Iraqgate

Iraqgate, media term for the scandal that emerged during the administration of U.S. President George H.W. Bush, in which it was alleged that U.S. agricultural loans made to Iraq during the Ronald Reagan administration were used to purchase weapons with the administration’s knowledge. However, no evidence was ever found to prove this allegation.

During the administration of President Reagan, the United States began to change its policy toward Iraq, primarily because of its opposition to the Iranian government. The United States normalized diplomatic relations with Iraq in the early 1980s and began to give financial support to the country to offset the costly Iran-Iraq War. In 1983 Iraq was added to the Commodity Credit Corporation (CCC) program, run by the Department of Agriculture, which issued credit to nations for the purchase of U.S. agricultural products.

This friendly policy toward Iraq was reexamined by Congress in 1988, when the issue of sanctions against Iraq was brought up after the gassing of several thousand Kurds by Iraqi dictator Ṣaddām Ḥussein. Despite congressional reevaluation, the Reagan and later the Bush administration continued to seek good relations with Iraq, in hopes of the United States gaining greater influence in the region. In October 1989, National Security Decision Directive 26, signed by Bush, explicitly supported increased financial links with Iraq. This desire for improved relations lasted until Iraq invaded neighbouring Kuwait in August 1990, instigating the Persian Gulf War.

The friendly Iraq policy came under intense media scrutiny following a search conducted in August 1989 of the Banca Nazionale del Lavoro (BNL), an Italian bank with a branch in Atlanta, Georgia. The bank’s branch manager, Christopher Drogoul, was accused of having loaned or credited Iraq about $4 billion, which was used to purchase weapons illegally. When it was discovered that some of these funds were connected with the CCC program, allegations emerged that the Iraqis were buying U.S. agricultural products for less than the loan amounts they received and then using these extra funds for arms purchases. Though there was no proof that the Bush administration had knowledge of Drogoul’s illegal activities, it was reported that the administration had continued to provide funds to Iraq despite this corruption. The scandal also brought to light Iraq’s apparent credit problems, and the administration’s eagerness to engage with such a borrower was called into question. Supporters of the administration argued that there had been no actual exchange of money involved, only a line of credit extended for agricultural purchases. Furthermore, some argued that Iraq had already repaid a portion of the loans it had been given and thus was a good risk.

The media dubbed the scandal Iraqgate as an allusion to the Watergate scandal that had brought an end to the presidency of Richard Nixon more than a decade earlier. As a result of the media attention on Iraqgate, numerous internal investigations were launched by Congress and the executive branch. The House Banking Committee, for example, examined whether there were possible problems with banking practices, and the Department of Agriculture launched a probe into its CCC program. A special Senate committee on Iraqgate was also created.

Four years were spent investigating Iraqgate. Attorney General Janet Reno released a 119-page report in 1995 summarizing the findings of nearly 20 prosecutors and investigators. They found no evidence of a conspiracy or a cover-up in the Bush administration. Although it can be argued that poor policy decisions were made over Iraq on the part of the Bush administration, there was no evidence that the administration acted illegally.