Iraq's covert arms procurement network

All throughout the 1980's and early 1990's, the Iraqi regime of Saddam Hussein had a covert worldwide arms procurement network that was used to buy technology and material for the regime's program to develop chemical, biological, and nuclear weapons. Both the U.S. and Britain allegedly turned a blind eye to the network's activities as part of covert polices that came to be known as Iraqgate.

Matrix Churchill was a British company that was central to the covert procurement network and also at the centre of the Arms-to-Iraq affair.

On October 23, 1987 TMG Engineering Ltd. acquired TI Machine Tools of Coventry, Britain (soon afterwards renamed Matrix Churchill Ltd.). Matrix Churchill was a leading British tool-maker, which in turn controlled several divisions and subsidiaries. TDG owned 89 percent of the shares of TMG Engineering. Four Matrix Churchill Directors, including the managing director of Matrix Churchill Ltd. Paul Henderson, controlled 11 percent of the shares under the name Echosabre. In early 1988, Admincheck, controlled by Anees Wadi and Roy Ricks, bought a small fraction of these shares. Iraq's procurement leader, Safa al Habobi was the chairman of TDG, TMG Engineering, and Matrix Churchill Ltd.

TMG also bought Matrix Churchill Corporation in the United States which had been a distribution agent for Matrix Churchill in the United States, and Newcast Foundries Ltd. in Britain which made castings for Matrix Churchill.

The Iraqi members of the boards of directors of companies in the group were in firm control of the companies' day-to-day activities and sometimes authoritarian in their actions. Both Habobi and Fadel Jawad Khadhum, a board member of several of these companies, worked for Iraqi establishments and sometimes dictated to their British and U.S. employees Iraqi desires.

Because two of Matrix Churchill's senior officials provided information to British intelligence about Iraqi activities, the British government had considerable knowledge about Iraq's secret military procurement activities.1 However, the British government decided to allow most of Matrix Churchill's sales to Iraq. As a result, a scandal erupted after the Persian Gulf War about the role of the British government in arming Iraq. This scandal reached a crisis when the government's case against Matrix Churchill officials collapsed in November 1992. The government prosecutors developed convincing evidence that Matrix Churchill officials had deliberately deceived export control officials about the true purpose of the items exported to Iraq. However, the case collapsed because the defense was able to show that the government had known the true purpose of the exports at the time and had encouraged the exports.

After the collapse of the case, the Brisih government set up the so-called Scott Inquiry, (also known as the Inquiry into Exports of Defence Equipment and Dual Use Goods to Iraq), to investigate covert British government policy in sending technology and goods that would assist Saddam Hussein's government in developing chemical, biological, and nuclear weapons.


 * David Heller, "Ambitious Director Who Traded in Sales and Intelligence," The Independent, Feb. 16, 1996.


 * Charles Blackhurst, "Chance and Friendship Led to Discovery of Iraqi Supergun," the Independent, Nov. 8, 1995.


 * Elaine Sciolino, "Arming Iraq: The Ohio Connection," New York Times, July 28, 1992.


 * Douglas Frantz and Murray Waas, "U.S. Knew Firm Was Iraq's A Year Before It Closed," the Los Angeles Times, July 24 1992:

"In September of 1990, Customs Service agents padlocked the doors of an Iraqi front company in a Cleveland suburb and, in response to a presidential order, froze its $2 million in assets. Customs Commissioner Carol Hallett said the action against Matrix Churchill Corp. came after agents learned that Iraq, which had invaded Kuwait one month earlier, had bought the firm "for the specific purpose of illegally acquiring critical weapons technology."

"But, unknown to Customs officials, government intelligence agencies had been aware of Matrix Churchill's role in Baghdad's arms procurement network for more than a year and had warned Bush Administration policy-makers, according to newly obtained documents and sources interviewed by The Times.

"The Administration, however, allowed Matrix Churchill to continue operations, in keeping with President Bush's decision to try to influence Iraqi President Saddam Hussein through favorable policy on high-tech exports and economic incentives. Administration officials maintain that any military assistance to Iraq was an inadvertent consequence of the attempt to moderate Iraqi actions. They said that they were unaware of the extent of the network's operations in this country and that top officials were distracted by other foreign policy concerns.

"But Rep. Henry B. Gonzalez (D-Tex.), whose House Banking, Finance and Urban Affairs Committee has been investigating Matrix Churchill and the Administration's policies toward Iraq, said: "The Administration knew a great deal about Saddam Hussein's military procurement program and made a conscious decision to tolerate it, and in many cases facilitated the effort."

"As early as June, 1989, a top-secret U.S. intelligence report had identified Matrix Churchill's British parent company as a key component of the Iraqi network, according to a newly disclosed document. And two months later, Defense Department analysts discovered that the Cleveland operation had funneled tens of millions of dollars worth of U.S. technology to Iraq's nuclear weapons and ballistic missile programs, according to sources. Recently declassified State Department documents show that after Iraq's invasion of Kuwait, Administration officials calculated that the Iraqi regime spent $10 billion to $20 billion acquiring nuclear weapons and missile technology in the 1980s. Most of the buying took place through a series of front companies and shadowy agents operating in Europe, but some occurred in the United States...


 * Douglas Frantz and Murray Waas, "Bush Had Long History of Support Iraq Aid," Los Angeles Times, Feb. 24, 1992.
 * Murray Waas and Douglas Frantz, "U.S.Loans Indirectly Financed Iraq Military," Los Angeles Times, Feb. 25, 1992.
 * Norman Kempster and Murray Waas, "Bush Pround of Role in Secret Iraq Aid Policy," Los Angeles Times, Feb. 26, 1992.
 * Murray Waas and Douglas Frantz, "Despite Ban, U.S. Arms Are Sold to Pakistan," Los Angeles Times, March 6, 1992.
 * Murray Waas and Douglas Frantz, "U.S. Knew Arms Sales Broke Law, Pell Charges," Los Angeles Times, March 7, 1992.
 * Murray Waas and Douglas Frantz, "U.S. Gave Intelligence Information to Iraq Three Months Before Invasion," Los Angeles Times, March 10, 1992.
 * Murray Waas and Douglas Frantz, "Abuses in U.S. Aid to Iraqis Ignored: Bush Administration Pushed Trhough $1 Billion More in Assistance Despite Efforts of Kickbakcs and Evidence That Food May Have Been Traded for Arms," Los Angeles Times, March 22, 1992.
 * Norman Kempster and Murray Waas, "U.S. Paying Off Bad Iraqi Loan," Los Angeles Times, March 29, 1992.
 * Murray Waas and Douglas Frantz, "Saudi Arms Link to Iraq Allowed," Los Angeles Times, April 18, 1992.
 * Dean Baquet, "Documents Charge Iraqis Made Swap: U.S. Food for Arms," New York Times, April 27, 1992.
 * Murray Waas and Douglas Frantz, "Bush Tied to `86 Bid To Give Iraq Military Advice," Los Angeles Times, May 7, 1992.
 * Douglas Frantz and Murray Waas,"Bush Officials Defend Prewar Aid to Iraq," Angeles Times'', May 22, 1992.
 * Douglas Frantz and Murray Waas, "Iraq's $5 Billion Windfall Spins Deepening Mystery," Los Angeles Times, May 24, 1992.
 * Murray Waas and Douglas Frantz, "Officials Investigating Whether U.S. Loans Helped Iraq Buy Arms," Los Angeles Times, May 30, 1992.
 * Elaine Sciolino, "U.S. Reports A Stronger Saddam Hussein," New York Times, June 16, 1992.
 * Douglas Frantz and Murray Waas, "Testimony on Iraq Export List is Contradicted," Los Angeles Times, June 24, 1992.
 * Douglas Frantz and Murray Waas, "Special Counsel Sought to Probe U.S. Aid to Iraq,"Los Angeles Times, July 10, 1992.
 * Murray Waas and Douglas Frantz, "Administration Perferred `Iraq Papers Get Under Wraps," Los Angeles Times, July 19, 1992.
 * Murray Waas and Douglas Frantz, "Iraq Got U.S. Technology After CIA Warned Baker," Los Angeles Times, July 22, 1992.
 * Elaine Sciolino, "Arming Iraq: The Ohio Connection," New York Times, July 28, 1992.
 * Douglas Frantz and Murray Waas, "CIA Told White House of Iraqi Arms Exports," Los Angeles Times, August 6, 1992.
 * Douglas Frantz and Murray Waas, "Iraqi Used American-Built Plant to Develop A-Arms," Los Angeles Times, August 7, 1992:

"In the spring of 1989, a CIA officer approached the president of a small engineering firm in Alabama and quizzed him about a carbide-tool manufacturing facility the company was building at an Iraqi government installation southwest of Baghdad. In the fall of that year, a Customs Service agent and an Agriculture Department criminal investigator visited the firm, XYZ Options Inc. in Tuscaloosa, and posed a similar set of questions to its president, William H. Muscarella.

"In both instances, I told the government what we were doing," said Muscarella. "I gave them blueprints and told them everything about the plant. They knew everything." By the fall of 1989, U.S. authorities suspected that Iraq intended to use the plant as part of its ambitious weapons program, according to newly obtained records. Yet, while the government blocked the export of a key piece of machinery, it apparently did nothing to discourage construction of the $14-million plant by withholding export licenses for other components, which were shipped to Iraq.

"When Iraq invaded Kuwait in August, 1990, the plant was virtually complete and capable of turning out military goods as well as consumer products, according to Muscarella. "After the Gulf War, the military use was confirmed. U.N. inspectors hunting for Iraqi weapons facilities discovered the carbide factory was part of Iraq's main nuclear-weapons complex. After determining that the factory had been used in the effort to develop a bomb, the inspectors blew up the plant, U.N. documents show...

"The Times reported previously that U.S. intelligence agencies warned high-level Administration officials as early as June, 1989, that a company outside Cleveland named Matrix Churchill was a front in Iraq's worldwide arms-procurement network. However, the Administration rejected efforts to restrict sales of U.S. technology to Baghdad as late as May, 1990. The XYZ Options deal is a clear example of how the Iraqi network operated. Described as a commercial transaction, the arrangement was set up by Matrix Churchill and financed by the Atlanta branch of Italy's Banca Nazionale del Lavoro.


 * Murray Waas and Douglas Frantz, "New Documents Show U.S. Helping Iraq Loans," Los Angeles Times, Sept. 4, 1992.
 * Murray Waas and Douglas Frantz, "Kuwait, Saudis Supnplied Iraq With U.S. Arms," Los Angeles Times, Sept. 12, 1992.
 * Murray Waas and Douglas Frantz, "U.S. Aid to Bank Tied to Iraq is Questioned," Los Angeles Times, Sept. 25, 1992.
 * Murray Waas and Douglas Frantz, "Justification of Iraq Aid Found Flawed in 1990," Los Angeles Times, Oct. 20, 1992.
 * Murray Waas and Douglas Frantz, "Justification of Iraq Aid Found Flawed in 1990," Los Angeles Times, Oct. 20, 1992.
 * Douglas Frantz, "U.S. Eased Way for Iraqi Supergun," Los Angeles Times, Oct. 27, 1992.
 * Murray Waas and Douglas Frantz, "Jordan Gave Iraq Broad Military Assistance,"  Los Angeles Times, Nov. 9, 1992.
 * Neil Lewis, "New Jersey Concern is Tied to Iraq Arms Network," the New York Times, Feb. 15, 1993.


 * Russ Baker,"The Big One That Almost Got Away," the Columbia Journalism Review, March/April, 1993:

"ABC News Nightline opened last June 9 with words to make the heart stop. "It is becoming increasingly clear," said a grave Ted Koppel, "that George Bush, operating largely behind the scenes throughout the 1980s, initiated and supported much of the financing, intelligence, and military help that built Saddam's Iraq into the aggressive power that the United States ultimately had to destroy.

"Is this accurate? Just about every reporter following the story thinks so. Most say that the so-called Iraqgate scandal is far more significant then either Watergate or Iran-contra, both in its scope and its consequences. And all believe that, with investigations continuing, it is bound to get bigger.

"Why, then, have some of our top papers provided so little coverage? Certainly, if you watched Nightline or read the London Financial Times or the Los Angeles Times, you saw this monster grow. But if you studied the news columns of The Washington Post or, especially, The New York Times, you practically missed the whole thing. Those two papers were very slow to come to the story and, when they finally did get to it, their pieces all too frequently were boring, complicated,and short of the analysis readers required to fathom just what was going on. More to the point, they often ignored revelations by competitors.


 * Neil Lewis, "Bank Fraud Plea Forestalls Questions About Iraq Arms," New York Times, Sept. 23, 1993.
 * Index of Articles, ""U.S. Military Aid to Iraq," Los Angeles Times, 1992-1994.
 * Index of Articles, "U.S. Foreign Policy Towards Iraq," Los Angeles Times.

All from (ISIS)

Matrix Churchill (company number 00563431) went into liquidation in 1992.(from Companies House). Paul Henderson is now involved in Matrix Laser Group.

Name changes: