IN THE spring of 1984, as I prepared for an interview with Saddam Hussein, State Department experts told me that Saddam would use the occasion to explain that Iraq had joined the "moderate" Arab camp. In fact, he did nothing of the kind during the 90 minutes we spent together. Saddam even praised the Soviet Union and claimed he was not interested in resuming full diplomatic relations with the United States.

White House and State Department officials insisted that what Saddam said that day was a mere aberration. They continued to argue that Saddam had changed -- that he was moderating his extreme positions, distancing himself from his former radical allies, Syria and Libya, and moving closer to Jordan and Egypt. Saddam, these officials stressed, was preferable to the Ayatollah Khomeini, with whom he was at war. Iraq deserved U.S. support.

Not only did Saddam get U.S. aid in the form of intelligence, money and assistance in stopping the international flow of arms to Iran, he also received aid from many other Western countries -- aid that preceded the U.S. "tilt" to Iraq. As one Reagan administration Cabinet official put it, "The whole Western world wanted Iraq to win because the ayatollah was so evangelical. People feared Moslem fundamentalism. Moreover, there was a romanticization of {the Arabs} in the foreign offices of the West -- the 'Lawrence of Arabia' complex."

The result: Today President Bush is left with limited options, not because of an intelligence failure but due to a misguided policy. Obsessed by the danger posed to the Gulf and to the oil supply by the ayatollah, the U.S. government sided with Iraq during most of the eight-year Iran-Iraq war. While this may have been approriate for a limited period, U.S. policymakers went overboard and actually helped secure an Iraqi victory, failing to anticipate the dangers that a victorious Saddam might pose to U.S. interests in the region.

Saddam, who started the war with Iran, was originally seen as relatively weak. But he gradually gained strength through direct U.S. assistance, and -- perhaps more importantly -- from the willingness of American policymakers to turn a blind eye as European countries sold Iraq missiles and technology that enabled Baghdad to manufacture and store chemical weapons. U.S. officials also deliberately ignored the continuing Soviet effort to provide Iraq with sophisticated weaponry. The decision to favor Iraq was made in the early '80s, in the aftermath of the seizure by the Tehran government of American hostages. As Iran began to roll up impressive victories over Iraq in late 1981 and early 1982, the Gulf states panicked. A senior State Department official recalls "a decision . . . to prevent an Iranian victory. That's when we started to provide intelligence, to deny things to Iran and to tilt. We chose the lesser of two evils for U.S. policy interests."

One of the first results of this tilt was that the administration, in 1982, took Iraq off the international terrorism list -- on which it had been placed in 1979. Iraq had earned this new status, policymakers argued, by kicking archterrorist Abu Nidal out of Baghdad, his longtime home. Another major terrorist, Abu Ibrahim, was also asked to leave by the Iraqis.

The following year, Saddam's image was further enhanced by a statement he made on Israel to Rep. Stephen J. Solarz (D-N.Y.): "The simultaneous existence of an independent Palestinian state acceptable to the Palestinians and the existence of a secure state for the Israelis are both necessary." U.S. officials saw this as a significant softening of Saddam's position, a signal that he had separated himself from the rejectionist line of Syria's president, Hafez al-Assad.

A key part of the tilt toward Iraq was Operation Staunch, launched in 1983 and designed to persuade other nations to cut off the flow of weapons to Iran. According to Iran-Contra testimony, over 400 cables were sent between 1984 and 1987, urging compliance with Operation Staunch.

Meanwhile, even as Operation Staunch prevented weapons from reaching Iran, the U.S. allowed strategic weapons to be purchased by Iraq. France supplied Iraq with jet fighters and AWACs; West Germany sold Iraq the technology to make and store nerve gas. (According to one former Pentagon official, Germany, in collaboration with Argentina and Egypt, also sold Iraq the means to design and build medium-range ballistic missiles, which would give Saddam a way to attack Israel and Saudi Arabia with chemical weapons.)

By the end of 1984, Iraq and the United States had resumed full diplomatic relations. (Relations had been broken off by Iraq in 1967.) This unleashed a flow of credits and loans from U.S. government institutions -- amounting today, according to a Treasury Department official, to a U.S. exposure in Iraq of $2.24 billion.

Chemical weapons proved the key factor in turning the war in Iraq's favor during 1987 and early 1988, when -- as one U.S. official put it -- Iraq was on the ropes. Iraqi use of chemical weapons in the battlefield had actually begun as early as 1983. Washington chose to overlook this outrage -- an act that went beyond anything even Hitler had attempted.

The final American contribution to Iraq's victory was the reflagging and escorting of Kuwaiti ships, which resulted in the blockade of arms shipments meant for Iran. The reflagging also made it impossible for Iran to attack Iraq's military supply route which ran through Kuwait. Not everyone was enthusiastic about the U.S. tilt. As early as 1985, for example, CIA analyst Graham Fuller wrote a now widely cited memo arguing that administration policymakers should not forget that the Soviets could take advantage of unmitigated U.S. hostility toward Iran. Iran, Fuller noted, was still a strategic prize. Fuller, moreover, was skeptical of Saddam's alleged change of heart -- he saw no changes in Iraqi domestic policy, and he called for a policy review. But the ensuing review rejected major policy changes, especially the idea of an opening to Iran, a notion Israel was promoting. "People were more afraid of Islam than of communism," recalls Fuller.

This memo is often cited as the beginning -- or ideological legitimation -- of the Iran-Contra scheme: A small band of Reagan administration officials who didn't agree with the tilt and believed in pursuing an opening toward Iran began an effort to trade arms for hostages. When their dealings were exposed, the consequence was an even stronger tilt toward Baghdad.

The tilt involved more than fear of the ayatollah: Iraq meant big business. The Commerce and Agriculture departments actively promoted U.S. exports to Iraq, while the Defense Technology Security Administration, a section of the Defense Department, headed by then-deputy undersecretary Stephen Bryen, fought an unpopular rearguard action to prevent the export of U.S. products that could be used by the Iraqis for military purposes. For a year and a half, Bryen recalls, he battled Commerce and State over the proposed sale of an advanced computer. He contended that the computer was ordered by the Iraqis to make their long-range missiles more accurate. The sale didn't go through.

A second fight took place in June 1988 when the Iraqis wanted to buy between half a million and a million AtroPen auto-injectors, devices designed to protect soldiers from the effects of nerve gas. This sale, too, failed to go through, though only after a bitter internecine battle. (Bryen noted, with a measure of irony, that the U.S. Army last week ordered the same protective material.)

This year, the Iraqis sought to buy three or four specialized furnaces, which the manufacturer concedes can have nuclear applications. In the end, the Defense Department ordered Customs to seize a shipment of the furnaces and the White House stopped the sale.

By late 1987, Iran was incredibly weak, notes one expert. He adds, "We had underestimated the Iraqis." But U.S. policy didn't change.

Yet when the war was over, Saddam did not turn his attention to rebuilding his country. He began shipping arms to radical Christian forces in Lebanon to cause trouble for his old Syrian enemies. At home, he continued to build up his strategic forces. The Iraqi dictator's aims should have been clear even to untutored observers when, earlier this year, a shipment of nuclear detonators was seized in London en route to Iraq. If that wasn't sufficient to demonstrate that Saddam's intentions were less than benign, he gave a bloodcurdling speech in April in which he threatened to burn half of Israel.

Nor did the end of the war mean that Saddam ceased using nerve gas. Instead, he turned chemical weapons on part of his own population -- the Kurds. Indeed, congressional action was prompted by the discovery in 1988 that the Iraqis had slaughtered upwards of 10,000 Kurds with poison gas. As Senate Foreign Relations Committee staff member Peter Galbraith pointed out in a report prepared for the committee, poison gas was part of Saddam's campaign of genocide: "Since 1986 Iraq has been systematically dynamiting and leveling all but the largest towns in Kurdistan." Various senators, led by Claiborne Pell (D-R.I.) and Jesse Helms (R-N.C.) attempted to impose sanctions on Iraq for Saddam's attempt to annihilate the Kurds. But the Reagan administration, unwilling to offend Saddam, managed to kill the bill in the House. The following year, Helms and Pell introduced new legislation -- this time imposing sanctions on any firms involved in the manufacture or transfer of biological and chemical agents to Iraq and certain other outlaw states. This bill, too, was opposed by the administration.

But the Senate persisted. Only a few days before Iraq invaded Kuwait, Sens. Alfonse D'Amato (R-N.Y.) and Pell introduced legislation to cut off any further U.S. financial credits or assistance to Iraq. Due to Bush administration opposition, the legislation was so watered down in the House as to render it meaningless.

In the end, it's easy to understand why Saddam, if he studied U.S. policy, might have concluded that he could get away with seizing Kuwait. Only a few weeks before Iraqi troops marched across its neighbor's border, the Bush administration was still pandering to Saddam. Perhaps the administration should have listened to Sen. Daniel P. Moynihan (D-N.Y.),as he explained to Assistant Secretary of State John Kelly that "the idea of international law got lost in the fog of the Cold War" -- and that the use of poison gas in World War I was "a shock to mankind." Moynihan told Kelly, "The whole world came together in Geneva in 1925 and said never again will poison gas be used. Never . . . . And we solemnly undertook never to use it again, with the absolute presumption that the first nation that did would be punished."

But after systematically violating the Geneva Convention, Saddam received more arms and more aid -- certainly not punishment.

Lally Weymouth writes regularly about foreign affairs for The Washington Post.