Iran: Arms For the Ayatullah

Despite a ban, U.S. weapons are still flowing

From the outside, the brick-faced building looked like any other shop in prosperous, suburban Stamford, Conn. Above the broad plate-glass window, a large painted sign read simply PERSIAN RUGS. But inside there were no customers looking at the dusty piles of carpets. Instead, behind a curtain in the rear of the shop, telex machines, shortwave radios and computerized communications gear hummed continuously. Business was brisk, and it had nothing to do with rugs. The shop was a front for the illegal sale of U.S.-made weapons and aircraft parts to the government of Iran's Ayatullah Ruhollah Khomeini.

The Stamford store was opened in 1980 by Balanian Hashemi, a wealthy Iranian businessman who had fled his country after the fall of the Shah. Although he had lost favor with the mullahs, Hashemi had no qualms about making money from their revolution. As thousands of Iranians gathered daily in the streets of Tehran to shout "Death to America!" and even after a gang of students took over the U.S. embassy, holding 52 Americans hostage for 444 days, Hashemi was selling U.S. arms to Iran. Ordered by the Iranian military to be more discreet, Hashemi closed the shop last year. He now directs his U.S. and international arms operations from London.

Hashemi is not alone in pursuing the illegal arms trade with Iran. TIME has learned that hundreds of millions of dollars' worth of U.S.-made military equipment continues to flow to Iran each year, despite a State Department ban on all arms sales to that country. The suppliers include at least a score of American companies as well as international arms dealers operating in the U.S. In addition, large quantities of American arms sold legally to such allies as South Korea and Israel are being resold to Iran in clear violation of written agreements with the U.S.

American officials privately admit that the traffic in U.S. arms for Iran is out of control. Says a Customs agent responsible for halting illegal high-technology exports at Los Angeles International Airport: "There is a large and active movement to ship illegal arms and weapons-systems parts and spares to Iran." A Pentagon intelligence agent in Washington notes that "whatever the dollar value, it is far more than any of us think."

Customs officials say they are unable to stem the tide because they have neither the manpower nor the technology they need. They accuse the Commerce Department of often approving licenses for materials after Customs has seized them. All the agencies involved claim that the State Department lacks a clear policy. Says a senior Customs official: "As long as you can keep Defense, Commerce, Customs and the Office of Munitions Control separated, the Ayatullah's purchasing agents have it made."

The State Department seems to be unaware of the scope of the illicit deals. "We have heard these rumors of U.S.-supplied restricted military items getting to Iran for years," says Barbara Schell, the desk officer responsible for Iran, "but there is no proof." American diplomats insist that they do not secretly condone the shipment of arms to either of the belligerents in the three-year-old Iran-Iraq war.