CIA Failed to See Iraq’s Attack Plans, Gates Says : Intelligence: Agency told Bush in 1989 that Hussein would not strike for two to three years.

CIA Director Robert M. Gates said Friday that U.S. intelligence agencies officially told the Bush Administration in the fall of 1989 that Iraq would not attack any of its neighbors for two to three years.

Gates said the projection--made less than a year before Iraq invaded Kuwait, precipitating the crisis that led to the Persian Gulf War--was contained in the influential National Intelligence Estimate, a composite of the views of all U.S. intelligence agencies, prepared by the CIA.

It came at a time when the Administration was escalating political and economic ties with Iraq on orders from the President.

The disclosure provides further insight into White House thinking as Iraq was secretly building up its war machine. President Bush has said he provided assistance to Iraq in hopes of moderating its behavior.

At the time Gates said the CIA made its projection, the Pentagon was taking a more ominous view. In its post-mortem on the Gulf War, the Pentagon said its planners had singled out Iraq’s growing ambitions and powerful armed forces as the greatest threat to U.S. interests in the region in the fall of 1989.

Classified documents show that other senior Administration officials were objecting to continued aid and technology sales to Iraq that fall. They were concerned because Baghdad had been implicated in a banking scandal and intelligence data showed that American food aid may have helped Iraq to buy arms.

Gates was Bush’s deputy national security adviser at the time and was among those arguing for continued assistance for Iraq.

In testimony Friday before the House Banking, Finance and Urban Affairs Committee, Gates said the intelligence agencies concluded that fall that Iraqi President Saddam Hussein would spend two to three years concentrating on rebuilding his economy after the end of Iraq’s eight-year war against Iran.

As a result, he said, the Administration was told not to expect Iraqi aggression.

“We provided them with a message of reassurance in terms of Saddam’s intentions, and we were wrong,” said Gates, who became CIA director late last year.

By the spring of 1990, Gates said, the CIA was monitoring Iraq’s massive arms buildup. But he did not say if the formal intelligence estimate was changed before Hussein’s troops overran Kuwait in August, 1990, setting the stage for a war that eventually cost the United States and its allies $66 billion.

Gates’ disclosure of the substance of the highly classified report comes at a time when Democrats in Congress are raising questions about the wisdom of Bush’s assistance to Iraq after the end of the Iran-Iraq War in 1988.

Members of the House committee recalled Friday that the Bush Administration was fighting a congressional effort to stop another $500 million in U.S. food aid for Iraq just five days before the invasion of Kuwait.

“I think it is one of the central issues of this election that has not yet been fully developed,” said Rep. Jim Slattery (D-Kan.). “I happen to believe that colossal political blunders were made prior to the Persian Gulf War that many in this government don’t want the American people to learn about for a few more years, at least until after November.”

Rep. Henry B. Gonzalez (D-Tex.), the committee chairman, also criticized the Administration’s economic aid and exports of sensitive technology to Iraq. His investigators and others have discovered that American aid and technology helped Iraq build its military arsenal.

“Ironically and incredibly, our own government allowed itself to help finance terror weapons that easily could have been used against our own troops,” Gonzalez said.

In his testimony and response to questions, Gates acknowledged that the CIA also underestimated Iraq’s nuclear capability, failing to discover one of the two processes Baghdad was using to develop weapons-grade uranium.

“What we missed was their calutron program, a program that would have been able to produce weapons-grade material probably two or three years before the gas centrifuge system,” Gates said. “I think that the bottom line is that, while we had a pretty good idea of some of the basic elements of the program, we underestimated both the scale and the pace of it.”

Because of the destruction of many of Iraq’s nuclear facilities in the Gulf War, Gates predicted that it would take Baghdad “a few, but not many years” to produce a nuclear weapon. Iraq could have chemical weapons in about a year, he said, and biological weapons in a matter of weeks.

Gates was testifying about legislation proposed by Gonzalez that would bar international financial institutions, such as the International Monetary Fund and the World Bank, from lending money to nations seeking to develop nuclear weapons.

The bill grew out of the committee’s long investigation into $4 billion in loans made to Iraq in the late 1980s by the Atlanta branch of Italy’s Banca Nazionale del Lavoro. Nearly $1 billion of the loans were guaranteed by the U.S. Agriculture Department. Committee investigators have determined that some BNL loans were used by Iraq to buy military goods.

Gates did not comment on the measure, but it was opposed as too restrictive by witnesses from the Federal Reserve Board, the Treasury Department and the State Department.

Over the last two months, Gonzalez has read numerous classified documents into the congressional record about assistance to Iraq during the Ronald Reagan and Bush administrations.

Rep. Doug Bereuter (R-Neb.), citing his membership on the House Intelligence Committee, said he knows “the intelligence community, as well as other executive agencies, are deeply concerned about the nature of this information and the way it was released.”

Gonzalez defended his disclosures, saying that none of the documents dealt with current activities.

Frantz is a Times staff writer, and Waas is a special correspondent.