I am pleased to have the opportunity to speak to a circle of experts on the administrative and criminal law aspects of prohibited deliveries to areas of tension.

It is certain without a doubt that the deliveries of companies, German companies as well, for example to Iraq have considerably accelerated the armament of these countries. I would like to look into the question as to how these companies established initial business relations with these procurement circles and how these deliveries were then completed, why authorities reacted to the violations so late and how they were in part deceived and bypassed. I will also speak about the loopholes, on which some of these companies have capitalized.

However, I would like to warn you that you should not have too great of expectations. As a defense counsel in criminal proceedings, where I represented managing directors of supplier companies in such proceedings, I obtained information that remains confidential. I will not violate these secrecy obligations because then I would commit an offense myself.

At the same time, however, the information that I will be able to reveal without problems will point out paths that could prevent German companies once again contributing on a massive scale to the armament of the so-called "rogue states." And this is something that should be of vital interest here.

With the help of some examples from my experience, I would like to show how German companies were involved in the modification of Iraqi Scud missiles and the development of the gas ultracentrifuge (GUC), and how, upon discovery, German authorities reacted. Even at the end of 1995, Herbert Schmülling, the government spokesman, explained to the press that German suppliers never officially supported the Iraqi missile program. And if isolated companies had aroused suspicion, criminal proceedings had been initiated and have been in part completed with the passing of judgment on them. The truth is that not only the approval of [such] practice by German authorities, but also the subsequent criminal prosecution in Germany was no brilliant achievement. Although more than 70 percent of sensitive deliveries for weapons technologies came from Germany, the Foreign Ministry (in a confidential paper, reported in Der Spiegel issue 51/1996) suggested to refer to other parties as well and thus distract from their own guilt. I would also like to shed some light, from my point of view, on why there could have existed reasons to act in such a way.

In the end, most of the criminal proceedings were dismissed and only a few trials even ended in noticeable prison sentences (e.g. Thyssen - turbo pumps for Scud missiles; Harvart Industries - test Stand for Scud missiles; Anton Eyerle - detonators for missiles; Plath KG - gyroscopic compass for Scud missiles; H&H Metalform - flow-forming machines and specialty parts for missiles; Schaab, GUC - technology for uranium enrichment).

I personally defended Mr. Hinze (managing director and owner of H&H Metalform), Mr. Reichwald (managing director of Leifeld & Co.), and Mr. Karl Heinz Schaab (managing director of RO-SCH GmbH). All companies had sold key technologies for Iraq's missile and nuclear program. Not only did they supply important technical information, which in part was secret, they also provided the appropriate know-how in addition to the machinery and equipment, putting Iraq in a position to save on its research and development expenses.

The question as to why Iraq went on a shopping spree particularly in Germany is surely obvious to everyone. When it comes to know-how and high-tech, Germany is one of the leading countries in the world. This fact does not remain hidden from countries like Iraq either. Everyone wants German precision and quality. This is also true for the areas of nuclear non-proliferation and so-called dual- use product groups, i.e. goods that have civil and military application possibilities.

These countries are, of course, aware of the export stipulations in Germany. The gist of the unmodified principle, which also applied at that time (i.e. before the Persian Gulf War in 1991), reads:

"Export control policies of the Federal Government (of Germany) are the principles for the transfer of conventional weapons, which were passed by the CSCE (today OSCE) in November 1993. They are based on the criteria for weapons exports adopted by the European Councils in Luxembourg in 1991 and Lisbon in 1992. Within the framework of this agreement, the participating countries are obligated to examine planned transfers based on these criteria. Particularly the respect for human rights, the interior situation of the receiving country, as well as the willingness to observe international agreements, should be taken into consideration. The Federal Government has always practiced restrictive armament export politics on the basis of a bi-partisan political consensus. The export of weapons, other armament goods and products with dual applications - goods that can be used for civil and military purposes (dual-use goods) - is subject to strict export controls. Violations are punished rigorously. Applications for exports of weapons, other armament goods or dual-use goods are evaluated to a decisive extent based on security policy or foreign policy criteria. The Highest Federal Authority of the Federal Ministry of Economics (BMWi), the Federal Export Office (BAFA), examines whether the export of an armament-related product, technology or software (armament and dual-use goods) requires approval and decides on the granting of export approvals. At the same time we should emphasize that the approval or rejection of armament exports does not represent a decisive element of the Federal Government's foreign policy. They rather apply the principle that approvals for armament exports, i.e. war weapons and other armament goods, are granted restrictively. By limiting and controlling sensitive exports, they want to contribute to the international preservation of peace. The Federal Government does not pursue power politics with armament exports. Their goal is not to create or uphold influential areas or to change regional balances. However, the realization of the attested right for self-defense, which is incorporated in Art. 51 of the Charter of the United Nations and which Germany also claims, is not denied to other countries either. Within the framework of its restrictive armament export policy, the Federal Government is willing to help other countries set up and maintain their ability for self-defense."

How it was subsequently possible for Iraqi companies to contact German firms such as H&H or Mr. Schaab can be explained in just a few words. Messrs, Hinze and Hütten from H&H were formerly employed by the Westphalian firm Leifeld & Co. as managerial employees. That period of employment resulted in business contacts around the world, especially in Avibras in Brazil, but also in other countries such as the Soviet Union, Taiwan etc. Particularly the Soviet Union and Brazil had armed Iraq already in the past. Many machines that were supplied to those regions of the globe had a clear military association right from the beginning.

World experts were very familiar with the engineer Hinze, being one of the few specialists for the so- called flow-forming process, the high-precision forming (pulling) of steel tubes. When he founded the company H&H in 1983 with his partner Hütten, he was able to reconnect with these old contacts and business partners. Then the Worldwide Sales Manager, he was welcome everywhere as a specialist for machining processes.

The mostly, and quite obviously, military-related connection of that technology resulted from the physical properties of such flow-formed, rotationally symmetrical tubular parts: The flow-formed and light-weight cylinders withstand the highest pressures and temperatures and thus make them ideal combustion chambers for liquid fueled missiles, such as the Scud missile (NATO description: 8K14). Flow-forming machines are therefore of great strategic importance in missile technology; therefore lawmakers (not only in Germany) subjected them to strict export controls.

However, since this type of machinery can also be utilized for purely civil purposes, they are recorded in the category of so-called dual-use goods, i.e. goods that have both a civil and a strategic, i.e. military, application range.

Specifically, the first contact of the Iraqis with H&H occurred via Meed International, which was part of a secret Iraqi procurement network that reported to Nassr Establishment for Mechanical Industry Ltd. a complex that was responsible for armament technology procurement, located in Taji, near Baghdad. Subsequently it became clear very quickly that Iraq wanted to produce artillery projectiles with diameters of 122 mm to 262 mm. Civil application purposes did not play a role initially.

The Iraqis disguised their true intentions only with regard to the larger diameter and cited civil application purposes since it was to be expected that German authorities would never permit the export of flow-forming machines for military purposes. Therefore they invented the legend of the milk and oil separators, which from then on was used as the application purpose.

The attached contract with Dr. Welzien will clarify just how authorities were deceived, in part systematically. Dr. Welzien had long been responsible for approvals at the Export License Office in Eschborn and recognized that a lot of money could be made with providing consultations to firms as to how to overcome the complicated export guidelines. So he left the Export License Office and offered his services as a freelance and well-paid consultant to various companies. In doing so, he knew that the remaining employees at the Export Office were overworked from extremely high demands, both with regard to personnel and expertise. Additionally, he knew when certain employees of this office, who were less restrictive in their approval practice, filled in for stricter employees who examined the matters more closely. This way, many an application was approved by the Export Office that was actually not eligible for approval. I have also attached an example of this. Of course, Dr. Welzien was very familiar with the regulations and the possibilities of circumventing them and was therefore particularly valuable to the exporters.

Additionally, as an export country, Germany generally pursues a less restrictive export policy. Also, at that time, Iraq did not have the poor political reputation that it has today; after all, even the Federal Government back then trained Iraqi agents at the German intelligence agency in Pullach and supplied espionage technology. Naturally this overall climate favored these types of exports.

After a large order had been placed by the Iraqis for delivery of a total of nine flow-forming machines with an overall order far exceeding $15 million, the banks rejected the financing for production of these machines. The Iraqis realized their chance and advanced this sum to the young H&H firm, protecting themselves through interests in the company. Al-Arabien Co. Ltd., a subsidiary of Nassr, received interests in H&H. Of course, this was an extremely clever move, especially since the Iraqis now directly had their foot in the door. Later on, the international press maintained that H&H had been one of the main purveyors to Iraq - an accusation that even the Defense was not able to deny completely. After all, H&H supplied machinery and equipment components worth nearly $25 million up until Iraq's invasion of Kuwait. These deliveries were also accompanied by an array of technical support and know-how transfer. Hinze and Hütten traveled to Iraq several times in order to set up their machines and conduct test runs. Even if the Iraqis never mentioned the exact usage of these machines or where the pressed parts that were produced on the machines would be used, the connection shows clearly and precisely that they were missile parts. I have brought along also excerpts from an expert opinion document that confirms this conclusion. When business was running at full speed, it was too late to turn back. Suddenly, the small company was dependent on Iraqi orders and the owners, Hinze and Hütten, felt a social responsibility toward their employees and families. Therefore, they closed their eyes to critical questions. Within this framework, Hinze and Hütten became guilty and were sentenced to prison in 1996 by the Münster District Court.

It was also easy for the Iraqis to approach Mr. Schaab. After they had asked Mr. Hinze to name a specialist for carbon fibers and the winding of these fibers, they selected - with the help of Mr. Stemmler, a former employee of MAN-Neue Technologie, Mr. Schaab, who was Stemmler's friend and former colleague at MAN. Schaab had left MAN because he was not satisfied there and because MAN, in his opinion, did not allow him to participate sufficiently in the success. So he founded his own company, which dealt with the very difficult carbon fiber technology.

An Iraqi delegation then visited Mr. Schaab together with Hinze and Stemmler in his hometown at RO- Sch GmbH and initially inquired about application possibilities of his technology in armored vehicles (VIP protection). It was not until much later that he received the order to produce and supply carbon fiber tubes, the core of the rotors for gas ultra centrifuges. It was even later that the Iraqis also demanded support at their location in Baghdad, where they started up a test stand of a model centrifuge. They explained to Mr. Schaab that this was a research project of the University of Baghdad--a legend that he readily believed and was not able to refute. Since he was aware that the enrichment of uranium with the gas centrifuge method could also occur for nuclear power plants, he had no serious concerns. Any slight concerns he had he swept aside since he, a person from the small Bavarian town of Kaufbeuren with a humble background of fiddling around with technology, finally saw his chance to sit at one table with "the big guys," a mistake by the way, which he had to pay for dearly in the subsequent criminal proceedings in Munich.

Finally, probably wanting mostly to impress his friend and patron, Dr. Stemmler, whom he admired for his cosmopolitan demeanor, he was enticed into procuring even secret drawings (blueprints) for the construction of a supercritical, modern gas centrifuge for the Iraqis. Throughout this process he was very well aware that he probably caused the Federal Republic of Germany considerable damage. However, he suppressed this thought because he was blinded by the relatively easy money promised to him and deceived about the true application purpose of the Iraqis. This way he became perpetrator and victim at the same time, in a game that he was not able to see through with his then-limited possibilities.

The courts also recognized this and issued a relatively mild sentence. I am now willing to answer any questions. Thank you very much for your attention.

Notes