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       NSA, Crypto AG, and the Iraq-Iran Conflict

                    by J. Orlin Grabbe

	One of the dirty little secrets of the 1980s is that 
the U.S. regularly provided Iraq's Saddam Hussein with 
top-secret communication intercepts by the U.S. National 
Security Agency (NSA).  Consider the evidence.

	When in 1991 the government of Kuwait paid the 
public relations firm of Hill & Knowlton ten million 
dollars to drum up American war fever against the evil 
dictator Hussein, it brought about the end of a long legacy 
of cooperation between the U.S. and Iraq.  Hill & 
Knowlton resurrected the World War I propaganda story 
about German soldiers roasting Belgian babies on 
bayonets, updated in the form of a confidential witness 
(actually the daughter of the Kuwaiti ambassador to the 
U.S.) who told Congress a tearful story of Iraqi soldiers 
taking Kuwaiti babies out of incubators and leaving them 
on the cold floor to die.  President George Bush then 
repeated this fabricated tale in speeches ten times over the 
next three days.

	What is remarkable about this staged turn of 
events is that, until then, Hussein had operated largely 
with U.S. approval.  This cooperation had spanned three 
successive administrations, starting with Jimmy Carter.  
As noted by John R. MacArthur, "From 1980 to 1988, 
Hussein had shouldered the burden of killing about 
150,000 Iranians, in addition to at least thirteen thousand 
of his own citizens, including several thousand unarmed 
Kurdish civilians, and in the process won the admiration 
and support of elements of three successive U.S. 
Administrations" [1].

	Hussein's artful slaughter of Iranians was aided by 
good military intelligence.  The role of NSA in the 
conflict is an open secret in Europe, the Middle East, and 
Asia.  Only in this country has there been a relative news 
blackout, despite the fact that it was the U.S. 
administration that let the crypto cat out of the bag.  

	First, U.S. President Ronald Reagan informed the 
world on national television that the United States was 
reading Libyan communications.  This admission was part 
of a speech justifying the retaliatory bombing of Libya for 
its alleged involvement in the La Belle discotheque 
bombing in Berlin's Schoeneberg district, where two U.S. 
soldiers and a Turkish woman were killed, and 200 others 
injured. Reagan wasn't talking about American 
monitoring of Libyan news broadcasts. Rather, his "direct, 
precise, and undeniable proof"  referred to secret 
(encrypted) diplomatic communication between Tripoli 
and the Libyan embassy in East Berlin.

	Next, this leak was compound by the U.S. 
demonstration that it was also reading secret Iranian 
communications.  As reported in Switzerland's Neue 
Z^Árcher Zeitung,  the U.S. provided the contents of 
encrypted Iranian messages to France to assist in the 
conviction of Ali Vakili Rad and Massoud Hendi for the 
stabbing death in the Paris suburb of Suresnes of the 
former Iranian prime minister Shahpour Bakhtiar and his 
personal secretary Katibeh Fallouch. [2]
	
	What these two countries had in common was they 
had both purchased cryptographic communication 
equipment from the Swiss firm Crypto AG. Crypto AG 
was founded in 1952 by the (Russian-born) Swedish 
cryptographer Boris Hagelin who located his company in  
Zug.  Boris had created the "Hagelin-machine", a 
encryption device similar to the German "Enigma".  The 
Hagelin machine was used on the side of the Allies in 
World War II.

	Crypto AG was an old and venerable firm, and 
Switzerland was a neutral country. So Crypto AG's 
enciphering devices for voice communication and digital 
data networks were popular, and customers came from 
130 countries. These included the Vatican, as well the 
governments of Iraq, Iran, and Libya.  Such countries 
were naturally skeptical of cryptographic devices sold in 
many NATO countries, so turned to relatively neutral 
Switzerland for communication security.

	Iran demonstrated its suspicion about the source of 
the leaks, when it arrested Hans Buehler, a top salesman 
for Crypto AG, in Teheran on March 18, 1992.  During 
his nine and a half months of solitary confinement in Evin 
prison in Teheran, Buehler was questioned again and 
again whether he had leaked Teheran's codes or Libya's 
keys to Western powers.  Luckily Buehler didn't know 
anything.  He in fact believed in his own sales pitch that 
Crypto AG was a neutral company and its equipment was 
the best.  They were Swiss, after all.  [3]

	Crypto AG eventually paid one million dollars for 
Buehler's release in January 1993, then promptly fired 
him once they had reassured themselves that he hadn't 
revealed anything important under interrogation, and 
because Buehler had begun to ask some embarrassing 
questions. Then reports appeared on Swiss television, 
Swiss Radio International, all the major Swiss papers, and 
in German magazines like Der Spiegel.  Had Crypto AG's 
equipment been spiked by Western intelligence services? 
the media wanted to know. The answer was Yes [4].

	 Swiss television traced the ownership of Crypto 
AG to a company in Liechtenstein, and from there back to 
a trust company in Munich. A witness appearing on Swiss 
television explained the real owner was the German 
government--the Federal Estates Administration. [5]

	According to Der Spiegel, all but 6 of the 6000 
shares of Crypto AG were at one time owned by Eugen 
Freiberger, who resided in Munich and was head of the 
Crypto AG managing board in 1982. Another German, 
Josef Bauer, an authorized tax agent of the Muenchner 
Treuhandgesellschaft KPMG, and who was elected to the 
managing board in 1970, stated that his mandate had 
come from the German company Siemens.  Other 
members of Crypto AG's management had also worked at 
Siemens. Was the German secret service, the 
Bundesnachrichtendienst (BND), hiding behind the 
Siemens' connection?

	So it would seem.  Der Spiegel reported that in 
October 1970, a secret meeting of the BND had discussed 
how the Swiss company Graettner could be guided into 
closer cooperation with Crypto AG, or could even merged 
with it. The BND additionally considered how "the 
Swedish company Ericsson could be influenced through 
Siemens to terminate its own cryptographic business." [6]

	A former employee of Crypto AG reported that he 
had to coordinate his developments with "people from 
Bad Godesberg". This was the location of the "central 
office for encryption affairs" of the BND, and the service 
instructed Crypto AG what algorithms to use to create the 
codes.  The employee also remembers an American 
"watcher", who strongly demanded the use of certain 
encryption methods.

	Representatives from NSA visited Crypto AG 
often. A memorandum of  a secret workshop at Crypto 
AG in August 1975, where a new prototype of an 
encryption device was demonstrated, mentions the 
participation of Nora L. Mackebee, an NSA 
cryptographer. Motorola engineer Bob Newman says that 
Mackebee was introduced to him as a "consultant".  
Motorola cooperated with Crypto AG in the seventies in 
developing a new generation of electronic encryption 
machines.   The Americans "knew Zug very well and gave 
travel tips to the Motorola people for the visit at Crypto 
AG," Newman told Der Spiegel.

	Knowledgeable sources indicate that the Crypto 
AG enciphering process, developed in cooperation with 
the NSA and the German company Siemans, involved 
secretly embedding the decryption key in the cipher text.  
Those who knew where to look could monitor the 
encrypted communication, then extract the decryption key 
that was also part of the transmission, and recover the 
plain text message.  Decryption of a message by a 
knowledgeable third party was not any more difficult that 
it was for the intended receiver.  (More than one method 
was used.  Sometimes the algorithm was simply deficient, 
with built-in exploitable weaknesses.)

	Crypto AG denies all this, of course, saying such 
reports are ""pure invention".

	What information was provided to Saddam 
Hussein exactly?  Answers to this question are currently 
being sought in a lawsuit against NSA in New Mexico, 
which has asked to see "all Iranian messages and 
translations between January 1, 1980 and June 10, 1996". 
[7]

	The passage of top-secret communications 
intelligence to someone like Saddam Hussein brings up 
other questions.  Which dictator is the U.S. passing top 
secret messages to currently?  Jiang Zemin?  Boris 
Yeltsin?  

	Will Saddam Hussein again become a recipient of 
NSA largess if he returns to the mass slaughter of 
Iranians?  What exactly is the purpose of NSA anyway?

	One more question:  Who is reading the Pope's 
communications?

                   Bibliography

[1] John R. MacArthur, Second Front: Censorship and 
Propaganda in the Gulf War, Hill and Wang, New York, 
1992.

[2] Some of the background of this assassination can be 
found in "The Tehran Connection," Time Magazine, 
March 21, 1994.

[3] The Buehler case is detailed in Res Strehle, 
Verschleusselt: der Fall Hans Beuhler, Werd Verlag, 
Zurich, 1994.  

[4] "For years, NSA secretly rigged Crypto AG machines 
so that U.S. eavesdroppers could easily break their codes, 
according to former company employees whose story is 
supported by company documents,"  "No Such Agency, 
Part 4: Rigging the Game," The Baltimore Sun, December 
4, 1995.

[5] Reported in programs about the Buehler case that were 
broadcast on Swiss Radio International on May 15, 1994 
and July 18, 1994.

[6]  "Wer ist der befugte Vierte?":  Geheimdienste 
unterwandern den Schutz von Verschlusselungsgeraten," 
Der Spiegel 36, 1996.

[7] U.S. District Court for the District of New Mexico, 
William H. Payne, Arthur R. Morales, Plaintiffs, v. 
Lieutenant General Kenneth A. Minihan, USAF, Director 
of National Security Agency, National Security Agency, 
Defendant, CIV NO 97 0266 SC/DJS.