THE code word for the merchandise was ``toys.'' But the purpose of the deal was anything but playful: It might have meant thousands of United States antitank missiles and other smuggled weapons for the troops of Iraqi leader Saddam Hussein. Fortunately for US-led forces now gathering in Saudi Arabia, the alleged arms middlemen were trapped by Customs Service agents and taken into custody on Aug. 13.
They fell prey to a year-long probe dubbed ``Operation Dragon,'' and their story shows some of the shadowy methods Iraq and other Middle East nations use to try to obtain advanced weapons technology.
Because unfortunately, Operation Dragon is far from an isolated case.
The Customs Service currently is conducting more than 20 investigations dealing with potential Iraqi arms-technology smuggling. There are hints that in the months before Iraq's invasion of Kuwait its attempts to obtain US weapons intensified.
``Saddam Hussein's got an objective to obtain all the equipment he can,'' says Jack Kelley, Customs senior special agent and head of the EXODUS export control program.
Operation Dragon began in early July 1989, when an American arms dealer received a letter from a Dr. Claus Fuhler, a German eye doctor living in Spain, requesting help in obtaining TOW missiles and other items, according to an indictment handed up in US District Court in Orlando on Aug. 15.
The tube-launched, wire-guided TOW is the Pentagon's top antitank weapon and a highly controlled export item. The arms dealer contacted the Customs Service, agreed to act as an informant, and then sent Dr. Fuhler a return letter containing TOW brochures.
Fuhler allegedly wrote back that he would be working with a Spaniard named Juan Martin Peche-Koesters, and that for discretion's sake they would thereafter refer to the TOWs as ``toys.'' Eventually, the pair also supplied a secret code for use in communications.
In letters and phone calls during the following months, Fuhler and Mr. Peche-Koesters allegedly discussed the purchase of 10,000 TOWs for $160 million, 10,000 empty artillery shells capable of holding poison gas, and some 10,000 conventional artillery shells.
They said their customers were also interested in ``rifles, mortars, demolition charges, grenades, nuclear waste, atomic garbage, and chemical garbage,'' according to the unsealed indictment.
Early this year, Peche-Kosters also allegedly requested a price quote on Toyota jeeps mounted with 106mm guns. Purchase of this equipment was said to be ``urgent.'' The US dealer submitted a bid, only to be told that the arms brokers in Spain had three days earlier found an alternative source.
Iraq was not the only customer alluded to, says the indictment. In fact, initial inquiries were allegedly made on behalf of Iran. Iraq was mentioned later in the game as the probable ultimate recipient of the TOWs, along with Libya.
Customs agents said they did not know exactly how many of the weapons that the Operation Dragon suspects intended to buy were meant for Iraq. But they say the pair may have been pushed for results by Saddam Hussein's regime early this summer, presumably to help the Iraqi army prepare for its invasion of Kuwait.
Beginning in June, the alleged smugglers' interest in quickly getting their hands on TOWs increased considerably, according to Mr. Kelley. ``They were anxious,'' he says.
Fuhler and Peche-Koesters were not government agents, but rather one of the lower layers of the arms buying agencies of Middle East governments.
``We call them brokers,'' Kelley says.
Early in August, Customs agents lured them to Orlando, Fla., to inspect their first missile shipment. They were shown a genuine TOW borrowed from Pentagon stocks for the occasion, and, after they agreed to delivery terms, they were arrested on Aug. 13 and continue to be held without bail.
Lawyers have entered pleas of not guilty for both, and moved for bail to be set on grounds that neither man has prior convictions, and that both were lured to the US in the first place by undercover agents.
Since Iraq has been so successful in recent years in obtaining weapons over the counter, particularly from the Soviets, why bother to try to illegally obtain the relatively prosaic technology of antitank missiles?
``TOW missiles would be very important because they're good,'' suggests one Department of Defense Iraq analyst. The Iraqi military might need refill ammunition for TOW launchers captured from Iran, which in turn purchased them from the US when the Shah was in power. Iraq might also want to tear some TOWs apart and study them, so they can replicate the technology and produce them on their own. ``They're good at that,'' says the Pentagon analyst.
But in the long run, Iraqi attempts illegally to obtain US ballistic missile and nuclear and chemical weapon technology are far more dangerous, notes this analyst.
In a highly publicized case last March, US and British customs agents broke up an attempt by Iraq to obtain coaxial, high-voltage, low-inductance capacitors built to withstand high altitudes and vibration - electronic gadgets good mostly for atomic-bomb triggers.