216. Memorandum From the Director of the Office of Lebanon, Jordan, Syrian Arab Republic, and Iraq Affairs (Korn) to the Assistant Secretary of State for Near Eastern and South Asian Affairs (Sisco)1

SUBJECT

  • Outstanding Iraqi Military Sales Cases

Prior to the June 1967 war the Iraqi Government ordered a large amount of military equipment from the U.S. and paid for it in advance. As you know, with the outbreak of the war an immediate embargo was placed on the shipment of arms to the Middle East. Iraq, therefore, did not receive many of the ordered items. Since then the Iraqi Interests Section has from time to time sent the Department diplomatic notes concerning the status of these outstanding military sales cases. In the past we have limited ourselves to replies which stated that we were looking into the matter. The last two Iraqi notes, however, were not acknowledged because we wished to express some displeasure over the Iraqi seizure of our Embassy property in 1971.2 We have now received another Iraqi note on the same subject (Tab B).3 In view of current attempts to improve U.S.-Iraqi relations whenever the opportunity presents itself, we believe some U.S. acknowledgement is now required.

We have long known that the U.S. Government owes the Iraqi Government $2,488,277.45 for these unsettled sales cases. We have not over the years, however, informed the Iraqi Government of this specific fact because of several outstanding claims which we have against the Iraqi Government, including damages owed to us for the USIS Library [Page 626]in Baghdad burned during the June War as well as for damages sustained by our Basra Consulate during the same period. Moreover, as already mentioned, in 1971 following abortive bilateral negotiations in Baghdad, the Iraqi Government proceeded to seize our Embassy property. At that time the Iraqi Government stated its willingness to negotiate further about this property, and even offered to give us a new plot of land, and to build on it according to our specifications. Our position has been that no negotiations can occur until the property is returned to us.

It is obvious that we have here the makings of at least a partial trade-off between the two governments. We do not believe, however, that the time has yet come for us to begin negotiations with the Iraqis for an overall settlement of outstanding claims. This is something we would want to do when we begin talking with the Iraqis about the reestablishment of diplomatic relations. There might be other circumstances in which we would consider settling our mutual claims, i.e. a marked improvement in relations short of formal diplomatic ties.

We recommend, therefore, that we should answer the most recent Iraqi Interests Section’s note (see Tab B) on the subject in a brief non-committal fashion, which could at the same time also signal to the Iraqis that this issue is related to other outstanding matters between the two countries. If we are pressed by subsequent notes, however, we should be prepared to spell out in more detail that 1) we do not believe this matter can be discussed in a vacuum and 2) while acknowledging our debt for the military sales cases, we would prefer to discuss this debt in the context of an overall settlement of outstanding claims.

We have attached at Tab A for your approval the note we propose to send in response to the Iraqi Interests Section’s note of April 20.4

  1. Source: National Archives, RG 59, Central Files 1970–73, DEF 12–5 IRAQ. Confidential. Drafted by Scotes. Sent through Davies.
  2. See Foreign Relations, 1969–1976, volume E–4, Documents on Iran and Iraq, 1969–1972, Document 290.
  3. Not attached.
  4. Attached but not printed. On the first page of this memorandum are two handwritten notes: Atherton wrote: “JJS—I agree with this scenario and with text of proposed note,” and Sisco wrote: “OK JJ Sisco.” According to a memorandum for the files, January 18, 1974, the funds were transferred to an interest-bearing account in the Department of the Treasury. (National Archives, RG 84, Baghdad Post Files: Lot 78D61, Iraq, 1973–75, Box 1, ORG 1)