4. In Defence of Humanity

The fall of the Berlin Wall in 1989 led to a major change in the way arms dealers did business around the world. Rather than reflecting ‘an end to history’ and thus conflict, as the US model of market-led democracy was embraced globally, the post-Cold War world was wracked by ever more complex armed conflicts. The collapse of the support that had sustained many of the world’s less stable regimes on the basis of their affiliation to the US or the Soviets prefigured a massive outbreak in conflict between ethnic, intra-state and non-state actors. Disparate groups emerged within countries or without any national affiliation in the case of religious extremism, seeking power or to cause maximum disruption for a diversity of reasons – the promise of ethnic utopia, economic advantage or religious expression. For the smaller arms dealers operating in the shadows, these new clients were fertile ground.

Merex for one was quickly able to move into these new markets, taking advantage of the explosion of civil wars and ethnic conflicts across a number of continents. The company expanded its reach exponentially, running a raft of notorious sales agents, including the likes of the Liberian brothers Charles and Bob Taylor. It profited from some of the most notorious conflicts of the next decade and a half, including the civil wars in Yugoslavia and Liberia/Sierra Leone and the US invasion of Iraq. In so doing, Merex was connected into a vast, international network of arms dealers, revolutionaries, despots, charlatans, warmongers, religious extremists, torturers, sanctions busters, money launderers, shady intelligence operatives and opportunistic entrepreneurs, all of them operating wherever there was enough chaos to turn a profit. This anarchic labyrinth was the shadow world in the new global reality.

In 1990, Merex restructured to deal with legal and financial difficulties and to prepare for a profitable existence in the new world. In a significant move, Joe der Hovsepian was brought in as a partner. A self-proclaimed ‘citizen of the globe’,1 der Hovsepian is of Armenian and Lebanese origin with strong links to Germany, Italy, Switzerland and France.

I met him in Amman, Jordan, in May 2010. His office, on Mecca Street, all glass and dark wood, is decorated with posters of guns and other weaponry. Der Hovsepian is an imposing man. His craggy face reflects his cosmopolitan origins: Teutonic and Middle Eastern features, a trim Germanic moustache below a bulbous red nose. The large black Stetson and cowboy boots make him appear even taller than he is.

Garrulous, charming, sometimes brusque, der Hovsepian described his early career: the son of a Legionnaire father and a Lebanese mother, he had travelled the globe, always in military circles. Following his father’s military instincts, he joined the Lebanese army, where he trained as a fighter pilot, including at bases in the US. His own adventurous spirit, and marital ties to one of Lebanon’s pre-eminent families, saw the young Joe quickly attain the rank of Colonel – an appellation by which he was to become known in arms-dealing circles.

By 1978 der Hovsepian had left the Lebanese armed forces and opened a rifle and sports shooting store in Bonn – the home town of the former Nazi and Merex founder, Gerhard Mertins. And by the early eighties, he had started to work with Mertins as an arms dealer.2 Der Hovsepian was initially vague about the work he and Merex undertook for much of the 1980s, but it was clear that he was often in the loop about what Mertins was up to – not least because the two lived on the same property. Mertins had used his considerable windfall from his trial against the German intelligence agency, the BND, to purchase a massive chicken farm and estate in Thomasberg, a district of Königswinter across the Rhine from Bonn. Der Hovsepian suggested that Mertins had used his substantial government connections to increase the value of his property by persuading the German Department of Foreign Affairs, for whom his niece’s husband worked, to build an office complex on a plot next to his.

As Mertins was often cash-strapped during the 1980s, he sometimes paid those who undertook work for him with small slices of land from the Thomasberg estate. Der Hovsepian was one such recipient, living on the property along with Mertins and a hodgepodge of contacts that the German had developed. Der Hovsepian now claims that Mertins swindled him out of nearly $3m: instead of paying der Hovsepian for services rendered, Mertins offered him a prime piece of the Thomasberg estate for redevelopment. When developed, it was assumed, its value would sky-rocket. There was only one problem that Mertins kept to himself: planning regulations specifically forbade any building on der Hovsepian’s newly acquired land. This was one of a litany of instances in which der Hovsepian claims Mertins cheated him out of money.

When der Hovsepian became a partner in Merex in 1990, the company was floundering. Financial reports from the time suggest a rapid increase in costs amid falling income, a downswing in fortunes that almost eradicated the gains of its halcyon days.3 For salvation Mertins turned to a long-time partner, Saudi Arabia. The Saudis were looking to purchase Leopard tanks (known as Leos) from Germany. Mertins, with his government connections, was willing to undertake the deal, for which Saudi Arabia agreed to pay him DM16m to DM17m, enough to stave off bankruptcy. The Thomasberg property was raised as collateral against the cash advance. This unusual arrangement was negotiated by Mertins’s friend Prince Turki al-Faisal, brother of the Minister of Foreign Affairs, brother-in-law of Prince Bandar, son of the late King Faisal and, at the time of the deal, director of the Al Mukhabarat, the Saudi intelligence agency. The contracts were, therefore, signed in the name of Turki’s assistant, Ahmed Badeeb, and Gerhard Mertins.

Mertins’s key government contact on the deal was a controversial Bavarian politician and former Defence Minister, Franz Josef Strauss. Embroiled in the Lockheed bribery scandals in the early 1960s, among others (see Chapter 12), Strauss was described by Joe as ‘very corrupt’, perhaps explaining his willingness to engage with Mertins and Merex. However, the Bavarian leader died unexpectedly while out hunting in 1988. So Mertins was unable to deliver the Leos for which he had already been paid. Refusing to return the money and unable to supply the tanks, Mertins had only one option – to close down the company and reopen a new incarnation.

The restructuring of Merex was also motivated by Mertins’s advanced age – he would die in 1993. So the new company, named Deutsche Merex, was structured to reflect Mertins’s declining role. After some horse-trading, in 1992 the new company’s ownership was split equally between der Hovsepian and Mertins’s sons Helmut and Joerg Thomas (known as ‘JT’). One per cent of the company remained in the hands of the US Merex Corp, which, at the time, was still headed by Gerhard Mertins.4

Other parts of the Merex network mutated into bizarre forms. One, Merex AG, was cannibalized into a company running a hotel and sports centre in Gut Buschhof, a suburb of Königswinter, suggesting that some members of the Mertins clan may have been seeking a line of work less stressful than arms dealing.5 Soon after Gut Buschhof was formed, and after Mertins’s death in 1993, Thomasberg Hotel und Sportanlagen was established to run the centre.6 Officially, the director of the company was Ahmed Badeeb, Prince Turki’s assistant.

Deeply embedded in Saudi Arabian intelligence services, Badeeb had a relatively unremarkable career until the Soviet invasion of Afghanistan in the 1980s. As a biology teacher working under the Saudi Ministry of Education, Badeeb’s most famous pupil was Osama bin Laden. Badeeb befriended his student, whose family was from the same area of Yemen as his own.7 He rose through the ranks of the Saudi civil service and was, by his mid-thirties, Chief of Staff to Prince Turki al-Faisal. The assassination of Prince Turki’s father, King Faisal – by his half-brother’s son – didn’t affect Turki’s upward trajectory, which culminated in his appointment as head of the Al Mukhabarat, a post he held for the next two decades.8 He was the ambassador to the United Kingdom from 2003 to 2005 before briefly being made Saudi ambassador to the US to replace Prince Bandar, a post he held from July 2005 to December 2006.9

Badeeb, in his role as right-hand man to one of the most powerful intelligence figures in the desert kingdom, was often sent to mediate with important intelligence allies, arranging arms deals and cash drop-offs. In one deal Badeeb travelled to Pakistan, where he met with the military ruler, President Zia. Sent by Prince Turki with a considerable amount of cash, Badeeb informed his Pakistani hosts that Saudi Arabia was willing to fund the purchase of a range of high-precision rockets from Chinese suppliers. His handlers, scarcely believing the offer, pried open Badeeb’s suitcase to confirm the generous bounty, while he was speaking with President Zia.10 Badeeb was also active in Afghanistan, shepherding the relationship between his homeland and the mujahideen fighters. It is assumed that Badeeb took ownership of the Thomasberg estate in lieu of the money owed to the Saudis for Mertins’s failed Leo contract.

While it may have seemed strange to retain the Merex name, given the company’s difficulties, in some ways Deutsche Merex had cachet. According to der Hovsepian, the German and neo-Nazi connections won over Arab customers, some of whom believed that ‘if Hitler had finished off the Jews they wouldn’t have all the problems they have today [with Israel]’.11 Der Hovsepian didn’t shrink from capitalizing on this tortured logic, greeting Arab clients with a nonchalant ‘Walaikum Salaam, wie gehts dir?’ This may be the gimmick he alludes to when suggesting that ‘to be successful [in arms dealing] you need a good gimmick, good quality equipment and you must not cheat a client’.12 As important, and part of the reason so many dealers are gregarious, larger-than-life characters, is an ability to foster close relationships with those in power, something der Hovsepian has done with aplomb in Saudi Arabia, where the new Merex secured its first major deal.

In August 1990, Saddam Hussein, fresh from his bruising decade-long conflict with Iran, launched an invasion of Kuwait. The Saudis were deeply worried, especially at the prospective use of biological and chemical weapons by Saddam. Merex was approached to arrange the purchase of a million gas masks. For such a massive deal der Hovsepian required discreet assistance, so he recalled the Mertins brothers from the US. After patching together multiple suppliers, der Hovsepian was able to secure the consignment, personally flying the gas masks into Saudi Arabia. It was a lucrative contract, by der Hovsepian’s own account worth $126m. As further reward for his rapid delivery, the arms dealer was awarded an official citation by the Saudi government.

Der Hovsepian was nevertheless scathing about the ‘special’ costs of doing business with the Saudis. Using a glass on his desk, he described the process to me: ‘They are very greedy. You always have to pay bribes. If they want to buy this glass you tell them it’s five dollars. They will beat you down to one dollar, then they will say, “OK I will give you $3, but you give me $2 back!”’ Der Hovsepian claims that on his Saudi deals he has to give more than half of the contract price back in bribes. The local Saudi embassy military attaché always signs the receipts. ‘Money is paid to them in Germany and the kick-back is transferred to the local military attaché and he transfers it to the princes.’ He concluded: ‘Not a piece of equipment would go from the US to Saudi without Bandar getting a commission.’13

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Merex and der Hovsepian were prominent players in the Balkans as Yugoslavia collapsed in the wake of the Cold War. In June 1991, the country began to unravel as Slovenia declared its independence from the union, followed shortly by Croatia and Macedonia. It was the first act in a brutal four-year war of startling complexity, seared into the memory by the ethnic cleansing of Bosnian Muslims by the Serbs.

With arms embargoes quickly imposed on the region, each side had to scramble for whatever arms they could find – a veritable feast for daring arms dealers. Croatia, seeing the likelihood of war, started to equip itself as early as January 1991. An Italian, Lorenzo Mazzega, was ideally placed to help Croatia restock. At the time he was based in the Croatian city of Zara, where he had established useful links to the Croatian leadership.14 Mazzega’s reputation preceded him, at least as far as Franco Giorgi, an Italian born in 1943 who had travelled to Libya in 1975 to work – as what, he would not explain. In 1979, Libyan authorities decided he was a security risk who was spying for Israel. Following an eight-month incarceration he ‘turned’, now providing intelligence for Libyan authorities on figures in Italy and elsewhere. By 1990, he had returned to Italy, to his wife who ran a store in Venice, where Giorgi met a number of his contacts.15 He had heard, via a business acquaintance, that Mazzega was able to trade weapons freely throughout Eastern Europe through his company Venimpex. After being introduced through a mutual acquaintance in Venice, Giorgi travelled to Zara to discuss business.16 His objective: to sell arms and supplies to Croatia on behalf of Merex. Mazzega would later recall that Giorgi claimed that he ‘represented Merex in Italy, Croatia and Eastern European countries … He also showed me a Merex catalogue. He was in Zara because Merex produced police equipment – binoculars, bullet-proof jackets, radios and so on.’17 As a result of their meeting Merex did indeed secure a deal in Croatia, the order emanating from a company in Zara for which Mazzega was acting as a consultant. Giorgi duly approached der Hovsepian with the details of the deal. Der Hovsepian, despite initial scepticism, agreed to participate.

What the Croatian authorities needed – and fast – was ammunition – roughly a million dollars’ worth. Der Hovsepian turned to a long-time acquaintance, Eli Wazan, to help him secure the supplies. Wazan was a successful arms dealer in his own right, having acted as an equipment purchaser for Christian militias in Lebanon during the early 1980s. In the mid-1980s, after developing useful connections with Israeli intelligence, Wazan went into business for himself, dealing in weapons in East Beirut. He also rose to the position of Honorary Consul in Lebanon, which conferred useful diplomatic privileges. One of Wazan’s best suppliers was the South African parastatal Armscor, which was established by the apartheid government following the imposition of a mandatory UN arms embargo on the country – an embargo that also outlawed any Armscor sales abroad. Fed huge sums of money, Armscor turned into an industrial behemoth, churning out supplies needed by the apartheid government to undertake its reign of terror internally and throughout sub-Saharan Africa. To solicit its foreign sales, which were needed to subsidize domestic production, Armscor often relied on a web of dubious middlemen and agents. Wazan was one of their favourites, having worked with the company since 1983. By 1990, he had been appointed an ‘exclusive agent’ for Armscor.18

To secure the ammunition for Croatia, der Hovsepian and Wazan would need to break the UN arms embargo against South Africa. Fearful that German authorities would be alerted to the deal if it was done through Merex, der Hovsepian decided to conduct it through his sister company, Intersystems Beirut, even though he had met with Giorgi to discuss the deal in Germany – in itself an illegal act. Der Hovsepian and Wazan had to mislead South African officials too. At the time, a South African Cabinet injunction prevented Armscor from selling to any former Yugoslavian country.19 Sales to Lebanon, however, were not barred. So Wazan lied that the Armscor stock would be delivered to the Lebanese Christian militia, landing and unloading in Beirut.20 In reality the weapons freighted aboard the ship Anke were destined for Croatia, where they arrived in March 1991 to the immense relief of Croatian authorities.21 While the equipment cost just over $1m, Franco Giorgi was given a $200,000 commission for his role as middleman.

It was considerable effort for a relatively small deal. But it convinced Croatian authorities that Giorgi and der Hovsepian could be trusted. In 1992, just over a year after hostilities had broken out in the region and the UN had instituted a mandatory arms embargo against all the participants,22 Croatia went looking for more weapons. This time it was a much larger consignment, including missiles, valued at $26.1m.23 The deal was again initiated by Lorenzo Mazzega, who contacted Franco Giorgi on behalf of the Croatian authorities. Leaping at the opportunity, Giorgi travelled to Croatia to discuss the deal with an assortment of Croatian generals and the Minister of Finance, Jozo Martinovic.24 The former director of the Croatian state bank Privredna, Martinovic is alleged to have been heavily involved in many negotiations for arms deliveries in violation of the UN embargo.25

Giorgi turned once more to der Hovsepian, who made use of the same network of contacts he had used to secure the first Croatian shipment. Armscor was contacted and the deal agreed. An American shipping agent, Michael Steenberg, was drafted in to take care of transport.26 The weapons were delivered aboard the Sky Bird in mid-1992 – with two UN arms embargoes being violated by a single deal. In order to avoid detection, the shipping manifests were altered. Repeating their previous ruse, it was claimed that the shipment was intended for the Lebanese Christian militia.27 Umag, a port city in Croatia, was the real destination, with an end-user certificate provided by the Finance Minister, Martinovic.28 He also provided der Hovsepian with a promissory note agreeing to pay the dealer a $5m down-payment, followed by five monthly payments through Privredna of $4.35m dollars each.29 As the shipments started arriving, der Hovsepian received a steady flow of money. But payment was soon stopped by the Croatian authorities after der Hovsepian had received roughly $12m, with a further $14m outstanding.30

Why the Croatians stopped paying is still something of a mystery. According to der Hovsepian they complained about the quality of the material he delivered, claiming it was old, secondhand and unusable. Der Hovsepian was flabbergasted: the equipment was five years old, but had never been used, and performed perfectly under testing which he undertook personally. Franco Giorgi recalled that the Croatians insisted the equipment had been ‘dismissed [sic] by the Lebanese army’31 – when, in fact, the weapons had been entirely sourced from Armscor in South Africa. And while Armscor was certainly a shadowy operator, it maintained a reputation for solidly built weapons. More likely is that der Hovsepian was being played. Once the weapons had been delivered, the dealer had no means of ensuring the continued flow of money. According to Franco Giorgi, der Hovsepian received a strange delegation in Germany from Croatia, comprised of a woman and two men accompanied by Lorenzo Mazzega. ‘They tried to obtain a bribe from Hovsepian in exchange of a positive report about the weapons he had supplied [sic]. Hovsepian refused and sent them away briskly.’32 Either der Hovsepian was being conned by the cash-strapped Croatians or he was being set up to pay a commission to well-connected Croatian officials. Either way, der Hovsepian received no further income from the deal.

Things got even worse for the arms dealer. While the deal was underway another Merex export agent, Gerhard Doerfel, had made contact with the Croatian government. An engineer by trade, Doerfel was also a close confidant of Gerhard Mertins. He had come to the attention of Croatian authorities as a result of his links to the German company Gesiecke & Devrient, which they wanted to print the country’s new currency.33 Lorenzo Mazzega, the fixer for so much of Croatia’s business, frequently acted as Doerfel’s chaperone, and befriended him. Mazzega recalled that he had often travelled to Mertins’s Thomasberg estate to meet with Mertins and Doerfel, sometimes seeing der Hovsepian driving past in his car. This overlap of business interests was fatal for der Hovsepian, who had tried to keep the Croatian transaction secret from Mertins. Doerfel found out about the deal from the Croatian authorities and immediately informed Mertins. He was incandescent, as much out of professional jealousy as fear of attracting the unwanted attention of German authorities. Mertins decided to get even. He rifled through der Hovsepian’s papers that were filed on the Thomasberg estate, and gave the whole incriminating pile to the German authorities.34 Mertins had snitched on his partner.

German law enforcers opened an investigation, often liaising with Italian police officials who had begun to examine the activities of Franco Giorgi and Lorenzo Mazzega throughout the former Yugoslavia. It seems highly unlikely that Mertins decided to betray der Hovsepian for moral reasons. More likely, he was motivated by possible financial gain. For after Croatian authorities had rejected der Hovsepian’s cargo, Martinovic decided to try and settle the matter. Through Mazzega, he made contact with Mertins and proposed that if the German could convince der Hovsepian to stop badgering Croatia for the balance of the money, der Hovsepian would receive a one-off payment of just over $1m in full and final settlement. Mertins suggested that he could persuade der Hovsepian to accept the proposal, even though he had no intention of discussing it with his partner. In August 1992, in a bar at Munich airport, Lorenzo Mazzega placed in Mertins’s hands a briefcase containing over $1m in cash.35 True to character, Mertins never gave the money to der Hovsepian, believing that his partner would be too busy dealing with the attentions of German prosecutors to discover Mertins’s subterfuge.

As a result of Mertins’s disclosures der Hovsepian was forced to flee Germany to avoid prosecution, only returning years later, when it was clear that the investigation had come to a standstill.36 Mertins was a million dollars richer but his deceit marked the end of their relationship and, as a result, the end of Deutsche Merex GmBH as a going concern. Der Hovsepian remained on close terms with Mertins’s sons, both of whom displayed a canny awareness of their father’s conniving business practices. After Gerhard died der Hovsepian received a congenial letter from J. T. Mertins confessing that der Hovsepian was ‘only about twelfth on a list of people Gerhard Mertins had cheated’.37

Der Hovsepian’s enforced exile from Germany didn’t mark the end of the ill-fated Croatian deal. In 1998, he took the bizarre decision to pursue the matter in the Swiss courts, demanding that the remainder of the money be paid to him by the Croatian state.38 Finally in March 2001, after the matter had been appealed by der Hovsepian, the Swiss Supreme Court rejected his claim for the outstanding monies. The court found that while the promissory note was unambiguous and the violation of sanctions was not a reason to cancel the contract – Switzerland was not, at the time of the transaction, a part of the UN – the deal offended conceptions of Swiss public order, and therefore universal public order, because the transfers to Yugoslavia were unethical.39 When I asked der Hovsepian about the court’s decision his mood darkened. He barked an obscenity and pounded the table in fury. How, he wondered, could any arms deal be considered unethical, when he undertook his dealings for a moral purpose? ‘I’m in this business for the defence of humanity,’ he explained. ‘You have to prepare for war to make peace.’ In an ironic twist of fate, der Hovsepian may have unintentionally done his bit for peace and humanity: the decision of the Swiss court has become a much discussed topic among legal experts, raising hopes that other shady deals could be blocked by Switzerland’s legal obligation to maintain universal public order.

*   *   *

Merex’s involvement in the former Yugoslavia did not end with the Croatian fiasco. Like most weapons dealers, the company had connections to a group of individuals who were supplying weapons to the arch-enemies of der Hovsepian’s Croatian clients. In particular, Nicholas Oman, listed in a 2005 German investigation as a foreign representative of Merex during the early 1990s, was highly active in the region. Little is known of Oman’s background, except that he was born in 1943 in Podkoren in Slovenia.40 From at least the 1960s onwards he made Australia his home. Under interrogation by Italian officials investigating his activities in the Balkans, Oman claimed to be a commercial pilot who had graduated from the NASA pilot school in the 1960s and a committed democrat with strong emotional ties to Slovenia.41 Australian authorities paint a far less rosy portrait. The Canberra branch of Interpol confirmed that Oman had frequent run-ins with the law. In 1966, he was found guilty of ‘assault with a weapon’. A year later he was found in possession of a ‘restricted substance’. 1973 saw him charged with unlawful assault. And in the mid-1980s he was acquitted on charges of ‘theft by deception’, ‘fraudulent use of a number plate’ and ‘armed robbery’.42

Oman travelled to Italy in 1989 to meet an infamous Italian, Licio Gelli, on three occasions.43 Gelli had gained notoriety in the early 1980s when he was accused of – but not prosecuted for – being involved in a massive banking scandal, in which over $1bn had inexplicably gone missing from the giant Banco Ambrosiano. Gelli had been appointed as the ‘Venerable Master’ of a Masonic lodge known as Propaganda Duo, or P2,44 a sprawling network of far right-wing figures in Italian industry, the media and politics, many of whom would go on to have a major impact on Italian political life.45 In 1987, Gelli was found guilty of financing right-wing terrorist organizations in Italy. He had fled to Switzerland by the time of his conviction and only returned when he had negotiated an extradition agreement that ring-fenced his political crimes.46

Nicholas Oman claims to have met the insalubrious Gelli as part of an effort to raise investments into the small Pacific state of Tonga on behalf of its government.47 He believed that Gelli might be interested in such investment, as the government of Tonga offered diplomatic recognition, and thus immunity, to major investors.48 Oman’s meeting with Gelli in 1989 belied his claim to be simply a commercial pilot. A former aide to Oman, Jornej Cepin, admitted under interrogation that Oman had told him in explaining his considerable wealth that he had ‘worked with Iran at the time of the Iran–Iraq War, and that he had been paid these sums in recognition of this. This enabled him to develop his arms business. The amount was $35m.’49 Cepin believed this account, citing Oman’s travel to Iran in 1990 as additional evidence.

In 1991, Oman moved back from Australia to his homeland in Slovenia. He set himself up in an ostentatious castle in Bled from where he conducted most of his business. His aim, he claimed, was to assist Slovenia move towards independence and out of the clutches of communism.50 The lord of the castle was a distinctive figure, often described as resembling a stick insect due to his thin, lanky frame. Slovenian police once described him uncharitably as ‘185cm tall, average height, wedged face, dark brown (greying hair), dark brown eyes, middle nose, askew head, oval ear’.51

From his lofty castle this ungainly character set about establishing a profitable network of devious accomplices. He found a ready partner in the kleptocratic government of Liberia. Oman was soon involved in the trading of diamonds from that impoverished country to various parts of Europe. In 1992, the Liberian ambassador Taylor Nill – later a confidant of the brutal dictator Charles Taylor, another Merex agent – flew to meet Oman in Liberia. A few days later it was announced that Oman had been appointed the Slovenian Honorary Consul to Liberia, conferring on him both a diplomatic passport and diplomatic immunity.52

The diplomatic title was in return for helping Liberian elites move diamonds and buy arms, despite a UN arms embargo imposed on the country in 1992. Cepin recalled that Oman frequently travelled to Liberia on ‘business’ and that he employed a South African diamond expert on a retainer to help him smuggle the goods. Lorenzo Mazzega, whom Oman referred to during cross-examination as his ‘pleasant Italian friend’,53 recalled that in the mid-1990s Oman had travelled to the Liberian capital for ten days. ‘As war had broken out in Liberia, shortly after Oman had gone there, I remember asking him, somewhat ironically, if he had gone to Liberia to trigger a war. He told me at the time that he had gone there specifically to conclude a contract for the supply of arms.’54 The Liberian Truth and Reconciliation Commission found Oman guilty of a number of economic crimes, including ‘illegal arms dealing’, ‘aiding and abetting European Community actors [i.e. arms suppliers]’ and ‘smuggling and other customs violations’.55

With his base in Slovenia and diplomatic immunity Oman was in a unique position to supply weapons to most sides of the Yugoslav conflict. Slovenia, which had once been part of Yugoslavia, declared independence from the union in June 1991 on the same day as Croatia. The declaration precipitated a ten-day war between remnants of the Yugoslav army, which was simultaneously mobilizing against Croatia, and Slovenian forces. The Yugoslavs made little headway and soon declared a ceasefire with Slovenia, which was granted independence and, buffered geographically from Serbia by Croatia, witnessed little further conflict. This relative tranquillity and its location made it the perfect terminus for arms deals. Nicholas Oman was quick to take advantage, using his connections at the very top of the Slovenian political and military establishment.

He hosted elaborate and gaudy diplomatic functions at his castle, during which he befriended the Slovenian Ministers of Defence and the Interior. He also developed ‘collegial relations’ with the Slovenian President, Milan Kukan.56 Initially Oman helped Kukan’s government acquire lines of credit and foreign exchange, a role he fulfilled with aplomb.57 Soon the government approached him to help acquire arms in the build-up to independence. Oman contacted a friend in Greece, Konstantin Dafermas, whose company, Scorpion, quickly arranged to forward a considerable stock of arms via Oman to the Slovenian leadership.58

The brevity of the Slovenian fighting caused Oman to start providing supplies to others in the Yugoslav conflict. At first he focused on supplying arms to Croatia. An invoice dated 28 October 1991, just after the declaration of the UN arms embargo, and written on the letterhead of Oman’s company, Orbal Marketing Services, was addressed to the ‘Ministry of Defence, Republic of Croatia, for the delivery of “blowpipe portable anti-aircraft missile systems”’. The equipment was of NATO stock built in the UK in 1980.59 In total Oman invoiced a fee of $15.6m for 400 MK40 missiles and eighty launchers.60

By 1992, Oman was involved in delivering arms to both Croatia and Bosnia. The Bosnian Serbs at the time were resisting Croatian aims to expand its borders into parts of Bosnia-Herzegovina. On 8 January 1992, according to a Slovenian investigation, a ship named Hel, sailing under the Antiguan flag, docked at the port of Koper in Slovenia. Its manifest stated that it was carrying agricultural equipment destined for Croatia. But when its forty-six freight containers were unloaded and searched, 13,000 AK-47 rifles with 13 million rounds of ammunition, 10,000 Makarov pistols with 5 million rounds, 14 mortars and 2,000 winter military uniforms were discovered. They had been supplied by Oman’s Orbal Marketing with Scorpion reselling them to all sides in the conflict.61 The total cost of the cache was $8.9m.62

Oman also developed relationships in Russia, where he had contact with former Soviet generals looking to dispose of the country’s massive Cold War arsenal. A visitor of Oman’s, Fulvio Leonardi, recalls dropping in on the Slovenian at his castle in Bled, where he was invited to join his host and VIP guests in a restaurant Oman owned. To Leonardi’s surprise he had been asked to a meeting of major weapons traffickers. Among the guests were the ex-president of Russia’s Sukhoi Corporation, an important weapons manufacturer, and a former General named Kuzin. The General was particularly forthcoming after a few bottles of rakija, bragging that he had been appointed by corrupt officers to arrange for the sale of old Red Army stock, including but not limited to tanks and heavy-weapons systems. ‘Kuzin,’ Leonardi confirmed, ‘made no mystery about introducing himself as an arms trafficker at a very high level.’63

It is because of these Russian contacts that in 1994 Oman was approached by the Bosnian Serb leader, Radovan Karadzic, to discuss a special need. Karadzic, currently on trial for war crimes including the Srebrenica genocide, wanted to acquire something that would fundamentally alter the conduct of the Balkans conflict: a weapon of mass destruction.64 Karadzic believed that Oman could use his connections in the Russian military to deliver a so-called ‘vakuum’ or elipton bomb. The device, roughly suitcase size with a kiloton payload powered by nuclear material – either red mercury or osmium – was known to be immensely powerful.65 Vladimir Zhirinovsky, the ultra-nationalist Russian leader famous for his racist and anti-Semitic diatribes, had incessantly bragged about this Russian ‘secret weapon’ on his visits to Serbia.66 The Russian, who during a trip to the United States famously warned Americans that the country needed to do more for the ‘preservation of the white race’ in the face of potential Hispanic and black domination, and was banned from Australia and Japan, was not only a major presence in Serbia but also friendly with Nicholas Oman, whose castle he had once stayed at.67 This relationship lent credence to Oman’s claim that he could source the bomb for the Bosnian Serb leader, who agreed to pay $60m for it. Ten per cent of the payment – $6m – was paid in cash as a deposit, transported to Oman in Slovenia by his friend and fellow fixer, Lorenzo Mazzega, in the back of his Saab.68 As collateral for the balance Oman was allowed to take out a mortgage on one of Bosnia’s oil refineries.

Oman was unable to deliver the armed bomb to Karadzic’s satisfaction. The Slovenian seemed able to get his hands on nuclear material, as a 1996 raid on a safety deposit box of his revealed 30 grams of osmium.69 But Franco Giorgi recalled that Oman had offered him a kilogram of osmium for resale.70 This suggests that Oman may have had no intention of providing the bomb and had been misleading Karadzic the whole time, in the hope of swindling the alleged war criminal out of a cool $6m. The New York Times had a different take, suggesting that Oman had handed over a makeshift bomb in a suitcase to Karadzic but that its red mercury content, encased in red jelly-like tubes, was inactive.71

The bottom line is that Karadzic was left without the weapon and $6m out of pocket. Determined to get the money back, the enraged Bosnian enlisted the help of Branislav Lainovic, one of his former militia commanders and now a businessman known by the nickname ‘Dughi’.72 Lainovic contacted Franco Giorgi, whom he saw as an ‘arms dealer and mafiosi’ who could intimidate Oman into relenting.73 Oman meanwhile, yet to hear of Karadzic’s displeasure, had brazenly sent two couriers – one of whom was Mazzega – to Sarajevo to collect the remainder of the money. Instead of receiving the outstanding $54m, they were held hostage by Lainovic, who took their passports and agreed to release them only if the money was forthcoming from Oman. To Lainovic’s anger, a US bombardment of the area where the two were held allowed Mazzega and his colleague to escape.74

Undeterred, ‘Dughi’ paid a visit to Oman in Slovenia with the intention of retrieving the money and assassinating the double-dealing broker. The wily Oman, however, talked Lainovic into accepting a bribe of $1.2m in return for which he would let Oman live and inform his superiors that the Slovenian could not be found. For Lainovic it proved a fatal decision. Soon after his bosses discovered the deceit, ‘Dughi’ was found murdered.75 On hearing of his accomplice’s demise, Oman fled his castle and settled in Australia. His five-year reign as one of Yugoslavia’s most successful and least scrupulous arms dealers was over.

*   *   *

For both der Hovsepian and Oman, Yugoslavia was an unmitigated disaster. But while Oman was forced to flee into obscurity, der Hovsepian moved back into his comfort zone: the Middle East. In September 1993, he began to supply arms to a group deeply at odds with Merex’s previous customers: left-leaning militias in South Yemen.76 Der Hovsepian was involved in the deal as a result of his close relationships in Saudi Arabia, in particular with Prince Anwar Bin Fawaz Bin Nawaf Al-Shalaan. According to the report of a South African Commission of Inquiry into the deal, ‘the Prince’s trust of Hovsepian, his business associate, was profound and complete – even to the point of his according Hovsepian some implicit mandate to wheel and deal, provided it was in the Prince’s ultimate interest, and that his honour was not impugned’.77

Prince Al-Shalaan is a typical member of the Saudi royal family, with fingers in a considerable array of entrepreneurial pies. He had a particular interest in the South Yemeni commodity market, a potentially lucrative and largely untapped opportunity. He was informed, however, that in order to gain access he would have to secure arms for the South Yemenis, many of whom formed a secessionist movement that baulked at the unification of the country in 1990.78 For this he turned to his trusted confidant, der Hovsepian, whom the Commission of Inquiry described, with a degree of understatement, as in possession of a ‘sophisticated appreciation of the international arms business’.79

To secure arms for the Prince, der Hovsepian used the same network he had utilized in Croatia. Through Eli Wazan he purchased the cargo – a collection of rifles and ammunition – from Armscor and shipped them through Michael Steenberg aboard the Vinland Saga to Yemen. When Armscor was forced to explain the transfer of weapons – it was still encumbered by the arms embargo – it pointed out that the stated end-user was, as with the previous deals, the Lebanese Christian militia. Armscor claimed it was not responsible for onward transfer. According to der Hovsepian Armscor knew that Lebanon was the end-user, especially as the Prince himself, with no connection to Lebanon, had travelled to South Africa to inspect the weapons. And der Hovsepian was always clear where the weapons were going, regardless of the end-user certificate.80 How much der Hovsepian made from the deal is unclear. The purchase price was $350,175. However, the Prince paid an initial $510,000 and a further $902,455 when it was agreed to parlay the first agreement into a second deal. Of this, Wazan received a total of $484,780 between September 1993 and 1994, giving some indication of the size of commission payments in the industry.81

The clause in the contract with Armscor for a second tranche of equipment related to G3 rifles, AK-47s and ammunition. The now familiar network was again utilized for this shipment, which set sail aboard the Arktis Pioneer.82 With such a well-rehearsed channel in place trouble was not anticipated. But der Hovsepian and his friends didn’t count on the fickleness of their clients or the deceptive nature of relationships between arms dealers. Eli Wazan, who had been almost entirely excluded from the second deal, was brought back in when it was realized he was needed to provide a fraudulent end-user certificate. He produced a crude forgery at great cost that was easily spotted. But what really scuppered the deal was the purchasers’ indecision.

When the cargo finally reached Yemen, it was roundly rejected. Officially, the Yemenis claimed to be unimpressed by the quality of the goods. Der Hovsepian knew better. In fact, by the time the equipment arrived the Yemenis had decided they no longer needed it – far more pressing within their limited resources was the acquisition of a naval vessel. As a result the Arktis Pioneer was turned back,83 arriving in a South Africa where the ANC’s Nelson Mandela had just been elected the country’s first democratic President. The local press got wind of the shipment and broke the story at the end of 1994, suggesting the ANC was aware of the deal and intended for some of the arms to go to their erstwhile allies in Palestine. As a result the ship was impounded and a public Commission of Inquiry instituted. The inquiry resulted in a warts-and-all retelling of der Hovsepian’s Croatian and Yemen deals with Armscor. For many involved it was a disaster: Steenberg feared further legal action and caved in while the Armscor official, Vermaak, felt obliged to resign his position.

When I initially contacted der Hovsepian requesting an interview, I mentioned that he had not given any public statement about the Commission of Inquiry and suggested he might want to tell his side of the story. He responded nonchalantly: ‘my caravan drives through in spite of the barking dogs’. Of far greater concern to him was the bottom line. With the Arktis Pioneer impounded he was staring at the loss of significant cargo and capital. Der Hovsepian thus employed a South African lawyer to pursue its release, which was finally secured in 1998. The ship made its way back to Yemen four years late, arriving with its cargo which by then had been massively devalued. Der Hovsepian recalled that his Yemeni buyers ‘beat the price down’ and, as a result, he ‘lost a hell of a lot of money’.84

After his experiences in Croatia and Yemen, der Hovsepian claims to have learned a number of useful lessons. The first is that he would only deal with government-to-government contracts. The second, that he would now refuse to supply goods on spec – all money had to be paid up front. But while he didn’t say as much in our interview, he could have added a third: to keep a low profile. Besides his ill-advised court case against Croatia in 2001 he has been unmentioned in the press for over a decade. When I first contacted him his immediate response was ‘But what’s in it for me? I have never got anything for nothing in my life, nor do I give anything for nothing.’

Der Hovsepian’s long silence has only reinforced an image of fear around him. Both Steenberg and the Armscor official, Vermaak, professed to have been terrified of the man.85 When I asked der Hovsepian about this he chuckled to himself. ‘Of course they were scared of me,’ he explained. ‘I put a gun to their head and told them I would kill them. But what they didn’t know is that I’m a pacifist. I only trade this stuff, I don’t use it.’86