TRADE: The Great Iranian Swap

When he went to Tehran last week, Federal Energy Administrator Frank Zarb expected to talk only about oil prices. But then a reporter asked an unforeseen question. Was the Iranian government trying to barter its crude oil for U.S. military hardware? Yes, replied a startled Zarb. The proposal was still in its preliminary stages, he said, "and there's hardly anything to comment on."

But the secret of what could be a multibillion-dollar deal was out. Executives at three major U.S. defense contractors—General Dynamics, Boeing and Northrop—reluctantly confirmed that such a swap is indeed under consideration. TIME has learned that the initial...

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