The Murky World of Weapons Dealers

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Khashoggi says he met the Iranian after Roy Furmark, a New York businessman and associate of Khashoggi's, ran across Ghorbanifar in January 1985 while attempting to arrange a billion-dollar swap of Iranian oil for various Western commodities. A friend of Ghorbanifar's set up a lunch appointment for the two. Khashoggi has given different versions of what he heard over that lunch. He told Barbara Walters of ABC-TV that Ghorbanifar represented himself as head of intelligence gathering in Europe for the Khomeini government. But he told TIME that this was incorrect. His explanation: "I simply assumed that a man with that kind of access to the Iranian Prime Minister must be one of his senior intelligence chiefs. Now I have more accurate information."

Khashoggi, says Ghorbanifar, saw "enormous" profit potential in a U.S.-Iranian rapprochement. The Saudi wheeler-dealer turned to Israel to act as diplomatic broker; he asked then Prime Minister Shimon Peres to use his good offices to put Iranians and Americans in touch -- but first to look into Ghorbanifar's background. Was Khashoggi suspicious? No, Khashoggi told TIME, but the Americans would be: "The problem with the U.S. is that it does not have the resources to check out somebody like Ghorbanifar. The Israelis do."

Khashoggi says the Israelis gave him a favorable report, but wanted to see for themselves if Ghorbanifar could make good on his boast that he could ^ deliver "practically anyone" in the Iranian government. Khashoggi set up a meeting in Hamburg in April 1985, telling Ghorbanifar that some Americans wanted to meet senior Iranian officials. Actually, Khashoggi brought two Israelis: Schwimmer and David Kimche, then director general of the Israeli Foreign Ministry. "If I had told them the truth," says Khashoggi, Ghorbanifar and the Iranian officials "would not have come." Khashoggi will not identify the Iranians Ghorbanifar produced, but says that when they walked into the room, "there was no doubt. This guy (Ghorbanifar) could deliver."

A series of meetings followed throughout Europe between Iranians, Israelis and, according to Khashoggi, CIA officials. (The CIA has consistently maintained it did not get involved until much later.) On July 1, 1985, Khashoggi sent a 47-page report on the meetings to Robert McFarlane, then U.S. National Security Adviser, with a covering letter recommending that the U.S. work through him to improve relations with Iran. So far as is known, that was the first formal proposal for U.S.-Iranian contacts made to a high official in Washington. It was in effect seconded by Kimche, who walked into McFarlane's office two days later with a proposal for contacts through Israel. (Israeli officials have insisted that their role in the U.S.-Iran affair began in late May or early June only when American officials asked for help in efforts to free American hostages in Lebanon.)

In August, Kimche was back to report that the Iranians were asking for arms, as Khashoggi and Ghorbanifar must have known they would. Kimche offered to have Israel ship the weapons if the U.S. would replace them. McFarlane says he obtained President Reagan's approval, and the Israeli deliveries began in late August. The shipments were arranged largely by Nimrodi on the Israeli side, with Ghorbanifar acting for Iran. Khashoggi was the financier. He put up $5 million in 1985 to pay Israel and was repaid by the Iranians.