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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 compounded by the U.S. demonstration that it was also reading secret Iranian communications. As reported in Switzerland's Neue Zurcher 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 than 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, Verschluesselt: der Fall Hans Buehler, 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.

November 2, 1997
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