Bush Officials Defend Prewar Aid to Iraq

The Bush Administration on Thursday delivered the first formal defense of its policy of providing extensive aid to Iraq before the invasion of Kuwait, maintaining that it was the best option for dealing with a difficult Mideast situation.

The detailed statement was provided to a congressional committee by Deputy Secretary of State Lawrence S. Eagleburger, an Administration point man on the Mideast. It was a clear reflection of the increasing heat the White House and State Department are feeling on issues of assistance to Iraq after the Iran-Iraq War ended in 1988. Prominent Democrats are now exploring the possibility of an investigation by an independent counsel.

“We tried to put together our best concept of what the policy ought to be in terms of trying to deal with Iraq,” Eagleburger said as he and other senior officials appeared before the House Banking, Finance and Urban Affairs Committee. “And we recognized that our levers were not great. We recognized that there was a potentially very serious opponent here.”

Eagleburger acknowledged the failure by the Administration, which had tried to foster stability in the Persian Gulf by providing economic incentives and other aid to Iraqi President Saddam Hussein.

“It is clear that policy did not work,” he testified. “It is not the first foreign policy of the United States, in a number of administrations, that didn’t work.”

Eagleburger defended the decision to provide Baghdad with $1 billion in new commodities loan guarantees in the fall of 1989 despite warnings that Iraq had diverted funds to buy arms and nuclear weapons technology. He testified that allegations about the diversions amounted to speculation and have never been proved.

The testimony also provided the Administration’s first response to the most sensitive aspect of its Iraq policy--why assistance continued after clear signs in the spring of 1990 that Hussein was becoming increasingly belligerent.

Eagleburger said the Administration responded to Hussein by holding up $500 million in aid in mid-1990 and increasing efforts to restrict the flow of arms to Iraq from other countries.

“We began to adjust even our modest efforts downward,” Eagleburger said.

Yet classified documents show that in May, 1990, the White House rejected a proposal to stop sharing intelligence data with Iraq and to cut the flow of sensitive technology. State Department cables indicated that efforts were under way as late as July, 1990, to obtain the additional $500 million for Baghdad.

Democratic congressmen also pointed out that on July 27, 1990--five days before Iraq’s invasion of Kuwait--the Administration fought efforts by Congress to impose sanctions on Baghdad that would have halted aid.

In recent weeks, President Bush and Secretary of State James A. Baker III have dismissed with brief, informal comments the renewed questions about why the Administration provided so much aid for so long.

Thursday’s daylong committee session was sharply partisan. Democrats criticized the Administration’s actions and Republicans blasted Committee Chairman Henry B. Gonzalez (D-Tex.), who has placed dozens of classified documents detailing the Administration’s Iraq policy in the congressional record in recent weeks.

In the most colorful remarks, Rep. Charles E. Schumer (D-N.Y.) said, “Saddam Hussein is President Bush’s Frankenstein--a run-of-the-mill dictator the President fed with billions of U.S. taxpayer dollars and turned into a monster.”

Glaring at Schumer, Rep. Jim Leach (R-Iowa) responded: “We did not create the Frankenstein called Saddam Hussein. We’re not responsible for his illegal behavior. I think our policy was wrong, but that does not mean that Saddam Hussein’s butchery is the fault of three or four people sitting before this committee.”

Clearly concerned over a possible criminal investigation by an independent counsel, Republicans on the committee repeatedly said no evidence had emerged that the Administration’s policy was criminal.

Eagleburger, Deputy Treasury Secretary John E. Robson and Agriculture Undersecretary Richard T. Crowder all testified that they were aware of no criminal wrongdoing by anyone in the Administration.

The only break in the Administration’s unified front came from Federal Reserve Governor Edward W. Kelley Jr., who said the Federal Reserve had opposed a final $1 billion in U.S. loan guarantees in November, 1989, because it was uneasy over Baghdad’s huge debt and refusal to pay some foreign creditors. The Administration pushed that aid through so Iraq could buy American commodities.

Other Administration officials testified that Iraq had consistently repaid its U.S. debts and that extending food aid was a prudent incentive to moderate Hussein’s behavior. They said the aid also gave U.S. farmers a valuable export market and maintained a constant oil supply for American consumers.

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