A HONG KONG company was involved in sending tonnes of explosive chemicals used in the production of Scud missile fuel to Iraq, the United States Government revealed last week. The cargo, allegedly smuggled from China, never reached its destination, being intercepted in Saudi Arabia in January. The seizure led to a global operation, centred in the US and Hong Kong, to stop the group behind the plan, and ignited fears in the US that Iraq's President Saddam Hussein was trying to re-arm his country. In a landmark case, a naturalised South Korean-American was arrested near New York last Wednesday for arranging the shipment through the territory by a Hong Kong firm, Forcefully Ltd. Investigators claim that Storm Kheem, who is also known as Kim Kyung-iI, orchestrated the deal to deliver 30 tonnes of ammonium perchlorate from Guangdong to Iraq by a series of telephone and faxed instructions. According to US experts cited in the complaint against Kheem, the restricted chemical is the key ingredient in the production of solid rocket fuel used in Scud missiles. The weapons were fired with deadly results at targets in Saudi Arabia and Israel by Iraqi troops during the Gulf War. The plan was uncovered when officials found the volatile substance in drums labelled as aluminium sulfate, a harmless chemical used in water purification, on a German ship when it docked in Jeddah. The ammonium perchlorate was marked for shipment to Aquatech International Services in Amman, Jordan, which US customs claimed was set up by Iraqi agents. According to one source, the freighter, Asian Senator, stopped in Hong Kong on December 3 last year on its way to Singapore and then to Saudi Arabia, arriving before Christmas. After months of investigations, US Customs Service officers arrested Kheem at his luxury Long Island home and are holding him without bail. According to Michael Nestor, head of the investigations unit for the area, it is the first arrest in the US involving the attempted illegal shipment of explosives to Iraq. 'He was dealing in death by long distance, using telephones and faxes,' he said. Kheem made contact with Iraqi agents in the Middle East in 1992 before travelling to Hong Kong and China to set up the deal which he then ran through a firm, Bkesco, Inc, from his home. According to US officials, Kheem, a multi-millionaire businessman, was paid US$50,000 (HK$386,000) by a man named Zeid Khorma to arrange shipment of the substance from Guangdong Chemicals Import and Export Corporation. He is alleged to have used Forcefully Ltd, which Mr Nestor believes was set up and run by Kheem, to buy the ammonium perchlorate on behalf of Bkesco, Inc. Investigators traced telephone and fax lines between Bkesco, Inc, Forcefully Ltd and Mr Khorma's office in Amman. Mr Nestor said an international operation, which included raids in the territory, was continuing to find others involved in the chemical smuggling. 'There was enforcement action in Hong Kong,' he said, without giving details. 'More arrests are to be made in a few countries around the world.' Mr Nestor said the head of the customs department at the US Consulate was investigating the racket with the co-operation of Hong Kong officials. Zachary Carter, US Attorney for the Eastern District of New York, said Kheem had been charged with conspiracy and violation of the Iraqi Sanctions Regulations and illegally shipping explosives to the country. 'The shipment was deliberately mis-labelled as water purification chemical to disguise its contents,' Mr Carter said.