried on even more enthusiastically by Bush and his Secretary of State, Baker, all through the years when neutrality was the official US policy.

The Bush-Baker enterprise was a disaster. The tilt to Iraq so encouraged the dictator that he invaded Kuwait, threatening vital cheap oil supplies to the US. Thus the tilt to Iraq led to war with Iraq. The technology supplied to Saddam by the US had to be bombed by the US. The Bush Government could not survive the contradiction for ever. By coincidence, Bush’s triumph in operation Desert Storm was celebrated on the very same day that his Attorney General handed down indictments against Christopher Drogoul and BNL, Atlanta.

Drogoul hired aggressive lawyers who argued in court that if Drogoul was guilty, the CIA and the President’s covert operations gang were ten times as guilty. So powerful was the evidence that Judge Marvin Shoob agreed with it. In a remarkable judgment, which effectively refused to allow Drogoul to face the more serious charges on his own, Shoob declared that BNL Atlanta had been ‘pawns or bit players in a far larger and wider-ranging sophisticated conspiracy that involved BNL Rome and possibly large American and foreign corporations and the governments of the United States, England, Italy and Iraq’.

This judgment was delivered on 5 October 1992, a month before Desert Storm hero Bush was chucked out of the White House by the electorate. One of the issues which had dogged his campaign was the growing evidence that his administration had conspired with some of its paymasters to break the law in order to arm Iraq with military technology which was used against US troops.

Alan Friedman is a persistent journalist whose book comprehensively exposes Iraqgate, USA. What about Iraqgate, UK? Here, necessarily, Friedman is much less sure of his ground. He places too much emphasis on the story of Frank Machon, the Glasgow haulier, who as early as 1988 spotted (and wrote to inform Prime Minister Thatcher) that end-user certificates for arms to Saudi Arabia and Jordan were being forged to disguise the arms’ real destination: Iraq. Machon is an important witness, but only a small cog in the conspiracy, which, as the Scott Inquiry hearings are beginning tentatively to reveal, was just as ‘wide-ranging’ and ‘sophisticated’ as the US operation from which it took its lead. Saddam sought to build up his links with Britain, which had so many historical associations with his country, every bit as feverishly as he sought to establish economic connections with the United States. The same techniques employed in the States, especially the use of Jordan as a conduit, assisted the British effort: the same shadowy companies, such as Allivane International, the same involvement of Intelligence, the same assistance from certain politically ‘safe’ ministers, and, when the conspiracy began to collapse, the same attempt to set up a fall-guy. The problem for the conspirators was that they were running against a stream of rules and regulations which they were expected to obey. Their covert dealing was bound to raise questions at some stage.

The British conspiracy was unveiled, most unwittingly, by HM Customs, some of whose officers were naive enough to believe that an embargo was an embargo and that anyone who broke the embargo was, well, smuggling. So when, in April 1990, HM Customs got a tip-off (probably from Israeli Intelligence) that the biggest gun in the whole history of the world had been made in Britain and was being shipped to Iraq in the most contemptuous defiance of the embargo, they rushed to Teesport and ‘seized’ the barrel of what became known as Supergun. At once they prosecuted the people they thought responsible: Peter Mitchell, managing director of the firm Walter Somers, which made the barrel, and a Bristol engineer, Chris Cowley, who had worked on the Supergun project in Iraq. The massive steel structures they had seized at Teesport provided Customs officers with the most substantial evidence they could ever have hoped for. There seemed no defence. Imagine, therefore, the Customs officers’ fury when six months later they suddenly received an order from on high to drop the charges. Mitchell and Cowley intended to claim in open court that the Government and its Intelligence knew what they were doing and connived at it. Proof of that came from Sir Hal Miller MP, a Tory grandee, who told the House of Commons that he had cleared the Walter Somers manufacture of Saddam’s Supergun with three different arms of government.

When the prosecutions were dropped, a subversive cartoon circulated round HM Customs showing a corpse marked Customs lying in a pool of blood stabbed in the back with a dagger from HM Government. Wounded and narked at so much wasted hard work, Customs officers continued to pursue the arms smugglers to Iraq. Their next victims were directors of a small firm called Ordtec. Once again, they seized incontrovertible evidence: a consignment of artillery fuses shipped by Ordtec to Baghdad. Six men were charged with smuggling and breaking the embargo. Once again, their defence was that the security services knew all about the smuggling. The six demanded government documents to prove it. Home Secretary Kenneth Baker signed a ‘public immunity certificate’ which enabled him to withhold the information on grounds of security. Eventually a back-room deal was struck whereby the Ordtec Six pleaded guilty in exchange for derisory punishment. The judge at Reading Crown Court praised their patriotism as he suspended their sentences and fined them.

Customs were livid. They proceeded apace with what they regarded as the safest case of all: against Matrix Churchill, a Midlands machine tools firm whose bulldog name disguised the fact that it had actually been bought lock, stock and especially barrel by the Iraqi Government. The case against Matrix Churchill seemed absolutely cast-iron. The firm’s three directors were to play the fall-guy role which in the US had been assigned to Christopher Drogoul. Like Drogoul, however, the Matrix Churchill directors – chief among them, Paul Henderson – refused to take their medicine. Henderson’s rather sad book again and again introduces characters from the Drogoul saga. Matrix Churchill’s Iraqi bosses (one of whose wives managed to spend £6000 one day at Harrods – on garden furniture) sent Drogoul’s side-kick to Coventry to offer ‘unbelievably’ cheap interest rates on loans from BNL in Atlanta. Henderson couldn’t understand ‘how the hell they did it’ – but he snapped up the loans just the same. He also had a visit from the Chilean cluster-bomb manufacturer Carlos Cardoen, whom he later checked out, just as he checked out the bank. Every important person he spoke to – in the City, in the intelligence services and in government – gave the thumbs up to both.

The three men protested that everything they had done had the tacit approval of the Government and its security services. Two of them revealed that they had been working for those security services. They demanded government documents to prove it. Four Ministers signed public immunity certificates refusing them the information. As in the US, though much more hesitantly, the ministers were baulked by a judge. Mr Justice Smedley insisted that some of the documents necessary to the defence should be released. From there it was all downhill for the Government. The Matrix Three were triumphantly acquitted and the Government had to set up the Scott Inquiry.

A keen huntsman who learned his law in South Africa, Lord Justice Scott seems an unlikely scourge of the Establishment. Yet ministers and especially their Civil Service chieftains have come to detest him and his chief interrogator, Presiley Baxendale, who has the effrontery to be a woman and who does not even take her husband’s name. To be asked questions in public about the internal workings of the Foreign Office, whose mandarins have been shielded from public view for centuries, seemed the most monstrous invasion of top people’s privacy. Scott and Baxendale, appalled no doubt, as Judge Shoob had been, by the grotesque can of worms they have opened, have concentrated, often to the point of pedantry, on three issues.

First, were the Government’s 1985 ‘guidelines’ on exports to Iraq relaxed in 1988, and, if so, why was Parliament not told about it? This question has exposed the most absurd contradictions. A senior FO official told a Commons Committee in 1992, several months before the Matrix Churchill case, that one of the three guidelines had been changed. Major and his ministers tell Scott it wasn’t. William Waldegrave, the Minister for Open Government, put forward the charming explanation that there cannot have been a change in the guidelines because the Prime Minister hadn’t announced it. Secondly, did arms go to Iraq through Jordan and did the Government know about it? Senior ministers, especially the former Foreign Secretary, say no, they never heard such a thing. Alan Clark, who was Minister of State at Defence, says yes, the ‘trickier items’ went through Jordan and everyone knew it. Thirdly, why did ministers sign public immunity certificates in the Ordtec and Matrix Churchill cases when they knew that they were concealing evidence which could save defendants from prison? To this question so far there has not been a remotely satisfactory answer.

It’s a fair guess that on one or all of these issues Scott, who cannot conceal his irritation with the mendacity of ministers and civil servants, will lash out sharply, and that heads will roll. On the other hand, no one should underestimate the tenacity of the British Establishment, even when its case seems hopeless. In 1978, Sir Thomas Bingham, now one of Scott’s fellow Lord Justices, discovered in the course of a long inquiry that the Government and the Foreign Office had conspired with the oil companies to break sanctions imposed on the illegal regime in Rhodesia. A few minor officials were moved sideways. Not a top head rolled. Iraqgate, however, has gone deeper into the public consciousness than sanctions-busting ever did and no doubt a minister or two will be asked to retire to a job in the City.

The point is that the real issue – the power of the arms industry and the secret cabal which supported it – is not even on Scott’s agenda. He has called to his public hearings not a single one of the arms manufacturers, merchants, insurers or financiers who filled their pockets from the huge commissions accruing to the Iraqgate conspiracy. Intelligence officers will give their evidence in secret. The myth will be preserved that our society is accountable to its democratic assemblies, and that when the rules are broken the assemblies will ensure that the transgressors are punished and the rules tightened. The truth about these conspiracies which grew up to profit from mass slaughter is that the slender thread which ties society to its representative institutions was effortlessly snapped. As long as economic corporate power remains irresponsible and unaccountable it will continue in its own interests to lie, cheat and dictate to elected government with the most horrendous consequences. On that issue, for certain, Lord Justice Scott will be silent.

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Vol. 16 No. 7 · 7 April 1994

In his piece on the Scott Inquiry (LRB, 10 February), Paul Foot does an injustice to Carlos Cardoen, ‘the Chilean Cluster Bomb King’ and arms supplier to Iraq, when he describes him as having ‘only two heroes, Pinochet and Saddam Hussein’. In fact, Latin America’s most notorious private arms manufacturer has proved himself far cannier than this. Certainly, his success story began under Pinochet, when Army contacts in the late Seventies allowed him to branch out from his existing small mining explosives business. But in the mid-Eighties, at the height of his cluster bomb bonanza, he fell out with the General and became a leading backer of the Christian Democrat and centre-left opposition; he was probably the most outspoken business dissident at the time. When elections came finally in 1989, he was a major funder of opposition leader Patricio Aylwin’s victorious Presidential campaign. Since then – having, he says, given up arms production for fruit exports and other activities – he has funded a leading leftwing magazine, done business in Cuba (food products, apparently) and continued to sponsor cultural projects, such as an arts centre on Easter Island.

The full story of Cardoen’s conflict with Pinochet has never emerged. His undoubted sensitivity to the direction of the political wind probably had much to do with it. He is also known to have criticised the quality of the Chilean Army’s ordnance products. But one incident, triggered by the Iran-Iraq War and the arms supply networks Paul Foot discusses, was certainly important. Presumably lured by the millions being pulled in by Cardoen’s sale of his cheap, efficient and very nasty cluster bombs to Iraq, a company linked to the Chilean Army attempted to get in on the act by selling another such bomb to Iran, in a triangular deal through Nigeria. The attempt ended in farce, as a sample bomb blew up in the air in tests carried out in Iran, reportedly destroying an Iranian Air Force plane and risking bloody reprisals against the Chileans involved in the project. The middleman between Chile and Iran, Bernard Stroiazzo, claimed to have been held captive by the Iranian Government for 18 months and later sued Pinochet’s Government, alleging it had reneged on a deal to compensate him by allowing his British-based company, Were International Ltd, to process toxic waste in the Atacama Desert. Cardoen, meanwhile, sued the Army-linked company, Ferrimar, for industrial espionage, alleging that one of his executives had decamped to it with his cluster bomb plans. The officer involved in developing the rival cluster bomb, Colonel Carlos Carreño, was later kidnapped by the Chilean left-wing armed group, the Manuel Rodriguez Patriotic Front, in one of its more spectacular hits against the Pinochet regime, and smuggled to Brazil, where he was released.

All of which is only a footnote to the vast and repulsive story told in Paul Foot’s article, but corrects the widespread and over-neat impression of Cardoen merely as a Pinochet acolyte. The unpalatable fact is that part of Chile’s campaign to return to democracy (albeit a democracy where Pinochet continues as Army commander-in-chief) was bankrolled by the profits from some of the more hideous deaths in the Middle East.

The next instalment to the Cardoen saga is likely to be an extradition request by the Miami courts to have him face charges brought by US Customs of illegal arms trading with Iraq. The request will almost certainly be turned down by the Chilean Supreme Court, a decision which will be generally applauded in Chile, despite the Court’s deep unpopularity due to its craven record when called on to defend human rights under Pinochet and the general feeling of embarrassment at Cardoen’s activities. In this case, however, Cardoen is seen as a relatively small Third World player being scapegoated by the US Government to distract attention from its own far vaster role in the game of supplying Saddam – an interpretation, as Paul Foot’s piece serves to emphasise, with which it is hard not to sympathise.

Malcolm Coad
Santiago, Chile

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