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IRAQ-GATE is the name given to a scandal centered on loans guaranteed by the United States government to Iraq. The allegations of the scandal arose after the Persian Gulf War in 1991, in which the United States fought against Iraq, led by Saddam Hussein. Subsequent investigations uncovered evidence that between 1985 and 1989, the Atlanta branch of Banca Nazionale del Lavoro (BNL), the Italian national bank, issued more than $5 billion in secret and illegal loans to Iraq. The loans were backed by the Export-Import Bank and the Commodities Credit Corporation, two executive branch agencies. While the purpose of these loans was for food and agricultural products, the grant of the money allowed Hussein to use money for arms that he could have spent on feeding the nation. The loans operated by lending money to companies that were supplying Hussein with weapons manufacturing products.

After being indicted for fraud and other related charges, the BNL Atlanta branch manager, Christopher Drougal, testified before the House Banking Committee as to the details of the loans. He claimed that the BNL loans were part of a covert operation designed to finance the secret rearming of Iraq. He claimed that he was merely the instrument of a secret U.S. policy to aid Hussein. The operation was coordinated with Italian officials by the administration of President Ronald Reagan and continued by President George H. W. Bush. The United States was involved in the arming of Iraq to gain bargaining leverage for U.S. hostages in Iraq. Despite these accusations, the Bush administration denied any involvement in the illegal loans. However, in October 1992, Attorney General William Barr instructed the Federal Bureau of Investigation to begin an investigation into allegations of obstruction of justice by the government. During the 1992 presidential election, Bill Clinton promised that if elected he would investigate the scandal. On 17 January 1995, Attorney General Janet Reno issued the final report resulting from the Clinton administration's investigation into the matter. The report concluded that there had been no violation of the law.


Krosney, Herbert. Deadly Business: Legal Deals and Outlaw Weapons: The Arming of Iran and Iraq, 1975 to the Present. New York: Four Walls Eight Windows, 1993.

Timmerman, Kenneth. The Death Lobby: How the West Armed Iraq. Boston: Houghton Mifflin 1991.

Shira M.Diner

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