
/** mideast.gulf: 33.0 **/
** Topic: BNL- GONZALEZ - April 25, 92 - II **
** Written 12:55 pm  Jul 29, 1992 by cadwallader in cdp:mideast.gulf **
671
Banca Nazionale di Lavoro 
 
Congressional Record - House - April 25, 1991
H 2551
 
Part two, Rep Henry Gonzalez, Chairman of the House of 
Representatives Banking and Finance Committee during the 
Special Orders, to an empty house.
 
BRENT SCOWCROFT
        Another Kissinger Associates alumni is Brent 
Scowcroft, a career Air Force officer and a specialist in 
Slavic languages and history, who has held various 
positions in six administrations. Early in his military 
career, Scowcroft served one year as the air attache at 
the United States embassy in Belgrade, Yugoslavia.
        After earning a Ph.D and working in academia from 
1962 to 1968, he held a succession of poses in the 
Department of Defense. In 1971, President Nixon appointed 
Scowcroft Military Aide to the President and in 1973, 
Kissinger chose him to be Deputy Assistant to the 
President for National Security affairs.
        Scowcroft often took charge of the National Security 
Council while Kissinger was fulfilling his duties as 
Secretary of State, and in 1975 succeded Kissinger as 
National SEcurity Adviser under President Ford. Although 
he resigned the position during the Carter administration, 
Scowcroft stayed active as a member of the President's 
general Advisory Committee on Arms control.
        In 1982,  Scowcroft joined Kissinger in setting up 
Kissinger Associates. Scowcroft served as vice chairman 
until regaining his position as National Security Adviser 
to President Bush in January 1989.
        During his tenure at Kissinger Associates, President 
Reagan appointed Scowcroft to various special commissions 
on defense issues and often sought his advice in national 
security matters.
 
SCOWCROFT OWNS STOCK IN FORTY COMPANIES WHILE NSC DIRECTOR
        Mr Scowcroft's financial disclosure forms indicate 
that up until October 4, 1990, he owned stock in forty 
companies. Several of the companies, like Lockheed and 
General Electric, are among the Nation's largest defense 
contractors. Other companies include multi-nationals like 
General Motors, ITT, Westinghouse, AT&T, Mobil Oil, Du 
Pont, Xerox, and Hewlett-Packard. Some of these companies 
are also defense contractors, but all routinely must 
obtain export licenses as a part of their international 
business operations. The NSC has considerable sway over 
the export licensing process.
        Mr Scowcroft's stock holdings are most startling 
since the actions of the NSC, whether related to the 
export licensing process or US security policy, could have 
an influence on those companies.
 
NSC HAS CONSIDERABLE SWAY OVER EXPORT LICENSING
        As I stated earlier, when George Bush took over as 
President , he issued a national security directive 
ordering improved relations with Iraq. The President, with 
the advice and consent of his senior advisers, including 
Mr Eagleburger and Mr Scowcroft, determined that the best 
way to improve relations with Iraq was through expanded 
trade. This policy was little different from that pursued 
during the Reagan administration.
        The NSC has direct responsibility carrying out the 
President's national security directives. In the case of 
export licensing, the National Security Act of 1947, and 
subsequent legislation provided the President, through the 
National Security Council, with ample authority to 
establish policies on export controls.
        To get a feel for the export licensing role of the 
NSC during the Reagan-Bush administrations, just look at 
the comments of Paul Freedengerg. He was the chief export 
licensing official at the Commerce Department during the 
latter half of the Reagan years and the beginning of the 
Bush administration.
        He recently testified that Iraqi use of poison gas 
against its own Kurds and the Iranians did not suppress 
the zeal of the NSC to approve technology transfer to 
Iraq. In testimony before Congress, Freedenberg stated:
 
<       In the summer of 1988, a number of licenses were
<pending with regard to technology transfer to Iraq. I 
<asked for official guidance with regard to what the 
<licensing policy would be toward Iraq since by that time 
<there was credible evidfence of the use of poison gas by 
<the Iraqis against their own people and also against the 
<Iranians. I suggested that the imposition of foreign 
<policy controls be considered as a way of justifying the 
<denial of export licenses to Iraq. I was told by the 
<National Security Council that the licensing policy with 
<regard to Iraq was that of normal trade and that under 
<normal circumstances I should clear the licenses that 
<were pending. I passed that information on to my 
<licensing officers and the few dozen licenses that were 
<pending at that time were approved and licenses were 
<issued for exports to Iraq.>
        This provides clear insiht into the power the NSC can 
exercise over the export licensing process.
        I would also like to include in the RECORD an article 
from the February 25, 1991 issue of Legal Times. This 
article gives the reader a good overview of Mr Scowcroft's 
role in promoting military sales. The article illustrates 
that an environment existed that could make it possible 
for Iraq to obtain sophisticated US technology to upgrade 
its military capability. The truth about the export 
licensing process is that the NSC and the State Department 
ignored or actually encouraged the transfer of militarily 
useful technology to Iraq, in violation of its public oath 
to prohibit such uses.
        Regarding the question of whether or not the 
companies that Mr Scowcroft owned stock in benefited from 
the United States policy toward Iraq, I can reveal one 
fact: Together, those companies received over one hundred 
out of the total eight hundred US export licenses for 
sales to Iraq.
 
NAMES CANNOT BE RELEASED
        Unfortunately, the names of the companies cannot be 
released at this time. [NDT: But some names were released 
on February 3, 1992, and are included in a footnote at the 
end of this transcript; they were also published in the 
WSJ around that time.] The administration has stated that 
the list of export licenses for Iraq must be kept secret 
because of the supposed "proprietary" information it 
contains. Maybe the real reason for the secrecy stance is 
that the administration is embarassed by the list because 
it symbolizes the abysmal failure of the trade-based 
approach to foreign policy.
 
KISSINGER ASSOCIATES AND THE GENERAL-MOTORS VOLVO TRUCK 
PLANT IN IRAQ
[NDT: Please remember that not only does this mean that  
Saddam was supplied with American technology and goods 
while he was threatening a US ally in the Middle East, but 
also that a number of jobs were exported to Iraq at 
taxpayer expense. Have the US taxpayers reaped any 
particular benefit from this scheme?]
 
        The following is an interesting story involving 
General Motors and Volvo and their link to Mr Eagleburger 
and Mr Scowcroft and to BNL, and illustrates the odd 
triangle linking foreign policy toward Iraq, and BNL's 
role in financing it -- not to mention the role of 
Kissinger Associates.
        Volvo was a client of Kissinger Associates and the 
chairman of Volvo, Pehr Gyllenhammar, was on the Kissinger 
Associates board of directors with Mr Eagleburger and Mr 
Scowcroft. Mr Scowcroft owned stock in General Motors 
until at least October 2, 1990.
        Mr Scowcroft's and Mr Eagleburger's jobs placed them 
in a position of considerable influence over United 
States-Iraq trade. Both were responsible for carrying out 
the President's directive calling for improved relations 
with Iraq.
        Volvo and General Motors are partners in a company 
called Volvo GM Heavy Truck Corp. In 1989, Volvo GM Heavy 
Truck proposed to build a 5,000 unit-per-year heavy truck 
factory in Iraq. A copy of that proposal is in the record.
        GM and Volvo had considerable dealings with Iraq. In 
1988, GM sold five thousand one hundred and twenty five 
Chevrolet Celebrities to Iraq. During 1989, GM secured 
financing from BNL for ten thousand Cutlass Cieras to be 
sold to Iraq. The BNL operation may have been shut down 
prior to actual disbursement of BNL monies. BNL money paid 
for dump trucks and units for Volvo and diesel engines to 
Iraq.
        GM frequently met with Eximbank officials to secure 
additionl GM projects in Iraq totaling an estimated eight 
hundred million.
        Hussein Kamel (or Kamil) is Saddam Hussein's son in 
law. BNL employees met with Mr Kamel when they travelled 
to Iraq. Mr Kamel is said to have been responsible for the 
secret Iraqi technology procurement network operating in 
Europe and the United States; Mr Kamel was the head of the 
Ministry of Industry and Military Manufacturing in Iraq.
 
[NDT: Today - July 6, 1992 - CNN is reporting that the 
Iraqi's will not allow UN inspectors into a building which 
houses the Ministry of Agriculture. Given the strong 
connection between part of their military procurement 
scheme and USDA funds sucked out of BNL, one cannot help 
but wonder whether or not there exist a number of 
documents of a particularly compromising nature inside 
that building. Update: July 29, 1992, Many documents 
removed. No end to sanctions can be forseen.]
 
        On June 20, 1989, Volvo GM Heavy Truck Corp. wrote to 
the Iraqi Minister of the Ministry of Industry, Hussein 
Kamel, proposing the construction of a five thousand unit 
per year heavy truck factory in Iraq. The Volvo GM letter 
failed to add the words "Military Manufacturing" to Mr 
Kamel's title.
        Two other US automotive companies considered 
participating in the project. They were Cummings Engine 
Co. and Eaton Corp., Cleveland OH. In a memo describing 
their visit to Iraq, Volvo GM staff stated:
        First, the delegation meeting them was headed by a 
Brigadier General.
        Second, the ministry they met with is responsible for 
Industry and Armament.
        Third, the delegation visited a number of top secret 
defense operations.
        The Volvo GM memo goes on to state:
 
        <US authorities have been approached with the 
<objective to obtain loans from the Eximbank. The 
<different government agencies have responded very 
<positively and appointments are made for further talks 
<with the government including the White House. So far, no 
<credit line is available from Eximbank.>
 
        Who at the White House was contacted remains a 
mystery. [NDT: Perhaps it was the same person to whom the 
UN-IAEA spoke by satellite telephone after a standoff 
situation in a Baghdad parking lot had been resolved.] But 
the White House was not alone in being sought out to 
suppor the project. Eximbank received fifteen letters from 
Congressmen, Senators, and one Governor interested in 
Eximbank financing for the truck factory.
        Thankfully for the taxpayer, the Eximbank refused to 
fund the project because it did not think Iraq was 
creditworthy. The project provides a good illustration of 
the sort of pressure the Eximbank was under to do business 
in Iraq.
 
EATON CORP IDENTIFIES MATRIX CHURCHILL AS IRAQI OWNED 
COMPANY
        A startling revelation appears in the Eaton 
Corporation portion of the Volvo GM memo. In that portion 
of the memo an Eaton employee states: <It is interesting 
to note that Matrix Churchill in the UK is seventy-five 
percent owned by the Iraqi Government.>
        Matrix Churchill, Ltd., was the prime Iraqi front 
company operating in the United Kingdom. Its Cleveland, OH 
affiliate, Matrix Churchill Corp., was the main Iraqi 
front company operating in the United States. Matrix was 
responsible for procuring technology to be used in Iraqi 
weapons factories.
        What is amazing is that the US Government did not 
confiscate the Cleveland operation of Matix until 
September 1990 and the British did not confiscate the 
London operation until October 1990, both after the Iraqi 
invasion of Kuwait and months after Iraqi assets were 
supposed to be frozen.
        BNL was a main source of funds for Matrix Churchill 
and other members of the secret Iraqi technology 
procurement network.
 
SCOWCROFT-EAGLEBURGER AND EXIMBANK MILITARY SALES
        The Legal Times article I referred to mentions the 
Eagleburger-Scocroft effort to get the Exoport-Import Bank 
to finance military sales. I have two points to make 
regarding the Eximbank financing of military sales; the 
first regards Iraq.
        I have evidence showing that Eximbank backed the sale 
of military articles to Iraq. I would like to place in the 
RECORD several examples of Eximbank financed military 
sales to Iraq. In 1986, the Eximbank approved the sale of 
six hundred thousand sollars' worth of <portable radio 
communications equipment> and in 1987 it approved the sale 
of <two hundred and fifty armoured military truck 
ambulances> to Iraq. I have also included a Mack Truck 
sale of two hundred fifth wheel trucks to Iraq that the 
Eximbank refused to finance because of their military 
applications. Mack Truck sold trucks, tractors cranes and 
dumbers worth six point four million to Iraq with the 
heklp of BNL loans. Iraq also paid for forty heavy duty 
Mack truck chassis worth over two point five million 
dollars with BNL loans.
        The sad part about the Exim-backed sales to Iraq is 
that only a small handful of the one hundred and eighty 
seven transactions were checked for military use by the 
Eximbank engineers familiar with dual-usetechnology. The 
vast majority of Eximbank bbacked sales to Iraq were 
checked only by a loan officer.
        Nobody really knows the extent of Eximbank-backed 
militarily useful exports to Iraq. It is imperative that 
the Banking Committee plug the loophole that allows 
Eximbank-backed exports to go to dangerous nations without 
being adequately checked by professional engineers.
        The second point I have relates to the Eagleburger-
Scowcroft proposal to finance one billion dollars in 
military sales using Eximbank. I have stated before and I 
will state again, Eximbank should not be used as a tool to 
augment declining military sales.
 
CONCLUSION
        One interesting question that remains unanswered is 
why United States law enforcement authorities have not 
arrested or charged many companies with violations of US 
export control laws related to Iraq. Other governments, 
such as Germany, have announced efforts to pursue dozens 
of companies, many very prominent, for criminal violations 
of export control laws. I challenge you to name one United 
States company that has been indicted for violating the 
export control laws related to Iraq.
        Clearly, it was official US Government policy to 
provide Iraq with the credit necessary to purchase 
enormous amounts of United States agricultural products 
and sophisticated United States technology. Warnings about 
the miitary uses of the technology, warnings about Irq's 
creditworthiness, and warnings about Saddam's ruthlessness 
were routinely ignored.
 
[NDT: In the early eighties the Spanish Ambassador was 
appalled to learn that Saddam's eldest son, with whom his 
children had been playing, boasted of having been allowed 
by his father to perform executions personally, at the age 
of nine. See <Unholy Baghdad> Abdel Darwish and an 
unidentified contributor.]
 
        It was in this climate that the BNL flourished, and 
close friends of those in key positions of power 
facilitated and profited from this shortsighted policy. 
This official neglect may in large part account for BNL's 
disastrous conduct.
 
Section 1230
 
        Mr Speaker, let me conclude by saying that the worst 
of all is that this is just a small fragment of the huge, 
over seven hundred and thirty billion dollars' worth, of 
this type of money, foreign financing or banking money in 
our country, that is here, that can just -- with a small 
proportion of that, as in BNL, propel huge financial 
packages, for God only knows what purpose, because nobody 
in our government knows, neither the Federal Reserve Board 
nor the State banking regulators in the States where these 
foreign entities charter their agencies, know just what is 
being done in the United States.
 
[NDT: But there is going to be new legislation so that the 
FBI can listen into telephone conversations and capture 
data as it is transmitted along fiber optic lines....]
 
        Mr Speaker, as chairman of the committee I have set 
forth the urgent need for the Congress to legislate with 
some priority in order to provide the American people with 
the sufficient assurance that their national interests and 
the very policies of their Government are in turn being 
protected, and at least being overseen.
 
        Mr Speaker, at this point I include for the RECORD 
the documents I have referred to during my special order.
 
[NDT: One and two thirds of six-point type over three 
columns of Volvo GM documents. Please consult library 
copies of the RECORD if you wish to study them. They are 
very detailed. If you think they should be included, 
append them as a response to this message.]
 
[ARTICLE FROM THE LEGAL TIMES]
 
DEFENSE EXPORTERS' SECRET WEAPONS
By Peter H. Stone
 
        For embattled weapons exporters, it was a salvo heard 
round the world.
        Last July, Deputy Secretary of State Lawrence 
Eagleburger fired off a classified memo to all US 
Embassies urging that US defense firms be given more help 
marketing weapons abroad.
        Some industry leaders boast that the Eagleburger memo 
was written at their behest., several months after a 
Januaru 1990 meeting with defense executives. And these 
leaders say that Eagleburger's directive is starting to 
provide an extra fillip fo foreign sales.
        The memo is just one result of the Bush 
administration's decision to put the government firmly in 
the business of promoting defense exports. Ambassadors now 
open doors, weapons makers may seeon qualify for 
government-backed loans, and the State Department helps 
push sales.
        But the change of policy is controversial -- and 
ironically timed, as the war in Iraq raises new worries 
about the proliferation of weapons.
        A key proponent of the pro-export policy has been 
Eagleburger. But he is dogged by ethical concerns about 
his dealings with former business associates.
        One industry representative at the January meeting 
with Eagleburger was chief executive of a defense 
subsidiary of the ITT Corp. Eagleburger was a director of 
the ITT Corp. before taking office in 1989 and will 
eventually receive benefits from the corporation's pension 
plan. He pledged to recuse himself from government matters 
in which the giant conglomerate is a formal party.
        In addition, as president of the consulting firm 
Kissinger Associates, Ind., Eagleburger did work for ITT.
        At least one critic believes that Eagleburger erred 
by participating in the meeting with the ITT official and 
by writing the directive promoting defense exporters. But 
a State Department legal expert says that Eagleburger, who 
declines comment, did not violate his recusal pledges.
 
ADMINISTRATION AID
        Eagleburger's memo is just one of several 
administration moves to provide help overseas for weapons 
makers.
        Prsident George Bush's budget proposal, for instance, 
authorizes the Export-Import Bank of the United States to 
provide in the next fiscal year up to one billion dollars 
in loan guarantees for defense products. Several companies 
have pushed hard for such guarantees, in a bid to make 
their deals more competitive with fopreign rivals.
        In addition, the State Department last year 
hettisoned its Office of Munitions Control, long a target 
of criticism from the defense industry because of delays 
in processing license applications. The office was 
replaced with a larger operation that for the first time 
has an export-promotion component. Industry leaders say 
the new Center for Defense Trade has already made a clear 
dirrerence in speeding up the licensing process.
        <The difference between 1980 and 1990 is pretty close 
to a quantum leap.> says Fred Haynes, a vice president for 
planning at the LTV corporation. 
[NDT: LTV Corporation is now bankrupt, and it's missile 
manufacturing segment has been awarded by a Bankruptcy 
judge to an international consortium composed of Thompson-
CSF, Mercedes Benz and Raytheon, who also participated 
very actively in end-running domestic controls on arms 
transfers for the benefit of Saddam's military program. 
The administration is considering allowing this sale, 
providing Americans are included on the board of 
directors. But Americans were on the boards of directors 
of over two hundred companies which shipped military and 
dual use technology to Iraq.] <The most significant change 
is that defense exporters are receiving cooperatiive 
support from US agencies and are no longer viewed as 
pariahs.>
        <I think we've found that a number of embassies are 
more supportive,> agrees George Perlman, president of 
Martin Marietta International Inc [also on the list of 
Saddam's suppliers]. <It has been heklpful for the people 
that I have overseas.>
        The backing for weapons exports follows high-powered 
lobbying by leading defense trade groups, including the 
Aerospace Industries Association and the American League 
for Exports and Security Assistance.
        In addition, several defense contractors have served 
as effective advocates for their cause. They include some 
CEO's and other top officials fromthe Lockheed Corp., the 
Unite Technologies Corp., the Martin Marietta Corp., the 
LTV Corp., and ITT Defense Inc.
 
A SHOT IN THE ARM
        State Department officials and defense executives 
stress that defense exports are different from cmmmercial 
trade since they must be deemed in the national interst 
before sales are allowed. Nevertheless, the thrust of the 
recent lobbying campaign and the government's campaign to 
promote the export has been to spur defense business 
abroad, which has been in the doldrums for years. 
Worldwide export deliveries of US arms totaled sixteen 
point five billion in 1987, but by 1989 had slipped to 
eleven point seven billion.
        Defense executives have used the shrinking defense 
budget as a key element in their campaign to increase 
foreign sales. With the Pentagon budget going down, they 
argue, exports are critical to individual companies and to 
the well-being of the defense industrial base. The war 
against Iraq notwithstanding, annual defense spending is 
projected to decrease by some fifty six billion, in 
constant dollars, over the next five years.
        <International opportunities are a must-do for the 
deefense industry,> says Gordon Adams, the director of the 
Defense Budget Project, an independent research group on 
defense issues.
        <You can't just drive over there,> Adams adds. <If 
you want to get into the foreign government, you've got to 
get into the American government.>
        That's just what the industry has been busy doing. 
And it has had a strong and well-placed ally in 
Eagleburger, who, along with National Security Adviser 
Brent Scowcroft, has been instrumental in forging closer 
ties between US agencies and industry export programs.
 
REVERSING THE LEPROSY LETTER
        For years, exporters smarted over one legacy of 
President Jimmy Carter. Dubbed the leprosy letter, the 
directive instructed US embassies to steer clear of 
defense firms because of concerns about regional arms 
races and high-tech weapons proliferation. Companies 
complained that many foreign governments took the opposite 
approach, providing their defense industries with strong 
encouragement for exports.
        Now that's all changing. And Lawrence Eagleburger has 
been getting a lot of the credit.
        <Larry has made a substantial difference. He's 
probably the most sympathetic guy who's been up there in 
years,> says Joel Johnson, vice president for 
international operations at the Aerospace Industries 
Association (AIA), a trade group made up of fifty six of 
the nation*s leading aerospace firms.
        Defense officials have been direct in their 
approaches to Eagleburger.
        At the January 1990 dinner meeting with defense 
executives, he was urged to send a clea signal to US 
embassies in favor of defense exporters.
        <We encouraged Eagleburger to do that, and he said he 
would be glad to do that,> says Don Fuqua, a former 
Democratic congressman from Florida who is president of 
the AIA.
        Adds Perlman of Martin Marietta, who wasn't at the 
meeting, but has worked on export issues: <We weere happy 
when Eagleburger, under pressure from the industry, put 
out his directive.>
        According to a State Department release in August, 
Eagleburger's July 10 cable advised ambassies to be <well 
informed about, and responsive to, US defense industry 
sales in host countries. Posts may provide pertinent 
country information to industry representatives," 
including help in setting up appointments for US 
executives.
 
        Fuqua says the January meeting was attended by a few 
members of the AIA's executive committee, including D. 
Travis Engen, the chief executive officer of ITT Defense, 
which makes radar-jamming systems for fighter planes and 
NIGHT VISION EQUIPMENT. The meeting, Fuqua adds, also 
focused on the need to expedite licensing procedures.
        Engen confirms that he attended the meeting but 
cannot remember whether the need for a letter to US 
embvassies was discussed. He did recall joking briefly 
with Eagleburger about hos they should be on good behavior 
at this gathering, considering their past corporate ties.
        Eagleburger was on the board of the ITT Corp. from 
JUNE 8984 to MARCH 1989. The annual director's fee varied; 
in his last full year, he received eighty four thousand 
seven hundred and fifty nine dollars, according to his 
financial disclosure form. As a former director, he has a 
vested pension plan from ITT that will kick in when the 
sixty-year-old Eagleburger turns sixty five.
        Through Kissinger Asociates, Eagleburger also had 
ties to ITT, which was one of his clients.  Eagleburger 
was president of Kissinger Associates from 1984 to 1989.
        Eagleburger terminated his director's role with ITT 
and other companies when he joined the Bush administration 
in 1989.
        To avoid any appearance of conflict, Eagleburger said 
that, among other steps, he would recuse himself for his 
whole term from any matter in which the ITT Corp. was <a 
formal party or in respect of which it is known to me to 
have a direct and predictable effect on my interest in the 
ITT pension plan for outside directors.>
        Eagleburger also agreed to recuse himself for one 
year from matters specifically involving his former 
clients at Kissinger Associates. That year expired on 
March 20, 1990, weeks after the January 8, 1990 meeting 
with defense officials that was attended by ITT Defense's 
Engen.
        While Eagleburger would not comment, a State 
Department lawyer, speaking on the condition of anonymity, 
says that Eagleburger -- through his meeting with the ITT 
Defense executive and through his subsequent embassy cable 
-- did not violate his pledge to recuse himself from 
matters relating to ITT.
        <We don't think the general promotion of exports, 
even industry specific exports, is a matter in which the 
ITT corporation is a formal party,> this official says.
        The ITT Corp. was not a formal party because the memo 
promoting exports was a general policy initiative that 
affected all American defense companies, not just ITT, 
according to this official.
        Another federal ethics officer concurs that 
Eagleburger's actions did not violate any ethics 
standards. **Formal Party**, this official says, is 
generally understood to mean a company or individual with 
a petition or other official proceeding pending at the 
department.
        In the one-year recusal from matters relating to his 
former Kissinger clients, Eagleburger did not specify that 
only situations where the clients were formal parties were 
covered. Nevertheless, the State Department official says 
that the **formal party** standard applies.
        At least one liberal public-interest activist, David 
Dohen, co-founder of the Advocacy Institute, is not 
convinced by the State Department's explanation.
        <It doesn';t matter that the whole industry 
benefits,> says Cohen, whose organization trains public-
interest advocates. <In this instance, there's a clear and 
direct benefit to the ITT subsidiary.>
        As for the notion that ITT *individually* would have 
had to petition Eagleburger for help in order for the 
recusal pledge to come into play, Cohen calls it a 
<distinction without a difference.>
        Cohen adds tht Eagleburger's presence at the meeting 
and his writing of the cable are issues that the State 
Department and the Office of Government Ethics [Orwellian] 
ought to address.
        Eagleburger is not the only high-ranking official who 
has passed through the revolvint door and is not pushing 
defense exports from the inside. Defense lobbyists also 
tou the help they've received from National Security 
Adviser Scowcroft, who for a time headed Kissinger 
Associates' Washington office. Scowcroft, who could not be 
reached for comment, also served as a consultant to the 
Lockheed Corp.
        William Paul, a senior vice president for United 
Technologies Corp. in Washington, says he and three other 
industry officials met with Scowcroft last year on the 
issue of developing a cohesive administration policy on 
defense exports. Nobody from Lockheed attended that 
meeting, participants say.
        <We talked about hos the US should have an 
affirmative policy for defense exports,> Paul says. <Weve 
gotten very good responses from Brent Scowcroft.>
        <Our role has been to stay with it and keep the 
pressure up,> Paul adds. <This administration has been
 
 
                ABSOLUTELY SUBERB.>
 
 
 
        The AIA's Johnson says that both Scowcroft's and 
Eagleburger's offices had significant roles in developing 
the administration's proposalo to provide loan guarantees 
for weapons exports fromthe Export-Import Bank.
        Without question, the defense industry's spadework is 
paying off. In relationships with other countries, the 
sale of defense weapons is now on the table with other 
issues.
        <We're now putting on the bilateral agenda issues 
like [defense exports]. When there's a sale pending, we're 
putting these sales on the agenda," says Charles Duelfer, 
the director of the Center for Defense Trade, the year-old 
State Department agency that replaced the Office of 
Munitions Control.
        Duelfer also notes that since the Eagleburger memo -- 
which his office helped draft -- went out last July, 
several ambassadors have been especially helpful. In fact, 
Duelfer says, when the State Department evaluates US 
embassies, support for defense companies <is one of the 
things they'll be graded on.>
        Duelfer adds that the revamping of the Office of 
Munitions Control grew out of extensive conversations with 
Eagleburger and Secretary of State james Baker on the need 
for streaml;ining the licensing process and promoting 
exports.
 
BANKING GUARANTEES
        The Export-Impor Bank is also likely to be part of 
the new effort to promote weapons exports. Under a new 
administration proposal, the Export-Import Bank programs -
- now almost entirely for commercial trade -- would be 
expanded to indlude loan guarantees for military sales to 
Japan, Israel, Australia, New Zealand, and the nations of 
the North Atlantic Treaty Organization. Sen. Christopher 
Dodd (D-Conn.) recently introduced a bill along these 
lines.
        Although the military guarantees would be limited to 
about one billion of the bank's nine point five billion 
dollars in direct loans and loan guarantees for fiscal 
1992, there is considerable dissension in Congress about 
whether the bank should be getting into the defense-export 
game.
 
[NDT: Typically, the clients most needy and greedy for 
defense imports will be those who subsequently require a 
forgiveness of indebtedness : seven billion in defense 
loans forgiven Egypt for its participation in the Gulf war 
- the list is quite long...and leads to the conclusion 
that the US will not be able to borrow on International 
markets indefinitely to pay the interest on a four 
trillion dollar debt which is allocated to projects such 
as these on the say-so of a handful of individuals and 
without public debate. We are not looking at a simple 
recession if this practice continues unabated. The scene 
is being set for one of two things: the collapse of 
capitalism as we know it, or Zee Big Bang.]
 
        <I think there are limited credits available,> says 
Rep. Lee Hamilton (D-Ind), <and they should not bve used 
to promote arms sales, especially in the post-Gulf war 
period, when we should be seeking to limit arms sales 
rather than increase them.> Hamilton is a senior member of 
the House Foreign Affairs Committee.
        Albert Hamilton, a senior staffer at the bank from 
1964 through 1987, is another prominent critic.
        <My sense is that to take these limited resources and 
squander them on military sales, which in all likelihood 
will not be repaid, just does'nt make sense from an 
economic point of view,> says Hamilton, now a senior 
associate at First Washington Associates Ltd., which 
consults for the foreign counterparts of the Export-Import 
Bank.
        Critics nothwistanding, the defense industry 
[Orwellian] is upbeat about its export prospects -- and 
about the ability of its lobbyists to continue to win 
backing from the Bush administration.
        <We pay these guys a good sum of dollars each year to 
lobby, and 
                       thank God 
 
                        [WHO?]
 
they're doing something,> says Thomas Peterson, the head 
of Raytheon's Patriot International unit.
 
HOT PLACE FOR ARMS:ISTABNBUL
By Peter H. Stone
 
        A good example of how defense companies are 
benefiting from administration backing is the burgeoning 
arms trade focused on Turkey,, one of the United States' 
key allies in the coalition against Iraq.
        Fred Haynes, a vice president of the Dallas-based LTV 
Corp., says defense companies have found an increasingly 
receptive audience in Turkey, where a ten-year, ten 
billion dollar defense-modernization program is under way.
        The Lexington, Mass.-based Raytheon Co., for 
instance, approached the Turkish government last March 
about a sale to Turkey of ten of the company's Patriot 
missile firing units. To expedite the sale, Thomas 
Peterson, the manager of the company's Patriot 
International unit, says he met with Morton Abramowitz, 
the US ambassador to Turkey, and since then has been in 
touch with the embassy regularly.
        <The embassy is talking to the Turkish government,> 
he sais. <Just about everything we've asked them todo for 
us, they've done.>
        Peterson notes that the State Department's Office of 
Defense Trade is <working alongside us and supporting us> 
in trying to put together a deal soon.
        As part of that effort, Peterson says, the Senate 
Department and Raytheon -- along with its German partner, 
Siemens -- have been prodding the German government to get 
its export-import bank to provide loan guarantees for a 
sale of Patriots in the German configuration -- a sale 
worth more than one billion dollars.
        Another defense giant, the Hartford, Conn.-based 
United Technologies Corp., is also eyeing the Turkish 
market.
        William Paul, head of United Technologies' DC office, 
boasts that he met with Abramowitz both in Turkey and in 
the United States, trying to get his help in convincing 
Turkey to produce jointly two hundred helicopters with 
United Technologies' Sikorsky unit.
        Among those working the issue for United Technologies 
is Alexander Haig, the former secretary of state and ex-
president of United Technologies who now runs Worldwide 
Associates Ind., a Washington consulting firm.
        <He has a lot of credibility with the people there 
and the people here,> says Paul. Although neither Paul nor 
Haig would comment on what Haig [i]s doing for the 
company, Raytheon's Peterson arrests to Haig's diligence. 
Peterson reports that he bumped into Haig leaving 
Abramowitz's office in Istanbul.
 
[NDT: Haig was commander of NATO forces during the crisis 
in Iran, which is known in the US as the Fall of the Shah, 
and which Iranians remember as kicking out the foreign 
devils...]
 
        To make its deal financially attracive to the Turks, 
United Technologies turned to its home-State senator, 
Christopher Dodd (D-Conn) Dodd spearheaded successful 
legislation in 1989 that emabled the Export-Import Bank of 
the United States to provide loan guarantees for military 
sales to Turkey or Greece -- guarantees that United 
Technologies is using in its Turkish deal.
 
 
End of the second part of transcription of April 25, 1991 
speech by Rep. Henry Gonzalez, Chairman of the United 
States House of Representatives Committee on Banking and 
Finance. The speech was made to an empty house and it was 
not transmitted on C-Span.
 
[NDT: There are also some interesting charts, which the 
format is difficult to replicate.]
 
 
 
 
 
  
 
 
 

** End of text from cdp:mideast.gulf **



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