Ally - 1. One that is allied with another, especially by treaty: entered the war as an ally of France. 2. One in helpful association with another: legislators who are allies on most issues.
As Ayotallah Khomenei’s Islamic Revolution took hold in Iran, the United States saw Teheran as its main adversary in the Middle East, as did Iraq. Consequently, with huge levels of American support–over $40 billion in weapons and technology through the 1980s, with many transactions “off book”–Iraq fought against Iran for nearly a decade. In the latter stages of battle, eventually won by Iraq, U.S. officers provided intelligence and tactical advice to the Iraqis, all the while Baghdad was using chemical and biological weapons on the battlefield to suppress the Iranians.
http://hnn.us/articles/1066.html
•James Baker received an SD memo stating that Iraq was diligently developing chemical, biological, and new missiles, and that Baker was to "express our interest in broadening U.S.-Iraqi ties" to Iraqi Under-Secretary Hamdoon.
•Although the CIA and the Bush (Senior) Administration knew that Iraq’s Ministry of Industry and Military Industrialization (MIMI) "controlled entities were involved in Iraq's clandestine nuclear, chemical, and biological weapons programs and missile programs ... the Bush administration [approved] dozens of export licenses that [allowed] United States and foreign firms to ship sophisticated U.S. dual-use equipment to MIMI-controlled weapons factories".
•By October 1989, when all international banks had cut off loans to Iraq, President Bush signed National Security Directive (NSD) 26 mandating closer links with Iraq and $1 billion in agricultural loan guarantees.
•According to the Washington Post, the CIA began in 1984 secretly to give Iraq intelligence that Iraq uses to "calibrate" its mustard gas attacks on Iranian troops. In August, the CIA establishes a direct Washington-Baghdad intelligence link, and for 18 months, starting in early 1985, the CIA provided Iraq with "data from sensitive U.S. satellite reconnaissance photography...to assist Iraqi bombing raids." The Post’s source said that this data was essential to Iraq’s war effort.
•Later in the year the Reagan Administration secretly began to allow Jordan, Saudi Arabia, Kuwait and Egypt to transfer to Iraq U.S. howitzers, helicopters, bombs and other weapons. Reagan personally asked Italy’s Prime Minister Guilio Andreotti to channel arms to Iraq
http://www.casi.org.uk/info/usdocs/usiraq80s90s.html
The United States re-established full diplomatic ties with Iraq on 26 November 1984.
Sounds like an ally to me.