Toward the end of the Iran-Iraq War, Saddam Hussein unleashed devastating chemical attacks on both Iranian forces and Iraqi Kurds to shore up his regime. Yet despite mounting evidence of atrocities such as the Halabja massacre, the U.S. obstructed international efforts to sanction Iraq for its use of chemical weapons.
Still viewing Saddam as a counterweight to Iran in the Persian Gulf, Washington’s diplomacy instead attempted to moderate the Baathist regime’s behaviour through economic incentives. Policymakers hoped that agricultural credits and favourable loan terms would encourage Saddam to curb human rights abuses and limit Iraq’s weapon development programmes.
Following the end of the Iran-Iraq War, however, Saddam became more belligerent than anticipated, and in late 1988, a CIA report warned:
‘Iraq has the largest and best equipped armed forces in the Arab world…Iraq is likely to remain more radical than its Arab allies and collide on occasion with regional rivals.’
As the decade came to a close, Washington therefore faced a question that would define its Iraq policy for years to come – could economic statecraft keep Saddam Hussein in check?
Intelligence report on Iraq’s national security goals:
In December 1988, a CIA intelligence assessment stated:
‘Baghdad’s emergence from the Iran-Iraq war in a position of strength will give impetus to President Saddam Husayn’s aspirations to leadership of the Arab world.’
The report subsequently reeled off a number of concerns about the Baathist regime:
‘Baghdad is not likely to abandon the use of terrorism against its opponents, both foreign and domestic…Iraq will intensify its efforts to acquire nuclear weapons and other advanced military technology to deter Iranian aggression…strategic considerations are likely to lead to severe tensions with Kuwait over disputed territory.’
Whilst highlighting numerous threats Iraq might pose to stability in the Persian Gulf, the report also claimed that Baghdad would:
‘Stress the importance of its oil reserves and encourage the continued growth of bilateral trade with the United States.’
Although wary of Baghdad’s long-term ambitions, Washington also sought to expand trade and capitalise on the growing market in Iraq. By 1987, the U.S. was already Iraq’s largest supplier of civilian goods, exporting over $700 million annually, but aside from the obvious benefits for U.S. commerce, policymakers also believed deepening economic ties would be an effective means of deterring future aggression. After blocking sanctions proposed under the Prevention of Genocide Act in 1988, the White House doubled down on its strategy of economic engagement over the following eighteen months.
President George H. W. Bush continues course:
When George H. W. Bush succeeded Ronald Reagan as president in January 1989, a State Department report prepared for the new administration argued that economic incentives could transform Iraq into ‘a status-quo state, working within the system’. President Bush’s transition team also maintained that ‘trade is the best key to political influence’, and Washington subsequently doubled agricultural subsidies for Iraq.
Not all U.S. government agencies, however, supported the economic policy pursued by President Bush. The Export-Import Bank opposed increases in financial aid, citing concerns about Iraq’s ability to make the repayments. There was further outcry on 4th August 1989, when the Atlanta branch of an Italian bank, Banca Nazionale del Lavoro, was raided by the FBI – revealing $4 billion in unauthorised loans to Iraq, including $900 million guaranteed through a U.S. Department of Agriculture programme. Yet the scandal did little to halt the administration’s approach, and Secretary of State James Baker sought another $1 billion in loan guarantees for Iraq over the following months.
With economic ties continuing to grow, Iraqi Foreign Ministry Undersecretary Nizar Hamdun met with Secretary of State Baker in Washington. Following the talks, Hamdun concluded that the Bush administration still regarded Iraq as a counterweight to Iran, with economic engagement as the cornerstone of bilateral relations. Buoyed by this meeting, and desperate to attract foreign capital for post-war reconstruction, Saddam therefore opened all sectors of the economy to foreign investment for the first time. Hamdun also offered preferential treatment to U.S. firms that joined the US-Iraq Business Forum, which by the end of 1989, included fortune 500 companies such as AT&T, Lockheed, Boeing and Exxon.
National Security Directive 26:
By Autumn 1989, several sectors of Iraq’s economy were being targeted by Washington, and on 2nd October, the administration underlined its objectives in National Security Directive 26:
‘We should pursue, and seek to facilitate, opportunities for U.S. firms to participate in the reconstruction of the Iraqi economy, particularly in the energy area.’
Whilst seeking a major role in Iraq’s reconstruction, the Bush administration also wanted to build influence that could be used restrain Saddam, and the NSD also stated:
‘As a means of developing access to and influence with the Iraqi defense establishment, the United States should consider sales of non-lethal forms of military assistance, e.g., training courses and medical exchanges, on a case by case basis.’
Beyond the commercial benefits, the main political objective underscored in NSD 26 was ‘for Iraq to moderate its behaviour and to increase our influence’. Ultimately, President Bush desired a strong Iraq, but one over which Washington could exert significant leverage. This proved difficult to achieve, and by Autumn 1989, U.S. military officials had become increasingly wary of Saddam’s intentions.
Internal Look 90:
In Autumn 1989, Commander of the United States Central Command, Norman Schwarzkopf, had ‘determined the Iran/Iraq conflict had altered the balance of power in South West Asia.’ Iraq had emerged as the fourth largest military in the world, and in Schwarzkopf’s view, ‘the most threatening and powerful force in the region.’
According to an executive summary presented to President Bush in the aftermath of the Gulf War, by September 1989, CENTCOM had concluded that whilst the Soviets would remain the ‘long term geopolitical threat’, planning needed to be directed to the ‘more realistic regional scenario of Iraq attacking Kuwait and Saudi Arabia.’ To prepare for this possibility, Schwarzkopf had therefore ordered the development of ‘Internal Look 90’ – a war game exercise and rehearsal for U.S. forces faced with an Iraqi invasion of Saudi Arabia via Kuwait.
With the fall of the Berlin Wall in November 1989, however, President Bush became preoccupied with the fate of the Soviet Union, and Schwarzkopf’s warning of a potential Gulf conflict received little attention. Saddam, meanwhile, grew increasingly suspicious of Washington, fearing it might use its newfound strategic freedom to assert control over the Persian Gulf – a region vital to the U.S. and its allies because of oil supplies. Saddam therefore remarked to King Hussein of Jordan, “we should be vigilant and cautious during this period … while the world takes its new shape.”
By early 1990, as the Cold War began to wind down and Soviet intervention became increasingly unlikely, Schwarzkopf again told the Senate Armed Services Committee that the greatest threat to Gulf stability was a local conflict rather than a superpower confrontation.
Tensions rise following Iraq’s execution of a journalist:
As communist governments across Eastern Europe continued to collapse, the Bush administration kept one eye out for evidence that economic engagement was successfully moderating Iraq’s behaviour. This hope, however, was dashed on 15th March 1990, when Farzad Bazoft, a journalist for The Observer, was executed on charges of espionage. Bazoft had been investigating developments in Iraq’s ballistic missile programme, and the British government responded by recalling its ambassador to Iraq whilst international media once again highlighted Iraq’s human rights abuses.
In the following weeks, customs officials at Heathrow Airport acting on U.S. intelligence also halted an Iraq-bound shipment of U.S. manufactured switching devices, suspecting they could have a nuclear weapon end use. In response to the seizure, White House press secretary Marlin Fitzwater stated:
“This issue raises once again our concern for the nuclear proliferation in the Middle East…It continues to pose a serious risk to U.S. interests. And it continues to exacerbate regional problems.”
The Israeli media also began to discuss ‘solutions to the Iraqi problem’, convincing Saddam that an Israeli strike – like the 1981 attack on Iraq’s Osirak nuclear reactor – was imminent. He subsequently reignited claims of a conspiracy against Baghdad, accusing Western nations of trying to sell enriched uranium to Iraq, and using the seized shipments to frame it for a nuclear weapons programme. In a speech broadcast on 2nd April, Saddam sent a stark warning to the U.S. and Israel:
“They will be deluded if they imagine that they can give Israel a cover in order to come and strike at some industrial metalworks. By God, we will make fire eat up half of Israel if it tried against Iraq.”
A State Department spokesperson condemned the comments as “inflammatory, irresponsible, and outrageous”. Despite no immediate shift in U.S. policy, events in the spring of 1990 had created distrust on both sides.
U.S. intelligence reports on Iraqi missile capabilities:
As Saddam’s speeches became more menacing, the CIA submitted regular reports on Iraq’s military capabilities, and one intelligence assessment in July 1990, concluded:
‘Iraq has the most aggressive and advanced ballistic missile development program in the Arab world. It already possesses two missiles – Iraqi modified Soviet Scud B’s called the Al Husayn and the Al Abbas – capable of reaching Tel Aviv or Tehran, targets some 600 km away.’
The assessment went on to warn:
‘In our judgment, current Iraqi missile projects will be difficult, if not impossible, to stop. Impeding the flow of foreign assistance, however, could slow development considerably…Iraq has, however, proved itself capable of tapping into Western and other nations aerospace industries for technology support, despite attempts by some governments to prevent it.’
A separate CIA study noted:
‘Iraq’s combined production capability of the blister agent mustard and the nerve agents sarin and GF – the principal agents in its arsenal – [are] about 2,000 tons per year.’
A sign of what was to come:
Despite the economic hardship following the Iran-Iraq War, it became evident that Baghdad was allocating vast resources to expanding its military capabilities and weapon stockpiles. As Iraq’s military strength grew, so too did Saddam’s rhetoric, with increasingly hostile threats directed at Israel, Kuwait and other Gulf states.
Although the Bush administration had shown strong commitment to its policy of economic engagement, by the summer of 1990, there was little evidence that the Iraqi regime was becoming more moderate or predictable. Foreign policy strategists in Washington started to doubt whether diplomacy alone could restrain Saddam Hussein – within weeks, those doubts would be overtaken by events.
Bibliography:
Photo source:
Series: George H. W. Bush Presidential Photographs, 1/20/1989 - 1/20/1993Collection: Records of the White House Photograph Office, 1/20/1989 - 1/20/1993, Public domain, via Wikimedia Commons.
Primary Sources:
CIA, Iraq’s National Security Goals, December 1988, National Security Archive.
20819 - National Security Directive 26, October 2nd 1989, National Security Archives.
‘Bomb parts seized on way to Iraq: U.S. nuclear triggers smuggled to London’, The Washington Post, 29th March 1990.
United States Central Command: Operation Desert Shield/Desert Storm, 11th July 1991, National Security Archives.
CIA Intelligence Assessment, ‘Iraqi Ballistic Missile Developments’, July 1990, National Security Archive.
CIA, Prewar Status of Iraq’s Weapons of Mass Destruction, March 1991, National Security Archives.
Secondary Sources:
Borer. D, ‘Inverse Engagement: Lessons from US-Iraq Relations, 1982-1990’, The US Army War College Quarterly, Vol. No. 2, 2003.
Chaudhry. Kiren Aziz , ‘On the Way to Market: Economic Liberalisation and Iraq’s Invasion of Kuwait’, Middle East Report, Issue 170, 1991.
Fredman. Z, ‘Shoring up Iraq, 1983-1990: Washington and the Chemical Weapons Controversy’, Diplomacy and Statecraft, Volume 23, Issue 3.
Galbraith. Peter W, The End of Iraq: How American Incompetence Created a War Without End. (Simon & Schuster, 2006.)
Malik, Shahin P. “Saddam Hussein: Survivalist or opportunist?” Strategic Studies, vol. 16, no. 4, 1994, pp. 59–83.
Scales. R, Certain Victory: The U.S. Army in the Gulf War (Potomac Books, 1998)
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