Its greatest impact, however, was financial, with the U.S. branch of the state-owned, largest bank, Banca Nazionale del Lavoro (BNL) in Italy providing several billion dollars in funding for Iraqi military procurement.
[1] The branch manager, Christopher Drogoul, was charged with making unauthorized, clandestine, and illegal loans to Iraq—some of which, according to his indictment, were used to purchase arms and weapons technology.
[2] Iraq subsequently defaulted on foreign debt just before the 1991 war, and the United States Department of Justice announced, on 16 February 1995, the CCC would pay BNL $400 million, in settlement of the bank's claims filed against the U.S.[2] These guarantees were for reducing the risk of agricultural producers and other American exporters in doing business with developing countries.
In 1992, it was determined that the 1989 investigation was flawed, principally in assuming that the Italian government was unaware that a state-owned bank, BNL, had secretly lent billions of dollars to the Iraqi regime.
According to the New York Times, the investigation was marred by bitter feuding among Atlanta prosecutors, their superiors in the Justice Department and the Central Intelligence Agency.
[4] While other scandals are receiving publicity, the Italian political consensus seemed to be that BNL could not strengthen its position vis-a-vis Christian Democrat Andreotti.
To skirt these restrictions, the company set up a new branch abroad in Singapore, where assembled mines with Vasella components and explosive from Bofors in Sweden, for shipment to Iraq in 1982.
Also, while Valsella only seemed peripherally interested in selling its know-how abroad, Misar was especially active in foreign licensing and coproduction, becoming an influential player in global production of small, detection-resistant antipersonnel mines.
Plea-bargaining in their 1991 trial, they acknowledged having committed irregularities; in December 1991 the Supreme Court acquitted the managers of the serious crimes of illegal arms trade and violation of the currency regulations.
[Italian PM Giulio] Andreotti, when asked in 1993 about the sale of Agusta helicopters to Iraq, sat stiffly at his desk in Rome and confirmed with a terse 'si' that they had indeed been sold as part of a top-level understanding between President Reagan and Prime Minister Craxi to try to assist Saddam.
[7] Although these four frigates and the six corvettes were ultimately seized by Italy under the United Nations embargo during the 1991 Gulf War, these purchases signaled Iraq's intention to upgrade its naval power.
[9] In 1983, following the setback of the Israeli Operation Opera attack on the reactor at Osirak, the Iraqis continued to work on building a full processing cycle for uranium and plutonium, primarily using Italian equipment.
Despite the proliferation risks, Italy will probably continue helping Iraq in numerous areas of nuclear technology, possibly even including reprocessing and plutonium chemistry.