In the book Prelude to Terror, author Joseph Trento described the fraying of the relationship between the United States and Iraqi Prime Minister Saddam Hussein towards the end of the Iran-Iraq War (1980-1988) which led to the Gulf War in 1991. In addition to Iraq's disputes with Kuwait, the U.S. Central Intelligence Agency-linked arms dealer Sarkis Soghanalaian explained in an interview with Trento that what angered Saddam the most about the U.S. was the Iran-Contra affair. According to Soghanalian:
"The idea that the United States was deliberately selling to both sides in the war destroyed all trust Saddam had. Then he finds out that when Iraq seemed ready to win the war, the U.S. begins to lie to him about intelligence. At the battle of [Al] Faw, the U.S. actually gave Iraq doctored satellite photographs which did not reveal the scale of Iranian forces in the battle zone. Iraq needlessly lost thousands. Hussein felt betrayed . . . and he knew enough to blame Bush personally." 
But supporting both sides of a conflict is not unique to America's involvement in the Iran-Iraq War. It appears to be a pattern.
From a notebook that survived former Lt. Col. Oliver North's (USMC) destruction of records in the run-up to the Senate's investigation of the Iran-Contra scandal, North noted a call from senior CIA operations officer Duane "Dewey" Clarridge on January 5, 1985 at 6:40 PM regarding what appears to have been a shipment of 200 tons of weapons. The note indicated that David Duncan would be offloading 70 tons.
On May 6, 1986, a small cargo vessel christened the Pia Vesta departed the port of Rostock in East Germany flying the colors of Denmark and bound for the port city of Callao in Peru. The ship was laden with 32 trucks and 99 crates addressed to the Peruvian Navy and filled with Soviet bloc small arms: 1,500 Kalashnikov rifles and 1,440 rocket-propelled grenades (RPG).
The bill of lading indicated that the cargo had been ordered by a fictitious Uruguayan company called Marnix S.A. in Montevideo, and consigned to another bogus company in Switzerland called Sinato International Inc. Both companies were eventually traced back to a reportedly comely, ginger-haired U.S. intelligence agent and arms dealer in Miami named David Duncan.
A month after it had departed from East Germany, the Pia Vesta radioed the port of Callao in Peru to inform them that it would be docking soon. A few hours later, the ship abruptly turned around and headed north towards the port of Balboa in Panama on orders from Copenhagen, Germany, according to the Washington Post.
According to the New York Times, Peruvian officials claimed that President Alan Garcia was tipped off about the shipment of Soviet bloc weapons "for possible delivery to terrorist groups" by the U.S. Central Intelligence Agency (CIA). The Washington Post reported that the Peruvian Navy was slow to initiate a search of the ship after supposedly being informed about its contents by the CIA. Frustrated by the slow response, the Washington Post's source narrated, Alan Garcia informed Panamanian General Manuel Noriega of the ship's cargo, prompting a search of the vessel by officials in Panama on June 14.
However, the search of the Pia Vesta revealed yet more twists in the plot. The bill of lading had been revised and directed the cargo to be offloaded in Balboa, Panama and delivered to Gen. Adolfo Blandon, Chief of Staff of El Salvador's armed forces, in Acajutla, El Salvador. There were also documents which had been signed and notarized which purported that the cargo had been loaded in Callao, Peru, despite the fact that the closest that the ship had come to Callao was 40 miles from the port.
In Oliver North's aforementioned January 5, 1985 note that referenced David Duncan's participation in a CIA-directed arms shipment, North also noted a call from someone named Adolfo.
After both the Peruvian Navy and Salvadoran Army declined to claim the shipment, the cargo was seized in Panama. David Duncan then came forward and claimed that he had arranged for the Honduran Army to receive the shipment instead.
In an interview with the Washington Post, David Duncan claimed that the shipment was indeed his and had been purchased on behalf of the Peruvian Navy, who had backed out of the deal while the weapons were en route to Callao. Duncan told the Post that he then frantically searched for another buyer and had made an arrangement with Salvadoran General Adolfo Blandon, although Blandon denied any involvement.
Duncan told the Post that the plan had been revised to direct the cargo to Panama instead of Peru. In Panama, the crates were to be offloaded and the contents transferred to containers and flown from Howard Air Base via U.S. military aircraft to Acajutla, El Salvador. Duncan claimed that the plan had been cleared with an official in Panama, and officials in Peru proferred a transcript of a call between Duncan, a Panamanian port official named Emilio Ortiz de Zevallos, and a retired Peruvian Army major who worked with Duncan named Alberto Coppo Gayoso.
The Washington Post also noted that officials in Peru said that a second bill of lading dated April 29 from the company Chartering APS consigned the shipment to the armed forces of El Salvador, which suggested that some plan had been in place even before the Pia Vesta set sail from East Germany.
The New York Times listed several speculative explanations for the bizarre turn of events:
…that the Pia Vesta had headed for Callao only to disguise its real destination; that the weapons were to be resold by the Peruvian Navy; that the C.I.A. was 'setting up' the Garcia Administration to show Peru was trafficking in Soviet-bloc arms, or that, from the very beginning, the weapons had been destined for anti-Sandinista rebels.
A story by Ken Silverstein published in Harper's Magazine in 2000 reported the technical details of how the CIA and Pentagon arms smuggling operations worked. The story recounted the life and times of Ernst Werner Glatt, a former Hitler Youth who became a gray market arms dealer after World War II for the CIA and the Department of Defense (DoD) through its Foreign Materiel Acquisition Program (FMA).
Glatt made a career supplying weapons to the irregular forces fighting the America's proxy battles in the Third World during the Cold War. Ernst supplied weapons to Somalia during the Ogaden War, where the U.S. backed Somali President Mohamed Siad Barre during the fight with the Soviet and Cuban-aligned Ethiopians. From 1980 to 1988, the U.S. reportedly spent $2 billion supplying arms to the mujahideen "freedom fighters" opposing the Soviet Army in Afghanistan.
Europeans like Glatt were selected for the CIA's covert arms smuggling operations to circumvent the legal restrictions imposed by the Foreign Corrupt Practices Act, which prohibited U.S. persons from bribing foreign officials.
And bribes were the lifeblood of the international weapons trade. In Peru and Nigeria, officials were bribed to supply end-user certificates for the weapons. The arms were purchased from communist countries like Hungary, Romania and Poland using bribery. In Romania, the brother of Prime Minister Nicolae Ceaușescu was bribed to buy Soviet bloc weapons and armored vehicles from the Ministry of Trade. In Yugoslavia, shipping companies were bribed to ship hundreds of tons of weapons.
After the Third Arab-Israeli War (also known as the Six-Day War) in 1967, in which the Israelis had defeated a coalition of Arab forces led by Egypt, Syria and Jordan to seize Golan Heights, the West Bank, Gaza and the Sinai Peninsula, the U.S. began a program exploiting Soviets arms and equipment seized by Israel known as Project MEXPO.
In an assessment of Iraq's chemical warfare capabilities from 1985, the CIA would noted that Iraq's chemical weapons program was likely a result of Iraq's perception of a chemical weapons threat from Israel following the Third Arab-Israeli War in 1967.
According to Silverstein's story in Harper's Monthly, the U.S. DoD created the Foreign Materiel Acquisition Program (FMA) in 1973 after the Fourth Arab-Israeli War (aka the Yom Kippur War), ostensibly to test Soviet equipment against American systems and technology.
In 1982, CIA Director William Casey wrote a memo to Defense Secretary Caspar Weinberger identifying the acquisition of Soviet arms captured by Israel as a priority requirement for the Agency. The weapons, Casey wrote, would be used to supply the Agency's special activities and unconventional warfare in areas where resupply would have to come from "battlefield recovery" of components and ammunition. In 1984, a CIA memo noted the Agency's interest in weapons seized by the Israelis in Lebanon for use in the CIA's paramilitary program.
In 1992, Seymour Hersh reported in the New York Times that the Reagan administration had authorized the sale of several billion dollars worth of arms manufactured in the U.S. to be sold by Israel to Iran shortly after taking office in 1981. According to Hersh's reporting:
"The flow of arms began only a few months after the American hostages seized at the United States Embassy in Teheran in 1979 were released on Inauguration Day in 1981. The United States specifically authorized Israel to make the sales to Iran for a period that by different accounts ranged from 6 to 18 months. But the United States watched them continue after that, even as the Reagan Administration aggressively promoted a public campaign, known as Operation Staunch, to stop worldwide transfers of military goods to Iran.
Occasional published reports since 1981 have linked Israel to the sale of some American-made arms and spare parts to Iran in the early 1980's, but no United States Government authority for those sales has been publicly demonstrated before now. The change in policy came before the Iranian-sponsored seizure of American hostages in Lebanon began in 1982, eventually leading the White House to trade arms for hostages in the Iran-contra affair.
Iran at that time was in dire need of arms and spare parts for its American-made arsenal to defend itself against Iraq, which had attacked it in September 1980. Israel was interested in keeping the war between Iran and Iraq going to insure that these two potential enemies remained preoccupied with each other."
At the height of the Israeli program, former Israeli officials said, the Israeli Government covertly chartered a large number of cargo ships, registered in Denmark and Liberia. They carried arms between the ports of Eilat in Israel and Bandar Abbas in Iran, making the round trip once a month.
Chartered aircraft from Argentina, Ireland and the United States were used to fly American-made arms to Israel and, in some cases, directly to Teheran.
No precise estimate of the volume of goods shipped could be made. But in interviews, Israeli and American intelligence officials acknowledged that weapons, spare parts and ammunition worth several billion dollars flowed to Iran each year during the early 1980's.
According to former Israeli Government officials, some of the chartered flights carrying American arms for Iran originated from a covert air base near Tucson, Ariz., known as Marana Air Park. For years, the Central Intelligence Agency has used Marana for secret arms shipments. In the mid-1980's, C.I.A. operatives and others used the field for the secret program to resupply the Nicaraguan rebels during the years that Congress had barred aid to the contras.
The Iran-Iraq War lasted from 1980 to 1988, and killed 450,000-730,000 Iranians and 150,000-340,000 Iraqis according to official estimates.
On February 27, 1982, Secretary of State Alexander Haig issued a memo calling for "de-designating" Iraq as a state-sponsor of terrorism. It was eventually revealed that the Reagan administration provided intelligence to Iraq from the Spring of 1982 until the end of the war in 1988, including after U.S. officials assessed that sharing information would result in Iraq using chemical weapons against Iran, which they did, and which the U.S. later cited as part of the justification for both the 1991 Gulf War and 2003 Iraq War.
According to reporting from Shane Harris and Matthew M. Aid for Foreign Policy, a Defense Intelligence Agency (DIA) assessment from late 1987 warned of a massive Iranian offensive in the spring of 1988 which stood a good chance of overwhelming Iraqi lines and claiming Basra, which they assessed would result in the collapse of the Iraqi forces and an Iranian victory.
After reading the assessment, President Reagan noted in the margins of the report: "An Iranian victory is unacceptable."
A top level decision was issued authorizing the DIA to share detailed intelligence "targeting packages" (including geospatial and signals intelligence) on Iranian troop deployments and movements with the Iraqi intelligence services, who used the information to execute sarin nerve gas attacks against the Iranians.
Sarkis Soghanalian was Lebanese citizen born in Turkey to an Armenian family with residences in Miami, Paris, and Amman, Jordan, where he managed businesses trafficking arms in the international gray market. Nicknamed "The Merchant of Death," Soghanalian reportedly sold billions in arms to Iraq annually during the Iran-Iraq War.
From 1982 to 1983, Reagan administration officials reportedly entered negotiations with the Iraqis over several deals trading 155-millimeter and 175-millimeter artillery and ordnance for a Soviet T-72 tank. But a deal was supposedly never reached.
Donald Rumsfeld met with King Hussein of Jordan in London on December 23, 1983 to discuss approaches to improve U.S.-Iraqi relations and the proposed Aqaba pipeline project, an initiative supported by financiers like Bruce Rappaport, a confidant of CIA Director William Casey.
Rappaport was an Israeli banker and owner of a legal entity called the Swiss American Bank that later purchased the Overseas Private Investment Corporation's (OPIC) interest in the Israeli "melon farm" in Antigua that Israeli mercenary Yair Klein used to traffic machine guns to the rightwing death squad led by the Castaño Gil brothers in Colombia [see Transnational Criminal Organization - Part I]. The Senate Subcommittee's investigation of the Iran-Contra affair later determined that the Sultan of Brunei had transferred $10 million to accounts controlled by Rappaport, supposedly to fund the Contras in Nicaragua, which had subsequently disappeared.
Because of the Iraqi's use of chemical weapons manufactured with U.S. and British agricultural chemicals, such as the shipment of 22,000 pounds of a precursor for the nerve agent sarin which was held back at JFK Airport on March 4, 1984, the Reagan administration was facing pressure to limit their support for Iraq.
Among other deals made with Iraq, Soghanalian struck an agreement with the Iraqis on April 26, 1984 for nearly $200 million in military uniforms purchased from Romanian Prime Minister Nicolae Ceaușescu. Disgraced former President Richard M. Nixon was apparently so elated about the CIA operative-brokered Romanian-Iraqi uniform pipeline that he personally wrote Ceaușescu to thank him:
I trust that this relationship which involves the production of military uniforms and accessories, will be a very successful and long-lasting one.
According to an investigative report from the U.S. Customs Service reported by The Miami New Times, Soghanalian attended a meeting at the Iraqi embassy in Washington on June 14, 1984 to negotiate deals for arms shipments to Iraq. According to the report:
Soghanalian has already provided from sources outside the U.S. 500 surface-to-surface Russian-made missiles and is to provide explosives and ammunition from Brazil.
Soghanalian was the subject of a January 1988 memo to FBI Director William H. Webster, in which the Bureau described some of his legal troubles in the two preceding years for conspiring to sell 103 combat-ready helicopters to Iraq and the illegal possession of rocket launchers and machine guns. Despite Soghanalian's record, the FBI noted that the Miami Division wished to emphasize that it had an excellent rapport with the arms dealer.
According to an interview with Soghanalian in the Los Angeles Times, he was approached in 1998 by Lt. Jose Luis Aybar, a Peruvian Army officer later charged as the leader of the smuggling ring, who was looking to buy Soviet Kalashnikov rifles for “the intelligence side” of Peru's military.
Soghanalian claimed he negotiated a deal for surplus East German AK-47 rifles with the Peruvian officials in Jordan, where he was licensed to do business. According to Soghanalian, he had an agreement with the Peruvians for 50,000 Kalashnikov rifles at $95/unit, and claimed that officials in Peru furnished the necessary letters of credit and end-user certificates showing that the buyers were government officials authorized to import weapons.
After an air shipment of 4,000 rifles was directed back to Jordan from Dubai, Sarkis traveled to Lima in mid-January of 1999 to meet with officials there, including Vladimiro Montesinos, the head of Peru's National Intelligence Service (SIN) from 1990-2001 during President Alberto Fujimori's administration. The Peruvians expressed interest in cultivating relations with countries in the Middle East, but had two unusual stipulations about business going forward. The Peruvians wanted the first shipment of weapons airdropped to troops they said were waiting in the jungle, and insisted on paying for the weapons in cash.
Soghanalian claims that he was hesitant since cash might draw the attention of authorities. Nevertheless, they worked out a deal to send cash through the Peruvian embassy in Spain where Soghanalian could receive the payments.
Peruvian officials later claimed that the representatives who made the arrangements used phony credentials, but Soghanalian maintained that high-level military officials secured transportation for the weapons, which were shipped using a Ukrainian-registered cargo plane with the help of a Russian military-attaché in Lima, according to the Los Angeles Times. The Russian-made plane made the journey in four legs with stops in the Canary Islands, Mauritania and Grenada before the arms were parachuted down to the jungle.
Colombian authorities claimed they seized AK-47s from FARC guerrilla in March of 1999, which were traced back (supposedly with assistance from the CIA) to the deal that Soghanalian had brokered. A U.S. tip was supposedly passed along to Peru.
On August 21, 2000, Peruvian President Fujimori announced that the SIN, at Montesinos' direction, had interdicted an arms trafficking ring supplying Eastern bloc small arms from Jordan to the Revolutionary Armed Forces of Colombia (FARC) using official Peruvian military credentials. Fujimori claimed that in March of 1999, the SIN had been alerted to the scheme when an empty Russian plane arrived at the airport in Iquitos supposedly to pick up a load of timber headed for Jordan. The SIN then supposedly opened an investigation called Operation Siberia which had cracked the case, Fujimori claimed.
Vladimiro Montesinos was trained at the infamous School of the Americas in Panama in 1965. According to information from a 2009 whistleblower complaint, the CIA cultivated a clandestine relationship with Montesinos starting in the early 1970s.
After the election of Fujimori in 1990, Montesinos joined the administration as political advisor and eventually became the de facto head of the SIN.
For the entirety of the Fujimori administration, Fujimori and Montesinos in particular faced credible accusations of corruption, drug trafficking, torture, enforced disappearances, media manipulation and fabrications, threatening and spying on political opponents, illicit enrichment, massacres, bribery, blackmail, murder and assisting a reactionary death squad known as Grupo Colina.
In spite of Fujimori and Montesinos's well-documented villainy, the U.S. intelligence services and political leadership turned a blind eye to all of it. In October of 1996, Clinton Drug Czar Barry McCaffrey praised Fujimori and Montesinos for their excellent work despite facing accusations that they were deeply involved in drug trafficking which were eventually proven in court. In 1997, President Clinton praised the Fujimori administration's handling of a hostage situation for "skillfully walking a fine line […] without giving in to terror."
U.S. officials denied all knowledge of Montesinos's involvement in a lifetime of atrocious and criminal behavior.
In 2009, a CIA whistleblower filed a complaint claiming that the Agency's involvement with Montesinos may have constituted criminal conduct.
In 2012, the International Consortium of Investigative Journalists reported that Montesinos received more than $10 million from the CIA for counternarcotics operations with the unit within SIN that Montesinos created and led.
But the story doesn't end there…
 Joseph J. Trento. Prelude to Terror: the Rogue CIA, The Legacy of America's Private Intelligence Network the Compromising of American Intelligence (2005). Carrol & Graf Publishers.