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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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A Mysterious death

Rumors that major Swedish armaments companies had been smugglinghigh-technology weaponry and ammunition to Iran for nearly ten yearserupted into a full-blown scandal on January 15, 1987, when atop-ranking military official responsible for granting arms exportlicenses fell mysteriously to his death in front of a Stockholmsubway train.

Half an hour before his death the official, Rear AdmiralCarl-Erik Algernon, received a visitor: Anders Carlberg, therecenty-appointed President of Nobel Industries AB. Carlberg wasfurious: a company audit he had ordered after the rumors firstsurfaced confirmed that for nearly ten years a Nobel subsidiary, ABBofors, had illegally sold weapons to Iran, Bahrein, Dubai, Libya andOman. Carlberg had been brought in to the Companyb to wipe the slateclean. Already, he had cancelled $80 million in orders from suspectforeign clients. But now, Carlberg said, Bofors officials weretelling him that Algernon had known about the smuggling from the verystart.

One of the loopholes in Sweden's arms export law - and the onemany Swedish officials believe Carlberg called to Algernon's memoryon the day he died - concerns prior knowledge by the government ofillegal diversion. If Algernon, as Chief of theKriegsmaterielinspectorat (KMI), had known Bofors was intending toship weapons to an illegal destination and failed to act, then Boforscould not be accused of a crime.

Swedish officials are divided as to the real cause of Algernon'sdeath. Some point to his honor as a career officer to suggest that hecould "never accept to become the scapegoat" in the Bofors case. Butco-workers who saw Algernon earlier that day say categorically he didnot commit suicide (1). The Swedish Government has suggested thatAlgernon was negligent and that he simply failed to suspect foulplay. However, before taking over the War Materiel Inspectorate job,Algernon headed Swedish military intelligence - not a position for a"blue-eyed" innocent. He fell to his death six days before he wasscheduled to give evidence on Bofors to the Police.

Adding to the malaise created by yet another unsolved murder -after the Palme assassination of February 28, 1986 - was the sudden,unexplained retraction of two eye-witnesses. Initially, they told thepolice they had seen someone push Algernon onto the subway tracks.Two days later, they said they may have been mistaken.

Algernon's death set off a political crisis in Sweden that wasthe closest any European country came to Irangate. The usuallycautious Swedish media pressed the case, three officialinvestigations came to a head, and every day brought its share of newrevelations.

The crux of the matter was a seris of questions similar to thoseof the Irangate investigations in Washington: who in the Governmentknew of the illegal arms exports, when did they find out, and what ifanything did they do to stop them?

The Singapore connection

Sweden has the false reputation of having some of the toughestarms export control laws in the world. In fact, just the opposite isthe case. Swedish law, for instance, leaves the door wide open fordefense companies to market their weapons abroad without governmentapproval - an activity outlawed in even such an "immoral" country asFrance. Worse, from the point of view of keeping arms exports undercontrol, Swedish companies may even sign contracts with foreigngovernments and accept down payments before informing the WarMateriel Inspectorat or applying for export licenses. This isprecisely what happened with Bahrein and Iran.

Martin Ardbo, who was forced to resign as Bofors President inMarch 1987 for his involvement in the illegal deals, says it allbegan in 1978. After years of trying, he finally pulled off his firstMiddle Eastern sale. He was especially pleased because the country -Bahrein - was light years removed from the Arab-Israeli conflict, andtherefore should make it through the KMI. He desperately needed toexpand export sales because the Swedish government had cut offdevelopment funds for the RBS-70 missile a few years back, leavingBofors to pick up the tab.

But when Ardbo applied for the export license, the Governmentturned it down. Although Bahrein was not at war, it still belonged toa "zone of conflict."

So Ardbo paid a visit to Algernon's predecessor as War MaterielInspector, Bengt Rosenius, to "discuss how we could solve the problemof the Government's refusal" (2). Faced with the fait accompli ofthe Bahrein contract - default on which would have damaged Bofors'reputation as a reliable partner in other parts of the world - Ardbosays Rosenius agreed to play ball. Bofors should make it look as ifthe missiles were really going to a legal purchaser in Singapore.Rosenius would get a new export license approved, and the missileswould be shipped. Once in Singapore, they could be quietlyre-exported.

The same process, citing Unicorn International in Singapore asthe "legal" purchaser of the equipment, was used again and again forarms exports whose real destination was Bahrein, Dubai, Oman, Libya -and especially, Iran (3).

A long history of suspicion

Successive Swedish governments had suspected Bofors of foul playfor years, but failed to turn up enough evidence for a crack down.

In November 1980, reports in defense magazines alleged that 304RBS-70 missiles had reached Dubai and Bahrein. Then Minister ofForeign Trade, Staffnor Burensten-Linder, went to Bofors headquartersto audit the company's books. When he found all the proper exportlicenses and shipping documents made out for Singapore, he droppedthe affair.

Shortly after elections returned Olof Palme to power, informationsurfaced that Bofors was trying to sell explosives to Libya throughYugoslavia. So just before Christmas 1981, the new War MaterielInspector, Rear Admiral Algernon, was sent to Karlskoga with alawyer. Ardbo agreed to sign an affadavit disclaiming any illegalactivity, and the matter was dropped. "It was a lie," Ardbo nowadmits. "We had to protect Rosenius."

Evidence of foul play mounted as the months went by, and stillthe Swedish government stood by - or conspired to hide the truth fromthe public eye:

•In May 1984 a disgruntled Bofors employee quit the company,and turned over a suitcase crammed with documents to researchers atthe Swedish Peace and Arbitration Society (SPAS). The new evidencedocumented at least other five illegal deals;

•In October 1984, Swedish Customs launched its investigationinto the munitions cartel, in which Bofors played a major role;

•Public Prosecutor Stig L. Age announced in August 1985 thatBofors weapons exported to Singapore had been diverted to Bahrein andDubai (Dubai was a well-known transshipment point for re-export toIran). Bofors Director, Claes-Ulrik Winberg, was forced to resign hisposition as head of Sweden's business association, and later fromBofors; arms deliveries to Singapore were suspended for threemonths;

•In December 1985, Swedish Customs intercepted a 26 tonshipload of Nobel gunpowder en route to Rostock, East Germany, whereit was to be packed into munitions for Iran.

"The Government knew about the illegal deliveries in the springof 1985 at the latest," Swedish Customs officials said. "The realquestion is, did the Government stop Swedish weapons from reachingIran or not? The evidence indicates that they did not."

A special Parliamentary Commission investigated the question ofgovernment involvement for five months, but claiming it lackeddocumentary evidence, abandoned the effort in May 1987. Vice ChairmanAnders Bjork explained: "Rosenius is dead. Algernon is dead. Palme isdead. Our investigation has been hampered by these deaths. Now we maynever know the truth."

A dangerous customer

Gunners from Bahrein were trained in Sweden on the RBS-70 in1983. Iranian artillery men went through Bofors training courses inKarlskoga in 1985. "It is rather curious they were there," said onemember of the Parliamentary Commission. "This was apparently amarketing effort. The company clearly wanted to export" (4).

The Bofors RBS-70 "Rayrider" is one of the best anti-aircraftmissiles on the market today. Two men operate the launcher, which canbe man-carried or mounted on vehicles such as jeeps or armoredpersonnel carriers. Its mobility allows it to be brought up right tothe front lines, where it can fire at targets within a 5 km radius,and up to 3 km high. As of June 1985, Ardbo said it had enteredoperational service in eight countries, including Singapore, where itwas mounted on a British armored vehicle. And Bofors was certainlyhoping for more. "It's as good as the Stinger, at half the cost,"Ardbo boasted (5). Arms experts were skeptical about the price, whichthey estimated at an expensive $41,500 per missile.

But price was no object for Iran. In the spring 1985 an Iranianmilitary delegation travelled to Karlskoga and bought 400 RBS-70missiles and ten launchers for $58 million. "That's about five timesthe normal price," says SPAS researcher, Hendrik Westander. Half ofthe shipment reached Iran in July 1985 (6).

Bofors had traded with Iran semi-legally in the early 1970s. Itsold anti-aircraft guns, ammunition, and explosives to the Shah in1973-75, and shortly before 1978 completed work on a dual-usefertilizer and explosives factory in Isfahan. The Iraqis destroyedthe munitions plant early in the war, and Swedish officials said itwould take a year to rebuild.

The first confirmed appearance of the RBS-70 on the battlefieldsof the Gulf occured during the January-February offensives in 1987.US officials and European intelligence sources said the Swedishmissile was responsible for "a good portion of the 42-45 aircraft theIraqis lost" on ground support and attack missions in the East ofBasra region. Iran integrated the Swedish missile into a revamped airdefense network, and deployed it with front line units, where theIraqis were least expecting it. The RBS-70 was a medium-range missilethat filled the gap between Iran's long-range American-built HAWKsand the shoulder-fired SAM-7s it bought from China.

The Iranians liked the Swedish missile. And they wanted more.

Iranian revenge?

And this is where the Swedish saga takes a dark twist. Accordingto the New York Times, Prime Minister Olof Palme was angered by theBofors sales and blocked shipment of the additional 200 RBS-70missiles the Iranians had ordered (7). Subsequent reports said hecalled back two ships carrying Bofors howitzers on their way to Iranin November 1985, one off St Helena's island and the other off thecoast of Mozambique.

On February 4, 1986 an Iranian commercial delegation arrived inStockholm to discuss bilateral trade issues. According to somereports, the Iranians also came to collect their missiles. A Boforsspokesman later admitted that the company was "under pressure fromIran." The missiles were never delivered, and twenty-four days later,Palme was murdered. The French newsweekly L'Express believes thatas the 7th anniversary of the Islamic Revolution approached inFebruary, "the order was given to "punish" Palme for having brokenhis word" (8).

It wouldn't be the first time Iran had been accused of murderingtop-ranking European officials who stood in the way of its armsprocurement effort. In July 1985, one of Austrian Chancellor BrunoKreisky's top advisors, Herbert Amry, collapsed unexpectedly at aViennese cocktail party and died on the spot. Some believed Amry waspoisoned for having discovered that Iran was trying to buy GH Noricumhowitzers from the Austrian firm Noricum, and attempting to block thesale (9).

A similar assassination occured in France in January 1985. Thehead of the Arms Export Directorate, General RenéAudran, wasgunned down in front of his house in the Paris suburbs after havingrefused to approve French arms sales to Iran. French intelligencesources said that Audran had been sent to Tehran three times onoffical mission in 1984 to discuss arms sales with RevolutionaryGuards leader, Mohsen Rafic Doust. When the Iranian requests wereturned down, Doust decided to "make Audran pay" (10).

Palme's secret diplomacy

Palme had long been engaged in a complex diplomatic initiativetoward Iran, to establish ties with the new leadership and help themwin international recognition for their Revolution.

Almost immediately after the fall of the Shah in 1979, Palmebegan courting the mullahs. Before he returned to power in 1982, heheaded a team of UN mediators attempting to bring the Gulf War to ahalt. Between 1980-1982, he visited Iran five times. During thesetrips he forged close personal ties with Iran's new leaders, Swedishofficials said.

Soon after he returned to power Palme concluded a large-scale oildeal with Iran, despite Sweden's historic shift away from itstraditional Middle East suppliers in favor of North Sea oil. Tradeofficials said the Iranians urged the deal on Palme in 1983 as ameans of balancing trade between the two countries. And althoughadverse publicity eventually killed that particular oil deal, tradefigures show that Sweden concluded other deals for Iranian oil worth$176 million over the next three years, at a time when oil importsfrom all other Middle Eastern suppliers had dopped to zero.

The oil deals were significant because they were politicallymotivated. And despite Palme's stated attitude of "neutrality" towardboth belligerants in the Gulf war, no similar gesture was made towardIraq. Indeed, Swedish oil purchases from Iraq over the same threeyear period were a mere $5.75 million.

Meanwhile, Iran became a major market for Swedish products, withcivilian exports to Iran topping the $500 million mark in 1984. "Ourforeign policy and Palme's good name helped establish thisdisproportionately large Iranian trade," a trade official said(11).

It was a secret to none that Palme saw himself as aninternational statesman, perhaps the only one capable of bringing theendless butchery of the Gulf war to a halt. It is also clear he usedtrade incentives to woo the Iranian leadership into taking hisadvice. Government investigators who had reviewed more than 7000pages of documents on the smuggling cases said that Palme knew aboutother arms deliveries to Iran "and did nothing to stop them." Itwould appear Palme carried his secrets to the grave.

The 'Sacred Principle'

The Swedes see themselves as one of the last rightful purveyorsof morality in the modern world. Sweden sparked the Europeangroundswell against the US involvement in Vietnam in the early 1970s,and was the first arms producer in the world to voluntarily restricther own arms exports. Swedes find it inconceivable that theirpoliticians might lie. Even in official circles, distrust is anuncommon phenomenon.

The facts now emerging from the Bofors case have gone a long waytoward shattering this public image, profoundly shaking Sweden'sfaith in herself. All the while they were proclaiming their moralascendancy, Swedish businessmen and officials did not hesitate tobend the rules they themselves had made.

Exactly how many RBS-70 missiles made their way to Iran remainsunclear. In addition to the 200 missiles sold to Iran in 1985,Sweden's Foreign Minister told Parliament in March 1987 that 714RBS-70 missiles had been delivered to the Unicorn Internationaltrading company in Singapore, and many were subsequently re-exported.Carl-Johann Åberg, who as Undersecretary for Foreign Tradeoversees arms exports, noted that companies such as Bofors can skirtthe entire regulatory process and sell weapons anywhere in the worldthrough subsidiaries and licensees abroad "and we have no controlover that." By 1983, when the practise was stopped, Bofors hadgranted production licenses to companies in sixteen differentcountries (12).

Some of the most energetic supporters of Swedish arms sales werein the trade unions and in the Social Democratic party. The reason?Bofors and other major defense contractors exported more than 50% ofall the weapons they produced. Jobs were more important than morals.

Olof Palme himself was probably the most effective arms salesmanof all. He singlehandedly convinced Indian Prime Minister RajivGhandi in 1986 to buy Bofors field howitzers worth $1.3 billion -Sweden's single largest arms export order ever. A year later, SwedishRadio discovered bank documents that showed how it was done: bypaying bribes of more than 200 million kronor into the numbered Swissbank accounts of top Indian officials. These revelations in May 1986dealt yet another blow to Swedish innocence, by unveiling the dirtyunderside of public morality.

Today many Swedes have begun to take a harder look at the wholedynamic of arms sales, and of how they might affect Sweden's role inthe world. One thing that has emerged from the Bofors affair is theclose linkage between arms exports and Swedish neutrality, held up asa 'sacred principle' by Swedes on Left and Right alike.

Palme and others realized that for Sweden to remain neutral itvitally needed a healthy arms industry. And to maintain productionruns, and make the cost of national Defense to the Swedish taxpayeracceptable, the political price was weapons exports. "The big plusfrom foreign sales," a SIPRI researcher said, "is that they keepproduction lines open free of charge. Without the Iranian (and otherblack market) orders, the Swedish government would have to increaseits own orders or begin buying many of its own weapons abroad. Andthat would definitely have a negative effect on Swedishneutrality."

Some politicians feel it would be less hypocritical to abandonarms export restrictions. "Swedes must understand that countries arebuying weapons to use them, not to keep them on the shelf," saidAnders Bjork. But the Social Democratic government of Ingvar Carlssonprefered to maintain the pretence of Swedish morality and announcedtoken changes in the arms export laws in April 1987.

With Palme's assassination, the mysterious death of War MaterielInspector Algernon and that of his predecessor, the truth aboutSwedish arms deliveries to Iran may never be known. However, onething is certain: the Bofors affair marks the end of the Palme myth.Sweden has irrevocably lost her innocence.


1. Some of the material this chapter appeared, in substantiallydifferent form, in the International Herald Tribune, June 3, 1987,and The Nation July 13, 1987. Reporting is based on interviews withSwedish Customs authorities, government officials, members of theParliament, the Swedish Peace and Arbitration Society, SIPRI, foreigndiplomats, and a review of documents seized during by Customs duringthe course of their three-year investigation. The author also wishesto thank Ingemarie Froman at TV2 (Rapport), and Bo Andersson andBjarna Stenquist at DagensNyheter for their assistance andguidance.

2. L'Expressen, March 31, 1987.

3. The SIPRI study, Arms Production in the Third World, (Taylor& Francis, London and Philadelphia, 1986) notes that UnicornInternational has agreements with a number of foreign arms producers"to export covertly to customers not approved by their respectivegovernments" (pp 72). These companies include Bofors, Ferranti (UK),General Dynamics (US), and the Italian aircraft manufacturer,SIAI-Marchetti.

4. Interview with Bertil Fiskesje, April 21, 1987.

5. Interview with the author, June 8, 1985, Paris.

6. L'Express, 21-27 November 1986; International HeraldTribune, March 6, 1987, and interviews. Bofors was quoting prices of250,000 SwK/missile, and 1,250,000 SwK/launcher, or roughly $41,500and $208,000 respectively, in 1982. A further 900 missiles werere-exported from Singapore to Bahrein and Dubai, Westander alleged,and some of these probably ended up in Iran.

7. Richard Reeves, New York Times Magazine, March 1, 1987.Reeves quotes "sources in the French Foreign Ministry," but may infact may have been referring to the 21-27 November 1986 issue of L'Express, which printed an identical story four months earlier,albeit with less effect.

8. Ibid.

9. Pascal Krop, "Les Secrets des ventes d'armes a l'Iran," L'Evenement du Jeudi , 19-25 February 1987. Krop has publishedseveral books on the French secret service. The GH N-45 155mmhowitzer was an earlier version of the South African G-5, which Iraqhad begun to receive at that time. See Chapter 3., and Chapter 7.

10. Newsweek, March 9, 1987; Charles Villeneuve and Jean-PierrePierret, L'Histoire Secrete du Terrorisme , Paris, 1987; andpersonal sources.

11. Sweden's trade with Iran fell off sharply after theRevolution, only to make a spectacular rebound once Palme returned topower.

Swedish imports from Iran Swedish exports to Iran

(in millions of Swedish Kronor)

1976: 1,170 647

1978: 1,283 1,012

1980: 638 798

1981: 32 998

1982: 1,190 1,293

1983: 1,093 3,232

1984: 404 3,885

1985: 153 1,630

1986: 502 844

Oil accounted for 99% of Sweden's imports from Iran. Deliveriesfluctuated because of the revolution, and shot up in 1982 as a resultof "extensive barter contracts," trade officials explained. By 1984,Iran was Sweden's 12th largest export market, but dropped to 34thplace by 1986 "because the Iranians had run out of money." The big1983-84 deals were mostly road-building equipment and trucks. MajorSwedish exporters to Iran were ASEA (electrical equipment, paper andboard), Volvo and Saab-Scania. A governent-owned trading company,SUKAB, now handles barter deals.

By contrast, Swedish trade with Iraq was erratic. Noticeablyabsent, however, were substantial Swedish oil imports.

Swedish imports from Iraq Swedish exports to Iraq

(millions of SwK)

1982: 1.0 2,961

1983: 1.0 997

1984: 0.5 874

1985: 35.0 1,086

1986: 1.0 624

(Source: Swedish Trade Ministry.)

12. Interview with the author, April 24, 1987. Singapore andPakistan are the two most likely foreign producers of the RBS-70.Bofors has had licensing agreements with both countries since the1960s.