ATHENS -- South African business interests have been secretly buying arms and military supplies through a Greek front company and trading them for oil from Iran, according to diplomatic sources and commercial records.
Using a loophole in the United Nations arms embargo against the white minority government, South African business interests secretly bought into a leading Greek munitions manufacturer and then used the company to purchase Western military technology and high explosives, legally forbidden to both South Africa and Iran.
The South Africans then traded the arms for Iranian oil, sources said. Under the Ayatollah Ruhollah Khomenei, revolutionary Iran has officially banned trade with South Africa, but shipping records reviewed by United Press International show deliveries of Iranian oil to South Africa going back to 1984.
'As far as we know, ships identified as carrying oil from Iran to South Africa have not had any problems in going to Iran again,' the Amsterdam-based Shipping Research Bureau told UPI.
The Hellenic Explosives and Ammunition Industry, Greece's fourth-largest arms and ammunition manufacturer and the nation's only privately owned one, came to the attention of the South Africans when it started suffering severe financial problems four years ago, sources said.
Diplomats said South Africa businessmen started making investments in the company through trusted foreign arms manufacturing intermediaries as early as 1977, when the U.N. arms embargo against Pretoria came into force.
The financially ailing Elviemek, the arms manufacturer's Greek acronym, offered the 'perfect opportunity' for South African interests to buy a respected explosives and ammunition manufacturer in a NATO country, one diplomat said.
Gaining a controlling interest in Elviemek meant not only the opportunity to establish a continuous pipeline of munitions to Iran, the diplomats said, but also access to a Greek-government-approved end users' certificate, or EUC.
Elviemek's valid EUC gives it Athens' blessing to purchase a wide range of military technology and munitions from Western member-nations of the Paris-based Coordinated Committee on Technological Transfer.
Diplomats said the committee, which includes NATO countries and neutral nations such as Japan,Switzerland, Sweden and Norway, requires the Greek government to ensure sensitive Western technology and military equipment is not shipped to Iran, Iraq, the Soviet bloc or South Africa.
But documents in the possession of United Press International show the Greek government issued the EUC to Elviemek in spite of the munitions manufacturer's strong links with Pretoria, and that the South Africans were using the company as a front to send arms to Tehran in exchange for Iranian oil.
'Greece has not in the past and is not now exporting arms to Iran,' the semi-official Athens News Agency quoted Yannis Roumbatis, a government spokesman, as saying. The matter is being investigated by Defense Undersecretary Staphis Yiotas, he said.
The Organization of Petroleum Exporting Countries has banned the sale of oil to South Africa -- which has no petroleum resources of its own -- because of its policy of apartheid.
But London-based sources recently reported a strong increase in South African oil purchases in the first half of 1985, 'more than double last year's 200,000 barrels a day,' according to the newsletter Africa Confidential.
Shipping sources said Pretoria has been actively involved in various schemes to obtain oil for several years.
In February 1986, a Greek court hearing an insurance fraud case found that a tanker had been fraudulently scuttled off Senegal in 1980 and its $56 million oil cargo secretly diverted to South Africa.
Oil sources in Johannesburg revealed that the South Africa needs some 350,000 barrels of oil a day. Iran was its main supplier before the shah was ousted in 1979. Recent reports are that Pretoria has also obtained oil from Saudi Arabia.
South Africa's efforts to obtain Iranian oil -- in spite of Tehran's official ban on trade with the apartheid regime -- apparently started in 1984 when a wealthy Greek businessman with South African connections became a major Elviemek stock holder.
Ion Vorres, 64, a former president of the Greece-South Africa Association and a consultant for Armscor, the state-controlled South African Armaments Development and Production Corporation, bought a major holding in Elviemek and was legally empowered to act on behalf of its managing director.
The same year, Iran obtained part of an estimated 900-ton shipment of high explosive propellant powder for howitzer shells from a subsidiary of Britain's Imperial Chemicals Industry -- via an unidentified front company in Greece, a British newspaper recently reported.
The explosives received customs clearance in Britain, according to the London Sunday Times, 'because they were accompanied by false documentation showing that a company apparently acting for the Greek government was the recipient.' That company was Elviemek, according to records obtained by UPI.
Company officials had no comment on the allegation when contacted by UPI.
'It is obvious the explosives were meant for the only customer who could absorb such a large shipment -- Iran,' said one Athens-based arms dealer.
More recently, Spanish customs agents quoted in the Belgian daily De Standaard last month said that in 1986 the Cypriot cargo vessel Age picked up a cargo of French artillery shells and Belgian ammunition supposedly destined for Spain. Instead, Elviemek arranged for the cargo to be offloaded in the Greek port of Piraeus, and from there to be shipped to the Iranian port of Bandar Abbas.
But what was not known was the third leg of the South Africa trade, the trade for Iranian oil.
According to confidential records at the Shipping Research Bureau in the Netherlands, the bulk of South Africa's crude oil from January 1979 to January 1985 originated in the Persian Gulf and Brunei. Saudi Arabia supplied 25 percent of Pretoria's needs, and Iran about 5 percent, the records show. However, about 40 percent of South Africa's crude supplies could not be traced to origin.
Of the seven ships that delivered Iranian oil to South Africa in 1984, five sailed direct and discharged 1,223,905 tons deadweight, and two made multiport calls in the gulf before discharging 559,237 tons in South Africa, the records show.
Official Iran government policy is strict adherence to the South African oil embargo, the requirement of a guarantee from companies buying oil that it will not be sold to Pretoria and a threat to blacklist any company that violates the agreement.
A diplomat in Athens said the South Africans were supplying U.S.-made Bell helicopters and spare parts to Iran 'in exchange for oil.'
Before Vorres bought a holding in Elviemek, public records showed the company had been losing money continuously.
Under Greek law, the Ministry of Commerce could have forced the ailing explosives manufacturer, which according to its accounts was recording losses exceeding 90 percent of its capital, into liquidation.
Sources said Greece's Socialist government allowed the company to continue operating at a loss after South African business interests pledged to keep it going with an infusion of badly-needed foreign exchange.
Greek-South African businessman Christakis Xenopoulos, registered at the Athens Chamber of Commerce and Industry as a resident of South Africa, bought Elviemek in 1985 and a year later, the company received a cash infusion of at least $2 million.
Xenopoulos confirmed he holds 30 percent of the Greek company's $8 million stock in his own name.
The remaining 70 percent of Elviemek stock is owned by the Guernsey, South Africa-based International Hellenic Operation, which UPI has learned is also own by Xenopoulos.
Elviemek used the $2 million, a $250,000 grant from the Greek government, along with $6 million from what one U.S. banking source described as 'South African sources' to pay off short-term bank loans and modernize its manufacturing operation.
Records of Elviemek's modernization program would normally be kept at the Ministry of National Economy, but an investigator who repeatedly tried to gain access to the file found it had 'mysteriously disappeared.'
In an interview with UPI, Xenopoulos was asked whether the company either exported or sold arms to Iran and replied, 'No comment.'
Asked whether his answer meant he neither confirmed nor denied the report, Xenopolous, one of South Africa's two or three richest men, replied, 'That is correct.'
In the early 1980s, in a case cloaked in Pretoria's secrecy laws, Xenopolous sued Italian-born South African oil magnate Marino Chiavelli for more than $130 million.
Because press coverage of the suit was declared off-limits under the National Supplies Procurement Act, the substance of their out-of-court settlement in 1985 was never reported, but it was believed Xenopolous sued Chiavelli for a commission on an oil deal.
Xenopolous, restrained from explaining the case under the secrecy laws, replied, 'No comment' when asked about the suit.
A British arms dealer, Mick Ranger, told the London Observer this month the South Africans asked him to supply them with 2,500 TOW anti-tank missiles worth $30 million in a 'weapons-for-oil barter deal between South Africa and Iran.'
In addition, according to a May 2, 1985 telex message obtained byUPI, the small privately owned Swedish arms manufacturer Scandinavian Commodity, of Malmo, offered Elviemek commissions to function as an arms supplier to unnamed countries. The company's director, Karl-Eric Schmitz, has been named in Belgian and Swedish press reports as part of a CIA effort to get Belgian arms to Iran.
The Stockholm daily Dagens Nyheter reported Nov. 22 that Schmitz delivered several arms shipments to Iran using the West Indian St. Lucia Airlines -- which the daily said is owned by the CIA.
Elviemek, which specializes in the production of NATO-type Israeli-patented grenades and grenade launchers, EM-20 anti-personnel mines and a wide range of commercial and military explosives, has been 'modernizing to meet the needs of its Iranian customers,' arms dealers said.
But Iranian officials and businessmen with South African links have 'tried to avoid direct contact,' according to a diplomatic source.
To maintain clandestine contact, a source said, Iranian and South African diplomats 'have been using a private Athens post office box number to secretly communicate with each other.' Another source identified the box number as 14151, and said it was located in the Athens suburb of Ambelokipi. But an Iranian group opposed to the Khomeini regime earlier this year gave UPI the same post office box number -- and said it was the Athens contact address for 'pro-Iranian terrorists.'
Also contributing to this story were UPI correspondents Brendan Boyle in South Africa, Basil Miller in the Hague, Arthur Herman in London, and Ralph Josephs in Cyprus.