The Iran Brief®

Policy, Trade & Strategic Affairs

An investigative tool for business executives, government, and the media.

Fanning the Flames: Guns, Greed & Geopolitics in theGulf War

by KennethR. Timmerman
Copyright©1986-1988, Kenneth R. Timmerman. All Rights Reserved

Click here to readbiographical information



4 Victoria Street, London. The address was an impressive one, butcurious affairs were conducted behind the smoked glass doors of theseven-storey building, which housed the European headquarters of theNational Iranian Oil Company. With Westminster Abbey across thestreet, and Scotland Yard not far away, the Iranians at NIOC Housecould feel comfortable commanding their multi-billion dollarorganization - whose primary aim was not just the sale of Iranianoil, but the purchase of American-made arms for the Iranian armedforces.

The Logistics Support Centre of the Islamic Republic of Iran AirForce moved into the NIOC offices early in the war, along with theTechnical Supply Office of the Iranian Navy, from their more modestquarters at 15 Young Street, by Kensington Gardens. They had chosento set up in Great Britain because of the extensive network ofIranian business contacts there, and to benefit London's well-knownbanking, shipping and insurance facilities. And also, to procurethrough direct factory orders hundreds of millions of dollars worthof engines, spare parts and munitions for the 890 British-builtChieftain tanks and 250 Scorpion armored cars in the inventory of theIranian Army at the start of the war.

But the most important reason concerned the complacency of thelegal apparatus. Unlike the US, there existed no broad conspiracylaws in Great Britain, making indictments against suspected armssmugglers nearly impossible. Great Britain had simply never outlawedthe negotiation, sale or shipment of spare parts to Iran, even if thesale and export of offensive military equipment to both belligerentswas against the law. This situation was partially corrected inSeptember 1987,when the British government announced its intention toclose the Iranian buying office. Still, there was no crackdown onBritish traders and companies selling weapons to Iran.

The early attempts of the London buying office to directly procureAmerican equipment on the European market met with little success(1). But as the need became more urgent in the early months of thewar, the Iranians stepped up their efforts, unleashing a thousandagents and hangers-on, crooks and confidence men, to roam the palacesand caravansaries of the world in search of black market Americangoods.

At times, their efforts met with comic results, as when oneshipment of F-5 fighters parts was intercepted in January 1984 bycustoms agents working at Chicago's O'Hare airport, on its way to theLondon and Tehran. The US agents, curious to know the finaldestination of the crate, replaced its contents with 52 pounds ofLove Me Tender Chunks dog food. Iranians from the London buyingoffice discovered the switch just as they were about to forward thecrate onto Tehran from London's Heathrow airport. The confiscatedparts had been worth $12,500.

On another occasion, F-4 parts were intercepted and replaced with1,128 pounds of sand, gravel and concrete. This crate arrived inLondon on October 31, 1984 "a little trick or treat gift for theayatollah" (2).

If London was the major center through which the Iranian ordersflowed, the agents set up shop everywhere from Bonn to Paris, fromLondon to Monte Carlo, from Strasburg to Tel Aviv - and made vitalcontacts in places much farther flung around the globe, such asAnkora, Seoul, Tai'pei, Montevideo, Buenos Aires, Sao Paulo, Tripoli,Washington, San Diego, and Orlando, Florida - and Tehran itself.

Sooner or later, however, they all wound up in the bar of thePresident Hotel, overlooking Geneva's Lac Leman. Fantastic shoppinglists would be pulled out of crumpled envelopes, and contracts in thehundreds of millions of dollars be bandied about as if they involvedlittle more than the transfer of frozen chickens. Buyer and sellergreeted each other with mutual suspicion. Their primary concern, farmore than making deliveries to Iran, was to ensure discreet transfersfrom one Swiss bank account to another. And of course, each wantedhis own bank transfer first.

As in London, the operations of the Iranian buying network were anopen secret in Switzerland. As long as the "gentlemen" at thePresident behaved themselves, the Swiss had no intention ofinterfering with the lucrative trade. Banking operations were secret,no merchandise was exchanged; and besides, Switzerland was not partyto the US-led alliance which had declared the arms embargo in thefirst place (known as "Operation Staunch" once the Irangate scandalbroke). As time went by, Swiss arms-makers would claim their ownshare of the action, selling air defense radars, guns and smallplanes, while the bankers hoped for the worst and rubbed their handsin glee. Unlike the rest of Western Europe, and the United States,unclaimed deposits in Switzerland became the property of the bank(and not the government) after a certain grace period. Some Swissbanks have been known to have incurred losses of $250 million in asingle quarter and still show a profit for this reason (3).

Tehran: Council of War

In the first days of the war a Supreme Defense Council wasestablished, regrouping the President of Iran, the chiefs of staff,and a number of religious authorities. From the very start, thefactional disputes then pitting Bani Sadr against his Prime Minister,Ali Radjai, and the professional army against the RevolutionaryGuards, would spill over into SDC sessions, complicating theday-to-day conduct of the war (4).

The same factional infighting would have other, more divertingresults. For the Supreme Defense Council was also responsible for allmilitary procurements. Each faction sent its own representativesabroad to comb the international arms market, for the type ofequipment used by the units that constituted its particular powerbase. Mohsen Rafic Doust, for example, as "Minister" of theRevolutionary Guards, specialized in the procurement of Sovietequipment, and personally toured Syria, Libya, North Korea and evenChina in search of it. General Valiollah Fallahi, on the other hand -the acting Chief of the Joint Staff at the start of the war -supervised the hunt for American spares, along with Air Force GeneralFakhouri. These two perished when their Army C-130 crashedmysteriously in September 1981 on a return trip from the warfront

Sometimes the SDC members would simply act on their own. Contractswould be signed with a certain broker because of a secret kick-backarrangement, while the equipment purchased was not necessarilycompatible with existing inventory, and in some cases did not work atall. In other cases, an "unpalatable" source would be selected at theinitiative of the professional officers, because none other wasavailable.

In the spring of 1981, for instance, Bani Sadr learned through oneof his advisors in Paris that someone inside the SDC was buying AirForce spare parts from Israel (5). When the report was confirmed bythe London Buying Office, the irate President convened the SupremeDefense Council. General Fakhouri and Defense Minister Chamrannonchalantly admitted that the Israeli arms pipeline had beenfunctioning for some time, primarily for Iran's F-4 fleet, and agreedto cut it off if supplies became available from other sources, suchas Taiwan, Singapore and South Korea. But the Israeli deliveries onlystopped in appearance, as the July 1981 crash of the Argentine planerevealed.

Further complicating the scene were individual initiatives by thehordes of "official Iranian government representatives" and theirunofficial assistants. They could be found in every city in the worldstudding the arms constellation. Elaborate deals would be negotiatedright down to the details of inspection, shipment and bank transfer,with only the most peripheral knowledge of the Supreme DefenseCouncil. These deals often began with an arms broker who had 'made acontact with a contact who knew someone in Tehran' - all of whomhoped to become millionaires overnight. "The biggest problem wasfinding a valid partner," one arms broker said privately. "We went toMadrid, London, Geneva, and Buenos Aires, and all we ever found weremiddle men with little or no contact with Iran."

The nadir of corruption was reached in November 1984, when ColonelAzzizi was deposed as Chief Procurements officer after a prolongedstay in West Germany - ostensibly to undergo treatment for stomachcancer. Azzizi was well-known to the black marketeers as thesignatory of those lapidary requisition forms, whose dubious Englishwas only matched by the extravagance of their price, which included ashare for one and all. The mark-up for parts and radar componentsreached 1000%. Big ticket items, such as the American M-48A5 mainbattle tank, reached Iran at more than three times the price paid theoriginal seller. The rest went into the pockets of a score ofintermediaries, and into the numbered Swiss accounts of the mullahs(6). Azzizi was also known for requiring arms dealers to provide himwith multi-million dollar performance bonds, which he someoccasionally forgot to remit after they delivered the equipment. Atleast fourteen complaints of this nature were lodged against him inthe International Court in the Hague before his "retirement" inNovember 1984.

How to buy arms on the black market

The American arms embargo, decreed in the dark hours following thestorming of the US Embassy, created a special situation for a countryat war, 95% of whose military hardware was of US origin. It forcedthe Iranians to turn to the black market, with the resulting increasein risk, cost and delay. As a side effect, it created opportunitiesfor covert American diplomacy, the full extent of which has yet to beknown.Indeed, as late as October 1987, Soviet officials wereconceding in private that they still believed that a U.S. return toIran. remained "a major American goal" despite repeated armed clashesbetween U.S. and Iranian forces in the Gulf (7).

After seven weeks of intense fighting, Iran needed parts for itsF-4s, F-5s, and F-14s. It needed spares for its 800-strong helicopterfleet. It needed munitions for the American-built howitzers and fieldguns. It needed missiles, radar components, night-vision equipment.Later, it would need whole tanks, helicopters, aircraft and, startingin 1983, special clothing to protect its human waves from Iraqi gasattacks. And since the US had cut off the supply lines, there wasonly one way to go. The Iranians had to find other countries andindustries capable of filling their needs. And in most cases, theycould not make a direct approach.

No matter how complex the array of front companies and untraceablethird parties, there is always a buyer and a seller in any blackmarket arms deal, and a host of shady, opportunistic, and sometimescrooked figures in between.

As a rule, neither buyer nor seller wants to expose himself untilthe deal is on the verge of completion: the seller, because hedoesn't want word to get around he is dealing with Iran (in the caseof many European companies, this risked jeopardizing their lucrativebusiness in the Arab world and eventually their good relations withthe US); the buyer, because he wants to remain in control of allcommissions and stay alive, all the while skirting the numerous USagencies tasked with stopping the flow of arms to Iran.

So the intermediaries play a major role in the whole process,which goes from the basic step of identifying another agent who isa potential source, evaluating his contacts with the buyer orseller, to the negocation and the delivery itself.

The RRC Company of Stamford, Conn.

Mohamad Balanian-Hashemi was the president of a large constructioncompany when the Islamic Revolution broke out. Like many Iranianbusinessmen, he sent his family abroad and sought to liquidate hisown holdings before joining them in exile.

Upon his arrival in the US, he set up R.R.C. Co. Inc. in Stamford,Connecticut. According to an affidavit made available to the author,Hashemi described RRC as "an import-export company ... (which)originally dealt in commodities such as rice and sugar, constructionmachinery parts and Oriental rugs" (8).

However, at the end of 1980, he was approached by a middle man "onbehalf of the Iranian Air Force (IRIAF) and asked if I could purchasecertain goods... During the course of a series of meetings in Spainand London the deal started to take shape."

What transpired was in fact a long series of deals whereby RRCwould use its American office to purchase aircraft parts from varioussuppliers throughout the United States, which it would then ship toTehran through London, Frankfort, Zurich or other stopover pointswhile "ownership" of the consignments changed hands.

Most of the billing was handled by RRC's London office, located at360-366 Oxford Street. Hashemi explained: "the IRIAF would not openLetters of Credit in favour of a company in the United States ofAmerica."

But the IRIAF's London office chief, Colonel Mohamad T. Bagheri,soon "insisted that if the goods were to be supplied through Europethen the transactions should be effected through a European company."So along with another partner, Mrs. Shahin Zobdheh Asadi, Hashemipurchased a British company with the improbable name of Zoomer FlyLimited that would act as RRC's official contact with the IRIAF.Later, he set up International Aircraft Parts Ltd. registered inAnguila, British West Indies, as an additional purchasing entity andtax shelter. Each shipment to Iran, loaded onto commercial aircraftof Iran Air, Swiss Air, and Flying Tigers, was accompanied byofficial documents certifying it to be of American origin.

Mohamad Balanian-Hashemi gave this rather ingenuous explanationfor the proliferation of intermediaries:

"The IRIAF (Islamic Republic of Iran Air Force) felt that theycould not go directly to suppliers in Western countries both forpolitical and economic reasons. It must be noted that prior to theIslamic Revolution in 1978, Iran was one of the largest, if not thebest, customer of hundreds of large, medium-sized and small companiesin Western Europe and the U.S.A. The majority of those companiessupplied goods on credit to both Government and private organizationsin Iran. However, immediately after the Revolution the new Governmentannulled those contracts and did not pay the sums due. Since thattime, it has been very difficult for companies in Iran andparticularly also Government Institutions to deal on the same basisas before. Accordingly, IRIAF wanted to buy the goods through anintermediary."

The documents show that Hashemi, his brother Cyrus Reza, and oneof Mrs Asadi's friends, Carlos Vieira De Mello, together purchasedmillions of dollars worth of Air Force parts from various suppliersin the United States, including gyroscopes, wing assemblies, new andoverhauled engines (shipped as "tractor parts"), F-4 tires,mechanical subassemblies for Bell 214 helicopters, and severalcurious items such as seven copies of "The InternationalCountermeasures Handbook" and microfiche updates of USAF, US Navy,and US Army parts lists.

RRC's operations apparently ceased late in 1981, due to hagglingamong the partners over how to split the profits. Hashemi's brotherCyrus was later involved in the Damavand Project (see Chapter 11),and died mysteriously in London in September 1986.

Smuggling American Style

To clear shipments of major American equipment to Iran, the sellerneeds what is called an EndUseCertificate, delivered by thepurchasing country. The EUC is theoretically scrutinized by theDefense Security Assistance Agency and the State Department's Bureaufor Political-Military Affairs, then passed over to the CommerceDepartment for the final Export License. Military sales abroad ofmore than $25 million must be directly approved by Congress, as mustthe retransfer to a third country of American equipment by theinitial foreign purchaser. However, due to the high volume of suchsales, the review process has become a standard bureaucraticprocedure: Congress is given 30 days in which to oppose the sale.No reply simply means the transfer has been allowed to go through(9).

Since Iran can not directly request to purchase F-4 fighters - ormajor component parts - because of the 1979 arms embargo, it mustpurchase an EUC from a front country. A typical EUC, shown to theauthor by a US Embassy official in Europe, reads as follows:






Por la presente, certificamos que el material indentificado acontinuacion:23 Aircraft Type F.4.E with improved Fire Control, USStandard USAF.-, objeto de nuestra Carta de Intencion con numero dereferencia JEMFA No. 130/83, de fecha 22 de Setiembre de 1.983,adquiridos y recibidos por nuestro pais sera destinado a garantizarla Defensa y la Seguridad de nuestro territorio contra todabeligerancia extranjera.-

El lugar de asentamiento de este material sera la Ciudad deAsuncion del Paraguay.-



Alexanjandro Fretes Davalos

General de Division

Jefe de EM de la FF.AA.

Republica del Paraguay


When contacted, the General whose signature appeared on the bottomdeclined any knowledge of the document, which was in fact purchasedthrough a French dealer in Buenos Aires for $100,000. However, the USdiplomat - perfectly aware that the document was not only a fake, butrisible, since Paraguay had never purchased a jet fighter in itsentire history - wrote letters of introduction on official stationaryfor the broker's agent, to present to DSAA officials in a countryknown to have used F-4s for sale. In the letter, he emphasized thatthe broker's "representation of the Government of Paraguay is acompletely legitimate operation" and requested that his colleaguesgive "assistance in advising him... (and) any other information thatis releasable to him about the F-4s, such as condition of aircraft,overall operation, etc." In return, the diplomat was promised a fatcommission if the sale went through.

Initially conceived as a guarantee of bona fides, the end-usercertificate in fact serves as a shield for many US aid recipients,anxious for the hard currency they could gain from selling USequipment in stock. If the news of a sale to Iran ever leaked out,they could simply present the EUC to the US State Department andinsist they were unaware any other final purchaser was involved.Otherwise, few countries with American equipment to sell - exceptthose which have changed alliance since procuring the equipment, suchas Ethiopia or Vietnam - will consent to discuss resale. Most are ina political position to request more modern equipment, often forfree, and so can not afford the risk of American reprisals (10).

The End Use Certificate is provided for a flat fee by one of themany intermediaries, who purchase it locally or simply forge it.Access to a convincing EUC is an important argument for brokerstrying to bridge the gap between buyer and seller. Some countries areno longer credible as end-users, because of the willingness of localofficials to forge the certificates, or the country's notoriousfinancial status. These include Turkey, Spain, Portugal, Brazil, andmore recently, Thailand and Pakistan.

Here a broker, there a broker

Often, as many as twenty different brokers will form the chainbetween buyer and seller, each protecting their "sources" - the nextlink in the chain - for fear they will be cut out of the deal. Insuch a situation, it becomes difficult to evaluate who really has thegoods, and who really represents the buyer - the Iranians. Many largedeals fell through because of this.

As negotiations proceed, the buyer wants to see the equipment heis being sold, and inspect it to ascertain its condition. But theseller's agent, too, has his demands: in particular, he wants to seean Evidence of Funds (a banking document which states that money hasbeen blocked to complete a specific deal) before he begins to revealhis sources. Failure to produce an Evidence of Funds indicates thatthe buying broker is not serious, or may be working for one of anumber of intelligence agencies hoping to break up the smugglingring; or, more simply, that he hopes to secure a larger commission bycontacting the selling country directly and cutting half a dozenagents out of the deal. Caution is the basic watchword.

US customs officials estimated that smuggling operations havefilled only about 10% of Iran's arms needs since the war began.Still, as one official told the LosAngelesTimes in 1985, "it's likedrugs - more gets through than gets stopped."

Like drugs, too, the US effort to curtail black market operationsintensified ten-fold in 1983-84. It became common practice to usetelex intercepts, undercover agents and sting operations to discoverarms smuggling rings. The number of indictments on counts ofviolating the US arms embargo on Iran rose vertiginously from asingle case in 1981, to fourteen separate indictments, involving 54arrests, in the 12 months from September 1984 to August 1985.

Among those indicted were:

- Brian Lewy, a West German freight forwarder whose IntranscoTransport and Speditions of Frankfort, West Germany was charged withillegally shipping munitions to Iran. Lewy was also charged withhaving illegally used the telephones of the State Department'sdiplomatic courier office in Washington to conduct his arms smugglingbusiness;

- William R. Fowler, a Chicago insurance broker, recruited inLondon while conferring with associates on how to cover a $650,000underwriting loss, for conspiracy to violate US export laws over a 20month period;

- George L. Veto, also of Chicago, and two British businessmen,Howard O. Freckelton and Gerald H. McDevitt. The three were indictedwith Fowler along with a London-based Israeli, David R. Sofaer, fortrying to export everything from warship parts to night visionequipment, as well as radar, helicopter, and aircraft spares. TheBritish government has refused to extradite them. The role of theIsraeli, apparently the broker in direct contact with the buyer,remains obscure;

- Frank Agustin, of San Diego, for shipping stolen F-14 parts andPhoenix missiles to Iran via a London trading company. Agustin wasworking with a London-based Iranian, Saeid Asefi Inanlou, and wasaccused of ordering parts for the Iranians from USAF and US Navyinventories, using local agents and 11-digit DoD computer stock codes(11).

- Amir Masoud Motamedi, a 27-year old Iranian-American, whoseBoustan Corp was used as a front operation for shipping spare partsfor F-4, F-5, F-14, A-4 attack aircraft, the C-130 transport, and theP-3 Orion naval surveillance and anti-submarine warfare aircraft viaLondon. Before opening Boustan Corp, a mail box address operated outof his living room in Los Angeles, Motamedi posed as a legitimatearms broker for the government of Canada, under the pseudonym "FredCoffey," and placed his orders from a computerized list of USAF partsnumbers. An estimated $10 million in Air Force spares passed throughMotamedi's hands before he was arrested in 1985.

- Cyrus Reza Hashemi, a 49-year old Iranian from Stamford,Connecticut, and US businessman Stephen Kiley, 38, of Swannscott,Mass, for illegally exporting field communications wire, rafts andengines for naval use, night vision sniperscopes, radar equipment,aircraft and helicopter parts. They also tried to obtain automaticweapons, rocket launchers, and missiles. A former US JusticeDepartment official, J. Stanley Pottiger, was being invested inconnection with the case. They apparently worked through CyrusDavari, 44, formerly the chief Iranian naval procurements officer inthe London bureau, and Colonel Mohamad T. Bagheri, in charge of theAir Force operation. As President of the First Gulf Bank and Trustlocated at 9 West 57th Street in New York, Cyrus Reza Hashemireceived at least 20,000 pounds sterling in commissions from hisbrother's Zoomer Fly Limited in 1981, for services rendered inestablishing banking procedures for the black market deals with theIRIAF. He was later offered a deal by US Customs officials whopromised to drop charges against him and his brother, if he agreed toinform them of other black market arms deals in the works;

- Benjamin Kashefi, also known as Mirmajid Kafehi, of La Jolla,Ca, for exporting munitions to Iran. Kashefi was charged with havingshipped spares parts for Iran's M-60 tanks without a State DepartmentEUC.

- Paul Sjeklocha, also known as Prof Paul S. Cutter, of San Jose,Ca, for conspiring to deliver $139.65 million of American militaryequipment to Iran, including the most up-to-date conventionalmissiles in USAF and Navy inventory. Sjeklocha was arrested inAugust, 1985 along with five others in a vast - and often burlesque -FBI sting operation. His case will be discussed in more detail inChapter 7 (12).

Rafsanjani, Tatatabai, and the Shelter Companies

If London and Geneva remained vital financial and communicationscenters for the arms brokers, the Iranians used other capitols aswell. Trading companies were set up in France, Great Britain,Switzerland, West Germany, Austria, Spain and Belgium. Others wereestablished in Israel and the US. Their purpose was twofold: toprovide at least superficial cover for the Iranians, and to shelterthe immense sums of money illegally passing hands.

Hundreds of Iranian officers, government officials and businessmenwere involved in these shelter companies. And so were the topmullahs. Those with direct financial interests included PrimeMinister Ali Radjai, Ayatollah Mohammad Beheshti (who died in a bombexplosion in July 1981), Speaker of Parliament Hashemi Rafsanjani,Ahmad Khomeini (the Ayatollah's son) and his brother-in-law SadeghTabatabai. Rafsanjani was said to have amassed one of the largestpersonal fortunes in Iran, through war-time arms transactions, whichhe "washed" through a brother's carpet import-export business inGent, Belgium.

One of the most curious - and most active - front companies was inreality an entire network, run by Sadegh Tabatabai and theAyatollah's son Ahmad. It was called the International TradingCenter, and it was based in Frankfort, West Germany, where Tabatabaihad solid connections.

From the very start of the war, Tabatabai played a discreet, andhighly lucrative role in the black market arms trade. On December 6,1980 he flew to Tel Aviv with an Iranian Jew by the name of YoussofAzar, to get the stalled Israeli-Iranian arms pipeline back intoworking order. The results of that trip would be revealed to theworld when the mysterious Canadair of the Transporte Aero Rioplateusecrashed in the Soviet Union in 1981 during a shuttle flight from TelAviv to Tehran. It had been carrying spare parts for Iran's M48tanks.

In January 1983, Tabatabai was arrested with 1.8 kilograms ofopium at Dusseldorf airport, while travelling on a diplomaticpassport. He was released within days on the personal intervention ofhis friend Hans Dietrich Genscher, the West German foreign minister.Following this incident, Genscher was increasingly used as ago-between by those in Iran who still hoped to patch up relationswith Europe and the United States, such as Rafsanjani and SadeghTabatabai, who had officially been named Vice Prime Minister ofIslamic Republic. The Frankfort airport, conveniently close to theoffices of the International Trading Center, was often used by B747cargo jets of Iran Air as a loading point for missiles, ammunitionand spare parts purchased through the black market in Europe andIsrael, while Bonn became a center for financial transactions(13).

Officially, the International Trading Center was in theimport-export business - as was its subsidiary, KTA, based in Londonand run by an Armenian named Galustian (KTA was extensively used bythe IRIAF for shipping and warehousing, and had one of its offices inthe same building as the Logistics Center). To cover the traffic fromthe eyes of West German customs officials, who sometimes requiredcash bribes, damaged weapons assemblies being returned for repairwere marked "Iranian caviar," while across the long wooden cratessealed in Tel Aviv was written... "frozen Israeli chickens!" For thiswas the legitimate business of the ITC.

One $50 million shipment of aircraft spare parts, negotiated inLondon late in 1984 by a Lebanese named Kalanjian, left Israellabelled as olive oil, peanut oil, butter, and chickens - and latercleared customs as "Dutch products". According to former PrimeMinister, Shahpour Bakhtiar, from the very start of the war theIsraelis were buying US weapons and spare parts "on the open market"and selling them to Iran through third countries.(14).

Other trading companies used to shelter black market arms dealsinclude:

- the Swiss-based Draekot Holding and Financial Co, run by HansAlbert Kunz;

- the Commerce International Group, an import-export concern basedin Brussels;

- Sati Co., of Zug, Switzerland, which had proven connections tothe Euro-right underworld and to gangster Stephano Della Chiaie,arrested in 1987 by the Italian police for his role in the 1980bombing of the Boulogne train station. He was seen on severaloccasions conferring with Tabatabai in the President Hotel in Geneva;

- Intercontinental Desalination Equipment, run by a former Israelimilitary attache in Tehran, Yacoub Nimrodi, who could achieveinternational reknown in November 1986 for his role in the Irangatedeals;

- Kendal Holding, of Monrovia (Liberia), and JCS International, ofBermuda, both of which belong to the Frydel family, domiciled atHerzlia Beach (Israel).

The trading companies were convenient because they allowed theIranians to benefit from all the advantages of a legitimatecommercial organization. While ostensibly doing business in caviar,carpets or industrial equipment, they would send epic telexes, issueperformance bonds, establish fabulous letters of credit, arrange banktransfers, contact shipping companies and take out insurancecontracts with Lloyd's of London. The Iranians, such as Tabatabai andRafsanjani, could hide behind the anonymity of the front company, andreceive their commissions discreetly in numbered Swiss accounts oncethe letters of credit were broken out.

When a major deal came close to being signed, Tabatabai orRafsanjani (or Rafsanjani's son) would come to the President Hotel inGeneva... and so would all twenty-or-so brokers involved in thevarious stages of the deal. But so compartmented was black markettrading, so multiple the layers of intermediaries and frontcompanies, lawyers and banks, that Tabatabai could be talking to hispersonal representative in one room, while in the next, the seller'sagent would be pacing the floor, waiting for the Iranians to showup.

CIA Cobras

The diversity of black market deals concluded or discussed in 1984alone is impressive.

In one proposed deal, an Indonesian-American, Charles Miseroy St.Claire, desperately phoned partners in California on October 24, 1984from a hotel room in Frankfurt, where he had been discussing the saleof 12 Bell AH-1G (1S) Huey Cobra helicopter gunships with a Frenchbroker who claimed to have contacts with members of Iran's SupremeDefence Council. The French broker, Jean-Louis Gantzer, later toldthe NewYorkTimes that he had arranged a $18 million sale of SovietSAM-7 anti-aircraft missiles to Iran in December 1986 (15).

St. Claire's plan was to purchase a fake EUC for Portugal, andarrange banking in Switzerland, using the Californians to obtain a$2.5 million performance bond. However, his primary fear was that theman he believed "controlled" the helicopters - a certain Neil Evans,of Salt Lake City - might no longer be able to obtain the "politicalclearances" freeing them for export. St. Claire said Evans was"working for the Agency" and may have been connected to the NuganHand Bank scandal in Australia, used as a cover by many former Agencyheavyweights for "freelance" intelligence operations.

The Cobras were from a secret CIA inventory of 29 units, which hadbeen crated up and mothballed in 1977 for export to areas of specialinterest, where it was necessary to avoid Congressional accounting.Arms brokers familiar with the deal told the author that the samehelicopters had been offered for sale previously by several differentdealers, including a Lebanese Shiite and a Franco-Syrian working outof a Panamanian front company. So many brokers claimed to have"exclusive rights" to sell them, the Cobras became one of the legendsof the Great Iranian arms extravaganza.

But they were not entirely mythical. In fact, the Cobras weresitting in a hanger on the military side of Frankfurt airport throughmost of 1984-85, before they were shipped back to the United Statesfor modernization. The grapevine had it that if you slipped the guarda $100 bill he'd let you look into the hangar to see the crates, andfor another $100, dig out a Xerox of the first page of the log books.This is how the arms brokers bought their "bona fides."

Nato gas masks

Another deal, following Iraq's use of chemical weapons in March1984, set the Iranian agents hastily scouring the world market forgas masks and protective clothing.

Aware they could not directly purchase the equipment in the UnitedStates, since the notoreity of the poison gas attacks made phoney enduse certificates impossible, they tried to purchase NATO-standardequipment through agents in Paris, London, Greece, including Americanmilitary officers, former diplomats, and a high-ranking Greek royalcourt official.

The following telex, sent from California to a US governmentofficial in the Paris embassy, was made available to the author oncondition the source remained anonymous. Dated April 23, 1984 andmarked "urgent," it begins as follows:


"Gasmasks: firm offer out of England only, since no one here buysthe Turkey EUC, ok. Our commission of 10 percent not included in thisprice. An immediate letter of credit can start the deal, with animmediate visit by supplier's London agent and our man there.

Gasmask to your specification M17A/1STP and also filter M/13/STP.These are of new production and manufactured to full US Army and NATONBC standard. We have 15,000 units available for delivery within 7days of acceptable L/C or bank guarantee and then upto 15,000 perweek thereafter. Our price for quantity of 200,000 units is USdollars 47.25 nett, CIF European seaport.

For your information we can also supply NBC protective clothing toUS military standard, prices for 200,000 are as follows

Gloves with fingers USD 2.42

Suit, shirt with headcover and trousers USD 29.81

Personal protection mantle USD 9.80

Protective boots USD 14.85

And finally powder and injection for treatment of chemical burns,again for quantities of 200,000

Decontamination powder, composition S102-59 percent. AL 203-19percent, PH-8, each lot experimentally tested against mustard gas.Supplied in plastic spray bottles containing 120 grammes of powderfor individual protection. Unit price is US dollars 3.50 Europeanseaport delivery 200,000 after 25 working days from date of openingL/C, then 200,000 per month thereafter.

Atrpone injection, 2 mg produced in accordance with AmericanDefence Medical Purchase Description No. 1 including latestmodification. Unit price USD 4.00 European seaport. Delivery 100,000after 25 working days from date of opening L/C then 150,000 permonth.


British journalists touring the front in late 1984 found Atrponesyringes in the kits of dead Iranian soldiers. Since then, Westernnewsmen invited by Iran to visit the southern front havesystematically been issued NBC protective gear, as are most Iraniansoldiers.

Australian C-130s

The story of John J. Ford III, originally a San Fransisco lawyer,is a series of amusing twists and turns spanning five continentsthat illustrates just how chaotic the Great Iranian Arms bazaar could become.

Since 1982, Ford had been working in an official capacity as an agent for the government of Australia, charged with selling usedaviation equipment the RAAF intended to retire from service. To thisend, he set up Ford and Vlahos Australia - Defence EquipmentLogistics, with mailing addresses in Canberra, Melbourne (c/o RAAFBase Laverton), and San Fransisco, and made contacts with armsbrokers throughout the world.

Ford's first assignment was to get rid of ten ageing C-130Amilitary transports, dating from the late 1950s and rotting away inthe salt-laden air of Australian air bases.

The very nature of his product narrowed the choice of clientele, excluding not only major industrial countries but those developingcountries which could rely on hefty military assistance programs andthus hope to buy newer (and more expensive) aircraft. Australianaviation experts, such as Frank Cranston of the Canberra Times, ridiculed the very idea of putting the aircraft on the market,saying that money and time could be saved by immediately sellingthem as scrap metal.

But Ford persevered, making contacts left and right. And finally,one of them paid off.

Late in 1983, following the French Operation Manta in Chad, theUnited States was seeking ways to aid the regime of Hissen Habre,without upsetting the sensibilities of the French. US militaryexperts quickly identified a crying need in Chad for militarytransport aircraft capable of landing on short, makeshift airstrips - just about the only type that existed in that desert country. Butthe project was plagued with budgetary problems: the US couldn'tafford to give Habre one of Lockheed's new C-130H, which sold for$28 million, when their total military aid to Chad, granted as alump sum following the Libyan invasion in July 1983, only amountedto $25 million (16). And the French could not afford to purchase theC-130H themselves.

Ford heard about the project and found the US Colonel in chargeof organizing US military cooperation with the French. The twoagreed something needed to be done, and fast, to help Habre get histroops to the north when and where he needed them, to stop theLibyan invasion. So Ford proposed one of the ageing AustralianHercs, at the rockbottom price of $2.8 million. The US agreed, paidthe ferrying costs from Australia to France and on to Chad, where aFrench crew maintained the aircraft through many months of loyal andvital service.

The Colonel, in turn, expressed an interest in continuing toassist Ford in marketing his aircraft though his own personal contacts; and this is how Ford first met various Iranian agents.

Word of mouth travels fast on the black market. Ford, as alegitimate broker for a legitimate government, was a tempting sourcefor black market brokers. Unlike so many other brokers, he stayedopenly in first class hotels, had plenty of cash, and carried aroundloose leaf binders with full color photographs, charts, andtechnical data on his wares.

Ford asked the US Colonel to test the waters in the Pentagon, andby June 1984 the reply was in: the aircraft could be exported toIran on condition they be "demilitarized" first, meaning that allmilitary-associated avionics gear, including radar and navigational packages, be removed.

By August, Ford had talked to a half dozen brokers claiming torepresent Iran, before settling on a man who presented himself as aformer Iranian Ambassador to South Korean by the name of DaryouchKalantari. The two signed a Protocol Agreement in Paris on September9, 1984 for the sale of six of Ford's Hercs, at a unit price of $4million - almost double the initial price. The condition of the salewere as follows:

1) The "Buyer" accepts the purchase of six C130 A HerculesAircraft ex RAAF according to specifications furnished.

1.a - The purchase is subjected to inspection.

b - The aircrafts in flying condition have been maintained bythe RAAF in accordance to their standards.

2) The aircrafts will be delivered to TEHRAN with a technicalstopover in PERPIGNAN, France.

2.a - At the request of the "Buyer," the avionics changes andpainting will be accomplished (at the cost of "Buyer").

2.b - The technical stopover in PERPIGNAN will take place three weeks after the down payment = the first 50% of total price..

2.c - A list of detailed pieces (ie, spare parts - author'snote: this contract was based on an English document, translatedinto French, renegotiated, then hastily translated back intoEnglish) will be at the "Buyer's" disposition after the down payment= first payment. (The detailed pieces will be furnished at 50% of catalogue price.).

3) Financial procedure:

3.a - Unit price to TEHRAN is $4 million.

3.b - The down payment (50% of the totality) occurs with the signature of the agreement.

3.c - The first payment of 50% of the global price depositedand blocked at La Banque Credit Suisse in GENEVA to the profit ofthe "Seller" after the positive advice of the Iranian technician in Australia. (Depending of the conformity of the specifications).

3.d - The "Buyer" engages himself by the Banque Credit Suisseto deal by the said banque, the reimbursement to the IranianGovernment the deposit of 50% minus 2% retained for bankingcosts.

3.e - The second payment should be guaranteed by letter ofcredit irrevocable, transferable and transmissible by the same bank.The letter of credit will be liberated continuing (ie, upon) thelanding of each aircraft in TEHERAN. (Author's note: this was howcommissions were deposited discretely into the appropriate accounts.In the initial version, the L/C was opened with the fir

st payment, whereas the aircraft were delivered at Perpignan,leaving full responsibility for ferrying them safely to Tehran up tothe buyer).

4) Additional costs:

4.a - A sum of 7.5 - 10% will be added to the global total forobtaining the agreement (of the) builder's country. (Author's note:this slush fund was for purchase of EUC, US government approval tooverfly US territory on the way to France, etc)

4.b - The responsibility of the 6 aircraft of (ie, en routefrom) Australia - TEHERAN by PERPIGAN is that of the "Seller".

4.c - The crew will be furnished by the "Seller" until thefinal destination. Between PERPIGANA and TEHERAN the "Seller"accepts the presence of the Iranian crew, depending on the politicalpossibilities.


The evening of September 9, when the two men met at the ParisHilton to sign the protocol, was the last time Ford would see Kalantari. Indeed, the Iranian simply disappeared - perhaps unable toconvince his backers to show evidence of funds, or perhaps, moresimply, victim of one of the many political turf battles raging backin Tehran.

New Zealand lamb

At the same time, Ford had other hopes for Iran, backed up by thismost official letter from N.D. McRae, Deputy Chairman of the NewZealand Meat Producers Board. The letter, dated 29 August 1984, wasaddressed to Ford and to John Shivas, President of AshburtonAviation Services Ltd, of Ashburton, NZ:



Authority to engage in countertrade for Lamb:


You are hereby authorized to negotiate with Islamic Republic ofIran for the delivery of aircraft and spare parts to New Zealand asapproved by the appropriate New Zealand Government Authority,payment therefor to be in equivalent value of Halal slaughtered NewZealand lamb carcasses as normally supplied to Iran..."


What interested the New Zealanders were Iran's Orion P-3 anti-submarine and maritime patrol aircraft. Out of a total of sixplanes, five were believed to be inoperable for lack of maintenance.New Zealand was proposing to bring in their own crews and spareparts to make the planes airworthy, and then fly them out of thecountry. "The most beautiful part of it all," Ford said in aninterview, "is that the higher the price the Iranians want, thehappier the New Zealanders will be, since they have so much lamb they don't know what to do with it."

The Iranians already imported more than 92,000 tons of NewZealand lamb, a traditional staple of the Iranian diet, so the ideaof trading with the Islamic Republic was not new to the gentlemen of the New Zealand meat board. Most amusing, however, was the fact thatanother of Ford's clients - the Royal Australian Air Force - hadthat very month managed to sell its ageing Orions back to Lockheedin exchange for newer equipment, a solution it apparently preferredto bartering them for lamb with neighboring New Zealand (17).

Ford's case is unique, for although he was forced to come intocontact with the black market brokers, his entire operation wasconducted with the knowledge and the approval of the Australian andNew Zealand governments. Selling 28-year old C-130s with a legitimateEUC was not the same as smuggling brand new F-14 parts from USNinventory. As for buying back Iranian aircraft in exchange forlamb... if successful, Ford was likely to meet with wild hurrahs from the entire US foreign policy establishment. Finally a way hadbeen found of making friends in Iran and discretely supporting themthat in no way compromised the US public policy of a total armsembargo.

The Heydari Sting

As the protocols quoted above show, the Iranians became much moresuspicious as the time went on of revealing their sources orintentions to the black marketeers. This was primarily the result ofa few expensive mishaps, where a series of swindlers, opportunists, and downright crooks took advantage of inexperienced but generallypatriotic Iranian agents abroad, anxious to serve their country inthroes of war.

Metro UK Ltd opened its doors in the summer of 1981, in an oldstone building not far from Buckingham Palace. Run by MahmoudSabahat, a retired Iranian Air Force General under orders from thenew rulers of Tehran, Metro UK entered into a $52 million deal forTOW missiles with a Greek arms dealer. According to the September 4,1985 edition of the LosAngelesTimes, the missile shipment "was tooriginate in the United States and be transferred to an Iranian shipin Belgium."

To conclude the deal, the Iranians sent an official from thecentral Markazi bank to London, to deposit $60 million in various accounts. Three Air Force colonels accompanied him. Their job was toinspect the missiles on the docks in Antwerp before $52 of the $60million was transferred to the Greek.

What they discovered, when they opened the crates, were tons andtons of tin scraps... and not a single TOW missile. Metro UK stoppedpayment on the deal. But the Greek, who had come so close to paydirt that his hands were trembling, kidnapped Sabahat, the Bank Markaziofficial, an Iranian businessman and the three Iranian Colonels, andheld them for ransom for seven days before the London police endedtheir ordeal.

A few days after the London adventure, con men in Zurichattempted a similar caper on a shipment of some fifty M-48 mainbattle tanks. The tanks were never shipped, and may never haveexisted; but the Iranians were out $45.9 million.

The most notorious of the black market stings was masterminded bya man named Ahmed Heydari, an arms merchant under the Shah who wasimprisoned by the Revolutionary Government... and set free byAyatollah Behesti in October 1980, to help reactivate theEuropean/Israeli arms pipeline. In Paris, where he was later based,Heydari had the reputation as being the only man who had ever cheated Saudi arms billionaire Adnan Kashoggi and stayed alive totalk about it.

In February 1981, Heydari faked a purchase of Israeli arms worth$73.5 million he then proceeded to sell to Iran. With the help of amistaken report from the Iranian Chargé d'Affaires in Madrid,stating that the non-existent weapons had been loaded aboard a shipbound for the Iranian port of Bandar Abbas, the Iranian Governmentreleased its letter of credit, payment was made, and Heydari onceagain found himself a rich man - if not for long. When the Iraniansdiscovered the sting, they pursued him from one end of France to another, including a picturesque chase through the drawing rooms ofthe George-V hotel in Paris. In a related incident, which occurredin June 1984, Heydari told the press he had been kidnapped in thesouth of France by a "Syro-Iranian commando," whose membersstrangely resembled local mafioso. He claimed they had held him in aPalestinian camp - in the hills above Nice!

Heydari understood his countrymen's love of the baroque and theirneed for secrecy perhaps better than anyone yet operating on theblack market, and was intent on beating them at their own game. OnceAyatollah Behesti freed him from prison, he contacted an old friendfrom the Shah's days, K. Minachi, who had been authorized by theIranian Defense Ministry to set up a private company in Tehran forprocuring weapons (and paying commissions) on the black market.

The company, called Interparts, sent Heydari to Paris, where hesigned arms purchase agreements with a Lebanese dealer named HamadSarakbi, whose affluence had reached such proportions he was able tomaintain two suites in the luxurious George V hotel on a permanentbasis. Sarakbi's firm, Universal Oil Trade Inc, was said to beestablished in Athens, Greece. In fact, it had never existed.

To protect itself from potential swindlers, the Iranian government had set up a complex procedure for releasing the funds,that involved a pre-shipment inspection by its representative inMadrid, Ali Behnam. But Behnam, who spoke no English (the languageused in all the documents), came to Paris unawares and signed therelease forms on February 16, 1981 - without ever having seen thearms. When some $53 million of the total amount cleared their bankthree days later, Heydari and Sarakbi disappeared. The Iraniangovernment took them to court in France and eventually recouped mostof the money, but not before Heydari had made a small fortune byinvesting it at going rates.

Despite legal proceedings against him and an attempt to freezehis assets, Heydari continued to operate openly in France. Later, hejoined forces with the arms sales operation of the Baron Empain, AirMateriel, alleged to have worked black market deals between Israel and Iran through Portugese middleman Angelo Caldas and his firm,X-TRA.

One reason for Heydari's continued affluence - let alone, hisphysical well-being! - may have been his links to the FrenchIntelligence services.

French intelligence

Late in September 1980, Ahmad Heydari "sponsored" a pair of French businessmen who came to Tehran at the invitation ofTransportation and Communications Minister, a certain Mr Kalantari(probably a relation to the Daryouch Kalantari mentioned above).When the war broke out five days after their arrival, they wereasked to stay on by the Iranian government, at which point theyoffered the services of SICAM company "which claimed to have a munitions export license and to operate under the sponsorship ofColonel Claude Jambel of the Direction de la Surveillance duTerritoire (the French counter-espionage service), as well as tobenefit from prestigious relationships, with the (French) PrimeMinister, General Jeannou Lacaze, Military Governor of Paris, andGeneral Robert Caillaux" (18). The two Frenchmen, Yves de Loreilheand Jacques Montanes, wasted no time in contracting new business. OnOctober 5, their company in Paris, the SETI, invoiced the IranianArmy for 50 Scorpion light tank engines and 18 Chieftain engines. OnOctober 24, four different pallets were unloaded at Tehran's MehabadAirport for a total value of $868,711. The shipment contained communications batteries from Spain, an M-60 engine from Italy, M-60spares from Italy, and 250 F-4 spare tires from Israel. TheFrenchmen had big hopes for more, and in telexes back to Parispraised the Iranian leadership for their "pro-French feelings."Particularly warm was their description of the crucial role playedby their sponsor, Ahmed Heydari, in "preparing privileged relationsbetween France and Iran... (that could include) the repair by French companies of damaged or destroyed oil installations, and a contractfor reorganizing the Iranian national railroads under the directionof the S.N.C.F."

On October 18, 1980, they received the following telex from their Paris office, which they were to transmit to Ali Reza Moayeri(19):


"General Robert Caillaux, upon the request of General Lacaze,Military Governor of Paris, is prepared to receive a phone call fromyou (ie, Moayeri) to authenticate Colonel Jambel of the Services ofTerritorial Defence. Colonel Jambel has served and serves asintermediary for the government of our country in the currentnegotiations. Colonel Jambel can certify to you that the SETI company is persona grata with our government and has its confidence.Monday, the line of conduct to be followed will be determined by thehighest authorities and an official telephone contact established.So we request that you telephone immediately to General Caillaux at73 9- --, his week-end residence."


Jambel was to arrange delivery via the SICAM of an unspecified quantity of military engines, "by October 27, 1980 at the latest".Did the French believe the war would only last a matter of weeks,and thus that a few clandestine arms deliveries to the Khomeinigovernment in times of need would be paid off by fat tradingcontracts later on? Did their Iraqi friends finally convince them ofthe contrary? At any rate, Jambel never came up with the goods, andMontanes was held hostage by the Iranians until March 1981 - when SETI managed to ship some $3,420,085 worth of military equipment toIran from various sources, including Israel. Regretfully, butwithout further comment, De Loreilhe transmitted the French refusalto sell more weapons to the President of the Islamic Republic, andleft the country.

As the last offer of arms made under the Carter Administration,and President Reagan's 1985-86 Iran "initiative," it was one moreattempt to trade Western arms for political influence in Tehran. Andjust as the other attempts, it failed (20).

Ethiopian F-5s

One of the more cruelly ironic twists of the black market underworld was an effort to purchase advanced fighter aircraft fromone of the poorest countries in the world, whose generals werestrapped for cash - not to buy food for the starving, but to pay offmilitary debts to the USSR. Information made available to the authorby arms brokers in Europe suggests that the Ethiopian F-5s sold toIran were purchased by an Israeli middleman working out of London aspart of a deal to help release the Falashas.

Under Emperor Haile Selassie, Christian Ethiopia was one of theUnited States' best allies in the region. A non-Arab State, it wasalso an important Israeli friend. Before the Ogaden conflict in thelate 1970s, when Ethiopia hurriedly switched alliances and joinedthe Soviet camp, the United States had supplied Ethiopia withadvanced military equipment to Ethiopia, including nineteen F-5s.The last of the F-5s, in the most modern version then available, were delivered to Ethiopia in 1974. Ten years later, the Iranians hadlocated them, and were seeking to purchase them on the black market(21).

Arms brokers in France said they had been contacted by officialsin the US State Department, once word got out that the Iranianswanted the planes. The plan was to repurchase all nineteen F-5s for$7 million cash and resell them for scrap - anything, to deny themto Iran. As a sweetener, the US Government promised to allowEthiopia to buy less strategic military equipment otherwiseembargoed, especially transport aircraft to deliver food supplies tofamine victims.

But Israeli middlemen beat the Frenchmen to the punch. In June1985, they convinced the Chief of the Ethiopian Air Force, GeneralFontabelle, to sell them four of the planes for a whopping $68million, using a British shell company set up for the deal. TheLondon office of the National Iran Oil Company (NIOC) paid for theplanes. They considered it "their contribution to the war effort,"brokers said.

It was a frustrating moment for the US officials who had tried toblock the sale. Since Ethiopia was not an ally, they had no leverageto convince it to respect US laws forbidding the transfer of USweapons to third counties without explicit approval.

There was one consolation: when the aircraft arrived in Iran theywere in such poor condition the Iranian Air Force refused to acceptthem, let alone purchase the remaining fifteen. Despite a scant497.5 hours average on the airframes (very low indeed), the aircrafthad been poorly maintained while in service and then storedcarelessly for several years. Iran's own F-5s were more airworthythan the Ethiopian fighters.

Smuggling around the world

Whether through black market pipelines or legitimate enterprises,all these arms deals ultimately came back to the Supreme DefenceCouncil, where rivalry among the mollahs, the Army, and theRevolutionary Guards continued. Each group pushed its own pet project, vying for funds and commissions in a free for all of greedand corruption that often brought the arms purchasing process to astandstill.

One arms dealer told the author how he waited for months on end toget all twenty-one signatures needed for final approval of hiscontract. In the end his deal fell through, he said, "because themullahs couldn't agree on who would get what cut."

Despite the US effort to stop unauthorized arms sales to Iran,which intensified in 1983 and continued until Special AmbassadorRichard Fairbanks left the State Department in August 1985 (22),many deals still went through that will probably never be fullyverified, but which left their traces here and there like so manytantalizing clues to some vast international puzzle.

•An Israeli arms dealer, who claimed he had sold "whole warehouses of F4 parts to Iran" up until late 1983, but who was laterblocked by the US arms embargo, said large quantities ofIsraeli-made 155 mm ammunition and guns were being shipped toArgentina in September and October 1984, en route for Iran;

•A Dutch arms dealer, working through contacts in theBelgian Air Force, acquired and shipped 10 refurbished jet enginesfor Iran's F-4 Phantoms, at $750,000 apiece;

•In October 1984, a 747 cargo of Iran Air full took off fromFrankfurt airport with a full load of TOW missiles, procured (somesay stolen) from NATO forces;

•Using a French agent in Seoul, a Consul of Luxembourg andformer armaments advisor to French President Georges Pompidou, Iranattempted to procure military transport aircraft via South Korea, ina complex arms-for-oil barter;

•An American arms dealer, using international shellcompanies, "arranged" the delivery of 100 Harpoon missiles, to armIran's F-14s in late 1984.

In 1984-85, the US Customs tracked arms dealers in the UnitedStates and Europe with increasingly effectiveness, blocking someshipments and making numerous arrests. Iran soon realized the limitsof the black market, and began to turn with mounting frequency toEastern block countries such as North Korea, which in 1985 accountedfor more than 40% of Iran's arms purchases.

Still, some US dealers held out hopes of instant money, andillusions of turning themselves into political superheroesovernight.

We shall tell the story of one such group of would be smugglersin a later chapter.

============ NOTES ============

1. Baltimore Sun, November 19, 1979; Newsweek, December 31, 1979; Aviation Week, January 28, February 18, and April 14, 1980.

2. Both mishaps were recounted in "Even in a Deadly Cat-and-MouseGame, Wags can be found," Los Angeles Times, Sunday August 4,1985.

3. The most notable cases of this type involved the Nazi warchests, and the numbered accounts of various African dictators whofell victims to revolutions in their countries.

4. William F. Hickman, "Ravaged and Reborn," Brookings Institute,1982, p 22-26.

5. Interview with the author, December 14, 1985.

6. Interviews with black market arms brokers, some of whomrequested to remain anonymous. The radar tube requisition form readas follows:

"Further to our verbal negotiations on 9-19-84, would youplease deliver two brand new and genuien (sic) of VA145E tubes toour assigned freight forwarder at your earliers convenience... It isunderstood that the sum of $294000 U.S. dallors (sic) will be paidto you within..." The same tubes could be obtained by authorized buyers for $30,000 a piece. Cf "Billion-Dollar Iran Arms Search SpansU.S., Globe," The Los Angeles Times, Sunday August 4, 1985.

7.See Le Monde Diplomatique, October 1987.

8. The author wishes to express personal thanks to Bill Dowell at Time magazine in Paris for his help on this section, as well asJacques-Marie Bourget of Paris Match.

9. As we shall see later, it is precisely the sales which fallbelow the legal limit requiring Congressional approval which tend togo through. Arms dealers boast that US officials can be bought off in the Defense and State Departments "to turn the other eye when theEUCs pass across their desk..." The loopholes in the export controlprocess were tightened by new legislation primarily aimed at Iran,proposed by the Reagan Administration in September 1984.

10. One notable exception was Israel, which we shall treat indetail in a separate chapter.

11. This effort has continued into 1987, according to Iraqimilitary sources and US satellite photos, which documented an 80%increase in the number of Iranian F-14s in 1986. The F-14 has neverbeen exported to any other country besides Iran, although US defenseindustry sources said in June 1987 that Israeli companies had been ordering F-14 parts from the US "just to have them in stock."

12. On the individuals mentioned here cf LA Times, August 4 andSeptember 4, 1985, the New York Times, July 19 and August 23, 1984,and The Wall Street Journal, March 28, 1984, etc. For other accountsof the Sjeklocha case see The Washington Post, August 21, 1985, Time Magazine, August 12, 1985 (p 18), and the Los Angeles Times,September 4, 1985. The author has relied heavily on confidentialsources, including arms brokers who spoke solely on the condition they not be identified, for much of the information in this and thefollowing chapters.

13. An early published account of Tabatabai's business dealings with Israel can be found in "Comment Israel Arme Khomeiny," MagazineHebdo, No.48, August 10, 1984. An Iranian opposition group, thePeople's Mujahidin, showed a copy of Tabatabai's passport during apress conference in Washington on December 1, 1986, with an Israelientry stamp for 1980. Tabatabai was one of the Iranians of the"second channel" opened by General Richard Secord in late 1986.

14. Interview with the author.

15. John Tagliabue, "Soviet Reportedly Sold Arms to Iran," InternationalHerald Tribune, May 28, 1987. St. Claire was laterarrested with Sjeklocha in an FBI sting we will discuss in aseparate chapter. Gantzer would also tell the French daily Le Matinde Paris (issues dated October 7,8, and19/1987) that he was offeringarms to the Iranians at the behest of the French government inexchange... for French hostages being held in Lebanon.

On the Nugan Hand Bank, see The Crimes of Patriots, by JonathanKwitny, W.W. Norton, New York, 1987.

16. The US supported Habre during his exile in Sudan and his longmarch back to power in 1982, and considered him the best bet againstLibyan expansion southward into Africa. During the July 1983 attackagainst the northern town of Faya Largeau by former ChadianPresident Goukouni Weddeye, the United States officials personallyshowed satellite photos to French President Mitterrand which revealed the Libyan involvement. Up until then, the French had beenreluctant to intervene.

17. Six of the Australian Orions were transferred by Lockheed toPortugal in an FMS deal - a transaction which sent shivers down thespines of the private trading community, which feared they would beedged out by direct government-to-government deals even in the usedequipment market.

18. Comments drawn from a deposition by Yves de Loreilhe andJacques Montanes , the two Frenchmen in question.

19. Moayeri was named Iranian Charge d'Affaires to Paris in 1984and Vice Premier in 1986, when he was put in charge of negotiatingthe hostage crisis with French Prime Minister Jacques Chirac.

20. For documents concerning the Heydari sting, and themisadventures of SETI, I am indebted to Pierre Salinger and thefiles of ABC News in Paris.

21. The US deliveries to Ethiopia were as follows: eleven F-5Asingle seat fighters (Northrup serial number 65-10505, 65-10509,65-10511, 66-9197, 66-9191, 67-21215, 67-21216, 67-22548, 68-9052,68-9059, 71-260); one F-5A reconnaissance version (71-261), threeF-5B double seat trainers (65-10584, 65-8447, 68-9093), and fourF-5E single seat upgraded fighters, such as those sold the Shah(74-01521, 74-01524, 74-01525, 74-01526. The first number of eachgroup denotes the year of manufacture). It was this last group the Israeli middlemen sold to Iran. They had previously been registeredin the Ethiopian Air Force as 426, 429, 430 and 431 respectively.After Ethiopia shifted alliances in 1979, it managed to keep some ofthe F-4s flying with parts supplied by Vietnam. By 1983, however,the aircraft were virtually grounded, and Ethiopia tried to sellthem to the West German German aircraft manufacturer Dornier, inexchange for Do-228 aircraft, a 15-seat regional transport plan. Seealso Jacques de Lestapis, MilitaryPowers:TheLeagueof ArabStates,VolumeII , Paris, 1987, pp 120.

22. The first directly US-sponsored deliveries from Israel toIran occured soon after Fairbanks left. The Tower Commission Report set the delivery dates as August 30 and September 14, 1985.