In 1982, the Reagan administration removed Iraq from the State Department’s list of countries regarded as supporters of international terrorism. That action eliminated legal restrictions that would otherwise have prevented Iraq from receiving credit guarantees, enabling it to obtain credit for the purchase of US products and technology. The authorization enabled Iraq to obtain financing to import US food products, a significant benefit for a country that had experienced growing financial difficulties throughout the 1980s. Iraq’s economic difficulties resulted in part from its commitment to intensive and expensive civilian and military industrialization programs, a commitment which was maintained throughout and after the war with Iran.

The US government, fully aware that Iraq had active programs in the areas of chemical and biological warfare and missile development, was concerned about providing it with US technology. Nevertheless, a great deal of dual-use equipment and technology made its way to Iraq from the US throughout the 1980s, including missile research and information on explosives and propellants research and production. Iraq additionally procured tens of thousands of artillery projectiles and warheads designed to hold chemical agents through a convoluted and deceptive supply chain.

The Bureau of Human Rights and Humanitarian Affairs described the government of Saddam Hussein as “one of the most brutal and repressive in the world”, based partially on the use of chemical weapons on its own people. Throughout the Iran-Iraq war (1980-1988), the Reagan administration chose to give priority to maintaining US-Iraq relations over concerns about Iraq’s use of chemical warfare. In March of 1984, the United States publicly condemned Iraq’s almost daily use of chemical weapons. However, Iraq continued its use of chemical weapons against Iranian forces throughout the war.

The issue became more problematic for the Reagan administration, however, in the Spring of 1988, when Iraq engaged in poison gas attacks against Iraqi Kurds in the village of Halabja. In August 1988 the Iraqi Government carried out a second wave of chemical attacks on Kurdish villages on the Turkish border, prompting the US Senate to pass the “Prevention of Genocide Act of 1988”. Intense lobbying of Congress by the Reagan-Bush White Houses and a veto threat from President Reagan convinced the Democrat-majority House of Representative to defeat the bill, citing expanding trade in rice and other grain between US farmers and Iraq, the desire to contain Iran, and unwillingness to antagonize Turkey.

The Bush administration became a particular focus of criticism because it followed its predecessor in making strengthened US-Iraq relations a key objective, despite the fact that the end of the Iran-Iraq war had eliminated a major rationale for this goal. A transition paper prepared for the new presidency outlined the conflicts that characterized existing policy toward Iraq. The paper recommended assigning high priority to US-Iraq relations because of Saddam Hussein’s potential as a “major player,” but reviewed persistent divisive issues, including Iraq’s chemical weapons use which “aroused great emotions” in the United States, and its “abominable human rights record.” These negative factors were contrasted with Iraq’s value as a financial market and its potential as a trading partner, and with the fact that it shared an interest with the US in containing Iran. Secretary of State James Baker personally intervened to promote strong ties with Baghdad, asking the Commodity Credit Corporation to increase its Iraqi funding by $1 billion during 1989.

On August 4, 1989, the FBI and other agencies raided the Atlanta branch office of the Banca Nazionale del Lavoro (BNL), one of Italy’s largest banks, whose shares were almost entirely owned by the Italian government. Informants had revealed that the bank had provided massive off-the-books loans to foreign countries, including Iraq. The loans had far exceeded the bank’s lending limits and were recorded in a parallel accounting system rather than in its official records. The branch office had not only handled a major portion of US agricultural credit guarantees for Iraq; it had also provided financing for exports of non-agricultural products.

In addition, the managers had signed a series of agreements obligating the bank to provide $1.155 billion in loans to Iraq’s Ministry of Industry and Military Production, a government organization that was in charge of Iraq’s efforts to obtain western technology for military research and development programs, including those involving chemical, biological, and nuclear weapons and missiles. The total amount of unauthorized credit transactions between BNL and Iraq exceeded $5.5 billion, concealed by BNL employees through document falsification and fraudulent financial reporting. George Bush still signed National Security Directive 26, committing the administration to strengthened ties with Iraq.

Despite the commitment of the Bush administration to maintaining political and economic relations with Iraq, sustaining that relationship became increasingly difficult. On December 5, Iraq launched a rocket capable of conveying satellites into space, although the space launch vehicle failed in an intra-stage collapse. US officials immediately began to discuss increased efforts to control technology exports to Iraq, and also began discussion of Iraq’s efforts to expand its chemical and nuclear weapons programs.

It took Iraq’s invasion of Kuwait in August 1990 for President Bush to issue executive orders to freeze all Iraqi and Iraq-controlled assets in recompense for the state’s $2 billion in defaults. Five years later, Iraqi officials revealed a failed plan to liberate highly enriched uranium controlled by the International Atomic Energy Agency from two reactors at the Al Tuwaitha Nuclear Center near Baghdad soon after the Kuwaiti occupation.

Two administrations, blinded by the economic potential of a solid US-Iraq relationship, supported Saddam despite well-documented involvement in humanitarian atrocities, corruption, and technological espionage. While I hesitate to assert that the United States “created” Saddam Hussein as he exists today, both administrations were naive in their machinations and in their support of his regime.

Author’s Note: Links to better sources and updated, more-legible documents were added during a 2012 revision.