The Central Intelligence Agency has acknowledged in a classified report that the agency had strong evidence about Iraq's worldwide effort to buy nuclear weapons technology a month before President Bush signed an order mandating closer ties to Baghdad in the fall of 1989, according to sources.
The disclosure was contained in a report provided by the CIA to the Senate Intelligence Committee, two sources familiar with the report said Wednesday.
One document described in the report was a top-secret, one-page CIA analysis concluding that Iraq's arms-procurement network was critical to its attempt to build the bomb, said the sources. "The document is as strong and definite a statement as they can make," said one of the sources familiar with the CIA report.
The analysis was dated Sept. 4, 1989, less than a month before President Bush issued his directive ordering closer economic and political ties to Baghdad. The source said the Sept. 4, 1989, analysis contained stronger language about Iraq's weapons-procurement efforts than two other intelligence reports issued by the CIA after Bush's Oct. 2, 1989 order, known as National Security Directive 26.
However, a second source familiar with the CIA report to the Senate said the agency did not "pull its punches" after Bush's directive. He said intelligence warnings on the network were consistently strong from mid-1989 until just before the Iraqi invasion of Kuwait in August, 1990.
A White House spokesman said Wednesday that he was unable to determine whether Bush read any of the CIA reports before issuing National Security Directive 26. While acknowledging that the policy failed, in recent weeks the President has defended the prewar assistance to Iraq as an effort to bring Iraq into "the family of nations."
Spokesmen for the CIA and Senate Intelligence Committee declined to confirm that the report has been submitted to the committee.
The report to the committee apparently confirms earlier stories in The Times describing the extensive intelligence provided to senior Bush Administration officials regarding Iraq's efforts to obtain technology for nuclear, chemical and biological weapons.
An Administration official said several intelligence reports on the Iraqi network were distributed to top policy-makers, including Secretary of State James A. Baker III, Assistant Secretary of State John Kelly and Richard Haass of the National Security Council.
The Senate Intelligence Committee had asked CIA Director Robert M. Gates to prepare the report about what the CIA and other intelligence agencies knew about Iraq and the scandal involving Italy's Banca Nazionale del Lavoro.
The bank's Atlanta branch loaned Iraq more than $5 billion between 1986 and Aug. 4, 1989, when it was shut down by federal agents. Federal investigators believe some of those loans were used by Iraq to acquire critical weapons technology in Europe and the United States.
Five former branch employees have pleaded guilty in connection with a scheme to conceal the loans from their superiors and bank regulators, and the investigation is continuing.
The CIA report indicates the agency monitored a general relationship between BNL and Iraqi military complexes as early as 1984, when Iraq was at war with Iran, according to one of the sources.
However, it was not until 1989 that the CIA received information about the Atlanta branch's ties to Iraqi arms-procurement agents and to Hussein Kamal Hasan, head of Iraq's military development program and the son-in-law of Iraqi President Saddam Hussein, the source said.
"It's clear that BNL was somebody they knew about, and that they knew the Iraqis were working with the bank," said the source.
In the fall of 1989, some Administration officials tried to stop U.S. loan guarantees to Iraq as a result of irregularities uncovered at BNL in Atlanta. The State Department and NSC fought successfully to win another $1 billion in guarantees for Baghdad, partly by playing down allegations of Iraqi wrongdoing.
During that time, the CIA prepared at least three classified documents on Iraq's procurement network and discussed the network in the influential National Intelligence Estimate, a composite of intelligence assessments, according to records and sources.
One source said the language of the Sept. 4, 1989, analysis was stronger and more definitive than a Sept. 3, 1989, CIA document described in a Times story last month. In that analysis, the agency warned Baker and others about Iraq's use of front companies in Europe to obtain nuclear-weapons technology. The Times also has written about a Nov. 6, 1989, CIA analysis describing the procurement network in broader terms.
The fact that top Administration policy-makers received CIA warnings on Iraq's network is also relevant because it shows that officials pressed ahead to relax restrictions on export licenses to Iraq despite reports describing Iraq's aggressive campaign to obtain such technology for its weapons programs.
CIA Director Gates has accused House Banking Committee Chairman Henry B. Gonzalez (D-Tex.) of using information from the Sept. 4 report in a statement on the House floor on July 7, one of a series of attacks on the Administration's Iraq policy by Gonzalez in recent months.
Gonzalez denied disclosing any classified information that could damage intelligence efforts and told Gates in a letter, "Your insinuation that I have revealed top secret, compartmentalized information is inflammatory and without merit."
Congressional Republicans also have stepped up criticism of Gonzalez. On Tuesday, House Minority Leader Robert H. Michel (R-Ill.) introduced a resolution calling for an ethics investigation of the Texas congressman because of Administration complaints about the use of classified material in his statements.
Frantz is a Times staff writer and Waas is a special correspondent.
Chronology on Iraq Aid
As this chronology shows, U.S. agencies warned of Iraq's arms-procurement network beginning in mid-1989, but the Bush Administration resisted efforts to restrict aid and high-tech sales to Baghdad:
June, 1989: The Defense Intelligence Agency warns high-level Administration officials in a top-secret assessment that "Iraq has developed a major European military procurement network of its defense industries."
Sept. 3, 1989: The CIA warns Secretary of State James A. Baker III in a top-secret report that Iraq's clandestine network is procuring nuclear weapons technology to "counter perceived military threats from Israel and Iran." The report lists specific technology, such as high-speed cameras, X-ray machines and sophisticated computers.
Sept. 4, 1989: The CIA issues a top-secret report that says Iraq's worldwide network is critical to its bid to build a nuclear bomb.
Oct. 2, 1989: President Bush issues National Security Directive 26 that says: "The United States government should propose economic and political incentives for Iraq to moderate its behavior and to increase our influence with Iraq." Among the incentives are expanded trade and non-lethal military assistance.
Oct. 6, 1989: Baker meets with Iraqi Foreign Minister Tariq Aziz and tells him the Bush Administration will not restrict high-technology exports to Iraq, according to meeting minutes.
Oct. 11, 1989: Baker is warned in a memorandum that federal prosecutors "are looking into allegations of widespread and blatant irregularities" regarding the U.S. agricultural loan guarantee program to Iraq. The report says prosecutors believe Iraq may have diverted "proceeds for arms purchases."
Nov. 6, 1989: The CIA warns again that Iraqi intelligence agents are operating a worldwide procurement network to obtain technology for nuclear and chemical weapons and ballistic missiles.
Nov. 8, 1989: The Administration grants $1 billion more in agriculture loan guarantees to Iraq after an intense lobbying campaign by Baker and other top officials to overrule objections by four other federal agencies concerned about the federal investigations of the program.
Nov. 21, 1989: A State Department memo says there is "a presumption by the intelligence community and others that Iraqi government is interested in acquiring a nuclear explosive capability" and that high-tech exports are being diverted to its nuclear program. The memo cites National Security Directive 26 in recommending no tightening of restrictions of export licenses to Iraq.
Source: Times staff reports