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Neutral Sweden's involvement in the black market arms trade to Iran was not limited to Bofors. Indeed, one of Iran's most capable arms procurement agents, Karl-Erik Schmitz, masterminded arms deals for Iran worth an estimated $600 million from his base in the Swedish port of Malmö, where he ran Scandinavia Commodities Corporation.black market arms trade to Iran was not limited to Bofors. Indeed, one of Iran's most capable arms procurement agents, Karl-Erik Schmitz, masterminded arms deals for Iran worth an estimated $600 million from his base in the Swedish port of Malmö, where he ran Scandinavia Commodities Corporation.
Schmitz had conducted business with the Shah for more than twenty years by the time Iranian Defense Ministry officials turned to him for help in 1983. Swedish investigators, who interrogated Schmitz at length, agreed that he seemed an unlikely figure to be running a sophisticated black market arms operation. "He was handsome, a family man, extremely polite," they said. "Certainly not the type of person you would imagine dealing in weapons. When asked whether he had any regrets on selling arms used in the Gulf war, Schmitz replied blandly: "The powder factories must be kept going. What else would the workers do?" (24)
But Schmitz could also be cunning, and extremely cynical. And according to Swedish investigators, he used ever every trick in the black marketeer's book. To help his Danish freighters loaded with gunpowder avoid the scrutiny of the Egyptian authorities while passing through the Suez Canal, he produced fake documents showing they were destined for Kenya. He sold gunpowder from Sweden, Holland and West Germany to Yugoslavia, then bought it back and resold it to Iran. 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-forma invoices and other documents, was worth a whopping $150 million.
And Schmitz was involved in dozens of deals. He was a world-class operator.Schmitz could also be cunning, and extremely cynical. And according to Swedish investigators, he used ever every trick in the black marketeer's book. To help his Danish freighters loaded with gunpowder avoid the scrutiny of the Egyptian authorities while passing through the Suez Canal, he produced fake documents showing they were destined for Kenya. He sold gunpowder from Sweden, Holland and West Germany to Yugoslavia, then bought it back and resold it to Iran. 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-forma invoices and other documents, was worth a whopping $150 million. And Schmitz was involved in dozens of deals. He was a world-class operator.
To satisfy Iran's enormous needs in artillery ammunition, Schmitz first turned to South Africa, whose munitions plants supplied him with the equivalent of 3700 tons of gunpowder. But in June 1984, the South Africans cut off supplies without explanation. In fact, the State-owned Armaments Corporation had just signed a top secret $520 million contract to supply Iraq with long-range artillery pieces. One of the Iraqi conditions was that South Africa stop deliveries to Iran (25).Schmitz first turned to South Africa, whose munitions plants supplied him with the equivalent of 3700 tons of gunpowder. But in June 1984, the South Africans cut off supplies without explanation. In fact, the State-owned Armaments Corporation had just signed a top secret $520 million contract to supply Iraq with long-range artillery pieces. One of the Iraqi conditions was that South Africa stop deliveries to Iran.
To make up the shortfall, Schmitz appealed to a little-known cartel of European munitions producers, which had grown out of a seemingly innocent trade organization set up in Brussels in 1975 called the European Association for the Study of Safety Problems in the Production of Propellant Powder (EASSP). According to an EASSP representative in Paris, the group was intended as a forum to share information on safety problems in chemical plants and on international Customs and transportation regulations. Schmitz appealed to a little-known cartel of European munitions producers, which had grown out of a seemingly innocent trade organization set up in Brussels in 1975 called the European Association for the Study of Safety Problems in the Production of Propellant Powder. According to an EASSP representative in Paris, the group was intended as a forum to share information on safety problems in chemical plants and on international Customs and transportation regulations.
With the Gulf War broke out, the Association became a convenient cover for a cartel whose sole purpose soon became supplying both Iran and Iraq with munitions. Of the more than fifty original members, by 1981 only thirteen companies remained. But they were among Europe's largest producers of military gunpowder, and included: Nobel Chemie in Sweden, PRB in Belgium, SNPE in France, Nobel Explosives of Scotland, Muiden Chemie in Holland, Forcit and Kemira in Finland, Rio Tinto in Italy, Snia BpD in Italy, Vinnis in Switzerland, and Vass A.G. in West Germany.West Germany.
"Cartel members in Sweden, France, Holland & Belgium would meet regularly to eat and drink together and plan how they would keep Iran and Iraq supplied with munitions," Swedish Customs officials explained. "They knew that no single company could produce enough gunpowder to meet the enormous demand, without raising production quotas and attracting attention. So they decided to spread the work around."
And that was how it worked. During those long business lunches in Paris, Madrid, Geneva, and Brugges, cartel members would sit down and portion out the monthly gunpowder needs of Iran and Iraq. Ten percent might go to a firm in Sweden, twenty percent to France, another ten percent each to Holland, Finland and Belgium. And Schmitz would sit in the middle with his fingers on the Iranian bank accounts. Western intelligence specialists estimate that during the months of intensive fighting, Iraq and Iran consume nearly half a million heavy artillery shells each. That's more than ten times the yearly consumption of most major European armies . Swedish deliveries alone sometimes amounted to 400 tons per year, or half of Sweden's yearly production of military explosives.Schmitz would sit in the middle with his fingers on the Iranian bank accounts. Western intelligence specialists estimate that during the months of intensive fighting, Iraq and Iran consume nearly half a million heavy artillery shells each. That's more than ten times the yearly consumption of most major European armies. Swedish deliveries alone sometimes amounted to 400 tons per year, or half of Sweden's yearly production of military explosives.
The cartel was first cracked in November -84, when Swedish Customs raided the headquarters of Nobel Chemie after getting wind of a suspicious gunpowder shipment that had criss-crossed West Germany on its way to Syria the month before. "We saw found of correspondence between Nobel and Iran," one investigator said. "So we made another raid, and discovered a real mess." The cartel was next surprised in action in December 1985, when Swedish Customs intercepted a twenty-six ton shipment of Nobel Chemie gunpowder en route from the port of Trelleborg to East Germany, where it was to be packed into munitions by the IMIS company before leaving Rostock directly for Iran.West
But the Customs investigators were not empowered to stop cartel agent, Schmitz, from engaging in black market arms smuggling. Indeed, once they quietly put a stop to Swedish gunpowder deliveries to Iran in 1986, "Schmitz went to every corner of Europe and elsewhere desperately seeking new suppliers," officials said. "He went to Holland, Belgium, Spain, Italy, Greece - and especially, to Israel. He had to continue these deals to avoid financial ruin, because he had posted performance bonds for 5-10% of the total value of his contracts."Schmitz, from engaging in black market arms smuggling. Indeed, once they quietly put a stop to Swedish gunpowder deliveries to Iran in 1986,
Schmitz himself remained unperturbed by the Customs investigation, even though he could face criminal prosecution. "After all," Schmitz said in 1987, "there are so many things you can sell the Iranians.
To Richard Fairbanks, the gunpowder club "sounded like something out of a novel." Unfortunately, for the more than one million dead on both sides of the front, the thirteen munitions manufacturers who formed the cartel were real, and their primary mission was to fan the flames of the Gulf war."