The Murky World of Weapons Dealers

(3 of 5)

In practice, those branches are not rigidly separate. Government military attaches and agents of weapons companies frequently work closely together to drum up business, and some later cash in on their experience and contacts by becoming private dealers. Governments occasionally use the private merchants to arrange sales that they cannot make openly. The standout example is Israel. Its government-owned arms industry depends heavily on foreign sales to defray research-and-developme nt expenses. Indeed, military sales account for a quarter to a third of Israel's industrial exports. But many potential customers are countries that have no diplomatic relations with the Jewish state. So the Israeli government relies on private citizens to set up deals with middlemen representing the buyers. Two Israelis who played major roles in the sale of U.S. weapons to Iran are Yaacov Nimrodi, 60, a former intelligence agent who built up extensive contacts in Iran during his ten years as military attache in Tehran, and Al Schwimmer, 69, the American-born founder and longtime chairman of Israel Aircraft Industries, who has continued to arrange weapons exports since his retirement.

TIME has obtained a memo written by an Israeli arms merchant to the Tel Aviv Ministry of Defense that offers some intriguing hints about how secret arms deals are set up. In the fall of 1984, when the U.S. was still trying vigorously to stop the flow of arms to Iran, the merchant met with Iranian representatives in Geneva and relayed to Israel a list of weapons they wanted to buy, including air-to-air missiles and spare parts for tanks. One hitch: the Iranians also wanted some jet engines overhauled. "British firms were providing this service . . . but some have now been caught by the Americans and cut off from spare parts," the agent reported. The Bedek division of IAI, said the agent, was eager to take over the work "as long as they had some sort of engine factory between them and the end user." The merchant's solution: "a cooperative venture between (a) U.K. firm and Bedek where all of the U.K. firm's business is funneled to Bedek and the Iranian engines are lost in the lot." The Defense Ministry said no.

There have been published reports that at about the time this memo was written, Ghorbanifar approached Theodore Shackley, a former high official of the CIA, to suggest a trade of U.S. weapons for American hostages. Ghorbanifar indignantly denies this. His account of how the deal started: though a refugee, "I still had ties to Iranian businessmen and government purchasing officers." They told him that a detente with the U.S. might be possible. "I had brokered many business deals," says Ghorbanifar. "I wondered whether I could broker a diplomatic deal as well." If successful, Ghorbanifar would become the "first mutually trusted agent of renewed thriving commerce between the two" nations. "I had been thinking about the idea," he added, "when I met Adnan Khashoggi in early 1985."