AGSCAM: the new world money order; the Department of Agriculture's long, dirty dance with a dictator - loan guarantee program to Iraq

Washington Monthly, April, 1991 by Mark Feldstein

Although Dickerson's memo warned of possible adverse congressional reaction and press coverage"-particularly "domestic political concerns ".. that no HUD or savings and loan type scandal be permitted"-it concluded that stopping those loans would be "considered by the Iraqi Government as unwarranted and an affront to their dignity."

By this time, of course, even some State Department officials were willing to affront Iraq's dignity, calling its human rights record "abysmal." But as Agriculture pushed American products and State pushed against Iran, both seemed oblivious to humanitarian concerns. For instance, while congressional hearings in 1988 had determined that Iraq's government had ordered the use of chemical weapons on the Kurds, USDA apparently had more reliable sources. After a "personal investigation" led by Sims, USDA decided that there was "no concrete evidence" that the poison gas was actually authorized by the government. "I never had anyone tell me that the evidence was conclusive at that time," he recalls.

It was not until 1990 that Iraq's reputation became sufficiently tarnished to raise the issue of canceling the guarantees altogether. By spring, Iraq had used the $500 million allotted to it and come back to USDA for more; Dickerson, citing the ongoing BNL investigation, refused to release the funds. Shortly thereafter, Rep. Charles Schumer introduced an amendment to the 1990 farm bill that would deny the Iraqis any further guarantees. On July 27, it passed-but the very same day, the House effectively gutted its sanctions by giving USDA the power to return Iraq to the program if the ban hurt American farmers.

Six days later, Iraq invaded Kuwait, finally Putting an end to the sorry saga of Iraqi agricultural credits-too late to undo the damage. The results: an Iraqi government supplied with military hardware and cash under a U.S. government program, and a $2 billion bill about to come due.

Check imbalances

As years of unnoticed GAO and inspector general reports amply indicate, the press considers USDA an unlikely outpost for international intrigue; cotton, rice, and milk contracts are not the usual stuff of searing foreign policy exposes. Yet in 10 years of existence, USDA's loan guarantees have been quietly transformed from a dull export-enhancement strategy into a critical foreign policy tool-one that has as much to do with backroom diplomacy as with careful estimation of credit risks.

In this perverted market," in which businesses, banks, and dictators make deals with U.S. government credits, there should be increased public and press demand for government oversight. There isn't. Iraq or no Iraq, tens of thousands of shipments still leave American ports unexamined, guaranteed by public money. It's checkbook diplomacy that we'll inevitably find ourselves paying for again-in our tax bills, certainly, and perhaps even in our next little war.

Just a few weeks after Iraq invaded Kuwait, sources say, some State Department officials suggested extending agricultural credits to Syria, a country notorious for its support of terrorism and its bloody record on human rights. The idea was to encourage Syrian President Hafez al-Assad to join the allied coalition against Iraq. Eventually, cooler heads prevailed. But the irony of it all went almost undetected.