Iraqgate

Media term for the scandal that emerged during the administration of President George H. W. Bush, in which it was alleged that U.S. agricultural loans made to Iraq during the previous administration were used to purchase weapons with the knowledge of the administration. No evidence was ever found to prove this allegation, however.

[Page 382]During the administration of President Ronald Reagan, the United States had decided that it needed to change its policy toward Iraq. In the early 1980s, wishing to have closer relations and more influence with that country, the United States normalized diplomatic relations with Iraq. In addition, the United States gave financial support to Iraq, which at the time was involved in a costly war with Iran. In 1983, as part of the U.S. plan to improve relations with Iraq, the country was added to the Commodity Credit Corporation (CCC) program, run by the U.S. Department of Agriculture. This program issued credit to nations for the purchase of U.S. agricultural products.

This friendly policy toward Iraq was reexamined by Congress in 1988, when the issue of sanctions against Iraq was brought up after the gassing of several thousand Kurds by Iraqi dictator Saddam Hussein. Despite congressional reevaluation, the Reagan administration continued to seek a closer relationship with Iraq, in hopes of the United States gaining greater influence in the region. In October 1989, National Security Decision Directive 26, signed by President George H. W. Bush, explicitly supported increased financial links with Iraq. This desire to improve relations would last until Iraq invaded neighboring Kuwait in August 1990.

The friendly Iraq policy came under intense media scrutiny because of a search conducted in August 1989 of the Banca Nazionale del Lavoro (BNL), an Italian bank with a branch in Atlanta, Georgia. The bank, specifically its branch manager Christopher Drogoul, was accused of having loaned or credited Iraq about $4 billion. It was discovered that this money helped Iraq purchase weapons illegally.

It was found that some of these funds were connected with the Community Credit Corporation program. There was no proof, however, that the Bush administration had knowledge of the branch manager's illegal activities. Specifically, what was reported in the media was that, as part of the CCC program, the Iraqis were buying U.S. agricultural products for less than the loan amounts they received. They then used these extra funds primarily for arms purchases.

The media also reported that, despite this corruption, the Bush administration had continued to provide funds to Iraq. Critics further argued that the granting of these loans was encouraged by the Bush administration, despite apparent credit problems of Iraq. Supporters of the administration argued that there had been no actual exchange of money involved, only a line of credit extended for agricultural purchases. Furthermore, some argued that Iraq had repaid a portion of the loans it had already been given and thus was a good risk.

The media dubbed the scandal Iraqgate as an allusion to the Watergate scandal that brought an end to the presidency of Richard Nixon more than a decade earlier. As a result of all the media attention on Iraqgate, numerous internal investigations were launched by Congress and the executive branch. The House Banking Committee, for example, examined whether there were possible problems with banking practices, and the Department of Agriculture launched a probe into its CCC program. Also, a special Senate committee on Iraqgate was created.

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