Indian Firm Aided Iraq

NEW DELHI -- An obscure Indian trading company has provided the first clear evidence that Iraq obtained materials over the last four years to produce or deliver weapons of mass destruction.

The company, NEC Engineering Private Ltd., used phony customs declarations and other false documents, as well as front companies in three countries, to export 10 consignments of raw materials and equipment that Saddam Hussein’s regime could use to produce chemical weapons and propellants for long-range missiles, according to Indian court records.

The shipments, valued at nearly $800,000, took place between September 1998 and February 2001. The exports -- highly specialized supplies like atomized aluminum powder and titanium centrifugal pumps -- ostensibly went to Jordan and Dubai. But they subsequently were traced to Iraq’s Fallujah II chlorine plant and a rocket fuel production facility at Al Mamoun, according to U.S. and British intelligence reports.

The NEC case marks the first illicit Iraqi procurement scheme traced to a specific company since December 1998, when U.N. inspectors were withdrawn from Baghdad. Iraq did not identify the Indian company as a supplier in the 12,000-page weapons declaration it handed to the Security Council last month.

The case may not provide the sort of definitive evidence the international community has said is needed to justify military action against Iraq, but it bolsters White House claims that Hussein has covertly continued attempts to build illegal weapons.

U.S. officials have not publicized the NEC case, in part to avoid embarrassing the Indian government about the lapse in its export controls. Washington sharply downgraded relations with New Delhi after India tested nuclear devices in May 1998. But the two governments have cemented extensive high-level diplomatic, military and intelligence ties since the Sept. 11 terrorist attacks.

Washington has imposed sanctions against the former head of NEC, who allegedly led a technical team to Fallujah II in April 1999 to help install equipment that can be used to produce chemical agents. India has suspended NEC’s export license, revoked passports of senior company officials and raided company offices and homes. NEC’s general manager, who was jailed for four months last year, has detailed the elaborate scheme to investigators. Further criminal charges are expected.

United Nations weapons inspectors have confirmed that Iraq used at least some of the supplies. This month, U.N. missile teams made their fourth visit to Al Mamoun, about 40 miles south of Baghdad. They identified solid propellant rocket motors “which Iraq had manufactured between 1998 and 2002,” according to a U.N. report, and witnessed “propellant production activities” for the second time in two weeks.

U.N. chemical weapons teams have visited Fallujah II three times. The site, which was bombed during the Persian Gulf War in 1991, had produced chlorine and phenol for Iraqi weapons in the 1980s. Both chemicals have civilian uses, but they also can be used to synthesize precursors for blister and nerve agents.

It is unclear whether Iraq used the materials to make chemical weapons, but simply acquiring them put Baghdad in violation of U.N. Security Council resolutions.

The CIA warned last October that Iraq’s recent chlorine production at Fallujah II and three other sites was “far higher” than any civilian needs for water treatment -- and thus reason to fear that Iraq was diverting chlorine to produce chemical weapons. However, U.N. teams reported Dec. 9 that the chlorine plant was “currently inoperable.” The report did not explain why, or what had happened to the equipment.

The Bush administration’s go-softly approach to the NEC case was evident July 9 last year, when the State Department imposed sanctions against the company’s founder, Hans Raj Shiv, making him the first and only person cited under the Iran-Iraq Arms Nonproliferation Act of 1992. The routine notice in the Federal Register drew virtually no attention at the time.

Shiv was cited for “knowingly and materially contributing through the transfer of goods or technology” to Iraq’s efforts to “acquire chemical weapons or destabilizing numbers and types of advanced conventional weapons.” Officials say he has fled his home in India and is believed to be hiding in the United Arab Emirates.

So are two of Shiv’s aides. His son, Siddhartha Hans, was based in Dubai and in charge of obtaining NEC export orders from the region. NEC’s technical director, R.C.P. Choudhary, allegedly helped ensure that the correct equipment was sent to Fallujah II. All three have been charged with violating Indian customs laws.

“This is the real thing,” said a U.S. official familiar with the case. “These are bad guys.” The official, who spoke on condition of anonymity, said the case shows the immense difficulties in detecting and unraveling Iraq’s suspected weapons smuggling and procurement networks around the world.

“It’s a hydra,” he said. “They do lawyering one place. Banking somewhere else. Fronts handle shipping and trucking.... Consignments go to Dubai and Jordan. Then they disappear. They use dead drops, subsidiaries, cutouts. It’s a real challenge.”

NEC lawyers say the locally owned company, which has exported chemical engineering and oil drilling equipment since 1984 to Persian Gulf countries, has violated neither Indian law nor U.N. sanctions.

“There is no evidence,” said R.K. Anand, one of New Delhi’s most prominent attorneys. “These were all legal exports.”

Satish Aggarwala, the special senior public prosecutor in the case, disagrees.

“The evidence collected so far, both incriminating documents and confession statements, is very strong,” he said. “I am confident we will be able to win convictions.”

S.K. Sinha, co-director of the Directorate of Revenue Intelligence, the chief investigating agency in the case, said expanded criminal charges will be filed against NEC and its officers after more evidence is gathered in Jordan and Dubai.

“We’re at a crucial stage,” he said.

The case began with a tip to India from British intelligence in early 2001.

“They tracked it initially,” said a senior Indian official. “Shipping, insurance -- it’s all British. So it’s easy for them to track these things.”

On March 26, 2001, Indian authorities raided NEC offices and company directors’ homes in New Delhi, Bombay and Chennai, seizing dogeared bundles of purchase contracts, bills of lading, shipping records, customs declarations and other documents.

Six weeks later, the Directorate of Revenue Intelligence issued an alert to customs offices in every Indian airport and harbor to stop NEC exports. NEC, it warned, “may be actively assisting Iraqi Missile and Chemical Weapons programmes by exporting/providing sensitive equipments, technologies and technical know-how/engineering assistance to Iraqi Companies.”

Still, the initial investigation dragged on for more than a year without result. Then Indian authorities discovered that NEC had created a new subsidiary, Euro International Project Ltd., to purchase equipment and “to bypass” the customs alert, according to court records. Another front company, British Scaffolding Private Ltd., also allegedly was used.

Under mounting pressure from Washington and London, Indian authorities cracked down last June. They formally suspended NEC’s export license and again raided company offices and homes. They also arrested NEC’s 46-year-old general manager, Shri Rajiv Dhir, and imprisoned him for four months in New Delhi’s notorious Tihar jail. A low-level employee in the company’s Chennai office also was detained.

Dhir “admitted his active role” during a two-day interrogation, prosecution documents show. Dhir’s lawyer, Krishan Kuman Manan, says Dhir was “tortured physically and beaten mercilessly” to sign a confession, a charge Indian officials deny.

Dhir, who faces up to seven years in prison for customs violations, was released on bail in October. Although Manan insisted that Dhir had left NEC and was abroad, Dhir answered the phone at NEC’s offices in New Delhi last week and said he was picking up his paycheck. Dhir declined repeated interview requests at his home and office.

Prosecutors say that at Dhir’s direction, NEC wrongly declared the contents of 10 consignments worth $791,342 to Jordan and Dubai between 1998 and 2001 to ensure their export.

In January 1999, for example, NEC was licensed to ship 3 metric tons of aluminum powder worth $13,500 to Target General Land Transport in Dubai. NEC export papers signed by Dhir did not acknowledge that the aluminum powder was “atomized,” a grade specifically used to produce rocket propellant. The powder, as well as titanium vessels and industrial batteries with platinum/titanium anodes, later was transported to the Al Mamoun rocket fuel production facility, prosecutors allege.

In another case, NEC purchased titanium centrifugal pumps from a company in south India. In the invoice and shipping bills NEC presented to Indian customs, prosecutors allege, “the word titanium was deleted so as to ensure its export.” Special membranes used in chemical weapons programs similarly were “declared to be innocuous.” Both the titanium pumps and the membranes were traced to Fallujah II.

The company also used front companies abroad to hide the ultimate destination. Indeed, prosecutors wrote, “the firms in Dubai and Amman [Jordan] to which these consignments were being sent are either nonexistent or merely transport firms.”

Dhir told investigators that NEC routed materials to Iraq through a Jordanian man named Mohammed Khatib, and his son, Abu Tariq. Dhir said that Khatib’s son was involved with the chlorine plant at Fallujah II and that Khatib hired NEC to provide “technical services and equipment” to rebuild the bombed-out facility. After an initial site visit, Shiv, Choudhary and several technicians went to Fallujah II in April 1999 to help install the equipment, records show.

An Indian Ministry of Finance document filed in court last Aug. 2 identifies Khatib and his son as “well-known transport contractors and bankers in Jordan [with] sound business connections with all Gulf countries.” But it alleges that they also operated as agents for a Baghdad-based company called Al Najah, a suspected procurement front for Iraq’s Interior Ministry.

Last Sept. 24, British Prime Minister Tony Blair charged that NEC had helped Iraq rebuild its missile production infrastructure. Although he said “other individuals and companies are still illicitly procuring for Iraq,” NEC was the only company Blair named in a 50-page intelligence dossier he presented to Parliament.

Whatever happens in the Indian courts -- or on the battlefields of Iraq -- the NEC case has one silver lining. A Western official who helps train U.N. weapons inspectors headed to Iraq said he plans to use NEC as a case study in future classes to explain the complexities of Iraqi procurement.

“It’s a textbook case,” he said.