
/** mideast.gulf: 32.0 **/
** Topic: BNL - GONZALEZ - April 25, 1992/I **
** Written 12:51 pm  Jul 29, 1992 by cadwallader in cdp:mideast.gulf **
652
Subject:  Special order in the House of Representatives, 
transcribed from the Congressional record dated April 25, 
1991. H 2547
 
BNL SUBPOENA RENEWAL
 
Mr Gonzalez: Mr Speaker, I take the floor today to deliver 
the third in a series of special orders related to the 
largest banking scandal in history [since the date of Rep. 
Gonzalez' speech, BNL has been somewhat overshadowed by 
the BCCI imbroglio and the close connections subsequent 
indictments have suggested between the last three 
Administrations and key figures in the rogue bank] - the 
events surrounding the Banca Nazionale del Lavoro scandal. 
the BNL scandal is the sensational banking fraud in which 
the former employees of the BNL provided over four billion 
dollars in loans to Iraq without reporting them to the 
appropriate State and Federal bank regulatory agencies or 
even to BNL's own management in New York or to their 
headquarters in Rome.
        But the BNL scandal had implications far beyond the 
fact that the State and Federal bank regulatory agencies 
failed to properly supervise the operations of BNL. The 
BNL scandal was a key factor in the United States-Iraq 
relations in that it was eventually responsible for 
halting the extension of billions in United States 
Government credit to Iraq.
 
BNL KEY FACTOR IN UNITED STATES-IRAQ RELATIONS
        The importance of BNL to United States-Iraq relations 
is best revealed in a Federal Reserve workpaper that 
states that Secretary of State James Baker actually talked 
to Saddam Hussein in September/October 1989 about the BNL 
scandal. In addition, there are many BNL-related telexes 
between Ambassador April Glaspie and the State Department 
in Washington
        The importance of BNL to United States-Iraq relations 
is further illustrated by the fact that in late 1989, the 
White House Director of Cabinet Affairs, along with 
deputies from Treasury, States, OMB, Commerce, 
Agriculture, US Trade Representative, Export-Import Bank 
and a Federal Reserve Board Governor held a meeting to 
discuss the implications of the BNL scandal.
        We also know that a former employee of BNL was close 
to Saddam Hussein's son-in-law, Hussein Kamel, who headed 
the Iraqi military industrialization effort. We also know 
that former BNL employees were close to several members of 
the Central Bank of Iraq [Bank Raffidian] including its 
director. BNL employees visited with Mr Kamel and high 
ranking Central Bank employees while in Baghdad.
        The involvement of such high level United States and 
Iraqi Government officials is quite revealing of the 
importance of the BNL scandal.
 
BNL MAJOR SOURCE OF PRIVATE LOANS TO IRAQ
        The reason the BNL scandal was so important to Iraq 
was money. During 1987-89, BNL was the No 1 source of 
private Western bank loans to Iraq. Because of Iraq's poor 
financial condition, Western banks would not loan money to 
Iraq without a government guarantee of repayment. BNL 
filled the void left by Iraq's inability to borrow by 
providing over three billion dollars in loans that were 
not guaranteed by Western governments.
        About a third of that amount went for food and 
freight charges while a little over two billion dollars 
was earmarked for the ambitious Iraqi reconstruction 
program. We have learned that a good portion of those 
funds were actually used to upgrade Iraqi military 
capability.
        BNL also provided almost one billion in United States 
Government guaranteed loans to Iraq. BNL was the largest 
single bank participant in the five point five billion 
dollar United States Department of Agriculture's Commodity 
Credit Corporation {CCC} with Iraq. Between eight hundred 
and nine hundred million in BNL loans to Iraq were 
guaranteed by the CCC.
        BNL was also the second largest participant in the 
two hundred and sixty seven million dollar Export-Import 
Bank [Eximbank] program with Iraq. Over fifty million 
dollars in BNL loans to Iraq were guaranteed by the 
Eximbank.
        Today I will talk about United States policy toward 
Iraq and several key people in the administration partly 
responsible for United States policy toward Iraq - Brent 
Scowcroft and Lawrence Eagleburger. I will explore their 
backgrounds, their interlocking relationships and Henry 
Kissinger's and Mr Eagleburger's relationship to BNL.
        President Bush, as did his predecessor Ronald Reagan, 
placed a high value on improving United States-Iraq 
relations. Both saw Iraq as an important United States 
ally in the region. Iraq was considered an important 
player in the Middle East peace process, and a key to 
subduing the Islamic fundamentalist movement in Iran which 
was perceived as a threat to United States interests in 
the region. United States policy makers also saw in Iraq a 
chance to snatch away a key Soviet ally in the gulf.
 
 
        President Reagan and President Bush followed a 
similar course of action in pursuing improved United 
States-Iraq trade. Since the United States decided to give 
the appearance of neutrality in the Iraq-Iran was, it 
could not provide arms shipments to Iraq. Given that 
decision it was left little choice but to offer trade 
including US high technology transfer as the cornerstone 
of its policy. The majority of our Western allies followed 
our lead.
 
[On July 1, 1992, ABC news ran a special Nightline program 
which detailed how the United States fought a covert war 
on the side of Iraq during the Iran-Iraq war. Admiral 
Crowe has since energetically denied the entire affair 
before a Congressional hearing. ABC, nonetheless, stands 
by it's story, which goes like this: The bombing of an 
Iranian civilian airliner by the US Vincenze was a 
casualty of that covert war. This observer, impressed by 
the difficulties of defeating Saddam, the previous US 
administration's decision to share intelligence with 
Saddam's regime, the enormous possibilities for corruption 
and defeat-from-within which the present level of arms 
transfers to Saudi Arabia provide, and the recently 
reported covert war currently being waged in Iraq, is 
inclined to  predict crisis in energy supplies which may 
be expected to result from present policy in the Gulf, 
which seems to be out of control.]
 
        A foreign policy based on commercial trade had the 
advantage of providing Iraq with high quality food and 
United States technology to upgrade its military 
capability in order to defeat Iran. It was also easy to 
sell back home because this policy benefited the American 
economy as well as some of the most powerful corporations 
in our country. Remember, during the latter half of the 
1980's the United States was frantically seeking to 
improve its trade deficit [NDT: the result New Economic 
Policies, otherwise known as Reaganomics, which produced 
the Reagan Generation, and culminated in riots in 
seventeen of America's cities] so a trade based  foreign 
policy with Iraq appeared to serve multiple objectives.
        In order for this trade-based foreign policy to work, 
the United States had to ignore a few Iraqi bad habits 
including massive human rights abuses, the imprisonment, 
torture and execution of political prisoners, an almost 
complete lack of democracy, the use of poison gas against 
Iraq's own Kurds, the use of poison gas against the 
Iranians, state-sponsored terrorism, making refugees out 
of over 100,000 Kurds, the execution of a foreign [Faroud 
Barzoft] journalist, continual debt servicing problems, 
and the diversion of United States technology to improve 
Iraqi nuclear, chemical and biological weapons capability 
and for many months, BNL scandal.
        A key to keeping trade open with Iraq was the 
availability of United States, European, and Asian 
government-guaranteed credit. Because of its costly war 
with Iran, by 1984, Iraq had exhausted its thirty five 
billion in estimated reserves and plunged into the ranks 
of the Third Wold debtor nations. Iraq was forced to 
reschedule their loans. The Iraqi debt situation 
jeopardized the trade-based policy.
        Banks and other private creditors would not touch 
Iraq without a government guarantee. In order to make the 
trade-based policy work, Western creditors had to cough up 
government guarantees which they did in generous amounts. 
For example, by 1988, the CCC program with Iraq reached a 
billion dollars annually and between 1985 the CCC program 
provided roughly four billion in credit for Iraqi 
purchases of United States agricultural commodities.
        The Eximbank helped provide two hundred and seventy 
six million dollars in short-term credit to Iraq between 
1985 and 1990. That amount would have gone through the 
roof had it not been for responsible people at Eximbank 
who realized Iraq was not a fundamentally creditworthy 
nation given the way it was running its economy and 
prosecuting the war with Iran 
        At this time I would like to introduce a couple of 
lists and projects United States companies wanted to 
building Iraq with the help of Eximbank financing. As you 
can see by 1988, US companies were seeing to secure 
Eximbank financing for projects totalling nearly thirteen 
billion dollars. As you can imagine, lobbying from the 
export community and their bankers, along with the urging 
of the State Department, which was trying to achieve the 
trade-based policy towards Iraq, was intense. Had it not 
been for responsible people at Eximbank, I am convinced 
the taxpayer would have been stuck with the tab for many 
of those projects. As it is, BNL helped to finance many of 
the very projects on the list.
        On the industrial side of the ledger the United 
States export licensing process was used by the State and 
Commerce Departments, with the backing of the President's 
National Security Council {NSC}, to increased trade with 
Iraq. Unfortunately, the export control process often 
failed to stop Iraq from obtaining militarily-useful 
technology even though some Defense Department officials 
warned that United State technology destined for Iraq was 
going directly into upgrading Iraqi military capability. 
The following provides an example of the official United 
States policy toward technology transfer to Iraq.
        Dr Stephen D. Bryen, former Deputy Under Secretary of 
Defense for Trade Policy and Director of Trade Technology 
Security Administration [DTSA}, testifying recently before 
the Banking Committee, stated:
<The Department of Defense objected to about forty per-
<,cent of the export licenses that came before it for
<Iraq. Generally speaking, the Defense Department's 
<strongest objections for Iraq concerned the potential
<use of exported goods for Iraq's nuclear program, for 
<missile testing and construction, and for chemical and
<biological weapons development. Examples include special
<computers for missile testing, analytical instruments
<best suited for chemical and biological weapons 
<development , satellite and airborne surveillance
<equipment to accurately locate distant targets and 
<furnaces for Iraq's nuclear weapons development 
<programs.>
        Officially, one point five billion in United States 
technology was transferred to Iraq through the United 
States export control process. Nobody knows for sure what 
additional United states technology reached Iraq.
        On the private side, ambits immediately after the 
United States normalized relations with Iraq in 1984, the 
UNITED STATES-IRAQ BUSINESS FORUM WAS FORMED. IT WAS 
FOUNDED NY MR MARSHALL WILEY, A FORMER STATE DEPARTMENT 
OFFICIAL STATIONED IN BAGHDAD  prior to the normalization 
of United States-Iraqi relations. The chairman of the 
Business Forum was Mr Robert A. Abboud, former chairman of 
First Chicago Bank, former president of Occidental 
Petroleum, and until recently, chairman of First City Bank 
in Houston, Texas. In other words, he was well wired into 
the US business community.
        To say that the Business Forum was US government-
sanctioned would be going too far. But the Business Forum 
did play a key role in United States-Iraqi commercial 
relations.
        Many of the companies dealing with Iraq, industrial 
and agricultural alike, received loans from BNL. Since the 
Eximmbank would not provide loans to finance the Iraqi 
industrialization effort, the Iraqis turned to BNL as a 
source of loans for large and small projects alike.
        During the remainder of my time I would like to talk 
about Kissinger Associates, Lawrence Eagleburger and Brent 
Scowcroft. I will explore the relationship of Henry 
Kissinger and Lawrence Eagleburger** urger to BNL which 
loaned four billion dollars to Iraq. I will also talk 
about several interesting links between MR Scowcroft and 
Mr Eagleburger and companies involved with Iraq.
        Again, I am merely exploring the interlocking 
relationship between these people and United States policy  
toward Iraq. This special order will also offer the public 
a view of the role of Kissinger Associates.
 
HENRY A. KISSINGER
        Henry Kissinger, one of the best-known and most 
powerful Presidential advisors of the post-war era, began 
his political career in 1956 as a consultant on military 
affairs. He advised many executive branch organizations 
including the Joint Chiefs of Staff, the National Security 
Council, and the Department of State. in 1969 he became 
President Nixon's National Security Advisor, and in 1973 
Nixon named him Secretary of State. He held that post 
until 1977.
        Kissinger remains active as a foreign policy analyst 
and consultant. In 1989, Mr Kissinger was a member of the 
President's Foreign Intelligence Advisory Board [FIAB]. 
Members in this elite club are permitted access to highly 
classified information and members actually advise the 
President directly on intelligence issues.
        In 1982, Mr Kissinger founded Kissinger Associates 
with offices in New York and Washington. It is said hat 
the firm analyzes political risk and international 
economic trends to help clients make concrete business 
decisions. Several of the Kissinger Associates clients are 
also members of the UNITED STATES-IRAQ BUSINESS FORUM.
 
KISSINGER ON BNL INTERNATIONAL ADVISORY BOARD
        Henry Kissinger was in fact a paid member of the 
Banca nazionale del Lavoro Consulting Board for 
International Policy. Mr Kissinger held this position 
during the height of the biggest banking scandal of all 
time -- was four billion dollars in unreported loans to 
Iraq by the Atlanta branch office of BNL.
        Other former or current employees of Kissinger 
Associates had links to Iraq.
 
ALAN STOGA
        Alan Stoga is a former economist at First Chicago 
Bank and is currently a director of Kissinger Associates. 
Mr Stoga is said to be an expert in country risk analysis 
and international finance. He has been interested in the 
Middle East for many years and has made numerous visits to 
the area.
        Mr Stoga worked as the chief economist of the 
international division oat First Chicago Bank. The 
chairman of the First Chicago at that time was A. Robert 
Abboud, the current chairman of the United States-Iraq 
Business Forum. Mr Stoga is a friend of Marshall Wiley, 
the Business Forum founder, and he spoke at Business Forum 
functions.
        In June 1989, Mr Stoga, MR Wiley and Mr Abboud, 
visited Iraq with other members of the United States-Iraq 
Business Forum. They met with Saddam Hussein who 
purportedly expressed an interest in expanding commercial 
relations with the United States.
        Many Kissinger Associates clients received United 
States export licenses for exports to Iraq. Several were 
also the beneficiaries of BNL loans to Iraq.
 
LAWRENCE S. EAGLEBURGER
        Lawrence Eagleburger, Deputy Secretary of State, has 
held many positions of international influence, in both 
the public and private sectors. Eagleburger started his 
political career in 1957 as a Foreign Service Officer. In 
this capacity, he represented the United States in 
Honduras for 2 years, and in YUGOSLAVIA for 4 years.
        Then in 1969, Henry Kissinger became Nixon's National 
Security advisor, and Eagleburger served as his executive 
assistant. After working as a political advisor to NATO in 
Belgium, and as Deputy Assistant Secretary in the 
Department of Defense, Eagleburger rejoined Kissinger at 
the State Department, again as his executive assistant in 
1973.  In 1973 he was named Deputy Under Secretary for 
Management at the State Department.
        Eagleburger was appointed Ambassador to Yugoslavia 
during the Carter administration and served in that 
capacity from 1977 to 1981. He has remained a close ally 
of Yugoslavia.
        Under President Reagan, Eagleburger became Assistant 
Secretary of State for European Affairs, and held this 
position from 1981 to 1982. Subsequently, he served for 
two years as Deputy Under Secretary for political Affairs. 
Before assuming his current position as Deputy Secretary 
of State in 1989, he served as president of Kissinger 
Associates Inc., a political consulting firm organized by 
Henry Kissinger.
 
EAGLEBURGER CLIENTS
        During his confirmation process, Mr Eagleburger 
identified a number of prominent clients of his at 
Kissinger Associates. Mr Eagleburger was a director of 
ITT, Alcatel, Bethlehem Rebar, Global Motors, Mutual of 
New York, JHosephson International, and Best Mart,. Mr 
Eagleburger was also a director of LBS Bank from 1986 - 
1990. LBS bank is a wholly owned subsidiary of one of the 
largest banks in [the former] Yugoslavia.
        Global Motors, Inc., was the corporation established 
in the United States to distribute the Yugoslavian-made 
small compact car called the <Yugo>. Global Motors filed 
for chapter 11 bankruptcy in 1989. A creditor filing suit 
against the investment bank acting as financial advisor to 
Global listed Mr Eagleburger as a defendant in that suit.
        The Yugoslavian maker of the Yugo is a firm called 
Zavodi Crevna Zastava (ZCS). ZCS is the backbone of the 
Yugoslavian arms industry and its main clients include 
Iraq, Libya and other Eastern European nations.,
        As a longtime loyal supporter of Yugoslavian 
interests, MR Eagleburger was instrumental in helping both 
Global Motors and LBS establish their United States 
operations. He was not alone. As we shall see, BNL had a 
very substantial, and even incestuous relationship with 
LBS.
 
THE BNL-LBS NEXUS
        After Iraq, BNL's largest foreigh customer was 
Yugoslavi. BNL had loans to various Yugoslavian entities 
as well as a very special relationship with LBS Bank-New 
York (LBS). LBS is a wholly-owned  subsidiary of the 
[former] Yugoslavian bank - Ljubljanska Banka. Ljubljanska 
Banka is the second largest bank in Yugoslavia with seven 
point one billion in assets as of year-end 1990.
        in 1986, with the help of Mr Eagleburger, 
LBS opened a State-chargered bank in New York City called 
LBS Bank-New York. BNL was responsible for a significant 
amount of the growth of LBS while Mr Eagleburger was on 
its board.
        During an examination of BNL in 1989, the Federal 
Reserve stated that between 1986 and August 1989:
 
        BNL fueled a significant amount of LBS's growth in 
the US with twenty percent to twenty-five percent of LBS's 
business from BNL.
        The first transaction between LBS and BNL was a 
credit facility established in October 1986, three months 
after LBS opened in New York. BNL also maintained a banki 
account at LBS. The majority of the business between the 
two entities -- totalling tens of millions of dollars -- 
involved the LBS purchase of loans originated by BNL. Some 
of those loans involved Iraq.
        Other loans purchased by LBS included BNL loans to 
Cargill. Cargill is now under investigation for violating 
the Trading with the Enemy Act involving the BNL-financed 
sale of Cuban sugar.
 
FORMER BNL-NEW YORK OFFICER REPLACED EAGLEBURGER AS 
DIRECTOR OF LBS.
        Symbolic of the close relationship between BNL and 
LBS, the former regional manager of BNL became a director 
of LBS soon after Mr Eagleburger left to take his current 
State Department post.
        Mr Renato Guadagnini, who worked for BNL for thirty 
nine years, was appointed a director of LBS in early 1989. 
Mr Guadagnini was the regional amanger of BNL's US 
operations while the Atlanta branch of BNL was illegally 
loaning four billion dollars to Iraw apparently without 
his knowledge.
        It is hard to fathom how the person responsible for 
supervising BNL during the time it illegally loaned four 
billion to Iraq is qua.lified to be a director of another 
bank. [Bear in mind that Rep. Henry Gonzaez is Chair of 
the House Banking and Finance Committee.]
 
ANOTHER LINK BETWEEN BNL AND LBS
        Another link between BNL and LBS is the chief lending 
officer of LBS. BNL's Christopher Drogoul, a main 
conspirator inthe BNL loan scheme with Iraq, had a close 
business relationship with the chief lending officer of 
LBS while both were stationed in London. On occasion that 
LBS lending officer, as well as the chief financial 
officer, visited BNL's office in Atlanta. BNL employees 
also visited LBS when they were in NEw York.
 
        [NDT: Christopher Drougul was indicted on 370 counts 
of fraud, and in his defense he recently announced that he 
would indeed  make clear the amount and degree of 
assistance he received for his system of loans, 
administered - as we think we have already noted - out of 
a shoebox in the trunk of his car, and dubbed <Perugina>. 
The Justice Department subsequently entered into a plea-
bargain agreement with Mr Drougul whereby he would plead 
guilty to sixty counts and the remainder would be dropped. 
This arrangement ensures that no public pleading will take 
place and the arguments will not be made in an open forum 
where the press may report on them. In sum, the trial was 
held in secret, and amounted to successful blackmail on 
the part of Drogoul. The Administration acceded to Mr 
Drogul's manipulation much the same as it did to those of 
Saddam, presumably because the pressures put on it by this 
tactic were too powerful. It is interesting to note that 
one of Mr Drogoul's assistants, Janine Speckman, is no 
longer mentioned. She is not indicted, and press reports 
of the story no longer make any reference to her.
        Another name cited at the beginning with Mr Drogoul's 
activities at BNL was one familiar to those who have 
studied successive international banking scandals: Michael 
Hand. Australian authorities would very much like to 
question Michael Hand in connection with the failure of 
the Nugan Hand bank in Australia. The Nugan Hand bank 
specialized in drug money laundering, gun running and 
covert activities. A California businessman testified at 
House Banking Committee hearings that the description 
given him of the Michael Hand involved with Drogoul did 
not fit the likeness of the man in photographs of Michael 
Hand in Jonathan Kwitny's book <The Crimes of Patriots>, 
which draws on testimony of the various hearings which 
took place following the collapse of the Nugan Hand bank. 
The California businessman had not seen the BNL Michael 
Hand. What are we to make of his testimony?]
 
LBS NOT WELL RUN WHILE EAGLEBURGER A DIRECTOR
        Apparently LBS was not a well run institution while 
Mr Eagleburger was on its board. Upon examining the 
relationship between BNL and LBS in 1989, the Federal 
Reserve concluded:
 
<LBS is conducting a very sloppy operation and supervision 
<by the head office is extremely weak. Examiners have 
<found a number of instances where there is a lack of 
<documentation in loan participations with BNL. LBS does 
<not have an internal auditor.>
 
        Sloppy management was mnot the only trouble LBS had 
during MR Eagleburger's tenure as director -- LBS was also 
involved in money laundering.
 
LBS CONVICTED OF MONEY LAUNDERING
        As we have seen, LBS and BNL had a significant 
relationship while the latter was perpetrating the largest 
banking scandal of all time. LBS was also involved in 
criminal activity during that same period. 
        In 1988, LBS and its chairman were indicted on 
charges of laundering almost one point five billion 
dollars. The chairman of LBS was eventually cleared of the 
charges made against him, nevertheless, a jury convicted 
LBS of money laundering.
 
LBS PARENT IN YUGOSLAVIA INVOLVED IN CRIMINAL ACTIVITY
        A literature search of the Yugocslavian parent of LBS 
revealed that it salso has been involved in several 
criminal proceedings during the past several uyears. Two 
such scandals took place in the cities of Pristina and 
Titograd in Yugoslavia.
        The Yugoslavian parent of LBS was also at the center 
of Yugoslavia's largest ever financial scandal - the 
Agrokcmmerc affair. Agrokommerc issued almost one billion 
dollars worth of false promissory notes in loal 
Yugoslavian currency. The parent of LBS and many of its 
affiliates arranged to purchase most of the notes. THe 
scandal led to scores of arrests, the fall of Yugoslavia's 
vice president, and shook the Yugoslavian banking system 
and economy.
 
LBS INVOLVED WITH ENTRADE WHILE EAGLEBURGER A DIRECTOR
        LBS's association with criminal activity and 
criminals extended to the New York-based compay called 
Entrade International, Ltd. and its chief financial 
officer, Yavuz Tezeller.
        Entrade International, Ltd., is a Turkish-owned NY-
based trading company specializing in the international 
trade of goods and commodities. Here BNL shows up again, 
as the bank was indicted with ENtrade and Mr Tezeller  for 
obtaining unauthorized financing for exports to Iraq often 
with CCC export guarantees or insurance.
        The Justice Department indicted Entrade and Mr 
Tezeller for providing cash, houses, jewelery, vacations, 
and other things of value for personal use and benefit of 
BNL employees in consideration for the unauthorized loans 
made to finance Entrade's exports to Iraq and elsewhere. 
Entrade faces a maximum fine of fifty four million 
dollars.
        Mr Tezeller, a Turkish national, is charged with 
directing Entrade's contracts with BNL and with other 
entities in Europe and the Midle East owned by Entrade's 
parent, Enka. Mr Tezeller has fled to Turkey.
        LBS also extended a three hundred thousand dollar 
moretgage loan to Yavuz Tezeller. The Federal Reserve 
stated that <this loan appears to have been the first and 
onlymortgage loan made by LBS.>
        Given the level of criminal involvement of LBC and 
its parent in Yugoslavia, and its close relationship with 
organizations charged with criminal activity, i have 
written letters to the Federal Reserve and State of New 
Yofk asking them to provide more information about LBS's 
operations in the US as well as a more in-depth look at 
the relationship between LBS and BNL.
 
EXIMBANK AND YUGOSLAVIA: IS THERE AN EAGLEBURGER 
CONNECTION?
        Mr Eagleburger has had a long and prosperous 
relationship with [the former]Yugoslvia. He was AMbassador 
to Yugoslavia and prior to holding that post he worked in 
the Embassy as a foreign service officer. WHile at 
Kissinger Asociates he ehlped set up Global Motors to 
distribute the Yugo and he helped LBs get started in New 
York. It is fair to say that over the past couple of 
decades Mr Eagleburger has been one of Yugoslavia's 
biggest backers in the US government.
        These facts could posslbly explain the Eximbank 
exposure to Yugoslavia which stood at a whopping one point 
zero five six billion dollars as of March 1991. One 
lontime Eximbank employee stated that he <always 
considered Eximbank's large exposure toYugoslavia 
unusual.> Upon closer examination, Yugoslavia may be 
receiving special treatment from theEximbank at this very 
moment.
 
BANKING COMMITTEE DENIED ACCESS TO YUGOSLAVIA DATA
        Yugoslavia is now on the brink of political and 
economic chaos. It is being torn apart politically and the 
most recent Eximbank country risk analysis for Yugoslavia 
is not encouraging. WHile the Committee was able to see 
the country risk analyses for Iraq, John Macomber, the 
President of Eximbank and a friend of Mr Eagleburger, 
would not permit Committee investigators access to the 
country risk analysis for Yugoslavia.
 
YUGOSLAVIA ADMINISTRATIVELY SUSPENDED FROM EXIMBANK 
PROGRAMS
        Mr Macomber recently decided to place all Yugoslavian 
transactions on hold -- effectively suspending Yugoslavia 
from Eximbank programs. This was not done throuth the 
usual process which calls for Eximbank Board of Directors 
to make the call regarding the suspension of a country 
from Eximbank programs. instead, Mr Macomber decided to 
give the order to place all Yugoslavian business at the 
Benk on hold without allowing the Board to formally vote 
on suspending Yugoslavia.
        Without a formal board action, an American exporter 
has no way of knowing Eximbank will not process 
yugoslavian transactions. That is unless the exporter has 
the foresigt to call the Eximbank before going to the 
expense of doing business with Yugoslavian concerns. The 
mission of the Exminbank is to serve exporters. by not 
formally suspending Yugoslavia, the Eximabk may be doing a 
disservice to American exporters.
 
LBS AND PARENT NOT SUSPENDED FROM EXIMBANK
        lbs and its parent bank in Yugoslavia both 
participate in Eximbank programs. both have been involved 
in serious ciniminal activity, one in the United States 
and the other in Yugoslavia, yet the Export-Import bank 
has not suspended either bank from its programs. 
 
IS EAGLEBURGER MEDDLING IN EXIMBANK AFFAIRS?
        The question arises why Yugoslavia has received 
special treatment from the Eximbank. Has Mr Eagleburger 
influenced the actions of Eximbank? Mr Macomber has stated 
that Yugoslavia has not received special treatment, but 
that statement is hard to understand given the facts.
        For example, longimt Eximbank staff stated that it 
was rare that an Eximbank President would take a 
unilateral action to place business with a nation on hold. 
they also stated that it was unusual for the Eximbank to 
decide not to formally suspend a nation that is suffering 
from such severe economic and political problems and is in 
arrears on Eximbank programs. Yugoslavia is evidently such 
a country.
        Staff at the Bank stated that Mr Macomber speaks to 
Mr Eagleb urger oftem, sometimes as often as two or three 
times a day. They also indicated that the topic of 
discussion between the two is sometimes Yugoslavia.
        Mr Macomber has stated that although he has frequent 
chats wityh Mr Eagleburger, the topic of Yugoslavia has 
bever been broached. This seems highly unlikely given Mr 
Eagleburger's position, his obvious interest in Yugoslavia 
and the importance placed on the Eximbank program in 
Yugoslavia.
        It would seem reasonable that Mr Eagleburger would 
inquire about YUugoslavia's status at Eximbank, but 
according to Mr Macmber this has not been the case. What 
is clear is that Yugoslavia is receiving special treatment 
from Eximbank. At this time the Committee does not know 
why.
 
EXIMBANK PLAYING GREATER FOREIGN POLICY ROLE
        Considering the Administration promosal to allow 
Eximbank to finance one billion dollars in military sales 
and to open up a three million Eximbank program with the 
Societ Union, the trend toward using Eximbank as a foreign 
policy tool is clear.
        This is a disturbing trend. The Eximbank was created 
to assist US exporters. It was not created to be a major 
foreign policy tool. Rest assured, in order to protect the 
taxpayer investment in the Eximbank, the Banking Committee 
will continue to fight to maintain the commercial export 
promotion function of the Eximbank.
 
 
 
 
End of Transcript of first half of this section of the 
April 25, 1991 record. 
 
 
 
  
** End of text from cdp:mideast.gulf **



