Crude Vision New!
The Secret History of the Aqaba Pipeline

In the early 1980's Iraq and America's newest enemy Iran were locked in a vicious conflict. The use of chemical weapons by Saddam Hussein was well-known. In fact, in November 1983, U.S. Secretary of State George Shultz received an intelligence report describing how SaddamHussein's troopswere resorting to "almost daily use of CW [chemical weapons]" in their war against the Iranians.

Undeterred by the reports, one month later, President Reagan dispatched a special envoy to Baghdad on a secret mission.

On December 20, the envoy meets with Saddam Hussein. He is not there to lecture the dictator about his use of weapons of mass destruction or the fine print of the Geneva Conventions. He is there to talk business.

The envoy informs the Iraqi leader that Washington is ready for a resumption of full diplomatic relations, according to a recently declassified State Dept. report of the conversation, and that Washington would regard "any major reversal of Iraq's fortunes as a strategic defeat for the West." Iraqi leaders later describe themselves as "extremely pleased" with the visit.

The envoy was Donald H. Rumsfeld, then the CEO of pharmaceutical giant Searle. The meeting is widely considered to be the trigger that ushered in a new era of U.S.-Iraq relations, one that opened the door to shipments of dual-use munitions, chemical, biological agents and other dubious technology transfers. But for years what exactly was discussed in that now infamous meeting has been shrouded in secrecy.

Until now.

In arecently released investigative report from the Institute for Policy Studies entitled Crude Vision: How Oil Interests Obscured U.S. Government Focus On Chemical Weapons Use by Saddam Hussein, researchers Jim Vallette, Steve Kretzmann, and Daphne Wysham detail the real reason Donald Rumsfeld was sent to Baghdad: Rumsfeld, under direct instructions from the White House, was there to convinceSaddam Hussein to approve a highly lucrative, and highly secret,oil pipeline project from Iraq to Jordan.

Examining recently released government and corporate sources, the researchers document how a close-knit group of high-ranking U.S. officials worked in secrecy for two years attempting to securethe billion dollar pipeline scheme for the Bechtel corporation. The Bush/Cheney administration now eyes Bechtel as a primary contractor for the rebuilding of Iraq's infrastructure.

Bechtel's pipeline would have carried a million barrels of Iraqi crude oil a day through Jordan to the Red Sea port of Aqaba.

What happened to thepipeline deal? What trade-offs were made? Who were the players? How did Israel fit into the scheme? What impact didit haveon current U.S. policy?

For answers to these questions, and links to the original memos and declassified cables, read GNN's Cointel interview with the report's lead author Jim Vallette here:

Crude Vision:

"While Iraq is not unique in possessing these weapons, it is the only country which has used them - not just against its enemies, but its own people as well. We must assume that Saddam is prepared to use them again. This poses a danger to our friends, our allies, and to our nation. Saddam is more wily, brutal and conspiratorial than any likely conspiracy the U.S. might mobilize against him. Saddam must be overpowered." - Donald Rumsfeld, Robert McFarland, Judge William Clark, "Open Letter to the President," Feb. 19, 1998

GNN: What are the origins of western involvement in Iraq's oil?

Jim Vallette: The U.S. and the British have a history of intervention in Iraq for oil. It really goes back over seventy years to 1911 when the British, German and Turkish formed a pipeline consortium interest. After WWI, the U.K. took over Iraq and installed a king and took over this oil consortium. Herbert Hoover, the former U.S. president, forced the British to allow what is now Exxon Mobil into the consortium. So by the 1920's you had a king installed by the British and you had oil exploration and production controlled by the origins of British Petroleum (BP), Exxon, Mobil, TotalFinaElf of France and Shell. From the 20's through the 60's, starting with the British and then with the U.S., there was a considerable backlash among the Iraqi people against the control of their resources.

There were interventions to get folks out of power who wanted to nationalize the oil company. In 1958, [Col.] Kassem took over in a coup and started nationalizing parts of the Iraq Petroleum Company. In 1963, the CIA assisted in a coup that wound up with an important deal and their oil interests somewhat protected.

Then the Baath Party took over in 1968 and a few years later in 1972 they nationalized the oil interests of Exxon Mobil and BP.

That was the end of sixty-one years of a British and U.S. stranglehold over Iraq's oil. It severed the relationship between the U.S., U.K. and Iraq on a business and political level. They turned their support to the north where the Shah Reza Pahlavi was a very tight friend of the British and Americans. But then, the Iranian revolution in 1979 swept him from power and made Iran a mortal enemy of the U.S.

A year later the Iran-Iraq war started and the Reagan Administration took over. Almost immediately they put out an olive branch to Saddam, saying they were interested in reestablishing business connections. They took Iraq off the list of states that support terrorism, despite evidence that they still did [including harboring master terrorist Abu Nidal]. But that allowed the sale of dual-use munitions to Iraq.

In 1983, these business interests ratcheted up quite a bit after Bechtel officials met with State Department officials to discuss a plan to build an oil pipeline from Iraq to Jordan. George Shultz, the Secretary of State, had gone from being president and CEO of the Bechtel Groupdirectly into the Reagan Administration.

GNN: Tell me about Bechtel.

Jim Vallette: Bechtel is a privately held company, one of the largest construction companies in the world. They and Halliburton are dominating the contracting for post-war Iraq. They have deep ties with the Bush-Cheney Administration.

Shultz went straight from Bechtel to the White House, where he promoted this pipeline idea. They hired Donald Rumsfeld, who was then the CEO of Searle pharmaceutical company, for a couple of months as a special envoy to the Middle East, where he made several trips.

In the public realm, these trips have always been described as peace missions, but it was never clear what Donald Rumsfeld was doing in Baghdad in December 1983 in his meeting with Saddam Hussein. But from papers that were released by the National Security Archive, and by papers I found in the government's National Archives, it is very clear in their own words that George Shultz gave Donald Rumsfeld marching orders to go to Baghdad and promote this Bechtel pipeline to Saddam.

In that meeting, Saddam told Rumsfeld that he thought this was a good idea since we needed to avoid the Persian Gulf where the Iranians were attacking Iraqi ships. This would be a pipeline that would go west through Jordan to the Gulf of Aqaba, and into the Red Sea, circumventing the Persian Gulf.

But Saddam told Rumsfeld that he was worried about the possibility of the Israelis attacking the pipeline. In his note back to Shultz, Rumsfeld said this is something we need to talk to the Israelis about. So for the next few years, while Saddam Hussein was unleashing thousands of chemical bombs on the Iranians, the Reagan Administration and many of the architects of this war were spending their time shuttling back and forth between Baghdad, Amman, Israel and Washington, trying to get the Israelis to guarantee that there wouldn't be an attack on the pipeline and to assuage Saddam's fears that there wouldn't be an attack.

GNN: The Israelis had attacked their nuclear plant at Osirak in 1982.

Jim Vallette: Exactly. It was fresh in their minds. There were all sorts of mechanisms that were put into place. Shultz's State Deptartment pressured another U.S. agency, the U.S. Export Import Bank that loans and credits exports to overseas projects, to extend hundreds of millions of dollars to their project. Then the National Security Agency put similar pressure on another agency, the Overseas Private Investment Corp., to give insurance to the project, all designed to allay Saddam's concerns.

A lot of this was being hatched out of the Bechtel offices, in cahoots with their buddies in the State Department and the National Security Council, and this went on for two years. It got dirtier and dirtier. Bechtel met with a Swiss billionaire Bruce Rappaport, who was close personal friends with the Israeli Prime Minister Shimon Peres. Rappaport and another agent E. Robert Wallace tried to make certain arrangements with the Israeli government, which included funneling off oil pipeline profits into Peres' Labor Party.

GNN: Pipeline protection money. [Peres was reportedly offered $700 million over ten years. Rappaport was later investigated by the FBI for illegal oil dealing. Wallace and his former client Attorney General Edwin Meese were investigated by a special prosecutor for their role in the bribing scandal. See the National Security Archive for an extensive list of documents relating to the scandal, including a photo of Iraqi Foreign Minister Tariq Aziz and Reagan.]

Jim Vallette: Exactly. They also looked at ways of dedicating Defense Department funds as a way of insuring against attack, and were looking at all sorts of mechanisms off the books that would set up this deal. This is what really preoccupied U.S. policy with Iraq at the same time Saddam Hussein was unleashing weapons of mass destruction.

GNN: At one point, at the same time the State Department was urging the Export-Import Bank to push through this loan for the pipeline, the State Department itself was issuing statements criticizing Iraq for using chemical weapons. It's taken so long for this major operation to come out, it must have been very top secret. How aware where they in keeping it under wraps?

Jim Vallette: There was definitely an assumption that these documents were never going to come out.

GNN: How were they just sitting in the National Archives?

Jim Vallette: There was an independent investigation into Edwin Meese, who was made the Attorney General under Reagan in 1985, and his relationship with E. Robert Wallach, who was one of the pipeline agents. He owed money to Wallach, who was an attorney, from a past defense. Wallach, once hired, went straight to Meese and said can you get your boys and get the ball rolling on this pipeline? And Meese did get the ball rolling in the National Security Council.

The timing of the official proclamations was interesting.

GNN: Yes, were those same people issuing statements condemning Iraq aware of these back channel deals going on?

Jim Vallette: Sure, in these memoranda you can see that in behind the scenes communications, they were saying, 'of course we had to say something about this, but just don't source your chemical weapons from the U.S. - don't embarrass us because we don't want this issue to dominate our bi-lateral relationship.'

Later, in March 1984 the United Nations had a team of experts go to Iran who came back and reported on March 28th that indeed Iraq had used chemical weapons on Iranians that same day Rumsfeld was back in Baghdad trying to push the pipeline deal.

Then things kind of cooled off, first with the Israeli elections. The Labor Party took over from the Likud Party as the dominant party in Israel and they had been relying on contacts with the existing government in Israel. It took about six months for Bechtel to work out this deal to find this other way, which they did in January 1985, when Bechtel worked out a deal with this Swiss billionaire Bruce Rappaport, who was close friends with Peres. Throughout 1985, Peres provided certain levels of guarantees, which got stronger and stronger as the pot sweetened. In the summer of '85, Bechtel and the pipeline and others hired two very high level officials; one was James Schlesinger, who was a Defense Secretary in the 1970s [and a CIA Director]. They also hired Judge William Clark, who was known as the Second Reagan or his right hand man. He was National Security Advisor for Reagan, left office and took a $500/hour job to promote the plan. He flew to the Middle East to discuss the pipeline, representing himself not as a pipeline agent but as being on [official] White House business.

I'm not making this up. Folks can read all of this themselves. It was really amazing to see all this stuff unfold and piece it together, and these are the same guys who are using this justification for the invasion of Iraq that Saddam must be disarmed of weapons of mass destruction. They say it doesn't have anything to do with oil.

GNN: Why did Saddamultimately decide not to go through with the deal at the end of 1985?

Jim Vallette: A couple of things happened. Around this time he was also negotiating to do deals to do pipelines through Turkey and Saudi Arabia, and those were completed. He also thought Bechtel was overpricing the project. Bechtel said it was a billion dollar project to build it. Saddam apparently thought it would be half of that.

GNN: It fell through on the numbers.

Jim Vallette: There may have been an element of Saddam using the U.S. as leverage against these other contracts. They were steaming mad. Bechtel was steaming. The Reagan Administration had expended a lot of political capital on this. They turned a blind eye to chemical attacks for naught.

GNN: How did U.S.-Iraqi relations progress from there?

Jim Vallette: That was really the last big effort to expand business ties between Washington and Baghdad. But Iran was still... there was still some relations between the first Bush Administration and Saddam allowing some dodgy technologies to get in there. Then it became 1990, and Saddam Hussein accused Kuwait of being in cahoots with the United States in influencing oil prices, which Saddam claimed was a threat to Iraq's national security, and with that pretext he invaded Kuwait.

Since then, the U.S. has seen oil contracts go to other countries like France, Russia and China. These are multi-billion dollar contacts. Beyond that the landscape hasn't really changed, in terms of what weapons and what tactics he has used to stay in power. But what has changed in the intervening 12 or 15 years, has been this lucre being parceled out to other interests.

GNN: And these guys got back into power. Do you think there's a personal feeling of resentment that these guys spent the good part of the early 80's trying to do a deal that never happened?

Jim Vallette: They keep calling him a wily dictator that can concoct these wild schemes greater than anything the U.S. could concoct against him, so maybe that reflects some sort of psychological state remnant of their dealings in the 80's.

In the 90's, a lot of these guys were in think tanks and in business concocting the current strategy against Iraq. In a lot of their papers, and in their testimonies before Congress up until last year, they were justifying their attack on Iraq in terms of oil. As recently as last August when Dick Cheney spoke to the Veterans of Foreign Wars and kind of launched this whole initiative, they raised the specter of Saddam holding weapons of mass destruction and holding oil hostage from the global community. Since August of last year, the Bush/Cheney Administration has completely eliminated the word oil from their dictionary.

GNN: What has been the response to your report? Any contact with the Times or the Post?

Jim Vallette: There is always hope. The alternative media is the best hope for the truth, especially in times of war. We'll see what happens. There is already talk in mainstream media about who will get the spoils of war, so maybe this will filter into that.

In some ways I wish I had found these documents earlier. It's kind of late.

GNN: Well, this information is extremely important to understand the secret history of how the U.S. and Iraq have been dealing with each other and to see through the hypocrisy of the weapons of mass destruction rhetoric. And I applaud you for digging this out.

Read the entire "Crude Vision" report here(PDF).

Additional documents:

07/20/84: Memo from Bechtel to energy ministries of Iraq and Jordan

07/26/84: Internal memo, Bechtel

10/15/84: Correspondence between Bechtel and Placke (State Dept.)

10/15/84: Notes from the first Rappaport/Bechtel meeting

01/07/85: Internal memo, Bechtel

01/23/85: Internal memo, Bechtel

02/08/85: Internal memo, Bechtel

05/03/85: Internal memo, Bechtel

05/03/85: Letter from law firm to Bechtel

06/14/85: Letter from law firm to Bechtel

07/11/85: Letter from William Clark to E. Robert Wallach

08/01/85: Internal memo, Bechtel

09/25/85: Letter from Shimon Peres to Edwin Meese

01/30/86: Internal memo, Bechtel

02/07/86: Internal memo, Bechtel

National Archives documents can be found on the National Security Archive web site. You can also find video of Donald Rumsfeld's December 1983 meeting with Saddam Hussein.