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Thursday, October 4, 1990 - Page updated at 12:00 AM

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How German Firms Built Up Iraq's Arsenal

Wall Street Journal

BONN - For weeks, the dismaying reports had trickled in: West German companies were supplying weapons factories to Iraq, shipping it poison-gas equipment, maybe even helping Saddam Hussein develop a nuclear bomb.

Trying to separate fact from fiction, members of the West German parliament in August demanded a confidential briefing from Economics Minister Helmut Haussmann. What they heard surpassed their worst fears.

Haussmann read off a long list of companies believed to have supplied Iraq with the means to manufacture arms. The French and Soviets had sold Iraq far more missiles and bombs, but the Germans were shipping, right up until the trade embargo on Iraq, something far more important to Saddam Hussein in the face of an international blockade: the wherewithal to build his own advanced weapons.

Last year, a leading German role was revealed in Libya's chemical-weapons program. Haussmann made clear that in respect to Iraq, his country's corporate sins were far broader: German companies were involved in virtually every major Iraqi weapons project, and were probably the most important suppliers in President Hussein's crash project to develop weapons autonomy.

``From poison-gas plants to rocket factories, from cannon forges to the nuclear sector . . . , the danger has already been spread,'' he said.

A text of Haussmann's secret statement makes clear that German links to the Iraqi arms industry are far more widespread than previously believed, raising questions whether the world's largest exporter is discriminating enough about who buys its sensitive technologies. The laxity is now clearly under attack in Germany, however: Investigators have so far made inquiries into 170 companies, and started criminal proceedings against 25.

The Haussmann report names more than 20 of these companies and points to at least a dozen more. It lists six Iraqi projects in which it says Germans have played important roles:

-- Nuclear weapons: Three German companies have provided machinery, special steel and components that are being used to build the gas centrifuges needed for producing weapons-grade uranium, Haussmann said. West German intelligence believes this has helped bring Iraq within perhaps two years of ``the bomb.''

-- Poison gas: A German company was the chief supplier for six plants in Samarra, Iraq, that make nerve and mustard gases, gases already used against the Iraqi Kurds and the Iranians.

-- Upgrading of missiles: Five German companies have helped improve Iraq's Scud-B missiles so they can carry chemical or conventional warheads farther and more accurately.

-- The ``Big Gun'': Six German firms have provided parts for a 150-meter-long ``supercannon'' Iraq has tried to build.

-- The Saad 16 project: A German contractor built Iraq's most advanced weapons research facility - President Hussein's pet project - where work on chemical and nuclear arms takes place.

-- The Taji project: A German company led the consortium that built what Haussmann called ``the best-known project in the weapons sector,'' which makes artillery and other arms.

Beyond this, at least one German company sold Iraq deadly mycotoxins, TH-2 and T-2, that Western intelligence reports say Iraq has used in research on biological weapons. (U.S. officials in Washington say Iraq has developed such weapons and will have enough by year end for battlefield use.) The company, Plato-Kuehn G.m.b.H., delivered the small amount of mycotoxins under legitimate license, and a principal of the firm, Josef Kuehn, has said he didn't know what they were to be used for.

Such reports haven't come at a convenient time, what with Germans celebrating their historic unification. To German chagrin, they lead inescapably to an unearthing of the past. Germany was the first country to use poison gas, when in 1915 its scientists opened several hundred cans of liquid chlorine along the trenches at Ypres, Belgium, killing 5,000 soldiers. By World War II, German chemists had developed nerve gas and modified a powerful insecticide to make Zyklon-B, the gas the Nazis used for mass killings in the concentration camps.

``We have a political and a moral problem,'' comments Wilfried Penner, a member of the Bundestag intelligence committee trying to curb weapons-related exports. ``We should be showing more restraint than other countries due to our inescapable history.''

It was American pressure that forced West Germany to begin looking inward, in late 1988. Initially, its leadership was bellicose when the U.S. charged that Libya's poison-gas plant in Rabta was German-made. But anger turned to embarrassment when German investigators found that a chemical company run by industrialist Juergen Hippenstiel-Imhausen, Imhausen Chemie AG, had planned and built the plant. Imhausen eventually drew the maximum jail sentence under the weak laws of the time: three years.

Since then, the West German government has tightened its controls, increasing penalties, tripling the number of export-control officials and cooperating more with U.S. and Israeli intelligence in tracking down suspect companies.

It was West Germany's industrial know-how that attracted Iraq. The country makes some of the most sophisticated machinery in the world, is the international leader in chemicals production, and, of notable importance to Iraq, has a relatively small customs control force. However, Germany's postwar constitution was designed to prevent the country from building a huge weapons industry. For one thing, it made it illegal to ship weapons to Spannungsgebiete, or areas of tension in the world.

But it doesn't bar the export of machinery of dual use, civilian and potentially military. To penalize a company, authorities have to prove it knew its export would be used to make weapons. Some German exporters to Iraq may not have had any idea their deliveries would be used in weapons manufacture, and many are now coming forward to volunteer information about their business with Iraq.

``The Iraqis have been more refined'' than Libya in acquiring chemical-weapons capability, notes Lutz Stavenhagen, the West German chancellery's intermediary with intelligence services. ``They have bought bits and pieces everywhere'' and made sure each supplier knew nothing about the bigger picture. The vast majority of German technology used in Iraq's chemical and nuclear weapons programs was sent out of the country piecemeal under legitimate export licenses.

Still, the various German investigations have uncovered a series of murky business relationships. Karl Kolb G.m.b.H., a laboratory and medical supplier based near Darmstadt, says a facility it helped Iraq build in 1983 was merely for pesticide production and wasn't built so it could produce chemical weapons. But German investigators conclude that the facility, a group of six plants in Samarra, is actually making chemical weapons, and that Karl Kolb knew it all along. The firm's lawyer denies this. A few days after Iraq invaded Kuwait, Darmstadt officials arrested Helmut Maier, the company's managing director; so far, he hasn't been charged with any wrongdoing.

Police also arrested several executives of another small company, Water Engineering Trading G.m.b.H., which had provided parts for the Samarra facility. Investigators believe Water Engineering, which has closed down operations, sold Iraq special machine tools to convert conventional 122-millimeter shells into poison-gas projectiles.

As it turns out, one of Water Engineering's four partners, Peter Leifer, worked for two years as a West German intelligence informant, a senior West German official says. The official says Leifer apparently used his intelligence contacts to help shield his illegal activities, adding that German intelligence knew nothing of these activities. Leifer, who is in custody, couldn't be reached for comment. His lawyer declined to comment.

Darmstadt prosecutors fear they may have to drop the case against Karl Kolb; besides the difficulty of proving guilty knowledge, German courts recently nullified a new law governing weapons exports (Bonn is appealing). However, prosecutors believe they have a stronger case against Water Engineering; it had no license for its exports.

Fingers are being pointed, too, at H&H Metalform G.m.b.H., a small company based in the farming town of Drensteinfurt. Ten days after Iraq invaded Kuwait, customs officials at Frankfurt airport seized crates H&H was trying to ship to Baghdad. The packing list read ``parts for a dairy plant.''

The contents, however, were high-quality steel components that investigators believe may have been destined for Iraq's rocketry program. Also inside were catalogs and product lists printed by the American Institute for Aeronautics and Astronautics.

Authorities seized the company's records and searched the homes of its two owners. They concluded that H&H is one of several suppliers of advanced machinery for Iraq's nuclear weapons program, among other things. What worries West German officials most is their conclusion that H&H has already sold Iraq machinery suitable for making gas centrifuges, an indication Iraq is in an advanced stage of nuclear-weapons development. Centrifuges separate inert uranium 238 from radioactive uranium 235, an essential step in creating weapons-grade material.

Officials at the Frankfurt airport also seized hundreds of gas centrifuges bound for Iraq that they believe were to be used to align machinery provided by H&H. Experts in Germany conclude that Iraq doesn't yet have a prototype gas centrifuge plant up and running, though they add it probably isn't far from that goal.

German authorities believe other German businessmen and companies have helped Iraq get there. Haussmann said that two former employees of MAN Technologien G.m.b.H. may have provided Iraq access to construction plans for different centrifuge types. He said they were investigated on suspicion of acting as foreign agents for Iraq, but authorities didn't find any evidence of illegal technology transfer. The company isn't suspected of any wrongdoing in this case.

The economics minister also said Export Union G.m.b.H. of Duesseldorf is suspected of providing special steels for the nuclear program. (It denies delivering special-grade steels under its steel-delivery license.) Authorities have arrested the director of a Bonn company believed to have sold special ring magnets that reduce friction in the critical centrifuge process.

The West Germans say H&H is also linked to two companies in London controlled by Iraq, Technology Development Group and Meed International. Both company names appear on contracts H&H has signed, and investigators believe Technology Development has acquired a 50 percent stake in H&H. One document sent by H&H to the Nassr Establishment for the Mechanical Industry (an arm of Iraq's war-materials ministry), through Meed International, offered to sell a ``drop tank'' that specialists say could be used to release chemical weapons from aircraft. ``They are of such good quality that they cannot only be used for one single mission but can be used several times for deep-penetration actions . . . ,'' the letter said.

The West Germans believe Technology Development has spent billions of dollars acquiring companies in the West, many of them makers of industrial equipment that has weapons applications. Sometimes it merely bought a stake in a company, and other times it placed huge orders and paid rich premiums for the goods.

Investigators believe the Iraqi strategy was to make the network of European firms in one way or another dependent on Iraq's business and therefore more willing to supply sensitive materials. The result is a sophisticated web of contacts that German authorities say includes companies in England, Northern Ireland, Germany, Switzerland and even the U.S. that could deliver virtually everything Iraq has needed.

German officials say a number of prominent Iraqis have visited H&H Metalform over the past three years, driving across Drensteinfurt's single set of railway tracks, past a couple of grain silos, then left at a large cornfield that marks the entrance to H&H.

Peter Huetten, one of its owner-managers, strongly denies links to any Iraqi arms network and says the government has made him and other businessmen scapegoats. He insists the supposed centrifuge machinery he sold Iraq isn't precise enough for that application, and is actually equipment to make customized aluminum wheels for Middle East hot-rodders. He also says Technology Development Group doesn't own an interest in his company, though he says he has done business with it and knows its erstwhile chairman, Safar al-Habobby.

Al-Habobby is also head of the Nassr State Enterprise for the Machine Industry, the war-materials firm.

Copyright (c) 1990 Seattle Times Company, All Rights Reserved.

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