TWO soldiers exchanged pistols for cocaine in a money-making plot involving guns and ammunition smuggled out of Iraq, a court martial heard yesterday.

Lance Corporals Michael White and Anthony Creswick allegedly obtained pistols and ammunition on the Iraqi black market while serving with the 3rd Battalion of The Yorkshire Regiment.

The guns were said to have been smuggled to Osnabruck, in Germany, where the soldiers hoped to sell the weapons to other members of the unit.

The court martial, sitting at Catterick Garrison, in North Yorkshire, was told White and Creswick produced a catalogue detailing the weapons available - including photographs of the weapons - which they would tout around their unit for sale.

The court was told that one soldier, Corporal Darren Clemie, offered them 30g of cocaine for two pistols.

The hearing was told White and Creswick divided the cocaine into one gram wraps and intended to sell them to other members of the unit to make money.

Nigel Jones, prosecuting, told the panel, made up of senior NCOs and officers, that between May and July 2005 White and Creswick sold four pistols.

He said: ''All these pistols were sold in exchange for money, apart from the pistols sold to Clemie.

"In exchange for pistols, Clemie gave them 30g of cocaine, the arrangement being that White and Creswick would then sell on the cocaine to other members of the unit."

Mr Jones said White and Creswick became involved in a "business arrangement" with White described as the "frontman" and Creswick the "quartermaster". He added: ''They then arranged somehow for these pistols and ammunition to be smuggled from Iraq to Osnabruck where the unit was based at the time.

''Having smuggled these weapons and ammunition back to Germany, they set about selling these pistols and the ammunition principally to other members of the unit.''

White has already admitted charges relating to the buying and selling of weapons and ammunition, and supplying cocaine. He will be called as the main prosecution witness, the court was told.

Mr Jones said the plan fell apart when other soldiers became aware of the guns for sale, and arrests were made.

The court was told Creswick panicked and buried a stash of weapons and ammunition in woods near Osnabruck.

He eventually led police to the weapons, but in interviews he said he was temporarily holding on to them for a friend.

Clemie denied any involvement. Creswick denies three charges of selling a prohibited weapon and supplying a controlled drug.

He admits unlawful possession of ammunition and possession of a prohibited weapon.

Clemie denies possession of a prohibited weapon, ammunition and supplying a controlled drug.

A third soldier, Sergeant James Malone, denies a single charge of possessing three hand grenades.

The court martial was adjourned until tomorrow