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Licensing Mass Destruction

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exports.

The Commerce Department also failed to refer millions of dollars' worth of compasses, gyroscopes and accelerometers to the State Department. Some of these items were sold to Iraqi Airways, which the U.S. Treasury identified in April 1991 as a "front company" in Iraq's "arms procurement network." Some also went to the Iraqi Air Force and some went to the Iraqi Ministry of Defense-both military organizations. All items in this category (ECCN 1485) are defined as missile-related because they can be used to make missile guidance systems./10 Commerce nevertheless approved them without consulting the State Department, as required by its own procedures.

Thus when Commerce stated on March 11, 1991 in a press release that "no license applications for any MTCR (missile technology) items have been approved for export to Iraq," it contradicted its own export records.

Commerce also violated its statutory obligation to refer nuclear cases to the Department of Energy. Section 309(c) of the Nuclear NonProliferation Act of 1978 requires that the executive branch develop a special list of items that "could be of significance for nuclear explosive purposes" if diverted from civilian use. The list is known as the "Nuclear Referral List." All items on the list require export licenses, and all license applications must be "reviewed by the Department of Commerce in consultation with the Department of Energy."/11

In fact, Commerce licensed numerous items on the list without referring them to the Department of Energy. The most common item was computers, which carry CCL number 1565. Computers operating above a certain speed are regulated by the Nuclear Referral List, and some special computers are also on the missile technology list. Commerce approved the following 20 computer cases, with a total value of over $5 million, without referring any of them to the Department of Energy. The fact that these computers required licenses shows that the computing speed must have been high enough to be regulated by the list. Thus, in all 20 cases, Commerce violated its own procedures as well as Section 309(c) of the Nuclear Non-Proliferation Act.

Case A800390:
Importer: State Organization of Post & Tel.
Value: $3,600,000

Case A843654:
Importer: Iraq Spare Parts Manufacturing
Value: $13,000

Case A844783:
Importer: Ministry of Industry Value: $488,000

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Importer: University of Baghdad Value: $11,000

Commerce also approved several military items to military buyers without consulting the Department of Defense. These included the machine tools and lasers, discussed above, which are used to fabricate rocket casings, the quartz crystals discussed above which are used as components in ground radar, and the navigation, radar and airborne communication equipment sold to the Iraqi Air Force and Ministry of Defense. Exports of such clearly military items to military buyers should have been referred to U.S. security experts.

The Defense Department, in fact, played only a minor role in the
export approval process. The Pentagon saw an export case for only
two reasons. First, it was consulted for its opinion whether an item
was likely to be diverted to a Cocom-proscribed country (primarily the
East Bloc). For these cases, the Pentagon had no power to decide
whether the export might contribute to nuclear, missile or chemical
weapon proliferation. Such a decision was outside the scope of its
review.

Second, the Pentagon saw a handful of nuclear cases because it
participated in the Subgroup on Nuclear Export Coordination (SNEC),
the interagency group that evaluates nuclear-related exports. But the
SNEC reviewed only 24 of the 771 cases approved from 1985 to
August 1990--three percent of the total. Commerce essentially
bypassed the SNEC by failing to refer cases to it. Thus, for the vast
majority of the exports--roughly 97%--the Pentagon did not
participate in judgments about the risk of proliferation. Neither did the
Arms Control and Disarmament Agency or the intelligence agencies.
They had no role beyond their participation in the SNEC. Thus, in
97% of the cases, Commerce alone decided, or decided with the
concurrence of Energy or State, whether an item increased the risk of
nuclear or missile proliferation.

Commerce did not follow a consistent pattern in selecting the few
cases it did send to the SNEC. The Iraqi Atomic Energy Commission,
for example, bought a large computer, valued at $2.8 million (case
B175217) which was not referred to the SNEC, and also bought
$87,000 worth of precision electronic and photographic equipment
(ECCN 6599) with no external review at all (case D042767). But a
second computer, worth only $24,390 (case B108166), was referred to
the SNEC, indicating that the SNEC may not have received the most
important cases. Ten of the items approved for the Iraqi Atomic
Energy Commission were on the Nuclear Referral List, but only three
were submitted to the SNEC.

Commerce also approved $200,000 worth of computers for Al-Qaqaa, the Iraqi nuclear weapon design laboratory. Commerce did not refer the computers to either the Department of Energy or the SNEC.

Violations of policies

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The Commerce Department had full authority to reject every
application discussed above. Under Commerce regulations, dual-use
exports must satisfy specific criteria. The criteria include the
following tests: whether the stated end use is acceptable, whether the
item could aid nuclear weapon or missile development, whether the
importing country has a nuclear or missile development effort, and
whether the recipient country has good "non-proliferation
credentials."/12

Iraq never came close to passing those tests. The "stated end use" of some of the items was explicitly to produce rockets and radar. The items exported, such as machine tools and radar components, were obviously powerful enough to aid missile and nuclear development. It was also clear that Iraq had nuclear and missile development programs. Iraq had been trying to build nuclear weapons since at least 1981, when Israel bombed the Osirak reactor near Baghdad, and Iraq had been known since the mid-1980s to be working with Argentina and Egypt on nuclear-capable missiles. In addition, U.S. intelligence knew by the mid-1980s that many of the importers listed on the licenses were fronting for Iraqi nuclear and missile sites. If the Commerce Department had applied its own criteria, it would have denied many of the Iraqi applications.

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suppliers. The Department of Defense opposed the sale and had the license brought before the National Security Council in September 1987. Although the NSC decided to block the export, the computer had been shipped eight months earlier in January, without the Pentagon's knowledge.

Commerce also approved exports informally that do not appear on the public list. In response to an exporter's request, Commerce can approve a shipment by stating that no license is required. Two of these cases have recently come to light.

In 1989, the Consarc Corporation of New Jersey notified Commerce that it wanted to export a "skull" furnace to Iraq. Consarc explicitly told Commerce that the furnace could aid a nuclear program. The furnace could melt zirconium for nuclear fuel rods, could melt titanium for missile nose cones and other critical missile parts, and might be able to melt plutonium and uranium for nuclear bomb cores. The skull furnace was to be accompanied by three other furnaces: an electron beam furnace from Consarc, and furnaces for vacuum induction and heat treatment from Consarc's subsidiary in Scotland.

Used together, the four furnaces would have far exceeded Iraq's stated
purpose, which was to manufacture artificial limbs for victims of the
Iran Iraq War. According to U.S. officials, Iraq would have had a
"Cadillac" production line for atomic bomb and ballistic missile parts,
even better than the facilities at American nuclear weapons labs.
Commerce nevertheless told Consarc that no export license was
needed.

In June 1990, a person outside the government told the Pentagon about the sale. This set off a chain of official reactions that led the White House to block the shipment.

It turns out that equipment accompanying the furnaces needed export licenses. In June 1989, Commerce licensed special computing equipment to control the furnaces' operation (case D030956) and in January 1990, Commerce licensed numerical control equipment to make new crucibles for the furnaces (case D064342). This latter export was crucial. One of the main reasons for thinking that the original skull furnace might not be used to make A-bombs was that the original crucible was not suited for melting heavy metals such as uranium. But when Commerce licensed the equipment for making additional crucibles, Iraq got what it needed to make A-bomb cores.

Also in 1989, another New Jersey company, Struthers, Dunn, Inc. of
Pitman, contacted the same Commerce representative, Michael
Manning, who had advised Consarc. Iraq wanted to buy "time-delay
relays," devices that have civilian uses but are also used to separate the
stages of ballistic missiles in flight. Iraq wanted a special model,
"tested for shock and vibration" that would perform at 350,000 feet--
66 miles above the earth. Ronald Waugaman, who handled the case

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