Yaacov Nimrodi, the Israeli arms dealer who helped arrange the Iran arms sale, talked last week about the origins of the fiasco that has rocked the Reagan administration. He was interviewed in his $ 2 1/2-million white stucco mansion, known here as "the White House."

Nimrodi is proud of the role he played, claiming that he helped the now-ungrateful Americans open the door to Tehran by producing Manucher Ghorbanifar, an Iranian close to the regime. But he is hurt that halfway through the operation, he and his friend, Al Schwimmer, were ousted as arms intermediaries by Israeli Prime Minister Shimon Peres. "I blame Shimon Peres," Nimrodi said. "Why did he fire us in such an ugly way?"

"We have to sell our arms," Nimrodi said, explaining his enthusiasm for the Israeli role in the American opening to Tehran. He is bitter at being pushed out of the Iran venture and losing a shot at future arms sales to the Iranian regime. "We [Israelis] are the losers," he said, "and the U.S. is gaining all the cash [from arms sales to Iran]."

At the center of the Iran arms deal is money. Nimrodi told me that in the transaction in which he was most closely involved -- the sale of 500 TOW missiles from Israeli stocks in 1985 -- he received $ 5 million from the Iranians and forwarded $ 4 million to the Israeli Defense Ministry, keeping $ 1 million for his out-of-pocket expenses. Nimrodi's acquaintances say that it's unlikely that he made any money on the deal. Still, some senior Israelis dispute his figures.

Nimrodi's role in the affair has troubled some Israelis. Yoel Marcus, a prominent journalist, asked in an article in Haaretz last week whether the Israeli military-industrial complex had turned on its creator, the state, and was now guiding Israeli policy for its own needs. One senior member of the Knesset admitted he didn't like the idea of an arms dealer taking such a prominent role in Israeli foreign affairs. And the Knesset has created a new committee to oversee future arms sales more rigorously.

Nimrodi's career is a real-life Israeli spy story. He was a brilliant military intelligence operative who helped develop the Israeli relationship with Iran in the 1960s and later used the contacts he made in Iran to develop a lucrative trading business. With homes in London and New York as well as his mansion here, he lives the lifestyle of his Saudi friend and fellow arms dealer, Adnan Khashoggi.

Nimrodi said last week of Khashoggi: "He's a great man."

Yaacov Nimrodi was born into a poor family of 10 children in Jerusalem and started work at 14. He says he was recruited into intelligence work in 1946, at the age of 16, by Israel's former president, Yitzhak Navon, a childhood friend. Nimrodi later signed up with a special unit of the Palmach, the elite fighting force, which specialized in gathering intelligence on Arab countries. After Israel won its independence in 1948, he was assigned to a military intelligence unit in the south of Israel, where he met another young officer, Ariel Sharon, who later became a close friend.

One anecdote gives the Levantine flavor of Nimrodi's intelligence work in those days. He told me he was particularly proud of recruiting an Egyptian officer, persuading him to come to Tel Aviv, setting him up in a trap with a girl and then turning him into an excellent Israeli spy who supplied intelligence for years.

Why was Nimrodi so universally regarded by his colleagues as a good intelligence officer?

"He knew Arabic, having grown up in Jerusalem, speaking Arabic with friends," explained a former Mossad chief. "But it's not enough to know Arabic from a university. He could integrate himself into the environment, the mentality, the reactions, the customs of the Arabs. He adopted Middle Eastern ways for himself."

The covert Israeli link with Iran brought all of Nimrodi's skills into play. The Israeli relationship began in about 1960 when the chief of Iranian intelligence came to Israel on a secret visit. According to journalist and Iran expert Shmuel Segev, the Iranian general was accompanied throughout his tour by a young Israeli colonel named Yaacov Nimrodi. At the conclusion of his visit, the Iranian general proposed that Israel secretly send a military attache to Tehran and suggested that the job be given to Nimrodi.

Israeli Prime Minister David Ben-Gurion blessed the idea, and Nimrodi was off to Tehran on an assignment that would last officially for 14 years and unofficially for 10 years more.

Nimrodi was the perfect man to start what, for Israel, was a crucial strategic relationship. He threw himself into the Iranian scene. Indeed, one Israeli friend recalls that Nimrodi was so accepted in Iranian circles that he once saw him greet the head of Iranian intelligence by kissing him on the lips.

Israel's relationship with Iran was part of a broader strategy: Surrounded by hostile Arab neighbors, Israel's best hope was to make friends with the next group of states, the so-called "Second Circle," consisting of Iran, Turkey and Ethiopia. These states, although also hostile to Israel, were at odds with her immediate neighbors. Thus, went the theory, "the enemy of my enemy is my friend."

Nimrodi, who spoke perfect Farsi, made excellent connections with the Iranian military. "I built the Iranian intelligence," he bragged last week. In this covert relationship, Nimrodi also helped build the Shah's army and air force. "We trained parachutists and the artillery," he said. He explained that he used as trainers Iranian-born Jews, who spoke Farsi so fluently that many of their students were not aware they were Israelis. In addition, more than 400 Iranian officers were brought to Israel for training. Some of the officers who were trained by Israel are still in the Iranian army today.

From Iran, Israel was able to gather excellent intelligence on Iraq, which most Israeli experts regard as a greater threat to Israel that Iran. Nimrodi, for example, recruited a senior Iraqi military commander as an Israeli spy and helped arrange the defection of an Iraqi pilot with an advanced MIG fighter. Israel also helped Iran foment an uprising in the Iraqi region of Kurdistan -- which kept the Iraqi regime busy -- thus making an attack on Israel less likely. Meanwhile, Iran became a huge market for Israeli goods, to the tune of $ 500 million a year.

Nimrodi also helped organize secret visits to Iran by leading Israelis -- including Prime Minister Menachem Begin and Prime Minister Yitzhak Rabin -- as well as visits by senior Iranian army officers to Israel.

Nimrodi showed me last week some of the 20 photo albums that document many parts of the secret relationship with Iran. There are photos of Israeli dentists fixing the teeth of fighters in Kurdistan, a picture of the chief of the Iranian air force with former Israeli defense minister Ezer Weizman, a picture of young Shimon Peres and Al Schwimmer visiting Iran.

After coming home from Tehran in the mid-1970s, Nimrodi says that he wanted to become the Israeli military commander in the West Bank. When he didn't get the job, he left the army, telling friends that they had forced him to become a millionaire. He then returned to Tehran as a businessman to exploit for profit the connections he had built up over so many years.

In just 10 years, Nimrodi became a multi-millionaire. He sold arms and desalinization equipment for staggering sums to the Iranians. He says he was the agent of Iran in partnership with the shah and several of his relatives. Some of his Iranian contacts survived the shah's downfall.

The details of Nimrodi's role in the arms-for-hostages deal are still fuzzy. Senior Israeli officials claim that Prime Minister Peres acted in response to an American request to help free the CIA's Beirut station chief, William Buckley. Peres contacted his friend Al Schwimmer, who in turn contacted Nimrodi. If you believe this version, which is also Nimrodi's, he and Schwimmer then got in touch with Saudi tycoon Khashoggi, who introduced them to Ghorbanifar, a former officer of the Iranian intelligence service Savak, who became the go-between in the deal.

Khashoggi himself emerged last week, in an interview with ABC's Barbara Walters, claiming that the arms deal was originally his initiative and that he got in touch with the Americans, the other Arabs and the Israelis to see what could be done to get arms for Iran and possibly to open contacts between the West and Iran.

(One Israeli cabinet official told me, however, that the deal actually started when Khashoggi got in touch with Israeli businessman Ronald Fuhrer in London and asked him to go to Peres regarding cooperation between Israel and Saudi Arabia in selling arms to Iran. Fuhrer has no comment.)

The background of the Iranian arms deal, according to one Israeli cabinet member who was intimately involved in it, was that a power struggle was going on in Tehran because of the Ayatollah Khomeini's deteriorating health. In this struggle, he explained, some elements emerged -- particularly one led by the speaker of the Iranian parliament, Hashemi Rafsanjani -- that appeared to be interested in doing business with the West.

"We brought these moderate people to [former Reagan national security advisor Robert] McFarlane," Nimrodi explained last week. "We met them in Europe and they said, 'We want to go back to the West.'"

Nimrodi argued last week that the Iranians he dealt with wanted to make a break with the zealotry of Khomeini: "They are moderate. They want to come back with the West and the U.S. They said what they wanted from the West. They wanted help -- money and arms . . . . There is a basis at the top of the Khomeini government which is ready to leave the radical states . . . and to open a new dialogue with 'the devil.' They agreed to throw out the radical declarations of the revolution and open a new dialogue with 'the big devil.'"

Nimrodi says that McFarlane investigated these so-called moderates and, after checking them out, concluded they were legitimate. McFarlane, according to Nimrodi, met with Rafsanjani, Prime Minister Mir Hossein Mousavi and the son of Ayatollah Khomeini during the Iran venture. Asked about Richard Secord, a retired Air Force major general who has been linked with the Iran arms deal, Nimrodi said he met him once in late 1985 when McFarlane and several Iranians visited Nimrodi's house in London.

Part I of the Iran deal ran from about March 1985 through last December. On the U.S. side, it involved McFarlane and Michael Ledeen, a consultant to the National Security Council; on the Israeli side, Nimrodi, Schwimmer and David Kimche, the former director general of the Foreign Office; and on the Iranian side, Ghorbanifar and his moderate allies. The original phase resulted in an agreement to sell Israeli weapons to Iran.

But the Iranians changed their minds and demanded U.S. weapons. At this point Yitzhak Rabin, the Israeli minister of defense, entered the picture. Not one bolt would leave Israel until he knew that the operation had the approval of President Reagan, that Secretary of State George Shultz was in the know, and that American weapons shipped by Israel to Iran would be replaced immediately. Rabin sent Kimche to see McFarlane in regard to these three points, and he got a positive response on all three -- including McFarlane telling Kimche that the operation had the approval of the president, according to top-level Israeli officials.

The story of how weapons were actually delivered to Iran is like the classic Japanese movie "Rashomon" -- with each observer having a different version of what happened. That's especially true with the first 100 TOW missiles sent to Iran last year. Nimrodi says, "I did it all on my account." Khashoggi claims to have advanced $ 1 million to pay for 100 TOWs, but it's not clear whether they are talking about the same transaction.

When the first 100 TOWs arrived in Tehran, nothing happened. Nimrodi says he went to Europe and spoke with the Iranian prime minister who told him, "I will send you one head and one leg (of Buckley)."

An additional 400 TOWs were then dispatched from Israeli supplies, and Nimrodi says that he had to underwrite the shipment and guarantee that "if something will happen, I will guarantee to replace them." He says the shipment cost him $ 4 million. Khashoggi also says he underwrote this deal. This time it worked. Hostage Benjamin Weir was promptly released.

Things started to go sour, according to Nimrodi, with the ensuing arms shipment of 18 Hawk missiles. He says that the Israeli Defense Ministry agreed to send improved Hawks but instead sent old Hawks. Nimrodi claims that he was in a Swiss hotel room with some Iranians awaiting the outcome of the shipment. The prime minister of Iran called him and angrily said that the Hawks were old. Nimrodi says he transferred the money back to the Iranians, but that the Hawks remained behind in Iran.

That was the beginning of the end for Nimrodi and Schwimmer. After the incident with the Hawks, they were replaced by Prime Minister Peres' advisor on terrorism, Amiram Nir, who became the contact man between Israel and the United States.

When Nir took over from Nimrodi and Schwimmer in January 1986, the Israelis -- hoping to avoid embarrassment if the operation backfired -- established new ground rules. No Israeli was to handle money. Money was to go from the Iranians directly into the secret Swiss bank account established by the Americans. Moreover, no more U.S. weapons would be shipped from Israeli stockpiles. The weapons would come from the United States and then be transferred to an Israeli plane that would be flown by American pilots to Iran.

Nimrodi explained to me his vision of life in the Middle East, which is a mixture of business and dreams: "If we want to be a factor in the Middle East," he said, "we have to work with the Arab countries." He described meeting Khashoggi and then going into business with him, and he said he has met many Arab heads of state secretly. Indeed, Nimrodi told me that it was he who first presented to Prime Minister Menachem Begin a plan allegedly devised by King Fahd in which the Saudi monarch is said to have offered huge Saudi investments in the Middle East in return for having a Saudi flag placed at one of the key mosques in Jerusalem. Begin rejected the idea, saying "no money in the world can buy that," as Nimrodi recalls it.

Yet while elaborating on his dreams for contacts between Arabs and Jews, Nimrodi turned to me and said bluntly: "There is no Arab that doesn't have his price."

In examining the life and times of Nimrodi and the other Israelis who particpated in the Iran deal, there are large and still-unanswered questions. Did some Israelis, including Nimrodi, think up the arms-for-hostages idea and sell it to the Americans? Was it an idea that really served Israeli and not American interests? Did Nimrodi or Khashoggi put up the financing? Did either make any money on these deals or were they hoping to make money on future deals, if and when Iran would open to the West as a market once again?

There are broader questions, as well. Businessmen like to make money and they like to trade with anyone, including the Soviets. Was it wise to have such persons -- who stand to profit in the long run, if not in the short run -- involved in what was supposed to be a national endeavor, whether it was winning Iran back to the West or freeing our hostages in Lebanon? Surely the narrow interests of arms merchants may differ from the national interests of the United States or Israel.

Lally Weymouth writes regularly for The Washington Post.