HE HAS MADE, and recently lost, millions. He has been labeled "the richest man in the world" -- a title he says, jokingly, he is lending temporarily to the Sultan of Brunei. Some say that he acts on behalf of the Saudi royal family, while others, including one Saudi official, assert that Adnan Khashoggi is not close to the Saudi royals and that he is just a free-wheeling, self-seeking entrepreneur.

He's an arms dealer, a spendthrift, and a high liver. But he has also shown considerable personal courage. Although he is a Moslem and an Arab, he has cultivated close friendships with Israeli leaders, and he claims he acted last year as an inter-Lally Weymouth writes regularly about foreign affairs for The Washington Post.mediary between Yasser Arafat and then-Israeli Prime Minister Shimon Peres.

But for now, Adnan Khashoggi is linked in the public's mind with the Iran debacle. While Secretary of State George P. Shultz was kept in the dark by the White House about secret arms shipments to Iran, the Saudi billionaire was in on the secret. Indeed he bankrolled the arms shipments to the tune of $30 million, some of which he claims is still missing.

Last week in Paris, Khashoggi sat and talked at length about the Iran affair. Among his revelations during the tape-recorded interview: The Israelis, he says, came up with the idea of overcharging the Iranian government for weapons in 1985 to create a fund which was to be channeled back into Iran to strengthen the hand of moderates there. Lt. Col. Oliver North discovered this covert-funding mechanism when he took over the Iran project in January 1986, Khashoggi says. Rather than continuing to use the excess cash to support the Iranian moderates, Khashoggi speculates, North instead may have used it to help the contras. "I think he inherited the whole system and used it for Nicaragua," asserts Khashoggi.

Khashoggi's remarks offer a plausible explanation by one insider of what Israel and its contacts hoped to achieve in the Iran affair. It's Khashoggi's version of events, to be sure, without confirmation by other key participants. But another source involved in the deal has said it was agreed that "any profit from the arms deal would be made available to" a moderate faction in Iran.

{Uri Savir, the spokesman for Israel's Foreign Ministry, declined to comment last night on the covert-funding allegation.}

In discussing the Iran affair, Khashoggi started from what he remembers as the beginning. That was back in May 1985 in Hamburg, Germany, when Khashoggi's friend, a New York businessman named Roy Furmark, took him to meet an Iranian named Manucher Ghorbanifar. Furmark had met Ghorbanifar in Hamburg in January 1985 when he was negotiating what he describes as a billion-dollar trade transaction.

As Khashoggi recalls it, Ghorbanifar talked to him of his desire to end the Iran-Iraq war. The Iranian asked Khashoggi to pass on a message to the Saudi government that at least some people in Iran were eager to build a moderate group that could take power when the Ayatollah Khomeini died.

Khashoggi says he told King Fahd of Saudi Arabia, who replied that the Saudi government would not become involved in internal Iranian affairs. Khashoggi then took the idea to the Egyptian government -- which checked out Ghorbanifar through the Central Intelligence Agency and got a negative report on him. The Egyptians told Khashoggi they weren't interested.

Then, as Khashoggi puts it, he had no choice but to turn to the Israelis -- specifically to then-Prime Minister Peres and Al Schwimmer, a Peres confidant who founded Israel Aircraft Industries. "The region is blowing up, the Soviets are next door, and you guys are going to take the burden of defending it one day," Khashoggi remembers telling the Israelis.

Peres sent David Kimche, a former Israeli intelligence officer who was then serving as director general of the Israeli Foreign Ministry, to meet Khashoggi in Hamburg in June. Kimche took along Schwimmer and Jacob Nimrodi, an Israeli arms merchant who spoke Farsi. In Hamburg, they met Ghorbanifar and some top Iranian officials. But Khashoggi says that Kimche warned him that Israel wouldn't be able to move forward unless it got the consent of the United States.

Unlike the CIA, which reportedly had told its agents not to deal with Ghorbanifar as far back as 1980, Israeli intelligence gave him "high marks," according to Khashoggi.

Khashoggi is the first to admit that the Israelis had their own motives for wanting to establish relations with Iran -- first and foremost a desire to see the Iraqi army suffer a severe defeat. Israel's motive wasn't important to Khashoggi, for he believed an improved U.S.-Israeli-Iranian relationship would benefit the entire region.

The idea of trading arms for hostages first arose, according to Khashoggi, during a meeting that Kimche held at the White House in July 1985 with Robert C. McFarlane, when Kimche sought American approval for an initiative toward Iran. The idea of exchanging a few arms for the American hostages was meant to be nothing more than a show of good faith on both sides, Khashoggi says, drawing on what his Israeli contacts have told him.

Khashoggi says his role in the arms deals was to put up the so-called "bridge financing" -- the money to pay for the arms shipments between the time they left Israel (and later, in 1986, the U.S.) and the time they arrived in Iran and the Iranians paid for them.

According to Khashoggi, the financing worked like this. Khashoggi put up $1 million for the first shipment, which was a portion of the 500 TOW missiles that were shipped from Israel to Iran in the fall of 1985. He deposited the money in an account belonging to Jacob Nimrodi that was, Khashoggi says, created just for these shipments. Khashoggi was repaid directly by Ghorbanifar when the Iranians received and approved the shipment. Later in 1985, Khashoggi put up a second bridge loan of $4 million to pay for the rest of the shipment of the 500 TOWs.

Khashoggi claims that it was Nimrodi, the Israeli arms dealer who had formerly served as Israel's military attache in Tehran, who dreamed up the idea of marking up the price of the weapons sold to the Iranians so that additional money could be generated and then channeled back into Iran to strengthen the moderates. The Israeli government supported the idea, according to Khashoggi. Says Khashoggi: "I did not look at Nimrodi as a businessman. I looked at him as representing the Israeli government in putting the package together." {Nimrodi could not be reached for comment yesterday.}

"Nimrodi thought that through the arms sales, funds would be generated to finance the political scene in Iran," Khashoggi explains. "If he sells $5 million worth of goods and charges them 20 percent on it, this can be used to give the political parties the ammunition to fight. . . . Nimrodi is being honest. People misunderstood what he was planning. He was plannning a long-range plan. His game plan was to use the funds to penetrate."

Khashoggi adds bluntly: "This is where North got the idea of {diverting} money -- from the Iranians. . . . North found a mechanism and he liked it."

Roy Furmark, who was present during the interview last week, chimed in at that point: "North just followed on the business Nimrodi did with Iran. It was set up and then he did the same thing."

Ghorbanifar, in a brief interview last week in Paris, says he knew of no such arrangement or of any money being channeled back into Iran. Indeed, he said he personally picked up many of the expenses in the arms deal, including the cost of McFarlane's trip to Tehran in May 1986. (After Ghorbanifar made this denial, Khashoggi asked that The Washington Post refrain from printing his earlier comments about the plan to divert excess funds to Iran in 1985.)

Khashoggi says that the Israelis initially decided not to tell their American colleagues about the creation of the slush fund "because they didn't want the U.S. to tell them it was morally wrong."

In the end, according to Khashoggi, Nimrodi and Ghorbanifar got into a fight over the money that was to be distributed to the Iranians. At that point, he says, the first part of the secret arms sales came to a halt.

Khashoggi praises Israel's Peres for refusing to let the Iran project drop at the end of 1985. By that time, McFarlane reportedly had become disenchanted with the project and recommended its discontinuation after a meeting with Ghorbanifar in December of that year at Nimrodi's London home.

"He {Peres} pulled out from his magic hat a man called Nir," Khashoggi says, referring to Amiram Nir, Peres' advisor on terrorism, who took over from Nimrodi, Schwimmer and Kimche as the Israeli liaison with the United States in January 1986.

When Nir briefed Lt. Col. North that month, he told him about the system of marking up the weapons, Khashoggi says. He explains: "This is when they accused Nir of coming up with the idea, but he didn't come up with the idea. He was just reporting."

Khashoggi says that he borrowed all the money he put into the Iran arms deal. He claims the first three installments -- for $1 million, $4 million and $2.5 million -- came from British industrialist Roland (Tiny) Rowland. Rowland, however, has denied that he lent Khashoggi money for such a purpose.

Khashoggi says he deposited the $1 million and then the $4 million in Jacob Nimrodi's account in Switzerland in the fall of 1985. But when he put up $10 million in February 1986 for the next arms purchases (which came directly from the United States with just a stopover in Israel), Khashoggi says Ghorbanifar told him to put the money into an account called "Lake Resources" in the Credit Suisse Bank in Geneva.

Uncertain, Khashoggi says he called Nir, who replied: "No problem, that's the American account."

A fourth loan -- for $15 million -- Khashoggi is widely reported to have borrowed from two Canadians, Walter E. Miller and Donald Fraser. According to some accounts, the two men are money managers for the Sultan of Brunei. Khashoggi, however, says that the Canadians work for a Saudi businessman (whose name he says he cannot disclose) who actually lent the $15 million to Khashoggi.

Khashoggi insists that he received no profits from underwriting the arms sales and that he did it with the hope of one day making a lot of money in oil-rich Iran.

Furmark, who was sitting in on the interview, had said previously that Khashoggi was supposed to receive a $3 million markup on the $15 million loan he made in May 1986 (on which Khashoggi says he is still owed some $10 million). But Khashoggi contradicted Furmark, saying that he was slated to receive only the $15 million he advanced -- and the other $3 million was slated for interest payments and "to pay the political participation," presumably meaning the slush fund for Iranian moderates. What about the diversion of funds to the contras? What did Khashoggi know and when did he know it?

Khashoggi says that at a meeting in Paris in September 1986 with him and Furmark, Ghorbanifar voiced suspicions that money was being diverted from the Iran arms sales to Central America to help the contras. What made Ghorbanifar suspicious, according to Furmark, were the inflated prices of the weapons -- which were being marked up 300 to 500 percent. Moreover, Khashoggi says that North had raised the subject of the contras with Ghorbanifar, asking him to collect $100 million for the Nicaraguan rebels from Khashoggi. (Khashoggi says that he refused this request.)

As time went by, Khashoggi says, American officials became obsessed with getting the U.S. hostages out of Lebanon -- almost brushing aside the strategic opening to Iran. As the Nov. 4, 1986 congressional elections neared, the Americans lost patience with Ghorbanifar. "They wanted some person by hook or by crook to be released the night of the election," claims Khashoggi.

American officals, meanwhile, had decided to open a new channel to Iran through a well-connected Iranian. Khashoggi says that in this new phase, the Americans put up $5 million, though Khashoggi says he doesn't know the source of the money. Soon after, on November 2, hostage David Jacobsen was released. The next day the story of America's secret arms dealing with Iran was published in a Beirut magazine.

In Khashoggi's eyes the real result of replacing Ghorbanifar in late 1986 was that "they burned two years of work to get a few lousy votes. I think it's disgusting, shameful. . . . They burned their friends and our covers and now we have to go public and talk."

For Khashoggi, the most vexing issues at this point were financial. He was suffering cash-flow problems that would eventually lead him last week to seek protection from creditors for his American company, Triad, under the bankruptcy provisions of Chapter XI. In last week's interview, he spoke of losses of up to a half-billion dollars on one venture and confirmed that he does indeed have financial troubles: "They do exist. We had problems in Salt Lake City {where} we had an investment of $800 million that shook down to $300 million." He added that he had lost about $80 million on business ventures in Sudan after the fall of President Jaafar Nimeri several years ago.

The Iran adventure was not Khashoggi's first contact with the state of Israel. He has developed (and kept secret until recently) friendships with many Israeli leaders. These contacts took considerable courage. Palestinians who did the same thing -- like Issam Sartawi -- have paid with their lives.

Khashoggi says that he tried to mediate between Israel and the PLO. He asserts that last year he met with Yasser Arafat and obtained from him a pledge that he would recognize Israel if Israel accepted the PLO as "a legitimate negotiator for peace."

Khashoggi says he then called Al Schwimmer and said, "Tell Peres this is what I'm doing." Khashoggi continues: "{Schwimmer} came back to me and said, 'Peres says if {Arafat} approves Camp David, we will accept -- recognize -- them.' We agreed. . . to sign a document. I'd put it in a safe, it was not to be used except as a threat on each one not to destroy the other." But at that point, Khashoggi says, Arafat "chickened out."

{"I think it's nonsense," said Israeli Foreign Ministry spokesman Uri Savir of the alleged PLO contact. "Between us and Arafat there was nothing, direct or indirect."}

In spite of all that has happened, Khashoggi is unshakable in his faith that a strategic opening to Iran by the West is essential. And he puts the blame squarely on McFarlane's shoulders for turning what could have been a strategic opening into an arms deal: "McFarlane stupidly was only after the hostages. He really wasn't interested in the whole Iran deal."

Khashoggi dismisses criticism that arms dealers are guiding American and Israeli policy. He sees the crux of the problem as "people like North with such power to play around with, not clearing {their actions} on the highest levels. . . . You should be put in Chapter XI yourselves."