BY DAVID E. KAPLAN
Known for its gold jewelry and cuckoo clocks, the small German town of Pforzheim seems a world away from the caldron of Saddam Hussein's Iraq. But it was from here that Bernd Schompeter shipped to Iraq machinery capable of making large cannons, according to charges filed by German authorities last month. Also on Schompeter's shopping list, officials say: MiG aircraft parts, rocket launchers, and machine guns. Schompeter's connection is said to have been an Iraqi-born American named Sahib al-Haddad, who allegedly sent the goods to Jordan. Police have jailed Schompeter, an engineer, and issued a warrant for Haddad's arrest.

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Oddly, quaint little Pforzheim seems to be something of a hot spot for arms traffickers. In late August, police there also arrested a Maserati-driving Canadian, Arthur Andersen, on suspicion of illegal trading in at least $66 million worth of East European arms, ranging from bazookas and hand grenades to antitank guided missiles. These weapons, too, were headed to Jordan and from there, officials suspect, on to Iraq.

Andersen's attorney says that his client's shipments were legal; Schompeter has yet to enter a plea. For U.S. and German officials, the two cases are but the latest evidence of an extraordinary international effort by Baghdad to rearm itself with the world's deadliest weapons. Schompeter's milling equipment, they say, could make howitzers capable of firing chemical or biological shells. Other evidence suggests that Saddam has re-energized his programs to build ballistic missiles and nuclear warheads.

Before they were thrown out of Iraq in 1998, U.N. inspectors believed they had destroyed much of Saddam's chemical weapons arsenal and had badly disrupted his nuclear and bioweapons programs. But it was left to U.N. member states to dismantle the arms- and technology-buying network, says a frustrated Tim McCarthy, one of the last inspectors to leave Iraq. "That clearly did not happen."

A worldwide embargo begun in 1990 required Baghdad to get U.N. approval for virtually any item it wanted to import. But such legal niceties haven't stopped the regime from scouring the world's black markets for weaponry. And since 1998, the absence of inspectors and a relaxed U.N. embargo, coupled with Iraq's growing sales of black-market oil, have allowed the regime to accelerate its purchases. "Saddam has a huge network," says Khidhir Hamza, a former director of Iraq's nuclear program, who defected. "He has a hundred front companies just in Jordan and Turkey." Such outfits, analysts say, range from "one man, one fax" offices aimed at getting gas masks to sophisticated spy operations targeting nuclear technology.

Worldwide. To hide its trail, the regime is turning increasingly to independent arms dealers and multiple "cutouts" or fronts, officials say, making the shipments maddeningly difficult to track. Investigators have traced Iraq's contacts to firms in Tunisia, the Czech Republic, and India, to name a few. "It's not just the occasional guy in a bar with a kilo of uranium," says Johan Peleman, a U.N. arms smuggling specialist. "It's organized crime operating in a worldwide black market."

Top-dollar payments don't hurt, either, and the Iraqis can afford them. Once strapped for hard currency, Iraq's earnings from black-market oil sales quadrupled to $3 billion in the past four years, according to a CIA report released last week. Thus, in recent years, Iraq has obtained rocket-fuel chemicals from India, magnets and high-precision electronic switches from Germany, and fiber-optic cables for air defense from China. Its agents have combed Africa for uranium, landing, among other places, in Niger and South Africa. "Iraq is cooperating with a number of new suppliers in China, India, Russia, Syria, and Eastern Europe," according to an internal German customs report. Even Iraq's old nemesis, Iran, has a cut of the action, officials say.

U.S. customs agents got a firsthand look at Baghdad's methods during a three-year undercover case that ended in 1999. An alert Connecticut manufacturer noted that an order for steam boiler equipment matched the exact specs for an Iraqi petrochemical plant destroyed during the Persian Gulf War. The would-be buyer, agents soon learned, was Fadi Boutros, an Iraqi-American who ran a liquor store in the San Diego area. Boutros, in turn, was working with an alleged Iraqi front company, al Qanater Trading Establishment, in Amman, Jordan, which had given him a rather lengthy shopping list. Approached by agents posing as arms dealers, Boutros asked for machine tools, computers, software for ballistic missile guidance systems, night-vision goggles, and parts for helicopter and inertial navigation systems. Boutros plunked down $30,000–wired to him from Amman–for five of the night-vision devices, which he tried to ship to Jordan as ophthalmology equipment. For his trouble, he received three years in prison.

Wide open. As Western countries have cracked down, Iraq has shifted its buying spree to the former Soviet Union, officials say. Needing spare parts for their aging Soviet weapons systems, as well as missile and nuclear technology, the Iraqis have turned to Ukraine in particular. So wide open is that nation that Iraqis are smuggling parts from other nations for assembly there before shipment to Baghdad, U.S. News has learned. Another worry: evidence that Ukrainian President Leonid Kuchma personally approved the sale of an advanced radar system that can detect Stealth aircraft without their pilots' knowledge.

The Ukrainian city of Kharkov, home to a complex of military and aerospace factories, is described by one ex-CIA official as a watering hole for arms traffickers from across the globe. "It's the barroom scene from Star Wars," he says. "Every animal in the galaxy was there." Kharkov is also host to a nuclear research center with 75 kilos of uranium so highly enriched that Washington is quietly trying to buy the load and spirit it out of the country. Worried U.S. officials think it no coincidence that Iraq opened a diplomatic office there in late 2000. Its "honorary consul" in Kharkov until recently was Yuri Orshansky, a politically connected Ukrainian businessman who has reportedly visited Iraq 40 times since the Persian Gulf War. Under U.S. pressure, the Ukrainian government last month stripped Orshansky of his status.

Most worrisome is Saddam Hussein's nuclear appetite. A recent British government dossier reveals a series of covert attempts by Iraq since 1998 to purchase vacuum pumps, specialized magnets, fluorine gas, and unique machines for filament winding and balancing. Considered alone, each item might be explained as a legitimate purchase. But in combination, say former weapons inspectors, they point to the kind of centrifuge-based system that Iraq, for a decade, has tried using to enrich uranium to weapons grade. "It's industrial level," says David Kay, the U.N.'s chief weapons inspector in the early 1990s. "They are after a Manhattan Project-sized program."

Once goods are purchased overseas, the route to Iraq invariably leads through its neighbors Jordan and, increasingly, Syria. Convoys of trucks routinely leave Jordan for the daylong trek to Baghdad, while Syria now has a direct rail link to the country. "It was pretty difficult for Iraq to get completed weapons systems until Syria opened up," says one Iraq watcher. Iraq's money is also flowing through Syria, in the form of oil pumped through a newly repaired pipeline. The Iraqis have sold as much as $1 billion of black-market oil this way, all of it without U.N. control.

The Syrian oil sales offer one hint of how Iraq pays for its varied purchases. U.S. financial investigators are also looking at the regime's use of underground banking and laundering of money using commodities as varied as dates and cigarettes. "The schemes are unbelievably complex," says former inspector McCarthy, who credits the Iraqis with an ingenuity that dates back to the days of Mesopotamia. "After all," he says, "they've been trading for thousands of years."

With William Boston in Berlin, Mark Mazzetti, Douglas Pasternak, Kevin Whitelaw, Peter Cary, and Brian Whitmore in Prague, Czech Republic