The present terror tangle came from the Bushes

January 11, 2004

• The Barreling Bushes
  Four generations of the dynasty have chased profits through cozy ties with Mideast leaders, spinning webs of conflicts of interest
  By Kevin Phillips
  
  WASHINGTON — Dynasties in American politics are dangerous. We saw it with the Kennedys, we may well see it with the Clintons and we're certainly seeing it with the Bushes. Between now and the November election, it's crucial that Americans come to understand how four generations of the current president's family have embroiled the United States in the Middle East through CIA connections, arms shipments, rogue banks, inherited war policies and personal financial links.
  
  As early as 1964, George H.W. Bush, running for the U.S. Senate from Texas, was labeled by incumbent Democrat Ralph Yarborough as a hireling of the sheik of Kuwait, for whom Bush's company drilled offshore oil wells. Over the four decades since then, the ever-reaching Bushes have emerged as the first U.S. political clan to thoroughly entangle themselves with Middle Eastern royal families and oil money. The family even has links to the Bin Ladens — though not to family black sheep Osama bin Laden — going back to the 1970s.
  
  How these unusual relationships helped bring about 9/11 and then distorted the U.S. response to Islamic terrorism requires thinking of the Bush family as a dynasty. The two Bush presidencies are inextricably linked by that dynasty.
  
  The first family member lured by the Middle East's petroleum wealth was George W. Bush's great-grandfather, George H. Walker, a buccaneer who was president of Wall Street-based W.A. Harriman & Co. In the 1920s, Walker and his firm participated in rebuilding the Baku oil fields only a few hundred miles north of current-day Iraq. As senior director of Dresser Industries (now part of Halliburton), Walker's son-in-law Prescott Bush (George W. Bush's grandfather) became involved with the Middle East in the years after World War II. But it was George H.W. Bush, the current president's father, who forged the dynasty's strongest ties to the region.
  
  George H.W. Bush was the first CIA director to come from the oil industry. He went on to became the first vice president — and then the first president — to have either an oil or CIA background. This helps to explain his persistent bent toward the Middle East, covert operations and rogue banks like the Abu Dhabi-based Bank of Credit and Commerce International (BCCI), which came to be known by the nickname "Bank of Crooks and Criminals International." In each of the government offices he held, he encouraged CIA involvement in Iran, Pakistan, Afghanistan and other Middle Eastern countries, and he pursued policies that helped make the Middle East into the world's primary destination for arms shipments.
  
  Taking the CIA helm in January 1976, Bush cemented strong relations with the intelligence services of both Saudi Arabia and the shah of Iran. He worked closely with Kamal Adham, the head of Saudi intelligence, brother-in-law of King Faisal and an early BCCI insider. After leaving the CIA in January 1977, Bush became chairman of the executive committee of First International Bancshares and its British subsidiary, where, according to journalists Peter Truell and Larry Gurwin in their 1992 book "False Profits," Bush "traveled on the bank's behalf and sometimes marketed to international banks in London, including several Middle Eastern institutions."
  
  Once in the White House, first as vice president to Ronald Reagan and later as president, George H.W. Bush was linked to at least two Middle East-centered scandals. It's never been entirely clear what Bush's connection was to the Iran-Contra affair, in which clandestine arms shipments to Iran, some BCCI-financed, helped illegally fund the operations of the anti-Sandinista Contra rebels in Nicaragua. But in 1992, special prosecutor Lawrence E. Walsh asserted that Bush, despite his protestations, had indeed been "in the loop" on multiple illegal acts.
  
  Much clearer was Bush's pivotal role, both as vice president and president, in "Iraqgate," the hidden aid provided by the U.S. and its military to Saddam Hussein's Iraq in its high-stakes war with Iran during the 1980s. The U.S. is known to have provided both biological cultures that could have been used for weapons and nuclear know-how to the regime, as well as conventional weapons. As ABC-TV broadcaster Ted Koppel put it in a June 1992 "Nightline" program after the 1991 Persian Gulf War: "It is becoming increasingly clear that George [H.W.] Bush, operating largely behind the scenes through the 1980s, initiated and supported much of the financing, intelligence and military help that built Saddam's Iraq into the aggressive power that the United States ultimately had to destroy."
  
  During these years, Bush's four sons — George W., Jeb, Neil and Marvin — were following in the family footsteps, lining up business deals with Saudi, Kuwaiti and Bahraini moneymen and cozying up to BCCI. The Middle East was becoming a convenient family money spigot.
  
  Eldest son George W. Bush made his first Middle East connection in the late 1970s with James Bath, a Texas businessmen who served as the North American representative for two rich Saudis (and Osama bin Laden relatives) — billionaire Salem bin Laden and banker and BCCI insider Khalid bin Mahfouz. Bath put $50,000 into Bush's 1979 Arbusto oil partnership, probably using Bin Laden-Bin Mahfouz funds.
  
  In the late 1980s, after several failed oil ventures, the future 43rd president let the ailing oil business in which he was a major stockholder and chairman be bought out by another foreign-influenced operation, Harken Energy. The Wall Street Journal commented in 1991, "The mosaic of BCCI connections surrounding Harken Energy may prove nothing more than how ubiquitous the rogue bank's ties were. But the number of BCCI-connected people who had dealings with Harken — all since George W. Bush came on board — likewise raises the question of whether they mask an effort to cozy up to a presidential son."
  
  Other hints of cronyism came in 1990 when inexperienced Harken got a major contract to drill in the Persian Gulf for the government of Bahrain. Time magazine reporters Jonathan Beaty and S.C. Gwynne, in their book "The Outlaw Bank," concluded "that Mahfouz, or other BCCI players, must have had a hand in steering the oil-drilling contract to the president's son." The web entangling the Bush presidencies was already being spun.
  
  Second son Jeb Bush, now the governor of Florida, spent most of his time in the early and mid-1980s hobnobbing with ex-Cuban intelligence officers, Nicaraguan Contras and others plugged into the lucrative orbit of Miami-area front groups for the CIA. But he too had some Middle East connections. Two of his business associates, Guillermo Hernandez-Cartaya and Camilo Padreda, both indicted for financial dealings, were longtime associates of Middle Eastern arms dealer, BCCI investor and Iran-Contra figure Adnan Khashoggi. Prosecutors dropped the case against the two, and a federal judge ordered Padreda's name expunged from the record. But a few years later Padreda, a former Miami-Dade County GOP treasurer, was convicted of fraud over a federally insured housing development that Jeb Bush had helped to facilitate. Jeb Bush also socialized with Adbur Sakhia, the Miami BCCI branch chief and later its top U.S. official.
  
  Neil Bush, most famous for the scandal surrounding the corrupt practices of Colorado's Silverado Savings & Loan, where he served as a director during the 1980s, also picked plums from Persian Gulf orchards. In 1993, after his father left the White House, Neil went to Kuwait with his parents, brother Marvin and former Secretary of State James A. Baker III. When his father left, Neil stayed to lobby for business contracts, and after returning home evolved a set of lucrative relationships with Syrian-American businessman Jamal Daniel. One of their ventures, Ignite!, an educational software company, also included representatives of at least three ruling Persian Gulf families.
  
  The Bush family's Middle Eastern commercial focus is further exemplified by Marvin, the youngest brother of the current president. From 1993 to 2000 he was a major shareholder, along with Mishal Youssef Saud al Sabah, a member of the Kuwaiti royal family, in the Kuwait-American Corp., which had holdings in several U.S. defense, aviation and industrial security companies.
  
  George H.W. Bush's own Persian Gulf relationships kept expanding. While serving in the Reagan White House during the 1980s, he was known in the Middle East as "the Saudi vice president," and a New Yorker article last year described the Saudi ambassador to the U.S. as "almost a member of the [Bush] family." Indeed, many saw the 1991 Gulf War to expel Iraq from Kuwait as an outgrowth of Bush's close ties to the oil industry and to Persian Gulf royal families, who felt threatened by Saddam Hussein's expansionism.
  
  After losing his bid for a second term as president, Bush joined up in 1993 with the Washington-based Carlyle Group. Under the leadership of ex-officials like Baker and former Defense Secretary Frank C. Carlucci, Carlyle developed a specialty in buying defense companies and doubling or quadrupling their value. The ex-president not only became an investor in Carlyle, but a member of the company's Asia Advisory Board and a rainmaker who drummed up investors. Twelve rich Saudi families, including the Bin Ladens, were among them. In 2002, the Washington Post reported, "Saudis close to Prince Sultan, the Saudi defense minister … were encouraged to put money into Carlyle as a favor to the elder Bush." Bush retired from the company last October, and Baker, who lobbied U.S. allies last month to forgive Iraq's debt, remains a Carlyle senior counselor.
  
  If the 1991 war with Iraq and its aftermath cemented the Bush ties with oil elites and royalty in the Middle East, it angered Islamic true believers and radicals. By the late 1990s, many of the Islamic insurgents who had been mobilized by the CIA and others to chase the Soviets out of Afghanistan were becoming increasingly anti-American. They found a kinship with Osama bin Laden, the renegade of his billionaire Saudi family, who was outraged at the U.S. presence in Saudi Arabia.
  
  When the U.S. launched a second war against Iraq in 2003 but failed to find weapons of mass destruction that Hussein was purported to have, international polls, especially those by the Washington-based Pew Center, charted a massive growth in anti-Bush and anti-American sentiment in Muslim parts of the world — an obvious boon to terrorist recruitment. Even before the war, some cynics had argued that Iraq was targeted to divert attention from the administration's failure to catch Osama bin Laden and stop Al Qaeda terrorism.
  
  Bolder critics hinted that George W. Bush had sought to shift attention away from how his family's ties to the Bin Ladens and to rogue elements in the Middle East had crippled U.S. investigations in the months leading up to 9/11. Sen. Charles E. Schumer (D-N.Y.) complained that even when Congress released the mid-2003 intelligence reports on the origins of the 9/11 attack, the Bush administration heavily redacted a 28-page section dealing with the Saudis and other foreign governments, leading him to conclude, "There seems to be a systematic strategy of coddling and cover-up when it comes to the Saudis."
  
  There is no evidence to suggest that the events of Sept. 11 could have been prevented or discovered ahead of time had someone other than a Bush been president. But there is certainly enough to suggest that the Bush dynasty's many decades of entanglement and money-hunting in the Middle East have created a major conflict of interest that deserves to be part of the 2004 political debate. No previous presidency has had anything remotely similar. Not one.

Kevin Phillips' new book, "American Dynasty: Aristocracy, Fortune and the Politics of Deceit in the House of Bush," has just been published by Viking Penguin.

[BFrank]

Not to mention the "debt" issue:

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Baker Backed Loans That Added to Iraq Debt
By KEN GUGGENHEIM, Associated Press Writer

WASHINGTON - Now assigned the task of reducing Iraq (news - web sites)'s debt, presidential envoy James A. Baker III once gave crucial support for continuing a billion-dollar loan program to Saddam Hussein (news - web sites)'s government that accounts for most of the money Iraq still owes the United States.

As secretary of state in 1989, Baker urged the Agriculture Department to offer $1 billion in loan guarantees for Iraq to buy U.S. farm products after Iraq said it would reject a smaller deal.

"Documents indicate he intervened personally to make sure that Iraq continued to receive high levels of funding," said Joyce Battle, Middle East analyst for the National Security Archives, a foreign policy research center with a vast collection of declassified documents from the era.

Only half the guarantees were provided before the program was suspended amid allegations of improprieties and deterioration of relations with Iraq in the months before the August 1990 invasion of Kuwait.

The guarantees were an important part of the first President Bush (news - web sites)'s effort to improve relations with Iraq in hopes of boosting commercial ties and gaining leverage with a powerful and strategically important nation.

U.S. officials were well aware at the time that Saddam had used chemical weapons against Iran and Iraqi Kurds. Iraq also was believed to have biological and nuclear weapons programs and to be harboring terrorists — reasons the current Bush administration has used to justify toppling the Iraqi leader.

But in 1989, Baker and other officials hoped incentives might change Saddam.

"That turned out to be unsuccessful, but I don't think it was necessarily a bad approach to try," said John H. Kelly, who led the State Department's Near Eastern Affairs bureau under Baker.

After invading Kuwait, Iraq defaulted on its debt to the United States; the debt has grown to more than $4 billion. That includes $1.9 billion in principal and $1.1 billion in interest on Agriculture Department-guaranteed loans.

"The Iraq loss was certainly a shock to the system because of the magnitude," Clayton Yeutter, agriculture secretary at the time, said in an interview. He said the Iraq experience taught officials to be careful about guaranteeing too much debt for a single nation.

The U.S. debt is a small part of Iraq's overall $120 billion debt. Baker is now traveling the world as Bush's envoy, seeking relief for Iraq.

The United States began providing loan guarantees to Iraq in the 1980s. Iraq was at war with Iran and the United States wanted to prevent advances by Iran's clerical government.

When the first President Bush took office in 1989, the Iraq-Iran war was over and Iraq was not a U.S. priority, Baker wrote in his 1995 memoirs, "The Politics of Diplomacy."

To the extent it was considered, however, there were reasons to seek better relations.

Iraq was a major oil supplier. It was the ninth largest customer of U.S. agricultural goods, with most purchases backed by U.S. loan guarantees. U.S. companies were competing with foreign rivals for postwar business opportunities. Iraq was then the most powerful Arab country, and the United States hoped it might help Middle East peace efforts.

Some U.S. officials and members of Congress opposed attempts to improve relations, given Iraq's record of gassing of Kurds and other abuses. The State Department's human rights bureau described Iraq's record as abysmal, and its director, Richard Schifter, argued against any assistance.

But some U.S. officials saw signs of change. Iraq appeared willing to discuss chemical weapons and human rights issues. Also, Iraq agreed in March 1989 to pay $27 million to the families of 37 sailors killed by a 1987 Iraqi missile attack on the USS Stark.

Bush spelled out his policy in a national security directive from Oct. 2, 1989: "The United States government should propose economic and political incentives for Iraq to moderate its behavior and to increase our influence with Iraq." The policy left open the possibility of punitive measures if incentives failed.

"We were under no illusions about Saddam's brutality toward his own people or his capacity for escalating tensions with his neighbors," Baker wrote. "We fully recognized at the time that it was entirely possible any carrots we offered him would fail to produce the desired result."

Baker tried to improve relations. In March 1989, he assured an Iraqi diplomat that he would take a personal interest in Iraq's request for expanded loan guarantees from the Export-Import Bank. Later, when Congress barred Iraq from participating in bank programs, the State Department drafted a waiver to override the sanctions. Bush signed the waiver in January 1990.

The big issue, however, was the agricultural loan guarantees, which provide producers and lenders with assurances that loans will be repaid. The guarantees helped Iraq obtain financing to buy U.S. farm products.

By 1989, Iraq had been receiving about $1 billion a year in guarantees. The Agriculture Department proposed reducing that to $400 million for 1990, with the possibility of more money later. Officials were concerned about Iraq's creditworthiness, about corruption in the Iraq loan program and about a brewing scandal involving unauthorized loans to Iraq by the Atlanta branch of Italy's Banca Nazionale del Lavoro.

Angered by the cut, Iraq said it would reject the guarantees. At an Oct. 6, 1989, meeting with Baker, Foreign Minister Tariq Aziz "made it clear this was not a sign that the U.S. wanted improvement in relations," a State Department cable said then.

If Iraq were cut off, some U.S. officials feared Saddam would default on the existing debt. Other officials, though, questioned expanding Iraq's already large foreign debt.

Kelly and Abraham Sofaer, the State Department counsel, proposed a $1 billion program for Iraq, divided in two parts, with safeguards to prevent misuse. Sofaer recalled that the Stark settlement was an important consideration.

"It wasn't a quid pro quo, but it was a positive reaction to a positive development," he said in a recent interview.

Baker supported the proposal and called Agriculture Secretary Yeutter, who agreed to back the plan. The $1 billion package was approved days later at an interagency meeting.

Baker then wrote to Aziz, saying the guarantees reflected "the importance we attach to our relationship with Iraq."

Iraq received the first $500 million, but never the rest. Relations quickly deteriorated. By April 1990, the United States was angered by Saddam's threat to use chemical weapons against Israel, his criticism of the U.S. role in the Gulf and other issues.

The multiagency group suspended the second part of the loan program in May 1990. Declassified documents do not cite the worsening relations, but rather allegations of abuses in the loan program.