Congress Wrestles Over Iraq

A wrangle over whether the U.S. should permit unfettered trade with Iraq was a factor in preventing Congress from acting before its Thanksgiving recess to extend the Export Administration Act (EAA) for a further two years.

The Senate is not expected to vote until January on a bill extending the Act, which grants the President authority to control U.S. exports for national security or foreign policy purposes. The House has passed a version of the bill which, among other things, would reclassify Iraq as a supporter of "international terrorism" and therefore make U.S. trade with Iraq subject to certain restrictions.

The Reagan Administration has quietly but effectively lobbied Congress not to put Iraq back on the "terrorist list," which now embraces countries such as Libya, South Yemen, Syria and Cuba On October 6 of this year, a State Department spokesman said that "the government of Iraq has publicly denounced international terrorism since at least September, 1982." The Administration also argues that Iraq has moderated its views and has sought better economic relations with Western countries.

U.S. trade with Iraq has suffered as a result of the Gulf war between Iraq and Iran, which has virtually paralyzed an Iraqi oil industry that once produced 2.5 million barrels a day of crude oil.

Before the war, Iraq was on its way to becoming a billion-dollar-a-year export market for U.S. firms. Even in 1982, at the height of the war, U.S. exports to Iraq were worth nearly $850 million. In February of that year, the Reagan Administration removed Iraq from the "terrorist list," and trade relations have continued to improve, with the U.S. becoming an annual exhibitor at the Baghdad trade fair. While the war and the severe economic constraints it has imposed on Iraq have hampered trade growth, the Commerce Department continues to regard Iraq as "a market of great potential."

The Iraqis, who have been in the market for loans from Western countries to finance their imports and development programs, have sought to balance their foreign relations more evenly between East and West. They have a preference for Western goods and technology. Before the war, they were letting $23 billion a year in construction contracts, even more, in 1981, than Saudi Arabia. Once the war ends, there will be a huge market in rebuilding Iraq's infrastructure and oil installations.

Export controls could seriously damage American prospects for getting future Iraqi business. As elsewhere in the Middle East, the U.S. already suffers a disadvantage in the marketplace because of the high value of the dollar, uncompetitive bidding practices and official restrictions on U.S. trade such as the anti-boycott and anti-bribery laws.

The State Department has presented evidence to Congressional committees that Iraq has taken significant steps to improve relations with the U.S. Specifically, the U.S. says Iraq has put a stop to all activities from its territory by the breakaway Palestinian faction headed by "Abu Nidal," who is now reported to be operating from Syria.

The Administration's efforts to get the Senate on its side appear to have been successful. Senator Alan Dixon (D-Ill.), who has said he felt he owed it to his constituents to get Iraq put back on the list and tighten up "terrorist list" procedures generally, is reported to have agreed to a compromise. An amendment which Dixon is expected to offer when the bill reaches the Senate floor next year would, according to a Senate aide, "leave room for the State Department to keep Iraq off the list." The department would have to demonstrate that it has "explicit assurances" from the Iraqis that they won't support "international terrorism."

Acquiring Allies

In efforts to forge a compromise on the issue, the Administration has acquired an ally in the person of Senator Rudy Boschwitz (R-Minn.), who normally opposes U.S. cooperation with Arab regimes. Said to have been impressed with the State Department's arguments on the Iraq issue, Boschwitz is ready to offer a compromise "counteramendment" to the Dixon amendment when the issue next comes up.

Supporters of Dixon's efforts to reclassify Iraq argue that the EAA controls as they are do not impose blanket restrictions on trade with countries accused of supporting terrorism and that the proposed reforms are designed only to bring in Congress for closer consultation.

Since Iraq was taken off the list in February 1982, it has received $400 million in U.S. government agricultural credits, bought 60 Hughes helicopters and signed contracts with U.S. firms for high-tech goods and design services for the new Baghdad subway. More important, U.S. firms may be involved in a proposed giant scheme to build a pipeline linking Iraq's oil fields with Saudi Arabia's oil export outlets.