For some months prior to Iraq's invasion of Kuwait, American intelligence had been keeping an eye on one of the world's leading arms suppliers, Monzer Al-Kassar.

A multimillionaire Syrian with multiple passports, he was being watched by Western intelligence services because of his known association with suspected terrorists and his role as arms supplier to governments and guerrilla forces around the world.Today, officials of several intelligence agencies say, he is perhaps the most successful private arms dealer in the world.

Global arms merchants such as Al-Kassar will always find rogue buyers like Iraq's Saddam Hussein. Tracking their tangled dealings yields vital information about the shadowy world of terrorists and despots.

Global military sales are enormous - and largely beyond the control of mechanisms established by the United States and other Western countries to prevent the spread of mass weapons of destruction to the Third World.

The international arms trade only begins with multibillion-dollar government-to-government transfers and sales. It also encompasses an intricate network of middlemen, companies and cutouts - from the legitimate, like General Dynamics, to the shadowy, like Monzer Al-Kassar. The difficulty for all governments is controlling this vast network.

Iraq's case exemplifies the ambiguities of control. From the start of the Iran-Iraq war in September 1980, the world's arms dealers gathered like vultures to pick on the corpse of conflict.

Before the war, the United States had branded Iraq as a state sponsor of terrorism and a tool of the Soviets. But once the war began, Iraq became the combatant of choice in official U.S. policy.

Today the U.S. Customs Service is investigating 40 cases of arms-smuggling to Iraq. Even late last year, after the invasion of Kuwait, Iraq actually sent machinery back to the United States for repair. The machinery allows Saddam to manufacture an impeller that helps shells explode in the air.

While Saddam is a visible and painful reminder of how ineffectual controls against arms shipments have been in recent years, arms proliferation is not simply a question of what happened with Iraq.

Chemical weapons - the nuclear bomb of the Third World - are cheap and militarily effective and offer grim international clout to underdeveloped countries. Twelve nations probably already have a chemical capability: Burma, China, Egypt, Ethiopia, Iran, Iraq, Israel, North Korea, South Korea, Syria, Taiwan and Vietnam, according to specialists.

Export controls on conventional weapons have proved only partially successful; and the same is true of chemical products. In addition, while conventional weapons are relatively easy to define in terms of export bans, most chemicals have a dual use in such peaceful pursuits as the manufacture of fertilizers. Effective controls would eliminate this elusiveness.

(James Adams is the defense correspondent of the London Sunday Times. He is the author of "Engines of War" published by Atlantic Monthly Press.)