'In 1981, the Reagan Administration continued its predecessor's hands-off approach to the war. But after Iran turned the military tide in 1982, the Administration became concerned about the consequences of an Iranian victory. It also saw an opportunity to move Iraq from its alliance with the Soviet Union into a closer relationship with the United States, a relationship that the more optimistic Administration strategists thought might actually replace the lost alliance with the Shah as a means for protecting American interests in the northern Persian Gulf.
Just as Iraq started using poison gas, the Reagan Administration began in earnest its courtship of Saddam Hussein. In staffing his administration, Ronald Reagan had passed over Donald Rumsfeld, President Gerald Ford's chief of staff and defense secretary. In 1983, as something of a consolation prize, Reagan asked Rumsfeld to be his special emissary to Saddam Hussein with the goal of reestablishing diplomatic relations, which Iraq had severed in 1967 in retaliation for U.S. support for Israel in the Arab-Israeli Six Day War. Years later, as he pushed the United States to war in 2002, Rumsfeld claimed that he had protested Iraq's use of chemical weapons, but he did not raise the matter in his two meetings with Saddam Hussein. Meeting with Saddam in December 1983, Rumsfeld discussed America and Iraq's common antipathy for Iran and Syria, U.S. efforts to stop arms going to Iran, and U.S. financing for an oil pipeline from Iraq to the Jordanian port of Aqaba. Even though the second meeting, in March 1984, took place after the State Department publicly expressed concern about Iraq's use of chemical weapons, Rumsfeld was silent on the matter with the dictator. He did tell Deputy Prime Minister Tariq Aziz that the international community took a dim view of Iraq's use of chemical weapons, but by raising the matter with Aziz and not Saddam, Rumsfeld clearly signaled that Iraq's use of chemical weapons was a secondary issue for the Reagan Administration.
In March 1984, the U.N. secretary-general submitted an experts' report to the Security Council on Iraq's use of chemical weapons. The Dutch and British representatives to the U.N. circulated a resolution condemning the use of chemical weapons (without specifically blaming Iraq) but the United States took no significant actions to support its allies. The State Department did meet with Nizar Hamdoon, Iraq's ambassador to the United States, to discuss how the Security Council might handle the issue in a way that would cause the fewest objections in Baghdad. The Iraqis did not want the Security Council to adopt a resolution on the matter (which could have been legally consequential) and asked instead for U.S. support in limiting any Security Council action to a statement by the council's president. The Reagan Administration obliged and the Iraqis got the outcome they desired. At the U.N. Human Rights Commission, the Reagan Administration went a step further and actively opposed a resolution condemning Iraq's use of chemical weapons.
In 1982, Ronald Reagan removed Iraq from the State Department's list of countries supporting terrorism, although there had been no significant change in Iraq's support for radical Palestinian groups that were the principal terrorist concern at the time. The Administration began providing guarantees from the government-controlled Commodity Credit Corporation for Iraqi purchases of U.S. agricultural products in 1983 and extended Export-Import Bank credits to Iraq in 1984. While these credits were intended to finance the purchases of U.S. agricultural and manufactured goods, they aided Iraq's war effort by freeing up other funds that could be used for military purposes. By 1988, U.S. subsidies to Iraq approached $1 billion a year.
In 1983, the Reagan Administration ordered the CIA to share battlefield intelligence with Iraq. Liaison officers provided Iraq with the locations of Iranian units, which enabled Iraq to anticipate and prepare for Iranian attacks. Assisted by American intelligence, Iraq was able to target Iranian troop concentrations with chemical weapons. The Administration certainly knew how its intelligence was being used. Thus, while the State Department publicly criticized Iraq for the use of chemical weapons, the Reagan Administration was working secretly to make them more effective.*
Ronald Reagan had good reasons not to want to see Iraq lose the Iran-Iraq War. If Iran prevailed, it would install in power like-minded Iraqi Shiites -- men such as Bakr al Hakim -- who would give Iran de facto control over the vast oil resources of both countries. Reagan's strategists feared that Iran would emerge as the preeminent power in the Persian Gulf, and be in a position to spread its revolutionary Islamic message to the Gulf's Shiite crescent, which includes Bahrain, Saudi Arabia's oil-rich Eastern Province, and Kuwait.
However, Reagan's courtship of Saddam was not just about blocking an Iranian victory in the war. The president and his team saw in Saddam Hussein a potential partner in the Middle East, both politically and economically. By seeing in Saddam what he wanted to see, Reagan overlooked, and then became an apologist for, gross human rights violations, the use of poison gas, and, ultimately, genocide.'
--Peter W. Galbraith, The End of Iraq