The Iran Brief®

Policy, Trade & Strategic Affairs

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

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

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

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Everyone's doing it

Iran's black market extravaganza created opportunities that arms merchants around the world simply could not afford to miss. By 1986, it had become a multi-billion dollar enterprise. Indeed, the lure of windfall profits was so great that few countries had any scruples about selling weapons to Iran or Iraq - or both at the same time. It was not the type of war that aroused deep moral commitment in favor of one side or the other. For most, the Gulf war provided a lucrative outlet for excess weapons production. It was a market; sometimes, the only market they had.

As this book goes to press, thirty-nine countries have shipped arms to Iran or Iraq since the war began, most to both belligerents at once. Often, bitter enemies and direct competitors have woken up to find themselves supplying the same side.

Twenty-eight countries were supplying Iran with military equipment manufactured in their own arsenals:

- North Korea

- South Korea

- Taiwan

- People's Republic of China (PRC)

- Japan

- Pakistan

- India

- Israel

- United States


- Poland

- Czechoslovakia

- East Germany

- Rumania

- United Kingdom

- France

- West Germany

- Italy

- Switzerland

- Sweden

- Netherlands

- Greece

- Belgium

- Spain

- Portugal

- Brazil

- Argentina

- Chile

Five more - Syria, Libya, Ethiopia, Singapore and Vietnam - made significant transfers to Iran of weapons they had purchased elsewhere, or that otherwise were part of their national inventory. A major transit point for much of the weapons traffic to Iran was the United Arab Emirates. Iraq repeatedly accused Army officers in the Tuba and Abu Dhabi of having illegally purchased up to $1 billion worth of weapons through intermediaries - including trading companies in India and Singapore - for reexport to Iran.

Another likely culprit on the black market arms scene was Turkey, which supplied fake End-Use certificates for Iran to Portugal, France and others, and served as a convenient transit point for shipments arriving from West and East alike. The greed of certain Turkish officers became legendary among the European brokers and something of a joke in the State Department - at least, among those officials who did not have to convince skeptical Congressmen to grant Turkey's staggering military aid requests. Never an easy task, due to Turkey's miserable human rights record, this became a Herculean labor in 1984 when reports leaked out that Turkey had supplied a fake EUC for twenty F-5 fighters shipped overseas from the United States in crates. How a country already receiving more than $600 million per year in US foreign aid could possibly afford to pay _c_a_s_h for twenty jet aircraft, staggered the imagination of Turkey's most convinced Congressional supporters. As one top US official put it, "everybody knows they're not buying for themselves" (1).

As the war went on, Iran turned increasingly to Soviet-standard equipment, acquired from countries not subject to US export restrictions. By 1982, the State Department estimated that more than 40% of Iran's annual $2 billion arms imports originated from North Korea. Much of this equipment was purchased from China or manufactured under license from the Soviet Union. Soviet-block weapons were also exported to Iran via Syria, Libya, Rumania and Poland - and directly from the USSR (2).

It was all a curious - and unexpected - side effect of the U.S. embargo on arms sales to Iran, first imposed during the 1979 hostage crisis and reconfirmed by the Reagan Administration in January 1981.

The Fairbanks Mission

To halt this illicit flow of U.S. arms to Iran the U.S. State Department launched "Operation Staunch," as it has come to be known, in the spring of 1983.

Special Ambassador Richard Fairbanks and his staff made the rounds of US friends and allies abroad, cajoling them to stop arms sales to Iran. They spoke with diplomats, intelligence officers and arms industry officials and lodged as many as "two or three protests" a month. Sometimes they shared what Fairbanks called "America's geopolitical stand" on why the arms sales should be stopped. Other times, they threatened obliquely to terminate U.S. licensing agreements.

With a few notable exceptions, the U.S. attempts to prevent high technology weapons systems and spare parts from reaching Iran saw results. In 1984, for example, Fairbanks succeeded in convincing the Italian firm Agusta Bell not to supply Iran with "Chinook" helicopters manufacturer under license. Later that year, Fairbanks staffers say they prevented a more than $1 billion arms agreement between Iran and the People's Republic of China. "It might not have been a 100% success," Fairbanks acknowledged, "but we definitely managed to stop most major weapons systems from reaching Iran from U.S. allies. By the time I returned to private law practice in September 1985, Iran's major suppliers were almost all Soviet block countries" (3).

According to members of Fairbanks' staff, U.S. diplomats"put a lot of pressure on those governments and companies trying to deal with Iran. We told them that they just didn't want to be on the same side as Iran, and if they continued to deliver, we reminded them of the Munitions Control regulations covering US-licensed equipment. If the shipments went through, we told them bluntly it would have a negative affect on future sales and technology transfer licenses. This in turn would mean cutting them off from other lucrative markets.

One example of this was the diversion of Bell 214 helicopters by a West German company, which sold them to North Korea in the spring of 1985, and from there, on to Iran. We came down very hard on the German middleman - and on Bell for not noticing something very strange about the routing."

Iraq had severely criticized the United States early in the war for helping provide Iran with sophisticated weapons, directly and through Israel. In November 1984, the United States resumed diplomatic relations with Iraq after a 17 year break. In Washington for the ceremony, Iraqi Foreign Minister Tariq Aziz cited Fairbanks by name as having contributed to the improvement in US-Iraqi relations, and called on him for additional help in cutting off supplies to Iran from Great Britain, West Germany, and Japan (4). American diplomats say that Aziz was not indulging in idle praise; he had been given hard proof that Operation Staunch could work.

Spain and Portugal

Fairbanks and his team fully expected to encounter difficulties when they took on the black market. Those difficulties turned into a stone wall when allied governments were themselves involved, winking - or even encouraging - clandestine arms sales to Iran that in most cases could be plausibly denied. "There are ways of keeping these things so quiet they never come out," explained Hamilton Spence, managing director of the private British firm Interarms. "There are very few private individuals acting on their own account. It is nearly all down to governments" (5).

Great Britain, for example, hosted an official Iranian weapons purchasing mission in London - the Logistics Support Centre of the Islamic Republic of Iran Air Force - until September 1987, and has never ceased direct exports of "non-lethal" war materiel to Iran, such as tank engines, spare parts, and even naval assault craft. According to a Wall Street Journal report, much of the estimated $3-4 billion Iran spends every year on black market arms purchases has been going through the London buying office (6).

Spain and Portugal were also major problems for Fairbanks, but they remained impervious to Operation Staunch for as long as Washington lacked the political will to back up Fairbanks' threats. Helping Spanish Prime Minister Filippe Gonzales through the difficult referendum on Spanish membership in NATO was of greater strategic importance to the United States than "staunching" the $280 million in Spanish arms deliveries to Iran which occurred between 1983 and 1985 (7).

The Iranian Embassy in Spain was used as a point of contact by various arms purchasing agents, and black market deals were signed in Madrid as often as in London. Sometimes they were based on false information, and led to huge Iranian losses. This is what happened with the $56 million Heydari sting in 1982.

Spain had developed a solid trade relationship with Libya and Syria, and this provided additional opportunities to the black marketeers. In 1984, Iraqi Foreign Minister, Tariq Aziz, accused Spain of selling 155mm artillery rounds to Syria and rerouting them to Iran. Syria had no 155mm guns capable of firing the NATO-standard ammunition purchased from Spain.

In 1981, Libya purchased 155 mm and 175 mm artillery shells from Spain in an extraordinary $156 million deal engineered by an enterprising black marketeer, George Starkman. Starkman, who had previously distinguished himself by selling Khaddafy fake "Startron" night-vision binoculars - and getting paid for them! - had convinced the Libyan leader he could supply US-built 155 mm and 175 mm howitzers, and hundreds of tons of ammunition. Starkman never got the guns - he never even tried - but documents show that he did manage to send Khaddafy entire shiploads of Spanish ammunition. For Khaddafy, the ammunition was useless. Not so for Iran. Under the Shah, Iran had purchased the M109-A1 and the M-107 howitzers from the US, and used them extensively in the war with Iraq.

Four of Spain's largest arms manufacturers - Gamesa, Santa Barbara, Explosivos Rio Tinto, Experanza y Cia and Explosivos Alavaesas - used Libya as the legal end user for munitions sold to Iran, and managed to keep the pipeline going despite Operation Staunch. The pipeline was shut down inadvertently in May 1986, when Felipe Gonzalez joined other European leaders in stopping arms sales to Libya because of its terrorist links. Once the Libyans ceased operating as middlemen (and taking their 25% commission), the Iran deals collapsed.

Portugal was also accused by US officials of exporting US-calibre artillery rounds to Iran in direct government-to-government agreements. The ammunition was produced in Portuguese factories, some of which operated on American licenses. Because the quantities were relatively small, the Portuguese claimed the deliveries would not affect the course of the war. Moreover, Portuguese officials contended with Fairbanks staffers that their sales were beneficial to the West "because they opened channels of information to Iran lacking ever since the US embassy shut down, and may have helped provide the Iranian military with an alternative to a total switchover to Soviet block weaponry."

But the Portuguese deliveries were not as small as all that. In 1984, Iran edged out Iraq as Portugal's principle arms customer. By 1985, Iran was buying ammunition worth $28 million, or 43.8% of all Portuguese arms exports. In 1986, that figure was believed to climb to 67% (8). Portugal was also known for providing fake EUC's to black marketeers trying to export US equipment to Iran.

Unconfirmed reports also alleged that Norte Importadora, acting with the full approval of the Portuguese Defense Ministry, repaired Iranian F-4 fighters using spare parts out of NATO stockpiles, and that two lots of TOW missiles were shipped to Iran from Portugal in May and December 1986. The first TOW shipment was for 4,020 missiles, at a cost to Iran estimated at $50 million, using Turkey as the fictitious end-user. 2,500 additional TOWs, worth $29 million, were shipped in December disguised as "plumbing equipment and medicine" (9).

Most of the Spanish and Portuguese deliveries involved the day-to-day hardware of the war, and not the modern weapons systems or high technology equipment Operation Staunch was meant to stop. As Fairbanks explained, "We never attempted to raise a total arms embargo. We figured there was no way in the world to stop Iran from getting artillery shells, bullets, bombs, and weapons like that."

Swiss radars for Kharg

But Iran was getting much more than just bullets, bombs, and "weapons like that." And it was getting them from Great Britain, France, Belgium, Greece, Brazil, France - even Sweden - at the very peak of Operation Staunch. The evidence now suggests that Fairbanks was hampered by a widespread perception abroad that the United States was pursuing a double-track policy: a public policy of cracking down on arms sales to Iran, and a private policy of seeking contacts with Iran. And that perception made more than one Allied government shrug off his efforts.

Switzerland gave Fairbanks as much trouble as Spain and Portugal, and not only because it was handling the mullahs' bank accounts. It was also selling sophisticated air defense systems, trainers, counter-insurgency aircraft and electronics to Iran, directly and using fake Italian EUCs.

The primary company involved, Oerlikon-Bührle, was based in Zurich, and was one of Europe's major arms manufacturers, despite Switzerland's reputation as a haven of peace. To hide its tracks, Oerlikon had its Italian-based subsidiary, Contraves, place the orders for Iran. This way, they looked like exports to Italy. Likewise, when Contraves obtained an Iranian contract Oerlikon would pretend to be the purchaser, so the Italian exports would look like they were going to Switzerland.

Oerlikon-Bührle broke into the Iranian market with a trial contract for six Pilatus PC-7 turboprop trainers, which it delivered in 1983. An additional thirty-five PC-7s were delivered by August 1984. One report claimed the Iranians were using them to equip a brigade of suicide terrorists trained to fly kamikaze missions against the US warships then patrolling the Gulf.

Delivery of the planes aroused controversy in Switzerland, since Oerlikon officials were forced to admit they were flown into Iran by Swiss Air Force reservists. Swiss law forbids weapons sales to countries at war. But in support of Oerlikon, the Swiss Government countered that the Pilatus PC-7s were not "war materiel," despite the fact they reached Iran equipped with bomb racks. Of the 80 aircraft initially covered by the contract, only 41 were finally delivered.

According to an Iranian defector, Hushang Mortezai, Iran's leaders decided in the summer of 1984 to form the suicide brigade, and sent him and a group 32 other Revolutionary Guards pilots for special training in Won San, North Korea. Mortezai defected from Iran by flying his plane across the Persian Gulf to the United Arab Emirates, where his Pilatus was found to contain eleven cases of dynamite - its operational load. Mortezai said that another group of 24 Iranian pilots was expected to return from training in North Korea at the time of his defection (10).

The Iraqis downplayed the "kamikaze theory." Instead, they believed the planes were being used for training pilots for the newly-formed Revolutionary Guard Air Force, which began to receive its first Chinese MiGs in 1985-86. The Swiss planes also doubled as armed reconnaissance and light ground attack aircraft - the same missions the Iraqis had assigned the PC7s _t_h_e_y had bought from Switzerland two year earlier.

The Pilatus trainers were not the only equipment Oerlikon-Bührle delivered to Iran's ayatollahs. Late in September 1985, Iran took delivery of major components of the Oerlikon "Skyguard" air defense system, and used them to protect it strategically-vital Kharg Island oil terminal, which was being pounded on a daily basis by Iraqi planes.

The "Skyguard" consisted of a series of twin 35mm anti-aircraft guns and "Sparrow" missile launchers, linked to a common radar and fire control system. Extremely sophisticated in conception and performance, the "Skyguard" made "a significant contribution to Iran's military capability," US officials said. Preventing equipment like the "Skyguard" from reaching Iran was what Staunch was all about. And in this case, despite more than 18 months warning, it failed (11). By November 1987, industry sources said, six complete Skyguard systems had been delivered to Iran, for a total of 24 guns and six "Flytermouse" radar/fire control units. Besides deployment at Kharg, which was the top priority, Iran was also believed to have deployed some of the units around Tehran, and may have sent some of the guns to Kurdistan.

The EEC: Money talks

Never thrilled by the prospect of taking political orders from Washington, especially when these would mean certain economic loss, Western Europe traded with Iran on a regular basis. Some countries, such as the Federal Republic of Germany, forged strong commercial ties with the Islamic regime, including direct and indirect arms sales. West German Foreign Minister Hans Dietrich Genscher was known to have developed personal relationships with Sadegh Tabatabai and Hashemi Rafsanjani, and was invited to Tehran by the latter in August 1984 along with a business delegation. West Germany racked up a 6.1 billion DM trade surplus with Iran for 1983, mostly by selling machine tools and "utility vehicles" - ie, Mercedes military transport trucks.

At the same time, with Genscher's support, negotiations were reopened for the purchase of at least six Type 209 Howaldtswerke-Deutsche-Werft submarines. The $393 million order was initially placed by the Shah in 1978, but canceled by Khomeini the following year. A new contract was signed in the spring of 1985, US officials said. Special Ambassador Fairbanks lodged a complaint with the West Germans, and was politely told the United States could go and purchase the submarines itself if it was so concerned about them falling into Iranian hands. The West Germans were also negotiating to sell Iran twelve "Transall" military cargo planes for a tidy $1 billion (12).

Italy's deliveries to Iran involved direct sales and clandestine operations. A former Iran Air pilot, in exile in the United States, said that in 1981-82 he often flew his civilian 707 cargo jet into a military air base outside of Milan, Italy, to pick up artillery pieces and missiles, presumably from NATO stocks (13). US officials confirmed his account in late 1985. They explained: "Italy had a substantial arms relationship with Iran up through early 1984. Export license records show they shipped artillery tubes, ammunition and other equipment to Iran by air and via Adriatic seaports, using Iranian or Italian flag ships." Iraqi military sources added that in early 1987 the Intermarine shipyard in La Spetzia was selling 26 meter naval vessels as well.

Shortly before leaving power, the Shah ordered 50 CH47C Chinook transport helicopters from Agusta S.p.A for $425 million. Beyond the Shah's substantial cash deposit, most of the payment was to be in oil delivered to the State-owned ENI, who would then reimburse Agusta. The helicopters were to be manufactured in Italy under license from Boeing Vertol, as indeed were many of Agusta's products.

But as the price of the aircraft rose, the number of helicopters covered by the contract fell to 30, and perhaps even fewer. During the 1979-81 hostage crisis, the United States tried to block the sale - one of the few that still interested the revolutionary government - and arranged for Egypt to buy 15 of the Chinooks from Agusta. However, in early 1984 Agusta told the Pentagon that eleven helicopters from the initial lot still remained, and threatened to sell them to the Iranians if the US did not act.

The upshot was a question of money. The eleven aircraft, now worth some $110 million, had already been assembled; and Agusta had spent the deposit left by the Shah. US officials were prepared to buy off the C model Chinooks and add them to US Army inventory, and set aside a special fund in the 1985 defense budget for this purpose. But the Army's CH47Cs were all slated to receive improved engines, transmissions, rotor blades and lift capacity in a major upgrade contracted out to Boeing Vertol Co. in Pennsylvania. Each upgrade from CH47C to CH47D, as the improved model was called, cost about $6 million.

The politicians won out, and a compromise was struck with the Italians. The choppers were bought for slightly less, and were put at the end of the line of some 400 Chinooks in US inventory waiting for the Vertol upgrade. US officials warned the Italian firm that they might get around the export restrictions once, but not twice. If they persisted on selling the Chinooks to the Iranians, it would mean the end of the Boeing Vertol licensing agreement (14).

Other European countries were selling services to Iran, which often proved as valuable as hardware. Dutch Minister of Transport and Public Works, Nellie Smit-Kroes, reported to Parliament in July 1984 that the Netherlands had converted one of Iran's Boeing 747-131 for military use, to provide in-flight refuelling for other aircraft (15). This significantly increased the range and loiter time of the Iranian Air Force.

Greece was supplying Continental-Teledyne engines for Iran's M-48 tanks. It also shipped spare parts, light armaments, and 155mm guns manufactured by Pyrkal, a Greek munitions firm. The Socialist government of Andreas Papandreou, while maintaining good ties with Iraq and the Arab world, frequently served as intermediary with radical regimes in Syria and Libya - both of which supported Iran's war effort.

Far more serious were reports that an August 1986 Greek purchase of 500 M-48 tanks directly from Pentagon stockpiles was in fact destined for Iran. The US Defense Department notified Congress of the pending sale, worth $138 million, on August 1, 1986. Pentagon spokesman, LtCol. Don Brownlee, noted that Greece wanted the tanks in a stripped down version "without communications equipment, machine guns or associated support equipment." But Greece had at least 1,250 of the ageing M-47/48 in inventory, and was already buying more modern tanks from West Germany. Clearly, it had no need for the additional US tanks. Iran was said to have arranged to purchase through middlemen, and planned to take delivery of the tanks after they had been modernized in Israel (16).

Belgium closes its eyes

One of the most helpful European nations for the Islamic Republic of Iran Air Force was Belgium, which sent aircraft mechanics capable of jerryrigging broken fighters and disused radar systems, US officials said. The Belgians also overhauled F-4 engines sent to Brussels via commercial carrier on a regular basis (17).

Lax Customs regulations turned Belgium into one of the major transshipment points for Iranian arms purchases. The port of Zeebrugge was used for years to transfer weapons from Sweden and France to Iran. And evidence now suggests that a major smuggling operation involving TOW missiles from NATO stockpiles in the US and Europe was conducted inside the sealed Customs zone of Brussels' Zaventem International Airport starting in mid-1985.

Intelligence sources in France and West Germany say that NATO Commander-in-Chief Bernard Rogers ordered an internal investigation late in 1986 into reports that TOW missiles from NATO warehouses in Germany - and perhaps other military equipment - had been diverted to Iran in 1985-86. Rogers was "furious to learn that NATO weapons were being sold to Iran without his knowledge," they said. A US spokesman at Supreme Headquarters-Allied Powers in Europe (SHAPE) in Mons, Belgium, replied in February 1987 that the investigation was "a political issue," and that "the Pentagon has ordered us not to comment on it." The Reagan Administration relieved Rogers of his command only weeks after he began his investigation. During his six years as NATO commander, Rogers had been extremely popular with Europeans.

Belgian Customs documents show that "at least 3000 TOW missiles" were involved in the shell game assembly operation. Chartered cargo planes arriving from the military bases in the U.S. brought in the TOW warheads. Shortly after they taxied to a stop in the Customs area, additional cargos arriving from NATO storehouses in the West German province of Bavaria would pull up alongside, bringing the missile fuselages and the motors. Since the warheads were never offloaded - and thus, never imported into Belgium - they required no Customs documents. The German cargos were labelled "industrial parts," and "motors," and did not arouse the suspicion of Belgian Customs officials. They were simply loaded onto the American charters for the final leg of the journey to Iran. The Brussels daily _L_e___S_o_i_r_, which reviewed the Customs documents, declared that the whole operation "had the benediction of the Pentagon," and suggested that the TOW deliveries were "the Belgian Irangate" (18).

Swedish scandals

In one of the ironies which has come to mark the Gulf War, high-speed patrol boats sold to Iran by neutral Sweden were used on May 6, 1987, to attack a Soviet freighter near the Straights of Hormuz. They were used again on June 27 to attack a pair of Scandinavian tankers off the coast of Kuwait. Thirty of these 13-meter boats, which some press reports mistakenly called "cabin cruisers" (19), were sold to Iran by Sweden in 1984, US officials said. Equipped with two 300 HP Volvo Penta engines, the boats can develop speeds up to 45 knots.

Despite US (and Iraqi) protests, the Liedinge shipyard on the outskirts of Stockholm delivered the first boats to Iran early in 1985. Liedinge owner, Anders Boghammars, said he had applied for an arms export license, but was told to his surprise by the Swedish government that the boats could be exported as civilian equipment, despite the 12.7 mm machine gun mounted on board.

These Swedish ships became the backbone of the newly-created Revolutionary Guards Navy, based Bandar Abbas and on Iran's Farsiyah Island. And the Guards liked them so much, they soon ordered thirty-two more. Their standard tactic was to use these small, fast boats to sneak up on freighters suspected of hauling arms to Iraq, and open fire with RPG-7 bazookas hand-carried by Revolutionary Guards on board. U.S. officials said that of the 50 boats eventually delivered to Iran, by September 1987 "only 20" were still operating.

In late 1986 and early 1987, evidence began to emerge that Iran had become one of Sweden's major arms customers, and that government officials had joined forces with arms merchants in a complicity of silence, to break Swedish arms export laws and defy parliamentary controls.

Swedish law forbids arms exports to countries at war or to "zones of conflict," a sweeping category understood to include the entire Middle East. Since 1978, however - and perhaps even earlier - the largest Swedish arms exporters have used fake end use certificates and falsified shipping documents to circumvent Swedish law. And they claim they did so with the explicit approval of the Kriegsmaterielinspectorat, or KMI, the Government office responsible for granting arms export licenses (20).

The most common procedure used by Bofors and Nobel Industries AB was to falsify their order books, listing sales of artillery munitions, 40 mm naval guns, 155mm field howitzers, and at least 714 RBS-70 laser-guided anti-aircraft missiles to Singapore, a perfectly legal weapons purchaser. Singapore then re-exported the vast majority of these weapons to Iran and to other black-listed countries through their State-owned trading company, Unicorn International. So extensive did this practice become, that by 1984 Singapore ranked as the third largest buyer of Swedish weapons, according to Swedish Foreign Trade Ministry statistics. By 1985, Singapore was number two, and was purchasing 14.4% of all Swedish arms exports. And other Swedish firms are currently under investigation for additional violations (21).

The sheer volume of these illicit weapons sales gives credence to accusations by former Bofors executives that they had come to a gentleman's agreement with their Government overseers to skirt the law, as long as they kept up appearances to please the left wing of the Social Democrat Party. The reason? "If we export less," said Nobel President, Anders Carlberg, "then defense equipment will be more expensive for Sweden. It's as simple as that" (22).

As public scrutiny increased, the Bofors/Nobel group was forced to cancel 400 million SK ($80 million) of export orders, while "at least a couple" of other deals "could be on the border of legality," Carlberg said. Carlberg also admitted that beyond these deals, an internal Bofors investigation had uncovered "more than ten cases" where arms shipments to black-listed countries had been disguised in the company's order books as legal exports to Austria, Singapore, and Italy. Former Bofors Marketing Director, Martin Ardbo, was more candid: "We thought we lived under a system of double morality. They (the government and the KMI) wanted us to do it like this" (23).

The fallout from the Bofors scandal was so intense that it shook the moral foundations and the political assumptions on which Swedish society was based. We shall treat these aspects of the Swedish scandals in a separate chapter.

An International Cartel

Neutral Sweden's involvement in the black market arms trade to Iran was not limited to Bofors. Indeed, one of Iran's most capable arms procurement agents, Karl-Erik Schmitz, masterminded arms deals for Iran worth an estimated $600 million from his base in the Swedish port of Malmö, where he ran Scandinavia Commodities Corporation.

Schmitz had conducted business with the Shah for more than twenty years by the time Iranian Defense Ministry officials turned to him for help in 1983. Swedish investigators, who interrogated Schmitz at length, agreed that he seemed an unlikely figure to be running a sophisticated black market arms operation. "He was handsome, a family man, extremely polite," they said. "Certainly not the type of person you would imagine dealing in weapons. When asked whether he had any regrets on selling arms used in the Gulf war, Schmitz replied blandly: "The powder factories must be kept going. What else would the workers do?" (24)

But Schmitz could also be cunning, and extremely cynical. And according to Swedish investigators, he used ever every trick in the black marketeer's book. To help his Danish freighters loaded with gunpowder avoid the scrutiny of the Egyptian authorities while passing through the Suez Canal, he produced fake documents showing they were destined for Kenya. He sold gunpowder from Sweden, Holland and West Germany to Yugoslavia, then bought it back and resold it to Iran. He faked end-use certificates to Pakistan and bills of lading. He sent gunpowder across national borders to be packed into "bullets, bombs, and weapons like that," so all trace of its origin was lost. One of Schmitz's munitions deals, for which the author saw pro-forma invoices and other documents, was worth a whopping $150 million. And Schmitz was involved in dozens of deals. He was a world-class operator.

To satisfy Iran's enormous needs in artillery ammunition, Schmitz first turned to South Africa, whose munitions plants supplied him with the equivalent of 3700 tons of gunpowder. But in June 1984, the South Africans cut off supplies without explanation. In fact, the State-owned Armaments Corporation had just signed a top secret $520 million contract to supply Iraq with long-range artillery pieces. One of the Iraqi conditions was that South Africa stop deliveries to Iran (25).

To make up the shortfall, Schmitz appealed to a little-known cartel of European munitions producers, which had grown out of a seemingly innocent trade organization set up in Brussels in 1975 called the European Association for the Study of Safety Problems in the Production of Propellant Powder (EASSP). According to an EASSP representative in Paris, the group was intended as a forum to share information on safety problems in chemical plants and on international Customs and transportation regulations.

With the Gulf War broke out, the Association became a convenient cover for a cartel whose sole purpose soon became supplying both Iran and Iraq with munitions. Of the more than fifty original members, by 1981 only thirteen companies remained. But they were among Europe's largest producers of military gunpowder, and included: Nobel Chemie in Sweden, PRB in Belgium, SNPE in France, Nobel Explosives of Scotland, Muiden Chemie in Holland, Forcit and Kemira in Finland, Rio Tinto in Italy, Snia BpD in Italy, Vinnis in Switzerland, and Vass A.G. in West Germany.

"Cartel members in Sweden, France, Holland and Belgium would meet regularly to eat and drink together and plan how they would keep Iran and Iraq supplied with munitions," Swedish Customs officials explained. "They knew that no single company could produce enough gunpowder to meet the enormous demand, without raising production quotas and attracting attention. So they decided to spread the work around."

And that was how it worked. During those long business lunches in Paris, Madrid, Geneva, and Brugges, cartel members would sit down and portion out the monthly gunpowder needs of Iran and Iraq. Ten percent might go to a firm in Sweden, twenty percent to France, another ten percent each to Holland, Finland and Belgium. And Schmitz would sit in the middle with his fingers on the Iranian bank accounts. Western intelligence specialists estimate that during the months of intensive fighting, Iraq and Iran consume nearly half a million heavy artillery shells each. That's more than ten times the _y_e_a_r_l_y consumption of most major European armies (26). Swedish deliveries alone sometimes amounted to 400 tons per year, or half of Sweden's yearly production of military explosives.

The cartel was first cracked in November 1984, when Swedish Customs raided the headquarters of Nobel Chemie after getting wind of a suspicious gunpowder shipment that had criss-crossed West Germany on its way to Syria the month before. "We saw found of correspondence between Nobel and Iran," one investigator said. "So we made another raid, and discovered a real mess." The cartel was next surprised in action in December 1985, when Swedish Customs intercepted a twenty-six ton shipment of Nobel Chemie gunpowder en route from the port of Trelleborg to East Germany, where it was to be packed into munitions by the IMIS company before leaving Rostock directly for Iran.

But the Customs investigators were not empowered to stop cartel agent, Karl-Erik Schmitz, from engaging in black market arms smuggling. Indeed, once they quietly put a stop to Swedish gunpowder deliveries to Iran in 1986, "Schmitz went to every corner of Europe and elsewhere desperately seeking new suppliers," officials said. "He went to Holland, Belgium, Spain, Italy, Greece - and especially, to Israel. He had to continue these deals to avoid financial ruin, because he had posted performance bonds for 5-10% of the total value of his contracts."

Schmitz himself remained unperturbed by the Customs investigation, even though he could face criminal prosecution. "After all," Schmitz said in 1987, "there are so many things you can sell the Iranians."

To Richard Fairbanks, the gunpowder club "sounded like something out of a novel." Unfortunately, for the more than one million dead on both sides of the front, the thirteen munitions manufacturers who formed the cartel were real, and their primary mission was to fan the flames of the Gulf war.


Friends, Allies, and Troublemakers in Asia

Operation Staunch was targeted against major weapons systems. It was intended to prevent Iran from acquiring tanks, aircraft, missiles, and radars. It also aspired to curbing the supply of spare parts and maintenance assistance that would contribute to getting high technology American weapons in Iran's inventory back in working order again.

One of Fairbanks' problems, as we have seen, was scope. Tackling the black market in any serious manner was beyond the reach of a small team of diplomats. To staunch the grey market - as SIPRI researcher Aaron Karp calls clandestine sales by governments to illegal destinations - required throwing the whole weight of the U.S. State Department behind the effort; and this was only done on rare occasions, when Secretary Schultz personally intervened (27). Still, U.S. diplomats claimed they had racked up "at least one success story on every continent. There were eight or ten countries who clearly altered their policy toward arms sales once it was brought to their attention."

One of these success stories was South Korea. U.S. officials said South Korea was shipping significant quantities of ammunition to Iran up until 1984, using Indonesia as the fake destination. High-ranking South Korean officials were bribed to fill out the export documents.

But bribery alone was not responsible for these deals. South Korean officials complained that the US had pressured them into building their arms industry on a war footing, so that to maintain their workforce in peacetime they needed to export weapons. Before the Iranian orders, South Korean arms factories had been running at one-third capacity. Besides, the South Koreans also felt that these deals "created opportunities for construction contracts," one of the largest money-earning industries in South Korea and one which had already won gigantic contracts in the Gulf. As South Korea's second-biggest oil suppler, Iran was as good a market as could be found anywhere (28).

Sustained US and Saudi pressure early in 1984 prompted Seoul to promise it would terminate its arms sales to Iran. However, rumors persisted that South Korea may have continued to supply spare parts for Iran's F-4 and F-5 fighters, either by diverting parts ordered from the United States or through the Korean Airlines factory at Pusan, which was assembling the Northrup F-5 under license (29). And early in 1987,it became apparent that South Korea was still selling munitions to Iran. A South Korean ship, the "OK Rita Anne," was discovered to be steaming for Bandar Abbas loaded with South Korean weapons, ostensibly for Portugal. The State Department intervened with the owner, and the South Korean government, and the "OK Rita Anne" was forced to turn around at high sea.

Some sources believed that South Korea had also diverted US-made Hawk surface-to-air missiles to Iran, with or without tacit US approval. The precision of such allegations is of interest in itself. Compare it to that of black market arms dealers such as Paul Sjeklocha, who claimed that "up to 550" US-made M48 tanks could be purchased from South Korea for Iran - but only as a "second choice," since they would require upgunning to the A5 version. The 1987 SIPRI _Y_e_a_r_b_o_o_k also alleges that in 1986, South Korea delivered three landing ships built at Inchon shipyard.

Japan, whose gross defense budget is the seventh-largest worldwide, also has a flourishing weapons industry, noted for its high quality vehicles, tanks, and aircraft. Both the F-15 and the F-4 Phantom have been manufactured under license in Japan, as have many Bell and Hughes helicopters.

Stringent and emotional laws forbid armaments export. But the high volume of trade with Iran, which provides upwards of 20% of Japan's oil imports, prompted Japan's Ministry of International Trade and Industry to pronounce a ruling of exception to the upper House Budget Committee on April 5, 1984, when a deal for Kawasaki C-1 military transport aircraft was announced. The twin-engine, medium-range aircraft were not offensive weapons, a Trade Ministry official said, and would not be "directly used by military forces in war." Thus they could be exported without breaking Japan's moral and legal obligations. A similar ruling was unsuccessfully sought to allow the sale to Iran of three-dimensional air-defense radars (30). By early 1987, Japan was Iran's primary trading partner.

Taiwan was another new Asian giant to have developed an indigenous aircraft industry - the Aero Industry Development Center - responsible for building more than 212 F-5E fighter under a Northrup license since 1973. It also manufactured local equivalents of the British Aerospace "Swingfire" anti-tank missile (which Iran used on its British-supplied Scorpion light tanks), and the Israeli Gabriel Mk II anti-ship missile. All of these factors, plus an abundance of qualified technicians, combined to make Taiwan an enviable source for the thousands of bona fide agents, crooks and confidence men roaming the world in search of guns for the mollahs of Tehran.

If few contracts have yet been made public between Taipei and Tehran, political pressure from the PRC is probably the main factor. However, Taiwan has sent aircraft technicians to Tehran to service and maintain Iran's F-14 fighters and C-130 transportsÆ A spokesman for Air Asia, an aircraft maintenance company in Taipei, claimed in March 1984 that this deal "was entirely a private one." Singapore Aircraft Industries was also supplying maintenance personnel, as well as avionics spares, for Iran's F-4 and F-5 fleet, according to US officials.

Iran's improved relations with the USSR in the 1986 helped it negotiate the purchase of $400 million worth of U.S. equipment left in Vietnam after the U.S. pullout in 1975. Sources at SIPRI said the package included twelve Tiger II F-5Es, twelve Huey 205 UH-1H helicopters, 48 M-48 tanks, and 200 M113 armored personnel carriers. The F-5s and the helicopters were said to have been found by the Vietnamese in their original packing crates.

Pakistan and India: supplying both sides

Pakistan, which has trained Iraqi pilots since the mid-1960s, has also acted as an intermediary for arms sales to Iran. According to a 1984 DMS Market report, Pakistan may have diverted US-made equipment and spares to Tehran. The French company Luchaire, for instance, used Pakistan as a phony buyer for 30,000 155mm charges, which left the port of Cherbourg for Bandar Abbas on September 25, 1985 aboard the Cyprus-registered cargo "Trautenbels."

Pakistan may have supplied ammunition directly to Iran through the Pakistan Ordnance Factories, one of the least expensive suppliers in the world. As one Pakistani broker said, "we are walking a tight rope in the Gulf. We can't afford to be unfriendly to anyone. We can't antagonize Iran by delivering munitions to Iraq: we have a direct border with Iran, so they could easily launch reprisal raids. But we can't supply Iran either without antagonizing the Arab Gulf States, and this could lead to a break in Saudi aid. It is very delicate situation" (31).

India, on the other hand, takes a more provocative stand: besides its training and support relationship with Iraq, it openly supplies large quantities of Jeeps, trucks, tents and military software to Iran. In the words of one Indian diplomat, "if the Chinese say they are neutral and claim not to supply arms, we say it is possible to be neutral and supply arms to both sides."

The Indian "Mahindra" Jeep, initially manufactured under a U.S. Willy's license, became 100% Indian as of 1974, and converted to French-designed Peugeot engines in 1980. India signed a major contract with the Iranian government in 1980 for the delivery of 5,000 Jeeps per year over four years. This was expanded in December 1983 to 10,000/year, making Iran far and away the largest customer of the widely-exported Mahindra. These jeeps can be fitted with 106mm recoilless riles, turning them into a fast, light-weight, and inexpensive anti-tank platform.

As one Indian salesman confided, "whatever the Iranians used to buy from the United States, we in India are now giving them" (32).

South American hopefuls

Brazil was another adept of the market, ardently pursuing its own fortunes. All the while it was engaged in a $1 billion business with Iraq, it was seeking ways of spreading its wares across the vast steppes of Persia, whose markets had opened their doors wide ever since the Shah fled with his all-American retinue.

Of course, a minimum of attention had to be paid to form - a bare minimum, in fact. Brazil had "no direct arms contracts with the Iranians," said General Jose Albuquerque, chief of the Brazilian Army Military Equipment Department. However, he admitted that "triangular operations" did exist. This meant that other countries were buying Brazilian goods for Iran, and merely changing the destination labels en route (33).

Libya, for instance had been purchasing the same Brazilian-made armored vehicles as Iraq for several years and simply re-shipping them to Iran. Estimates of the number of Cascavels reaching Iran in this manner run in the hundreds. Some sources believe that the 1983 oil agreement signed between Iran and Brazil was essentially a barter of 45,000 b/d of Iranian crude against Engesa armored cars that were to transit via Libya.

In April 1984, Defense and Foreign Affairs Weekly reported that Iranian Army communication equipment was being overhauled and repaired at a dedicated facility in Brazil. Two months later, Brazil's Avibras Company delivered half a dozen Astros multiple rocket launchers to Iran, equipped with a Oerlikon/Contraves tracking radar. These rocket launchers were developed with Iraqi funds, and Iraq used them in great quantities to counter Iran's February 1986 offensive. A top-ranking State Department official said that Iran bought the Astros from Libya, which air-lifted them to Iran along with the Cascavels (34).

A further contract with Iran - direct this time - was negotiated by the Sao Paolo Chemical and Explosives Branch of Brazil's Valparaiba Explosives Company in mid-1984, for one million grenades. This was the first major arms export contract Brazil publically acknowledged to have concluded with Islamic Iran. Earlier that year, Brazil temporarily banned arms sales to Iran, perhaps in response to Operation Staunch. But Iran's dealers merely crossed the border to buy arms from Argentina. Brazil rescinded its ban soon thereafter (35).

Argentina had several deals going with the Islamic Republic of Iran, and drew lively protests from Fairbanks and his team. In April 1983, Argentina delivered 5000 pistols and 60 machine guns. In 1984, it began negotiations to sell two British-built Type 42 destroyers, Hercules and Santisima Trinidad to Iran, ostensibly because the Britains had ceased to provide the spares and logistics support necessary to keep them seaworthy (hardly surprising, in light of the Falklands conflict).

Rumors began to circulate that Argentina was trying to sell its twenty-one Nesher fighter-bombers (an Israeli copy of the Mirage III) to Iran, in a deal said to "involve a trade-back of some or all of (its) Mirage III fighter aircraft" with France. Sources close to the Argentinian Defense Minister General Roque Guillerme Carraza denied that Iran, Iraq, Libya, or China were "acceptable" clients. However, the French could have an interest in buying back the Argentine aircraft for discreet transfer to Iran - as part of a political package aimed to secure the release of their hostages in Lebanon. This was not the first time Iran envisaged buying French fighters. Documents obtained by the author show that these discussions were already at an advanced state as of February 1975 (36).

The major confirmed Argentinian sale to Iran was an order placed in October 1983 for 100 Tanque Argentino Mediano (TAM) medium tanks, which the Argentinians produced under license from the West Germany company Thyssen Henschel. These 30-ton tanks cost between $1.5 and $1.7 million a piece, and came armed with a 105mm cannon, two 7.62 machine guns and a smoke-grenade launcher. The chassis was based on the West German "Marder" mechanized infantry combat vehicle. An Argentinian technical mission went to Iran in early 1984 to discuss the supply of spares parts and technical expertise for Iran's Armed Forces. Argentina was also believed to be serving as a fictitious end-user for significant quantities of 105mm and 155mm artillery rounds, purchased by Iran from Israel and elsewhere (37).

The TAM deal was yet another instance of a West German arms sale to Iran and Iraq (both were prohibited under German law), masked by licensed production in a third country. West German arms exports, which already surpassed Great Britain's by 1983, would undoubtedly rank higher if the various joint production and licensing agreements were included into the calculation.

To complete this South American triptych, a brief mention should be made of Chile, which in 1984 was having equal success in selling its Cardöen cluster bombs to Iran as it was with Iraq. Arms brokers said that Chile also served as a fake End User in late 1985-early 1986 for a $40 million shipment to Iran of F-4 wings built in Israeli factories as part of Israel's "Phantom-2000" upgrade program.

Even France...

Even France, despite the fact it had become Iraq's largest supplier of sophisticated weaponry by 1981, was dabbling in the black and grey market to Iran.

In the 1970s the Shah began a multi-billion dollar modernization program for the Imperial Navy, buying frigates, hovercraft, and the most modern gunboats then on the market. Most of the fighting ships were purchased from Great Britain and the United States. But the French also managed to cash in on the manna, securing an order for 12 Combattante II (Kaman) class 234 ton missile boats, nine of which were delivered by 1978.

The three remaining gunboats, which were equipped with four Exocet MM-38 anti-ship missiles, one 76mm Oto Melara and one 40mm/70 Bofors gun, were impounded by François Mitterrand in June 1981, who had pledged during his Presidential campaign that he would try to reduce French arms exports, or at the very least "moralize" them. The French Socialists hoped to find another buyer who was not at war.

In August 1981 one of the boats, the Taberzin, was hijacked by opponents of the Khomeini regime. After negotiations, the Iranians surrendered to the French authorities, and by the end of the year all three missile boats were delivered to Iran. The Elysée argued that France was only fulfilling commitments signed by previous governments, the same argument it used every time the press announced new arms deliveries to Iraq.

Franco-Iranian relations had deteriorated abruptly with the arrival in France in July 1981 of two of Khomeini's most hated opponents, former President Bani Sadr and Massoud Radjavi, leader of the People's Mujahidin. With billions of dollars of French investment at stake in Iran, it was hoped that delivering the missile boats would be taken by Tehran as a sign of good faith. It was not. Soon thereafter, the Iranian Government closed the commercial and cultural centers of the French Embassy in Tehran and refused the appointment of a new French ambassador. Relations between Paris and Tehran have been poor - and at times, violent - ever since. (38).

The missile boats were not the only instance of French arms sales to Iran. Nor was this the only time the French felt they could reach voices of moderation in Tehran through weapons sales.

Aerazur, maker of the famous Zodiac inflatable assault boats, sold several hundred Zodiacs to Iran under the Shah and sold another 1,000 to Khomeini.

The Zodiacs delivered to Revolutionary Iran had re-enforced hulls and bottoms that made it possible to fire 81 mm mortars or recoilless rifles from them. But because they lacked gun mounts, under French law they were classified as non-military equipment and required no export permit. The U.S. Embassy in Paris delivered a formal protest to the French in June 1985, but never received a reply. The Iranians used these Zodiacs with great success to infiltrate commandos across the Howeiza marshes, and as an assault wave during the Fao offensive in February 1986. Intelligence sources said that along with the Zodiacs, a small French company in the Paris suburb of Argenteuil also delivered 400 pocket submarines.

Sources at the French electronics giant Thomson-CSF say their company supplied TRC 577 tactical radios and communications gear to Iran, probably through third countries. Thomson has mastered the techniques of clandestine sales through years of practise with South Africa and Israel.

On May 9, 1984, shipping documents show that Thomson-CSF's Argentine subsidiary contracted with Swissair to ship twelve cases weighing more than 500 kg from Buenos Aires to Tehran. The crates contained three of a total twenty-five battle surveillance radars bought by Iran (the same as bought by Iraq). Thomson spokesmen in Paris deny all knowledge of the sale, but a top French Defense Ministry official who tracks arms exports admitted in an interview that "Argentina was frequently used by French firms to escape export controls. You could almost talk of an Argentine connection" (39). This agreement illustrates yet again how little can be done to staunch black market arms sales, especially through the licensing conduit, unless there is a strong political determination.

450,000 shells from Luchaire

A scant three weeks before the Parliamentary elections that returned Jacques Chirac to power on March 16, 1986, the French press revealed that the French company Luchaire had shipped more than 450,000 heavy artillery shells to Iran, worth an estimated $110 million. The deliveries stretched out over a year, in clear violation of French export laws. Falsified shipping documents and purchase orders listed the customers as Brazil, Portugal, Pakistan and Thailand. A careful examination of the Lloyd's shipping register, however, showed that the ships leaving Cherbourg loaded with Luchaire munitions to these destinations docked instead at the Iranian port of Bandar Abbas (40).

Luchaire made no effort to deny the shipments. But neither would it accept the blame for any wrongdoing. "Rigorous procedures for the export of armaments exist in France, and we followed these procedures to the letter," a company spokesman said. "Our contract was FOB, which meant that we no longer owned the materiel once it was taken on board and had no control over its destination." Prime Minister Laurent Fabius expressed outrage, and ordered a Defense Ministry inquiry.

By law, all French arms exports must be approved by an adhoc ministerial group called the Commission Interministeriel pour l'Etude des Exportations de Materiel de Guerre (CIEEMG). The CIEEMG intervenes at every possible stage of an arms deal. It must specifically approve requests from defense contractors to market their equipment abroad. It awards (or rejects) export licenses. It examines shipping documents and requires that a receipt be presented by the purchaser to prove that the materiel actually arrived at its official destination. Without passing all these hurdles, no weapons leave France.

That's the way the law works on the books. But on many occasions (Biafra, the Comores, Chad, and elsewhere) French Governments have simply sidestepped the whole procedure. Whenever they felt that quiet arms shipments would serve the national Interest, weapons were delivered. And as one Government official put it, "there are always front companies willing to provide the necessary certificates" to satisfy the strict requirements of the law.

A few months after the Luchaire scandal broke, the official investigation was quietly buried by the new Defense Minister, André Giraud. Luchaire's President, far from falling into disgrace, was awarded the Legion of Honor. So strong was the national consensus on "dirty tricks," that when the French weekly L'Express revealed that the deliveries had been sanctioned by Jean-François Dubos (41), a top Deputy to Defense Minister Charles Hernu, hardly a ripple stirred the pond of French public opinion. The Government was delivering weapons to Iran? It was obvious this was part of the price being paid to get the French hostages out of Lebanon and convince Iran to stop terrorist attacks on French soil. Just as the deliveries of the missile boats in 1981, it was hoped that the Luchaire deals would demonstrate French "good will" to Iran. And once again, they did not.

Britain's "non-lethal" tanks

What the French were doing on the sly, the British chose to call policy. Fairbanks protested this policy to "honor past contracts" with Iran again and again. The British nearly always managed to override his objections.

Great Britain was one of Iran's primary weapons suppliers under the Shah. During the 1970s alone, Britain delivered 890 Chieftain main battle tanks, five squadrons of Rapier anti-aircraft missiles, and 250 Scorpion light tanks equipped with Swingfire anti-tank missiles. An additional order of 1350 "Shir" tanks, worth $2 billion, was cancelled by the Revolution. The Shir was a significantly upgraded version of the Chieftain Mk.5. Some of the cancelled tanks were eventually sold to Jordan in 1981.

The British Chieftains were far more numerous than the American or Soviet tanks in Iran's inventory when war broke out in September 1980. One of the primary reasons for maintaining the Logistics Support Centre in London was to keep open the spare parts pipeline from British suppliers such as Vickers, Royal Ordnance, and Alvis. From the very first day of the war, and without interruption, Great Britain sent hundreds of millions of dollars worth of tank barrels and tank engines to Iran, calling them "non-lethal" equipment. On shipping documents, the Chieftain and Scorpion spares were classified as "automotive parts."

"Respecting previous contracts" was a catchword used by the British government to renew its arms relationship with Iran's new leadership. All through Operation Staunch, for instance, Britain continued to provide support and maintenance of Iran's hovercraft fleet, contending to Fairbanks that they were contractually bound to provide such assistance. When the Iranians successfully navigated across the Howeiza marshes in February 1984 to capture Iraq's Majnoon Islands, British hovercraft carried the first assault waves. Without the hovercraft, Iran could not have supported its troops long enough for them to establish a bridgehead. More than three years later, most of the Majnoon islands remain under Iranian occupation.

Another deal which Britain tried to pass off as the result of an "old contract" provoked vigorous protests from the United States, and was even discussed publically in August 1984, since it required Parliamentary approval.

At stake were three brand new naval vessels: the 33,000 ton replenishment ship Kharg, built by Swan Hunter, and two 2,500 ton landing/support ships, Lavan and Tumb, built by Yarrow under a $94 million contract for a total of four vessels of the same type. These "hospital ships," as the British called them, were fitted with reinforced decks and hulls allowing them to carry up to nine main battle tanks or a greater number of Scorpion light tanks for assault or landing operations. Parliament released all three vessels once armament was removed, which included a 76mm Oto Melara main gun for the tender and 40mm rapid-fire cannons for the two assault LSTs (landing ship, tank). The Thatcher government told Fairbanks that the Iranians had given their word that none of the vessels would be used for combat operations.

Since then, Britain has supplied Iran with 3,000 Land Rovers, more tanks engines, and even artillery munitions which, according to the Sunday Times, were "flown secretly from Britain to Iran... from Midland airports where they would attract little attention." By 1986, British arms sales to Iran were handled directly by the sales arm of Britain's Ministry of Defence, called International Military Services (IMS), which dealt directly with the Iranian Logistics office at 4, Victoria Street (42).

The controversial sale in December 1986 of six Plessey AR 3-D static air defense radars worth $343 million, encouraged Mrs Thatcher to change her tune. The sophisticated Plessey radars significantly improved Iran's ability to defend its air space from attack, and could also be used to direct offensive operations against Iraq. Instead of calling this undeniable success of Britain's arms salesmen the fulfillment of existing contracts, Mrs Thatcher now told Parliament that Britain "would not supply any military equipment that would prolong or exacerbate the war." Besides, she said, Iran promised to position the new radars solely along its north-eastern border with Afghanistan and the Soviet Union, and would not move the mobile, trailer-mounted units once they had been installed. This claim prompted one arms specialist to quip that the British radars "could only move north and not south. That's a north-facing radar" (43).

The lessons of Operation Staunch

Despite the extent of black market deliveries to Iran, Fairbanks believes his Mission was a success. "The pipeline bearing sophisticated Western weapons to Iran was virtually cut off during Operation Staunch," U.S. officials said. "You could see it in the air: the Iranian Air Force was down to about 25% capacity. Today that is much higher."

But the Fairbanks Mission also shows the limits of a partial embargo. Once one category of weapons is excluded, such as munitions, other categories of weapons tend to slip through. Toward the end of his Mission, in mid-to-late 1985, Fairbanks was further hampered by the strong perception abroad that Operation Staunch had been abandoned by the real power brokers back in Washington in favor of limited arms sales to Iran.

Finally, as we shall discuss in detail in a separate chapter, America's European allies had strategic objectives at variance with U.S. goals. And many of them believed that limited arms sales to Iran, if kept reasonably discreet, would afford them more advantages in the long run than strict adherence to a U.S. public policy none of them quite believed.

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


1. Interview with the author, October 1985. See also the July 23, 1984 editions of The Observer and the Christian Science Monitor.

2. "World Military Expenditures and Arms Transfers," United States Arms Control and Disarmament Agency, Washington, DC, 1985, conservatively estimates Iran's arms imports over the 1979-83 period at $5,365 billion, viz: $975 million from the Soviet Union, $1.2 billion from the US, $20 million from France, $140 million from the UK, $5 million from FRG, $150 million from Italy, $230 million from the PRC, $5 million from Rumania, $40 million from Poland... and $2.6 billion from unspecified "other" sources.

3. Much of this chapter is based on interviews with Richard Fairbanks and his staff conducted between October 1985 and April 1987. Other US officials, in the State Department, the Department of Defense, and the National Security Council (before the shakeup of December 1986) were also interviewed. Although "Staunch" began in Spring 1983, Fairbanks was not officially retitled as "Special Ambassador" until March 20, 1984.

According to the 1986 SIPRI Yearbook, the $1.6 billion deal went through in March 1985. French arms dealers negotiating with Iranian Air Force officers in Geneva in May-June 1985, said the Iranians confirmed a recent large-scale purchase from China. See Chapter 9.

4. Don Oberdorfer, "Iraq Asks U.S. Pressure Against Deals with Iran," International Herald Tribune, November 30, 1984.Staunch was given a boost when Fairbanks' boss at the State Department, Donald Rumsfeld, went to Baghdad in December 1983, for discussions with President Saddam Hussein and his Foreign Minister, Tarek Aziz. Staunch, said one of the diplomats who accompanied Rumsfeld for the trip, "was an effort to stop the war. The primary goal was to stop Iran from receiving spares for its American-built fighters. We figured we could have much less effect on Iran's capability to fight a ground war"

5. Interarms, a private arms clearing house, is run by one of the world's most voluble arms dealers, Sam Cummings. See "Britain ships Chieftain parts to Ayatollah," in The Observer, December 14, 1986.

6. John J. Fialka, "Iran Procures Arms Via Secret Network Operating In London," Wall Street Journal, January 30, 1987.

7. The $280 million figure was put forward by the Madrid daily, El Pais, (February 9, 1987), and the Spanish Communist Party, which demanded a Parliamentary investigation. See also David White, "Madrid accused of Iran arms sale cover-up," Financial Times, February 10, 1987, and the February 11, 1987 issue of The Independent. The Fairbanks team knew Spain was selling US-made 106 mm recoilless rifles and 105mm ammunition directly Iran in 1984, but was unable to stop it.

8. Scot J. Paltrow, "Portugal's Arms Dealers, Put in Spotlight by Iran Scandal, Prove to Be Embarrassing," Wall Street Journal-Europe, January 22, 1987; "Le Portugal au centre d'un trafic d'armes international," Le Matin de Paris, February 10, 1987.

9. Jacques Palente, "Des Armes de l'Otan Pour l'Iran," VSD, January 23, 1987. Meanwhile, reports in Newsweek and The Washington Post in January and February 1987 revealed that a Portuguese firm, Defex-Portugal, played a leading role in supplying arms to the Contra rebels in Nicaragua. The arms were purchased by Energy Resources International, whose registered address in Vienna, Virginia coincided with an office used by General Richard Secord.

10. Cf the French news magazine, VSD, December 1984, the International Defence Review, 12/83, Free Press International, March 8, 1985, Liberation, July 28, 1985, etc.

11. Reports that the "Skyguard" had been sold to Iran leaked to the British press early in 1984, and led the British Foreign Office to officially announce in April 1984 that some 10-12 Iranian artillery officers were then receiving training on the "Skyguard" system at the facilities of Oerlikon's British subsidiary. "Britain Says It Is Training Troops From Both Sides," Manchester Guardian, April 2, 1984.

12. According to an ABC report in January 1987, the West German manufacturer of the Franco-German "Transall," Messerschmitt-Bolkow-Blohm (MBB) sent a letter of offer to Iranian leader Hashemi Rafsanjani in late 1984, and promised to pay a hefty commission to Mohammed Hashemi for his services as middleman. Hashemi, who was interviewed by ABC, said MBB sent a negotiating team to Tehran early in 1985 that arrived at the $1 billion price tag. But the deal was turned down by the Bonn government on March 15, 1985. For details, see the January 6, 1987 editions of the International Herald Tribune, Le Matin de Paris, and the January 5, 1987 edition of Die Welt.The Transall deal became a politically-sensitive issue late in September 1987 when revelations by the PMOI suggested that negotiations were still continuing.

13. Interview with the author, October 1985.

14. "US to Buy Italian-Made Helicopters to Prevent Acquisition by Iranians," the Washington Post, January 21, 1984. However, a 1984 DMS report claims that Agusta delivered ten of the Chinooks to Iran in December 1981, while ten more were purchased in late 1981/early 1982. Both deals were said to occur before the 1984 Reagan Administration offer to buy the remaining eleven aircraft.

15. Iran Air had purchased nine of its eleven 747s from the American carrier, TWA., an irony that was lost when a TWA plane was hijacked to Beirut in July 1985.

16. Associated Press dispatches, August 1, 1986 and personal sources. For the 1984 deliveries, see "Arab Envoys Seek to Halt Greek Arms Sales to Iran, the Washington Post, May 5, 1984.

17. Iran claimed it was refurbishing the engines in its own factories, but Europeans with intimate knowledge of Iran's current military capabilities say this is false. The claims are advanced in (8). Tehran daily Keyhan, September 27, 1982, Near East/North Africa Report, November 2, 1982, Jeune Afrique, 24-31 December 1986. The Economist Confidential Foreign Report, May 31, 1984 first mentioned that Belgian mechanics were repairing Iran's F-4s.

The chapter on Iran's "enclave arms industry" in the SIPRI study, Arms Production in the Third World (Taylor & Francis, London, 1986), notes that "the Shah's efforts to increase indigenous maintenance and repair capabilities proved helpful to the Islamic regime's war effort," but lacks detailed information and specifically fails to conclude on the crucial issue of Iran's F-4 engine rebuild capability.

18. Le Soir, issues dated February 5, 6, and 11, 1987. "La France utilise la passoire belge pour livre des armes à l'Iran," in Liberation, February 6, 1987, details sea cargos passing via Zeebruge. In another deal, with Asco Malta Ltd, a wholly-owned subsidiary of the major Belgian defense contractor company, Asco, the Belgians shipped Hawk missile parts to Iran made under US license. This contact was signed by Mehdi Kashani, who worked for NIOC in London. See Serge Dumont, "Asco-Malte: le contrat iranien," in Le Vif/L'Express (Brussels), 6-12 February 1987, and issues dated 23-29 January and 30 January-5 February, 1987.

The Tower Commission Report identified Kelly Air Force Base in the U.S and Ramstein Air Force Base in West Germany as two of the shipping areas used in the delivery of 500 TOW missiles to Israel in November 1986, to replace TOWs Israel had just shipped to Iran on the orders of General Richard Secord and Colonel Oliver North.

19. Washington Post, May 10, 1987.

20. Martin Ardbo, 60, a Bofors official indicted in May 1987, claims that Bengt Rosenius, who was KMI in 1978, gave him the go-ahead to export arms to Bahrain and Dubai via Singapore as early as October 1978, and that his successor, Rear-Admiral Carl-Fredrik Algernon, was "happy with the information he got" even though Ardbo admitted that his lies were transparent. See the full page interview with Ardbo in the Stockholm daily, Expressen, March 31, 1987.

21. Regeringens skrivelse 1985/86: 178. "Med redogorelse for den svenska krigsmaterielexporten ar 1985." Sweden's arms buying customers for 1985 were, in order of importance: Finland (335,623,000 Swedish Kronor), Singapore (307,516,000 SK), Norway (251,908,000 SK), Great Britain (112,418,000).

22. See the interview with Carlberg in the Swedish business weekly, Veckans Affaren, April 2, 1987.

23. See note 20.

24. Interviews with the author, April and May 1987. An interview with Schmitz appeared in Expressen, February 8, 1987.

25. See chapter 3.

26. See also "La Mortelle filière suedoise," by Alain Campiotti, in the Swiss newsweekly, L'Hebdo, March 12, 1987, who briefly describes the cartel without actually naming it.

27. The Chronology, (National Security Archive, Washington, 1987), entries for January 20, 1984 and Late June, 1985. Even when Schultz did press U.S. allies personally, US officials in the Commerce Department and elsewhere would speak a different language.

28. "Both Koreas Supplied Weapons to Iran," by James R. Schiffman, Wall Street Journal, February 5, 1984.

HEAT and HE founds for 105, 155 and 203mm howitzers, as well as 106mm recoilless rifle rounds, are produced under US license by the Poongsan Metal Corporation of Seoul.

Kia Machine Tool Co, also of Seoul, produces the US-designed M101A1 105 mm howitzer, the M114A1 155mm howitzer, mortars, and 106mm recoilless rifles under license, large quantities of which can be found in Iran's military inventory.

South Korea also began co-producing the M109 155mm SP howitzer in 1984 following a technology transfer agreement signed between the American manufacturer, BMY, and the government-owned Korean Heavy Industries. The M109 was one of Iran's most prized artillery piece.

29. In 1983, the South Koreans signed a lucrative contract for 700,000 military overcoats with Iran. But once the Iranians started flying transport planes to Korea, Saudi Arabia got wind of the deal. As one of South Korea's major trading partners, they were in an excellent position to put pressure on Seoul. The overcoat deal was broken off after only 300,000 had been delivered.

30. "Japan Ponders sales to Iran," Flight International, May 19, 1984.

31. Interview with the author, November 1984.

32. Interview with the author. India's Hindustan Aeronautics Limited produces French and Soviet aircraft of a high technological standard under licensing agreements, and is scheduled to locally assemble the MiG 29 and parts of the Mirage 2000, and could be another source of aircraft maintenance technology for Iran.

33. For background see Jane's Defence Weekly, June 30, 1984, and Defence and Foreign Affairs Weekly, April 2-8, 1984. Albuquerque's comments appear in JDW, May 12, 1985.

34. Interview with the author, October 1985.

35. Defence and Foreign Affairs Weekly, June 11-17, 1984, and Jane's Defence Weekly, June 30, 1984. Brazil's non-military exports to Iran were estimated at $216 million for 1983 (only slightly less than its trade with Iraq), and may have gone much higher since. Iran began protesting Brazil's arms deliveries to Iraq in July 1984.

36. In a letter dated February 1, 1975, the Managing Director of Iran Aircraft Industries, Albert L. Charipar, invited the French to submit bids for military contracts. The letter was addressed to a subsidiary of Thomson-CSF called Sodeteg Iran, which was to lead a consortium of French firms that included Aerospatiale and Sogerma ("for maintenance of air crafts"), SNECMA ("for production, maintenance, and repair of engines"), and THOMSON-CSF ("for avionics, security, and electronic systems"). See also Jane's Defence Weekly, June 9, 1984.

37. DMS Market Intelligence Report: Iran II, DMS, Inc (Stamford, Conn, 1984).

38. Before the Islamic revolution, France ranked 6th among Iran's trading partners. By 1982, the French were running a 3.8 billion franc deficit with Iran, primarily because French companies were still purchasing some 6 billion francs/year of Iranian oil. French purchases of Iranian oil remained high through July 1987 - even after the break in diplomatic relations between the two countries - and only fell when the Chirac government ordered the oil companies to cancel their contracts with Iran.

39. Interview with the author, February 1987.

40. The Luchaire scandal is well-documented in the French press. The story first appeared on February 28, 1986 in La Presse de la Manche.

41. Jean-François Dubos was also the author of the 1974 study on French arms sales, Ventes d'Armes: Une Politique, we quoted in Chapter Two.

What Iran wanted most from France was the Exocet missile, which it had initially acquired on the missile boats delivered through 1981. French industry sources said in June 1987 that British middlemen, acting on behalf of Iran, had tried repeatedly over the previous two years to purchase Exocet, Roland, Milan and Hot missiles from French companies, using fake End-Use certificates for Dubai and India. The "Affaire Luchaire" would rebound in October-November 1987, as French Presidential elections approached.

42. The Sunday Times, November 23, 1986; Daily Telegraph, December 10, 1986; The Observer, December 14, 1986. The Mirror reported on February 13 1987, that a top-level British arms team, led the commercial director of IMS, Derek Johnson, was scheduled to travel to Iran to negotiate new arms deals with the managing director of the State-owned Defence Industries Organization of Iran, Mohandes Torken.

43. Interview with the author. See also Daily Telegraph, December 11, 1986; International Herald Tribune, December 18, 1986, the Independent, December 16, 1986, etc.