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Central Intelligencer geno(b)(3).

FILE

FIRE

DENSO

Washington, DC 20505

3-11-88 NO_EUR M 88-200415

3

DIRECTORATE OF INTELLIGENCE

&PD

4 March 1988

(b)(3)

Sweden's Bofors Arms Scandal: A Summary of the Diversions, investigations, and Implications

Summary

The lingering Bofors AB and Nobel Kemi AB arms scandals, which first came to light in 1984, owe to the failure of Sweden's private and public sector

leaders to observe their own rules governing 96)(3)?xports in an apparent

effort to bolster the domestic arms industry.

Numerous investigations were initiated to examine the complex web of bribery and arms diversions but, despite an admission from a key industry executive, only two individuals have been charged with violating Swedish law: a Nobel Kemi manager and a private arms trader. Stockholm has since called off the investigation of Bofors' bribery, probably in an effort to prevent future revelations of bribes to Indian officials that could embarrass Prime Minister Gandhi. Sidelights to the affair include the mysterious death of a customs official, a possible Iranian connection tothomurder of Olof Palme, and a surge in Swedish investigative journalism.

(b)(3)

The scandal is likely to lead to a tightening of Swedish arms export restrictions in the near term, but little change in practice in the long term given Sweden's commitment to maintaining its own arms industry. While the affair will almost certainly benefit the Greens in the September 1988 election, neither Prime Minister Ingvar Carlsson nor the mainstream socialist and nonsocialist parties are likely to be seriously harmed by the scandal since all are culpable and will therefore refrain from making it a partisan political issue. (b)(3)

(b)(3) This paper was prepared byl

West European Division, Office of European Analysis. Information available as of 3 March 1988 was used in its preparation. Comments are welcome and may be directed to the Chief, West European Division, EURA,

(b)(3jueries

EURM 88-20045

(b)(3)

(b)(3) CONFIDENTIAL Approved for Release: 2017/09/13 C06141809

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