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

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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 ofwindfall profits was so great that few countries had any scruplesabout selling weapons to Iran or Iraq - or both at the same time. Itwas not the type of war that aroused deep moral commitment in favorof one side or the other. For most, the Gulf war provided alucrative 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 shippedarms to Iran or Iraq since the war began, most to both belligerentsat once. Often, bitter enemies and direct competitors have woken upto find themselves supplying the same side.

Twenty-eight countries were supplying Iran with militaryequipment 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 - madesignificant transfers to Iran of weapons they had purchasedelsewhere, or that otherwise were part of their national inventory.A major transit point for much of the weapons traffic to Iran wasthe United Arab Emirates. Iraq repeatedly accused Army officers inthe Tuba and Abu Dhabi of having illegally purchased up to $1billion worth of weapons through intermediaries - including tradingcompanies 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 forshipments arriving from West and East alike. The greed of certainTurkish officers became legendary among the European brokers andsomething of a joke in the State Department - at least, among thoseofficials who did not have to convince skeptical Congressmen togrant Turkey's staggering military aid requests. Never an easy task,due to Turkey's miserable human rights record, this became aHerculean labor in 1984 when reports leaked out that Turkey hadsupplied a fake EUC for twenty F-5 fighters shipped overseas fromthe United States in crates. How a country already receiving morethan $600 million per year in US foreign aid could possibly affordto pay _c_a_s_h for twenty jet aircraft, staggered the imaginationof Turkey's most convinced Congressional supporters. As one top USofficial 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 than40% of Iran's annual $2 billion arms imports originated from NorthKorea. 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 hostagecrisis and reconfirmed by the Reagan Administration in January1981.

The Fairbanks Mission

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

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

With a few notable exceptions, the U.S. attempts to prevent hightechnology weapons systems and spare parts from reaching Iran sawresults. In 1984, for example, Fairbanks succeeded in convincing theItalian firm Agusta Bell not to supply Iran with "Chinook"helicopters manufacturer under license. Later that year, Fairbanksstaffers say they prevented a more than $1 billion arms agreementbetween Iran and the People's Republic of China. "It might not havebeen a 100% success," Fairbanks acknowledged, "but we definitelymanaged to stop most major weapons systems from reaching Iran fromU.S. allies. By the time I returned to private law practice in September 1985, Iran's major suppliers were almost all Soviet blockcountries" (3).

According to members of Fairbanks' staff, U.S. diplomats"put alot of pressure on those governments and companies trying to dealwith Iran. We told them that they just didn't want to be on the sameside as Iran, and if they continued to deliver, we reminded them ofthe Munitions Control regulations covering US-licensed equipment. Ifthe 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 bya West German company, which sold them to North Korea in the springof 1985, and from there, on to Iran. We came down very hard on theGerman middleman - and on Bell for not noticing something verystrange about the routing."

Iraq had severely criticized the United States early in the warfor helping provide Iran with sophisticated weapons, directly andthrough Israel. In November 1984, the United States resumeddiplomatic relations with Iraq after a 17 year break. In Washingtonfor the ceremony, Iraqi Foreign Minister Tariq Aziz cited Fairbanksby name as having contributed to the improvement in US-Iraqirelations, and called on him for additional help in cutting offsupplies 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 astone wall when allied governments were themselves involved, winking- or even encouraging - clandestine arms sales to Iran that in mostcases could be plausibly denied. "There are ways of keeping thesethings so quiet they never come out," explained Hamilton Spence,managing director of the private British firm Interarms. "There arevery few private individuals acting on their own account. It isnearly 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 hasnever 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 purchaseshas been going through the London buying office (6).

Spain and Portugal were also major problems for Fairbanks, butthey remained impervious to Operation Staunch for as long asWashington lacked the political will to back up Fairbanks' threats.Helping Spanish Prime Minister Filippe Gonzales through thedifficult referendum on Spanish membership in NATO was of greaterstrategic importance to the United States than "staunching" the $280million in Spanish arms deliveries to Iran which occurred between1983 and 1985 (7).

The Iranian Embassy in Spain was used as a point of contact byvarious arms purchasing agents, and black market deals were signedin 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 andSyria, and this provided additional opportunities to the blackmarketeers. In 1984, Iraqi Foreign Minister, Tariq Aziz, accusedSpain of selling 155mm artillery rounds to Syria and rerouting themto Iran. Syria had no 155mm guns capable of firing the NATO-standardammunition purchased from Spain.

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

Four of Spain's largest arms manufacturers - Gamesa, SantaBarbara, Explosivos Rio Tinto, Experanza y Cia and ExplosivosAlavaesas - used Libya as the legal end user for munitions sold toIran, and managed to keep the pipeline going despite OperationStaunch. The pipeline was shut down inadvertently in May 1986, whenFelipe Gonzalez joined other European leaders in stopping arms salesto Libya because of its terrorist links. Once the Libyans ceasedoperating as middlemen (and taking their 25% commission), the Irandeals collapsed.

Portugal was also accused by US officials of exporting US-calibreartillery rounds to Iran in direct government-to-governmentagreements. The ammunition was produced in Portuguese factories,some of which operated on American licenses. Because the quantitieswere relatively small, the Portuguese claimed the deliveries wouldnot affect the course of the war. Moreover, Portuguese officialscontended with Fairbanks staffers that their sales were beneficialto the West "because they opened channels of information to Iranlacking ever since the US embassy shut down, and may have helpedprovide the Iranian military with an alternative to a totalswitchover to Soviet block weaponry."

But the Portuguese deliveries were not as small as all that. In1984, Iran edged out Iraq as Portugal's principle arms customer. By1985, Iran was buying ammunition worth $28 million, or 43.8% of allPortuguese arms exports. In 1986, that figure was believed to climbto 67% (8). Portugal was also known for providing fake EUC's toblack marketeers trying to export US equipment to Iran.

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

Most of the Spanish and Portuguese deliveries involved theday-to-day hardware of the war, and not the modern weapons systemsor high technology equipment Operation Staunch was meant to stop. AsFairbanks explained, "We never attempted to raise a total armsembargo. We figured there was no way in the world to stop Iran fromgetting 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 verypeak of Operation Staunch. The evidence now suggests that Fairbankswas hampered by a widespread perception abroad that the UnitedStates was pursuing a double-track policy: a public policy ofcracking down on arms sales to Iran, and a private policy of seekingcontacts with Iran. And that perception made more than one Alliedgovernment 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. Itwas also selling sophisticated air defense systems, trainers,counter-insurgency aircraft and electronics to Iran, directly andusing fake Italian EUCs.

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

Oerlikon-Bührle broke into the Iranian market with a trialcontract for six Pilatus PC-7 turboprop trainers, which it deliveredin 1983. An additional thirty-five PC-7s were delivered by August1984. One report claimed the Iranians were using them to equip abrigade of suicide terrorists trained to fly kamikaze missionsagainst the US warships then patrolling the Gulf.

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

According to an Iranian defector, Hushang Mortezai, Iran'sleaders decided in the summer of 1984 to form the suicide brigade,and sent him and a group 32 other Revolutionary Guards pilots forspecial training in Won San, North Korea. Mortezai defected fromIran 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 of24 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, theybelieved the planes were being used for training pilots for thenewly-formed Revolutionary Guard Air Force, which began to receiveits first Chinese MiGs in 1985-86. The Swiss planes also doubled asarmed reconnaissance and light ground attack aircraft - the samemissions the Iraqis had assigned the PC7s _t_h_e_y had bought fromSwitzerland two year earlier.

The Pilatus trainers were not the only equipment Oerlikon-Bührle delivered to Iran's ayatollahs. Late inSeptember 1985, Iran took delivery of major components of theOerlikon "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-aircraftguns and "Sparrow" missile launchers, linked to a common radar andfire control system. Extremely sophisticated in conception and performance, the "Skyguard" made "a significant contribution to Iran's military capability," US officials said. Preventing equipmentlike the "Skyguard" from reaching Iran was what Staunch was allabout. And in this case, despite more than 18 months warning, itfailed (11). By November 1987, industry sources said, six completeSkyguard systems had been delivered to Iran, for a total of 24 gunsand six "Flytermouse" radar/fire control units. Besides deployment atKharg, which was the top priority, Iran was also believed to havedeployed some of the units around Tehran, and may have sent some ofthe guns to Kurdistan.

The EEC: Money talks

Never thrilled by the prospect of taking political orders fromWashington, 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 commercialties with the Islamic regime, including direct and indirect armssales. West German Foreign Minister Hans Dietrich Genscher was knownto 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 upa 6.1 billion DM trade surplus with Iran for 1983, mostly by sellingmachine tools and "utility vehicles" - ie, Mercedes militarytransport trucks.

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

Italy's deliveries to Iran involved direct sales and clandestineoperations. 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 amilitary air base outside of Milan, Italy, to pick up artillerypieces and missiles, presumably from NATO stocks (13). US officialsconfirmed his account in late 1985. They explained: "Italy had asubstantial arms relationship with Iran up through early 1984.Export license records show they shipped artillery tubes, ammunitionand other equipment to Iran by air and via Adriatic seaports, usingIranian or Italian flag ships." Iraqi military sources added that inearly 1987 the Intermarine shipyard in La Spetzia was selling 26meter naval vessels as well.

Shortly before leaving power, the Shah ordered 50 CH47C Chinooktransport helicopters from Agusta S.p.A for $425 million. Beyond theShah's substantial cash deposit, most of the payment was to be inoil delivered to the State-owned ENI, who would then reimburseAgusta. The helicopters were to be manufactured in Italy underlicense from Boeing Vertol, as indeed were many of Agusta'sproducts.

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 elevenhelicopters from the initial lot still remained, and threatened tosell them to the Iranians if the US did not act.

The upshot was a question of money. The eleven aircraft, nowworth 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, andset 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, costabout $6 million.

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

Other European countries were selling services to Iran, whichoften proved as valuable as hardware. Dutch Minister of Transportand Public Works, Nellie Smit-Kroes, reported to Parliament in July1984 that the Netherlands had converted one of Iran's Boeing 747-131for military use, to provide in-flight refuelling for other aircraft (15). This significantly increased the range and loiter time of theIranian Air Force.

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

Far more serious were reports that an August 1986 Greek purchaseof 500 M-48 tanks directly from Pentagon stockpiles was in factdestined for Iran. The US Defense Department notified Congress ofthe 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 needfor the additional US tanks. Iran was said to have arranged topurchase 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 Republicof Iran Air Force was Belgium, which sent aircraft mechanics capableof jerryrigging broken fighters and disused radar systems, USofficials said. The Belgians also overhauled F-4 engines sent toBrussels via commercial carrier on a regular basis (17).

Lax Customs regulations turned Belgium into one of the majortransshipment points for Iranian arms purchases. The port ofZeebrugge was used for years to transfer weapons from Sweden andFrance to Iran. And evidence now suggests that a major smugglingoperation involving TOW missiles from NATO stockpiles in the US andEurope 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 NATOCommander-in-Chief Bernard Rogers ordered an internal investigationlate in 1986 into reports that TOW missiles from NATO warehouses inGermany - and perhaps other military equipment - had been divertedto Iran in 1985-86. Rogers was "furious to learn that NATO weaponswere being sold to Iran without his knowledge," they said. A USspokesman at Supreme Headquarters-Allied Powers in Europe (SHAPE) inMons, Belgium, replied in February 1987 that the investigation was"a political issue," and that "the Pentagon has ordered us not tocomment on it." The Reagan Administration relieved Rogers of hiscommand only weeks after he began his investigation. During his sixyears 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 cargoplanes arriving from the military bases in the U.S. brought in theTOW warheads. Shortly after they taxied to a stop in the Customsarea, additional cargos arriving from NATO storehouses in the WestGerman province of Bavaria would pull up alongside, bringing themissile fuselages and the motors. Since the warheads were neveroffloaded - and thus, never imported into Belgium - they required noCustoms documents. The German cargos were labelled "industrialparts," and "motors," and did not arouse the suspicion of BelgianCustoms officials. They were simply loaded onto the Americancharters for the final leg of the journey to Iran. The Brusselsdaily _L_e___S_o_i_r_, which reviewed the Customs documents,declared that the whole operation "had the benediction of thePentagon," and suggested that the TOW deliveries were "the BelgianIrangate" (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 onMay 6, 1987, to attack a Soviet freighter near the Straights ofHormuz. They were used again on June 27 to attack a pair ofScandinavian tankers off the coast of Kuwait. Thirty of these13-meter boats, which some press reports mistakenly called "cabincruisers" (19), were sold to Iran by Sweden in 1984, US officialssaid. Equipped with two 300 HP Volvo Penta engines, the boats candevelop 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 anarms export license, but was told to his surprise by the Swedishgovernment 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 FarsiyahIsland. And the Guards liked them so much, they soon orderedthirty-two more. Their standard tactic was to use these small, fastboats to sneak up on freighters suspected of hauling arms to Iraq,and open fire with RPG-7 bazookas hand-carried by RevolutionaryGuards on board. U.S. officials said that of the 50 boats eventuallydelivered to Iran, by September 1987 "only 20" were stilloperating.

In late 1986 and early 1987, evidence began to emerge that Iranhad become one of Sweden's major arms customers, and that governmentofficials had joined forces with arms merchants in a complicity ofsilence, to break Swedish arms export laws and defy parliamentarycontrols.

Swedish law forbids arms exports to countries at war or to "zonesof 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 theyclaim they did so with the explicit approval of the Kriegsmaterielinspectorat, or KMI, the Government office responsiblefor granting arms export licenses (20).

The most common procedure used by Bofors and Nobel Industries ABwas to falsify their order books, listing sales of artillerymunitions, 40 mm naval guns, 155mm field howitzers, and at least 714RBS-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 toaccusations by former Bofors executives that they had come to agentleman's agreement with their Government overseers to skirt thelaw, as long as they kept up appearances to please the left wing ofthe Social Democrat Party. The reason? "If we export less," saidNobel President, Anders Carlberg, "then defense equipment will bemore expensive for Sweden. It's as simple as that" (22).

As public scrutiny increased, the Bofors/Nobel group was forcedto cancel 400 million SK ($80 million) of export orders, while "atleast 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 inthe company's order books as legal exports to Austria, Singapore,and Italy. Former Bofors Marketing Director, Martin Ardbo, was morecandid: "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 shookthe moral foundations and the political assumptions on which Swedishsociety was based. We shall treat these aspects of the Swedishscandals in a separate chapter.

An International Cartel

Neutral Sweden's involvement in the black market arms trade toIran was not limited to Bofors. Indeed, one of Iran's most capablearms procurement agents, Karl-Erik Schmitz, masterminded arms dealsfor Iran worth an estimated $600 million from his base in the Swedishport of Malmö, where he ran Scandinavia CommoditiesCorporation.

Schmitz had conducted business with the Shah for more than twentyyears by the time Iranian Defense Ministry officials turned to himfor help in 1983. Swedish investigators, who interrogated Schmitz atlength, agreed that he seemed an unlikely figure to be running asophisticated black market arms operation. "He was handsome, afamily man, extremely polite," they said. "Certainly not the type ofperson you would imagine dealing in weapons. When asked whether hehad any regrets on selling arms used in the Gulf war, Schmitz repliedblandly: "The powder factories must be kept going. What else wouldthe workers do?" (24)

But Schmitz could also be cunning, and extremely cynical. Andaccording to Swedish investigators, he used ever every trick in theblack marketeer's book. To help his Danish freighters loaded withgunpowder avoid the scrutiny of the Egyptian authorities whilepassing through the Suez Canal, he produced fake documents showingthey were destined for Kenya. He sold gunpowder from Sweden, Hollandand West Germany to Yugoslavia, then bought it back and resold it toIran. 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-formainvoices and other documents, was worth a whopping $150 million. AndSchmitz was involved in dozens of deals. He was a world-classoperator.

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

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

With the Gulf War broke out, the Association became a convenientcover for a cartel whose sole purpose soon became supplying both Iranand Iraq with munitions. Of the more than fifty original members, by1981 only thirteen companies remained. But they were among Europe'slargest producers of military gunpowder, and included: Nobel Chemiein Sweden, PRB in Belgium, SNPE in France, Nobel Explosives ofScotland, Muiden Chemie in Holland, Forcit and Kemira in Finland, RioTinto in Italy, Snia BpD in Italy, Vinnis in Switzerland, and VassA.G. in West Germany.

"Cartel members in Sweden, France, Holland and Belgium would meetregularly to eat and drink together and plan how they would keep Iranand Iraq supplied with munitions," Swedish Customs officialsexplained. "They knew that no single company could produce enoughgunpowder to meet the enormous demand, without raising productionquotas and attracting attention. So they decided to spread the workaround."

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

The cartel was first cracked in November 1984, when SwedishCustoms raided the headquarters of Nobel Chemie after getting wind ofa suspicious gunpowder shipment that had criss-crossed West Germanyon its way to Syria the month before. "We saw found of correspondencebetween Nobel and Iran," one investigator said. "So we made anotherraid, and discovered a real mess." The cartel was next surprised inaction in December 1985, when Swedish Customs intercepted atwenty-six ton shipment of Nobel Chemie gunpowder en route from theport of Trelleborg to East Germany, where it was to be packed intomunitions by the IMIS company before leaving Rostock directly forIran.

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

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

To Richard Fairbanks, the gunpowder club "sounded like somethingout of a novel." Unfortunately, for the more than one million dead onboth sides of the front, the thirteen munitions manufacturers whoformed the cartel were real, and their primary mission was to fan theflames of the Gulf war.


Friends, Allies, and Troublemakers in Asia

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

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

One of these success stories was South Korea. U.S. officials saidSouth Korea was shipping significant quantities of ammunition to Iranup until 1984, using Indonesia as the fake destination. High-rankingSouth Korean officials were bribed to fill out the exportdocuments.

But bribery alone was not responsible for these deals. SouthKorean officials complained that the US had pressured them intobuilding their arms industry on a war footing, so that to maintaintheir workforce in peacetime they needed to export weapons. Beforethe Iranian orders, South Korean arms factories had been running atone-third capacity. Besides, the South Koreans also felt that thesedeals "created opportunities for construction contracts," one of thelargest money-earning industries in South Korea and one which hadalready won gigantic contracts in the Gulf. As South Korea'ssecond-biggest oil suppler, Iran was as good a market as could befound anywhere (28).

Sustained US and Saudi pressure early in 1984 prompted Seoul topromise it would terminate its arms sales to Iran. However, rumorspersisted that South Korea may have continued to supply spare partsfor Iran's F-4 and F-5 fighters, either by diverting parts orderedfrom the United States or through the Korean Airlines factory atPusan, which was assembling the Northrup F-5 under license (29). Andearly in 1987,it became apparent that South Korea was still sellingmunitions to Iran. A South Korean ship, the "OK Rita Anne," wasdiscovered to be steaming for Bandar Abbas loaded with South Koreanweapons, ostensibly for Portugal. The State Department intervenedwith the owner, and the South Korean government, and the "OK RitaAnne" was forced to turn around at high sea.

Some sources believed that South Korea had also diverted US-madeHawk surface-to-air missiles to Iran, with or without tacit USapproval. The precision of such allegations is of interest in itself.Compare it to that of black market arms dealers such as PaulSjeklocha, who claimed that "up to 550" US-made M48 tanks could bepurchased 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 deliveredthree landing ships built at Inchon shipyard.

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

Stringent and emotional laws forbid armaments export. But the highvolume of trade with Iran, which provides upwards of 20% of Japan'soil imports, prompted Japan's Ministry of International Trade andIndustry to pronounce a ruling of exception to the upper House BudgetCommittee on April 5, 1984, when a deal for Kawasaki C-1 militarytransport aircraft was announced. The twin-engine, medium-rangeaircraft were not offensive weapons, a Trade Ministry official said,and would not be "directly used by military forces in war." Thus theycould be exported without breaking Japan's moral and legalobligations. A similar ruling was unsuccessfully sought to allow thesale to Iran of three-dimensional air-defense radars (30). By early1987, Japan was Iran's primary trading partner.

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

If few contracts have yet been made public between Taipei andTehran, political pressure from the PRC is probably the main factor.However, Taiwan has sent aircraft technicians to Tehran to serviceand maintain Iran's F-14 fighters and C-130 transportsÆ Aspokesman 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 maintenancepersonnel, 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 itnegotiate the purchase of $400 million worth of U.S. equipment leftin Vietnam after the U.S. pullout in 1975. Sources at SIPRI said thepackage included twelve Tiger II F-5Es, twelve Huey 205 UH-1Hhelicopters, 48 M-48 tanks, and 200 M113 armored personnel carriers.The F-5s and the helicopters were said to have been found by theVietnamese in their original packing crates.

Pakistan and India: supplying both sides

Pakistan, which has trained Iraqi pilots since the mid-1960s, hasalso acted as an intermediary for arms sales to Iran. According to a1984 DMS Market report, Pakistan may have diverted US-made equipmentand spares to Tehran. The French company Luchaire, for instance, usedPakistan as a phony buyer for 30,000 155mm charges, which left theport of Cherbourg for Bandar Abbas on September 25, 1985 aboard theCyprus-registered cargo "Trautenbels."

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

India, on the other hand, takes a more provocative stand: besidesits training and support relationship with Iraq, it openly supplieslarge quantities of Jeeps, trucks, tents and military software toIran. In the words of one Indian diplomat, "if the Chinese say theyare neutral and claim not to supply arms, we say it is possible to beneutral 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 toFrench-designed Peugeot engines in 1980. India signed a majorcontract with the Iranian government in 1980 for the delivery of5,000 Jeeps per year over four years. This was expanded in December1983 to 10,000/year, making Iran far and away the largest customer ofthe widely-exported Mahindra. These jeeps can be fitted with 106mmrecoilless riles, turning them into a fast, light-weight, andinexpensive anti-tank platform.

As one Indian salesman confided, "whatever the Iranians used tobuy 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 ownfortunes. All the while it was engaged in a $1 billion business withIraq, it was seeking ways of spreading its wares across the vaststeppes of Persia, whose markets had opened their doors wide eversince the Shah fled with his all-American retinue.

Of course, a minimum of attention had to be paid to form - a bareminimum, in fact. Brazil had "no direct arms contracts with theIranians," said General Jose Albuquerque, chief of the Brazilian ArmyMilitary Equipment Department. However, he admitted that "triangularoperations" did exist. This meant that other countries were buyingBrazilian goods for Iran, and merely changing the destination labelsen route (33).

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

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

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

Argentina had several deals going with the Islamic Republic ofIran, and drew lively protests from Fairbanks and his team. In April1983, 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 theBritains had ceased to provide the spares and logistics supportnecessary to keep them seaworthy (hardly surprising, in light of theFalklands conflict).

Rumors began to circulate that Argentina was trying to sell itstwenty-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 theArgentinian Defense Minister General Roque Guillerme Carraza deniedthat Iran, Iraq, Libya, or China were "acceptable" clients. However,the French could have an interest in buying back the Argentineaircraft for discreet transfer to Iran - as part of a politicalpackage 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 werealready at an advanced state as of February 1975 (36).

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

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

To complete this South American triptych, a brief mention shouldbe made of Chile, which in 1984 was having equal success in sellingits Cardöen cluster bombs to Iran as it was with Iraq. Armsbrokers said that Chile also served as a fake End User in late1985-early 1986 for a $40 million shipment to Iran of F-4 wings builtin Israeli factories as part of Israel's "Phantom-2000" upgradeprogram.

Even France...

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

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

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

In August 1981 one of the boats, the Taberzin, was hijacked byopponents of the Khomeini regime. After negotiations, the Iranianssurrendered to the French authorities, and by the end of the year allthree missile boats were delivered to Iran. The Elysée arguedthat France was only fulfilling commitments signed by previousgovernments, the same argument it used every time the press announcednew arms deliveries to Iraq.

Franco-Iranian relations had deteriorated abruptly with thearrival in France in July 1981 of two of Khomeini's most hatedopponents, former President Bani Sadr and Massoud Radjavi, leader ofthe People's Mujahidin. With billions of dollars of French investmentat stake in Iran, it was hoped that delivering the missile boatswould be taken by Tehran as a sign of good faith. It was not. Soonthereafter, the Iranian Government closed the commercial and culturalcenters of the French Embassy in Tehran and refused the appointmentof a new French ambassador. Relations between Paris and Tehran havebeen poor - and at times, violent - ever since. (38).

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

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

The Zodiacs delivered to Revolutionary Iran had re-enforced hullsand bottoms that made it possible to fire 81 mm mortars or recoillessrifles from them. But because they lacked gun mounts, under Frenchlaw they were classified as non-military equipment and required noexport permit. The U.S. Embassy in Paris delivered a formal protestto the French in June 1985, but never received a reply. The Iraniansused these Zodiacs with great success to infiltrate commandos acrossthe Howeiza marshes, and as an assault wave during the Fao offensivein February 1986. Intelligence sources said that along with theZodiacs, a small French company in the Paris suburb of Argenteuilalso delivered 400 pocket submarines.

Sources at the French electronics giant Thomson-CSF say theircompany supplied TRC 577 tactical radios and communications gear toIran, probably through third countries. Thomson has mastered thetechniques of clandestine sales through years of practise with SouthAfrica and Israel.

On May 9, 1984, shipping documents show that Thomson-CSF'sArgentine subsidiary contracted with Swissair to ship twelve casesweighing more than 500 kg from Buenos Aires to Tehran. The cratescontained three of a total twenty-five battle surveillance radarsbought by Iran (the same as bought by Iraq). Thomson spokesmen inParis deny all knowledge of the sale, but a top French DefenseMinistry official who tracks arms exports admitted in an interviewthat "Argentina was frequently used by French firms to escape exportcontrols. You could almost talk of an Argentine connection" (39).This agreement illustrates yet again how little can be done tostaunch black market arms sales, especially through the licensingconduit, unless there is a strong political determination.

450,000 shells from Luchaire

A scant three weeks before the Parliamentary elections thatreturned Jacques Chirac to power on March 16, 1986, the French pressrevealed that the French company Luchaire had shipped more than450,000 heavy artillery shells to Iran, worth an estimated $110million. The deliveries stretched out over a year, in clear violationof French export laws. Falsified shipping documents and purchaseorders listed the customers as Brazil, Portugal, Pakistan andThailand. A careful examination of the Lloyd's shipping register,however, showed that the ships leaving Cherbourg loaded with Luchairemunitions to these destinations docked instead at the Iranian port ofBandar Abbas (40).

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

By law, all French arms exports must be approved by an adhocministerial group called the Commission Interministeriel pour l'Etudedes Exportations de Materiel de Guerre (CIEEMG). The CIEEMGintervenes at every possible stage of an arms deal. It mustspecifically approve requests from defense contractors to markettheir equipment abroad. It awards (or rejects) export licenses. Itexamines shipping documents and requires that a receipt be presentedby the purchaser to prove that the materiel actually arrived at itsofficial destination. Without passing all these hurdles, no weaponsleave France.

That's the way the law works on the books. But on many occasions(Biafra, the Comores, Chad, and elsewhere) French Governments havesimply sidestepped the whole procedure. Whenever they felt that quietarms shipments would serve the national Interest, weapons weredelivered. And as one Government official put it, "there are alwaysfront companies willing to provide the necessary certificates" tosatisfy the strict requirements of the law.

A few months after the Luchaire scandal broke, the officialinvestigation was quietly buried by the new Defense Minister,André Giraud. Luchaire's President, far from falling intodisgrace, was awarded the Legion of Honor. So strong was the nationalconsensus on "dirty tricks," that when the French weekly L'Expressrevealed that the deliveries had been sanctioned byJean-François Dubos (41), a top Deputy to Defense MinisterCharles Hernu, hardly a ripple stirred the pond of French publicopinion. The Government was delivering weapons to Iran? It wasobvious this was part of the price being paid to get the Frenchhostages out of Lebanon and convince Iran to stop terrorist attackson French soil. Just as the deliveries of the missile boats in 1981,it was hoped that the Luchaire deals would demonstrate French "goodwill" 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 callpolicy. Fairbanks protested this policy to "honor past contracts"with Iran again and again. The British nearly always managed tooverride his objections.

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

The British Chieftains were far more numerous than the American orSoviet tanks in Iran's inventory when war broke out in September1980. One of the primary reasons for maintaining the LogisticsSupport Centre in London was to keep open the spare parts pipelinefrom British suppliers such as Vickers, Royal Ordnance, and Alvis.From the very first day of the war, and without interruption, GreatBritain sent hundreds of millions of dollars worth of tank barrelsand tank engines to Iran, calling them "non-lethal" equipment. Onshipping documents, the Chieftain and Scorpion spares were classifiedas "automotive parts."

"Respecting previous contracts" was a catchword used by theBritish government to renew its arms relationship with Iran's newleadership. All through Operation Staunch, for instance, Britaincontinued to provide support and maintenance of Iran's hovercraftfleet, contending to Fairbanks that they were contractually bound toprovide such assistance. When the Iranians successfully navigatedacross the Howeiza marshes in February 1984 to capture Iraq's MajnoonIslands, British hovercraft carried the first assault waves. Withoutthe hovercraft, Iran could not have supported its troops long enoughfor them to establish a bridgehead. More than three years later, mostof 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, andwas even discussed publically in August 1984, since it requiredParliamentary approval.

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

Since then, Britain has supplied Iran with 3,000 Land Rovers, moretanks engines, and even artillery munitions which, according to theSunday Times, were "flown secretly from Britain to Iran... fromMidland airports where they would attract little attention." By 1986,British arms sales to Iran were handled directly by the sales arm ofBritain'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-Dstatic air defense radars worth $343 million, encouraged Mrs Thatcherto change her tune. The sophisticated Plessey radars significantlyimproved Iran's ability to defend its air space from attack, andcould also be used to direct offensive operations against Iraq.Instead of calling this undeniable success of Britain's arms salesmenthe fulfillment of existing contracts, Mrs Thatcher now toldParliament that Britain "would not supply any military equipment thatwould prolong or exacerbate the war." Besides, she said, Iranpromised to position the new radars solely along its north-easternborder with Afghanistan and the Soviet Union, and would not move themobile, trailer-mounted units once they had been installed. Thisclaim 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, Fairbanksbelieves his Mission was a success. "The pipeline bearingsophisticated Western weapons to Iran was virtually cut off duringOperation Staunch," U.S. officials said. "You could see it in theair: the Iranian Air Force was down to about 25% capacity. Today thatis much higher."

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

Finally, as we shall discuss in detail in a separate chapter,America's European allies had strategic objectives at variance withU.S. goals. And many of them believed that limited arms sales toIran, if kept reasonably discreet, would afford them more advantagesin the long run than strict adherence to a U.S. public policy none ofthem 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 StatesArms Control and Disarmament Agency, Washington, DC, 1985,conservatively estimates Iran's arms imports over the 1979-83 periodat $5,365 billion, viz: $975 million from the Soviet Union, $1.2billion from the US, $20 million from France, $140 million from theUK, $5 million from FRG, $150 million from Italy, $230 million fromthe PRC, $5 million from Rumania, $40 million from Poland... and $2.6billion from unspecified "other" sources.

3. Much of this chapter is based on interviews with RichardFairbanks and his staff conducted between October 1985 and April1987. Other US officials, in the State Department, the Department ofDefense, and the National Security Council (before the shakeup ofDecember 1986) were also interviewed. Although "Staunch" began inSpring 1983, Fairbanks was not officially retitled as "SpecialAmbassador" until March 20, 1984.

According to the 1986 SIPRI Yearbook, the $1.6 billion dealwent through in March 1985. French arms dealers negotiating withIranian Air Force officers in Geneva in May-June 1985, said theIranians confirmed a recent large-scale purchase from China. SeeChapter 9.

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

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

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

7. The $280 million figure was put forward by the Madrid daily, ElPais, (February 9, 1987), and the Spanish Communist Party, whichdemanded a Parliamentary investigation. See also David White, "Madridaccused of Iran arms sale cover-up," Financial Times, February 10,1987, and the February 11, 1987 issue of The Independent. TheFairbanks team knew Spain was selling US-made 106 mm recoillessrifles and 105mm ammunition directly Iran in 1984, but was unable tostop it.

8. Scot J. Paltrow, "Portugal's Arms Dealers, Put in Spotlight byIran Scandal, Prove to Be Embarrassing," Wall Street Journal-Europe,January 22, 1987; "Le Portugal au centre d'un trafic d'armesinternational," 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 WashingtonPost in January and February 1987 revealed that a Portuguese firm,Defex-Portugal, played a leading role in supplying arms to the Contrarebels in Nicaragua. The arms were purchased by Energy ResourcesInternational, whose registered address in Vienna, Virginia coincidedwith an office used by General Richard Secord.

10. Cf the French news magazine, VSD, December 1984, theInternational Defence Review, 12/83, Free Press International, March8, 1985, Liberation, July 28, 1985, etc.

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

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

13. Interview with the author, October 1985.

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

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

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

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

The chapter on Iran's "enclave arms industry" in the SIPRIstudy, Arms Production in the Third World (Taylor & Francis,London, 1986), notes that "the Shah's efforts to increase indigenousmaintenance and repair capabilities proved helpful to the Islamicregime's war effort," but lacks detailed information and specificallyfails to conclude on the crucial issue of Iran's F-4 engine rebuildcapability.

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

The Tower Commission Report identified Kelly Air Force Base inthe U.S and Ramstein Air Force Base in West Germany as two of theshipping areas used in the delivery of 500 TOW missiles to Israel inNovember 1986, to replace TOWs Israel had just shipped to Iran on theorders 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 thego-ahead to export arms to Bahrain and Dubai via Singapore as earlyas October 1978, and that his successor, Rear-Admiral Carl-FredrikAlgernon, was "happy with the information he got" even though Ardboadmitted that his lies were transparent. See the full page interviewwith Ardbo in the Stockholm daily, Expressen, March 31, 1987.

21. Regeringens skrivelse 1985/86: 178. "Med redogorelse for densvenska krigsmaterielexporten ar 1985." Sweden's arms buyingcustomers for 1985 were, in order of importance: Finland (335,623,000Swedish 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 businessweekly, Veckans Affaren, April 2, 1987.

23. See note 20.

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

25. See chapter 3.

26. See also "La Mortelle filière suedoise," by AlainCampiotti, in the Swiss newsweekly, L'Hebdo, March 12, 1987, whobriefly 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 Schultzdid press U.S. allies personally, US officials in the CommerceDepartment 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 as106mm recoilless rifle rounds, are produced under US license by thePoongsan Metal Corporation of Seoul.

Kia Machine Tool Co, also of Seoul, produces the US-designedM101A1 105 mm howitzer, the M114A1 155mm howitzer, mortars, and 106mmrecoilless rifles under license, large quantities of which can befound in Iran's military inventory.

South Korea also began co-producing the M109 155mm SP howitzer in1984 following a technology transfer agreement signed between theAmerican manufacturer, BMY, and the government-owned Korean HeavyIndustries. The M109 was one of Iran's most prized artillerypiece.

29. In 1983, the South Koreans signed a lucrative contract for700,000 military overcoats with Iran. But once the Iranians startedflying transport planes to Korea, Saudi Arabia got wind of the deal.As one of South Korea's major trading partners, they were in anexcellent position to put pressure on Seoul. The overcoat deal wasbroken 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 AeronauticsLimited produces French and Soviet aircraft of a high technologicalstandard under licensing agreements, and is scheduled to locallyassemble the MiG 29 and parts of the Mirage 2000, and could beanother source of aircraft maintenance technology for Iran.

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

34. Interview with the author, October 1985.

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

36. In a letter dated February 1, 1975, the Managing Director ofIran Aircraft Industries, Albert L. Charipar, invited the French tosubmit bids for military contracts. The letter was addressed to asubsidiary of Thomson-CSF called Sodeteg Iran, which was to lead aconsortium 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'strading partners. By 1982, the French were running a 3.8 billionfranc deficit with Iran, primarily because French companies werestill purchasing some 6 billion francs/year of Iranian oil. Frenchpurchases of Iranian oil remained high through July 1987 - even afterthe break in diplomatic relations between the two countries - andonly fell when the Chirac government ordered the oil companies tocancel 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 laManche.

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

What Iran wanted most from France was the Exocet missile, whichit had initially acquired on the missile boats delivered through1981. French industry sources said in June 1987 that Britishmiddlemen, acting on behalf of Iran, had tried repeatedly over theprevious two years to purchase Exocet, Roland, Milan and Hot missilesfrom French companies, using fake End-Use certificates for Dubai andIndia. The "Affaire Luchaire" would rebound in October-November 1987,as French Presidential elections approached.

42. The Sunday Times, November 23, 1986; Daily Telegraph, December10, 1986; The Observer, December 14, 1986. The Mirror reported onFebruary 13 1987, that a top-level British arms team, led thecommercial director of IMS, Derek Johnson, was scheduled to travel toIran to negotiate new arms deals with the managing director of theState-owned Defence Industries Organization of Iran, MohandesTorken.

43. Interview with the author. See also Daily Telegraph, December11, 1986; International Herald Tribune, December 18, 1986, theIndependent, December 16, 1986, etc.