Bankrolling Saddam

SOMETHING about Iran seduces United States policymakers into doozy blunders, and possibly into out-and-out illegality. In US attempts to either influence or contain Iran, Realpolitik keeps blowing up in America's face.

Although George Bush saw the Iran-contra affair unravel as vice president, he failed to learn its two main lessons: (1) The US is out of its depth when it attempts insider-trading in the Middle East bazaar. (2) The US government should conduct its foreign policy both legally and ethically.

Thinking he could contain Iran by strengthening Saddam Hussein's Iraq, and also that he could tame the prowling Iraqi dictator after he emerged victorious in the Iran-Iraq war, President Bush in 1989 agreed to give Saddam billions of dollars in US credits.

The credits, primarily agricultural loan guarantees, enabled Iraq to buy grain from US farmers; but there is mounting evidence that Baghdad diverted millions of dollars into military procurement and weapons R&D. The US may have helped finance Saddam's invasion of Kuwait.

Long before Saddam's tanks rolled into Kuwait in August 1990, however, mid-level administration officials hoisted warning flags that the White House and State Department ignored. The critics' bill of particulars against Bush's courtship of Saddam:

* The use of Commodity Credit Corp. agricultural guarantees to achieve foreign policy ends is improper - even illegal.

* The White House and State Department slapped down concerns by Agricultural Department and Treasury officials that Iraq would not repay guaranteed loans and that US taxpayers would pick up the tab - as happened.

* When it came to light that Saddam was diverting loans into military uses, especially nearly $4 billion received from the Atlanta branch of Italy's Lavoro Bank, the administration delayed federal prosecution of Lavoro officers.

* The administration is resisting congressional investigation of the Iraq-Lavoro connection.

Most of the still-incomplete information about the Iraq-Lavoro affair has been tenaciously dug out by Rep. Henry Gonzalez (D) of Texas, chairman of the House Banking Committee. Mr. Gonzalez is now calling for the appointment of a special prosecutor to investigate the matter.

The long, costly, and inconclusive investigation of Iran-contra doesn't inspire much confidence in open-ended probes by special prosecutors into matters with foreign policy and national security implications. Any such prosecutor's authority in this affair should be carefully limited. But many questions have been raised about "Iraqgate" that cannot be swept under the Persian rug.

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